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The Experts

James
Craig James
Economy Expert
+ About Craig James
About Craig James

Craig James is CommSec’s Chief Economist.

On leaving school Craig James joined the (then) Rural Bank, whilst undertaking university studies. He received his Bachelor of Commerce (Economics) at University of NSW in 1984 and then a Master of Commerce (Economics) at the same university in 1988.

He remained at the Rural Bank, which became the State Bank over time and then Colonial, working in branches, Corporate, Planning and Economic Research.

He became chief economist of Colonial Group in September 1987, before becoming chief economist at CommSec in August 2000 with the Commonwealth takeover of Colonial.

In 2002 Craig had a sea-change, joining the Australian Financial Review. He had always wanted to pursue a role in journalism and enjoyed the role as an economic commentator and analysts, finding that he could pursue a journalistic-type role as well as doing more electronic media work at CommSec and rejoined the group in 2003.

On taking the reigns of chief economist at Colonial, Craig endeavoured to style their research in a “user-friendly” way – something that set their research apart and still does today. The approach has been successful in their media work and in promoting Colonial, and then CommSec, to the general public. CommSec is the most quoted economic group in the mainstream media.

CommSec economic reports are a bit different in that they devise tools such as the ‘Mums and Dads’ share index and the iPod index, and undertake research on the weather and demographic changes to show how they affect the economy.

Craig currently does around 2-3 regular TV crosses a day, ad hoc radio and newspaper interviews and writes regular commentaries as well as presenting to staff, clients and external organisations.

Outside work, Craig's main interests are athletics (cross country in winter), weight training, reading widely across a range of newspapers, magazines and electronic media, and trying to keep up with the children.

Good morning, Australia!

Monday, November 12, 2018

Howd’y USA

Producer prices rose by 0.6% in October (forecast +0.2%) to be up 2.9% over the year. Excluding food and energy (core measure), prices rose 0.5% (forecast +0.2%) to be up 2.6% over the year (forecast +2.3%). Consumer sentiment fell from 98.6 to 98.3 in November (forecast 98.0).

US share markets fell on Friday as investors booked profits at the end of the week. But shares rallied from lows in the last 90 minutes of trade. Consumer staples stocks rose but oil, technology and consumer discretionary stocks fell. Investors fretted about the slowing of the Chinese economy. At the close of trade, the Dow Jones was lower by 202 points or 0.8% after being down 308 points. The S&P500 index was down by 0.9% and the Nasdaq index was down by 124 points or 1.7%. But over the week the Dow rose 2.8%, the S&P 500 rose by 2.1% and the Nasdaq gained 0.7%.

US treasuries were firmer on Friday (yields lower) as investors favoured defensive assets. US 2-year yields fell by 5 points to 2.93% and US 10-year yields fell by 6 points to 3.186%. Over the week US 2-year bond yields rose by 1 point and US 10-year bond yields fell by 2 points.

Major currencies were generally softer against the US dollar in US and European trade compared with the Asian close. The Euro fell from highs near US$1.1360 to lows near US$1.1315 and was near US$1.1335 in late US trade. The Aussie dollar eased from near US72.50 cents to US72.15 cents and was trading near US72.25 cents in late US trade. And the Japanese yen held between 113.65 yen per US dollar and JPY113.95 was near JPY113.80 in late US trade. 

Global oil prices fell again on Friday with Nymex down for the 10th straight day - the longest losing streak since 1984. Investors worried that a slower Chinese economy could crimp oil demand. And supply concerns eased with eight countries granted a waiver from US sanctions against Iran. Brent crude fell by US47 cents or 0.7% to US$70.18 a barrel and the US Nymex price fell by US48 cents or 0.8% to US$60.19 a barrel. Over the week Brent fell by 3.6% and Nymex fell by 4.7%.  

Bonjour Europe

European share markets were mixed on Friday. Disappointing earnings news from Germany's Thyssenkrupp (-9.2%) and luxury goods group Richemont (-6.4%) weighed on investor sentiment. The basic resources sector fell by 3.4% as metal prices fell. The pan-European STOXX600 index fell by 0.4% but rose slightly on the week. The German Dax was flat (up less than 0.1%) but the UK FTSE index fell by 0.5%. In London trade, shares of Rio Tinto fell by 3.3% and BHP fell by 3.5%. 

Top of the morning, London

Base metal prices fell by up to 2.7% on the London Metals Exchange on Friday with nickel down the most and zinc down the least (just -0.1%). Over the week, metals fell by up to 3.9% with nickel down the most. But tin rose 0.4%. 

The gold futures price fell by US$16.50 an ounce or 1.3% to $1,208.60 an ounce. The spot gold price was trading near US$1,209 an ounce in late US trade. Over the week gold fell by US$24.70 or 2%. Iron ore rose by US$1.00 or 1.3% to US$77.25 a tonne. Over the week iron ore rose by US$3.15 or 4.3%.

G’day Australia!

Data on credit and debit card lending is released. In the US, Veterans Day is observed with bond markets closed.

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Spotlight on our job market

Friday, November 09, 2018

On Monday

The week kicks off when the Reserve Bank releases September data on credit and debit card lending. Unfortunately, there have been revisions to data, making it more difficult to uncover trends. But the evidence still seems to show that credit and debit cards are being actively used although account holders are keen to pay off outstanding credit card debt by the due date.

On Tuesday

National Australia Bank releases the October business survey. In September, the index of business confidence lifted by 6.2 points, while business conditions rose just under 1 point to a 3-month high. Notably the employment index posted a solid gain in the month. And the regular weekly reading on consumer confidence is published by ANZ and Roy Morgan. The key issues at present are petrol and home prices together with the volatility on the share market. Overall, Aussie consumers seem to be weathering the choppy conditions. Also released Tuesday is the broader array of lending figures. The data on home loans is provided but together with business, lease and personal loans. In August, total new lending commitments (housing, personal, commercial and lease finance) fell by 1.5% to $69.3 billion. And commitments were down by 4.2% on the year. In trend terms, lending rose for the fourth month, up by 0.4%. Of note, loans to buy new or used cars fell to 25-month lows in rolling annual terms in August.

On Wednesday

The main gauge of wages in Australia – the wage price index – is released. In the June quarter, wages rose by 0.6%, lifting the annual rate from 2% to 2.1%. And including bonuses, wages were up 2.5% on the year.

Overall we expect the tighter job market to show up in the September quarter with wages up 0.7% in the quarter to stand 2.4% higher for the year.

And Westpac and the Melbourne Institute release the November monthly reading on consumer confidence. This indicator is more of a check on the weekly consumer confidence survey.

On Thursday

The October labour force data is released by the Australian Bureau of Statistics (ABS). In September, jobs rose by just 5,600 but the unemployment rate hit a 6-year low of 5%. Based on an array of solid survey evidence, we tip a 25,000 lift in jobs in October, leaving the jobless rate unchanged at 5%.

And Reserve Bank Deputy Governor, Guy Debelle, delivers a speech. 

On Friday

The ABS releases the State Accounts – data that reveals how fast the state and territory economies grew over the past financial year.

Activity data in focus in the US & China

In the US and China next week, the ‘top shelf’ indicators of retail sales and industrial production are released.

On Monday

In China, with the Association of Automobile Manufacturers scheduled to release October sales figures. Vehicle sales are down almost 12% on a year ago. And also in China, the scheduled data are the lending and money supply indicators for October. Loans are growing at a solid 13.2% annual rate.

In the US, the week begins on Tuesday. The National Federation of Independent Business releases the Small Business Optimism index. In September, the index fell from a record high of 108.8 to 107.9. The usual weekly data on chain store sales is also released, with the October monthly federal budget figures.

On Wednesday

In the US, the October inflation data – the Consumer Price Index – will be issued. Inflation is creeping, not leaping higher. In fact the annual core rate (excludes food and energy) may have remained at 2.2% in the month. 

On Thursday

In China and in the US, retail sales data for October will be issued. There is also additional data in China in the shape of industrial production and investment figures. In the US, retail sales are growing at a 4.7% annual rate. In China, sales growth is almost double the US with sales up 9.2% over the past year.

And in the US, there’s data on export and import prices and two key manufacturing surveys – the Empire State and Philadelphia Federal Reserve surveys. The usual weekly data on claims for unemployment insurance is also expected. And data on home prices is slated for release in China.

On Friday

In the US, data on industrial production is issued together with capital flows data. Economists expect a 0.2% lift in October production.

 

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Good morning, Australia!

Monday, November 05, 2018

Howd’y USA!

In the US, non-farm payrolls (employment) rose by 250,000 in October (forecast +190,000). The unemployment rate was unchanged at 3.7%. Average hourly earnings rose by 0.2% as expected with the annual rate up from 2.8% to a decade high of 3.1%. The trade deficit rose from US$53.3 billion to US$54bn in September (forecast US$53.6bn). Factory orders rose by 0.7% in September, with the ISM New York index down from 72.5 to 69.8 in October.

US share markets eased on Friday. US officials gave mixed signals on the extent of progress on trade talks with China. And the jobs data pointed to further rate hikes – most likely in December. Shares in Apple fell by 6.6% after warning that holiday sales may miss expectations. The Dow Jones ended lower by 110 points or 0.4% after tracking a 500-point range. The S&P500 index fell by 0.6% and the Nasdaq index lost 77 points or 1.0%. Over the week, the Dow and the S&P 500 both rose by 2.4% and the Nasdaq lifted by 2.7%.

US treasuries fell on Friday (yields higher) in response to strong US jobs data. Investors also favoured bonds over equities on worries about the trade dispute with China. US 2-year yields rose by 6 points to 2.91% and US 10-year yields rose by 9 points to 3.22%. Over the week, US 2-year yields rose by 8.5 points and US 10-year yields rose by 12.5 points.

Major currencies were softer against the US dollar in US and European trade compared with the Asian close. The Euro fell from US$1.1455 to US$1.1370 and was near US$1.1385 in late US trade. The Aussie dollar fell from near US72.60 cents to lows near US71.80 cents and was close to US72.00 cents in late US trade. And the Japanese yen eased from near 112.65 yen per US dollar to JPY113.30 and was near JPY113.20 in late US trade.  

Global oil prices eased on Friday. The US Secretary of State Mike Pompeo said that eight countries would be allowed to temporarily import crude from Iran when sanctions are applied against the country from Monday. Brent crude fell by US6 cents or 0.1% to US$72.83 a barrel, and the US Nymex price fell by US55 cents or 0.9% to US$63.14 a barrel. Over the week, Brent fell by US$4.79 or 6.2% with Nymex down by US$4.45 or 6.6%.

Hola, Europe

European share markets were mixed on Friday. The pan-European STOXX600 index rose by 0.3%. Over the week the STOXX600 index was up by 3.4% – the best weekly gain in almost two years. Hopes of a mending in the trade dispute between the US and China also buoyed investor sentiment. Trade-sensitive luxury stocks rose. The German Dax rose by 0.4% but the UK FTSE index lost 0.3%. 

Top of the morning, London

Base metal prices were higher by up to 3.5% on the London Metals Exchange on Friday with copper doing the best. But tin fell by less than 0.1%. Over the week copper rose by 1.8% with nickel up 0.2% but other metals fell with zinc down by 3.8%. In London trade, shares of Rio Tinto fell by 0.1% while BHP rose by 0.1%.

The gold futures price fell by US$5.30 an ounce or 0.4% to $1,233.30 an ounce. The spot gold price was trading near US$1,232 an ounce in late US trade. Over the week, gold fell by US$2.50 or 0.2%. Iron ore fell by US45 cents or 0.6% to US$74.10 a tonne. Over the week iron ore fell by US$2.90 or 3.8%.

G’day, Austraila

The CBA and AiGroup services gauges are released, with new vehicle sales and ANZ job ads. Have a great day, Australia!

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Mate against mate. State against state

Tuesday, October 30, 2018

Victoria remains in top spot on the economic performance rankings ahead of NSW.  Each of the states and territory economies were assessed on eight key indicators: economic growth; retail spending; equipment investment; unemployment, construction work done; population growth; housing finance and dwelling commencements. 

Victoria is in top spot due to strong construction activity and the lowest jobless rate in a decade. NSW is in second spot on the economic performance rankings and has held its relative position on most indicators. The ACT retains third spot on the performance but Tasmania is closing the gap, improving its relative position on four of the eight indicators. South Australia is now in fifth spot ahead of Queensland, with the former picking up its relative position on business investment. The Northern Territory remains in seventh position just ahead of Western Australia. 

Victoria ranks first on economic growth, unemployment and construction work done, while NSW still holds top spot for retail spending and dwelling starts. NSW is second ranked on three other indicators. The ACT has held on to third spot in the rankings. The ACT is top-ranked on relative housing finance and second- ranked on population growth and business investment. Tasmania is in fourth position on the economic performance rankings, but is closing the gap on the ACT. Tasmania is ranked first on the relative position on population growth and business investment and is in second spot on housing finance. While South Australia is now in fifth position on the performance rankings ahead of Queensland, there is still little to separate the two economies. South Australia is third on construction work done and fourth on two other indicators. Queensland is now in sixth position. Queensland ranks fifth on four of the eight indicators. The Northern Territory retains its seventh position on the economic performance rankings and can be broadly grouped with Western Australia. Both are facing challenges with the transition of resource projects moving from the production to the export phase. 

The Northern Territory is third-ranked on economic growth. But it lags all other states and territories on five of the indicators. The good news is that employment has now been growing for the past five months. Western Australia is seventh or eighth on all indicators (eighth on three indicators). But equipment spending is now the highest in 31⁄2 years. 

Here are the key findings of the report:

1. Victoria has maintained top spot on relative economic growth. Economic activity in Victoria in the June quarter was 26.7% above its ‘normal’ or decade-average level of output, ahead of NSW, with output 25.7% above the ‘normal’ level of output. 

2. In terms of retail spending, NSW has maintained the top spot, extending its lead over Victoria. 

3. In the June quarter, Tasmania, the ACT, NSW and Victoria had equipment spending above decade-average levels, the same result in the March quarter. 

4. In NSW, the trend unemployment rate equals the rate existing from January to April 2008, which is the lowest rate in monthly data back to 1978.

5. Victoria has retained the top spot with construction work done almost 39% above its decade average.

6. Tasmania is strongest on the relative population measure, with its 1.02% annual population growth rate almost 78% above the decade-average rate.

7. NSW has taken back the top spot for dwelling starts from Victoria.

8. Wage growth in the year to June was strongest in both Victoria and Tasmania (2.5%).

The State of the States assesses economic performance by looking at the most recent result – such as retail trade or construction – and compares that with the ‘normal’ experience. And by ‘normal experience’, we define this as the decade average. A resident of the state or territory can therefore assess whether they are experiencing relatively better economic times. Comparing states or territories on the same criteria determines which state or territory is performing the best on a certain indicator. 

But as well as relative economic performance, some are also interested in economic momentum. That is, annual economic growth. A state/territory may have been under-performing, but if annual growth is rising, then this suggests that performance has scope to improve. 

On the eight indicators assessed, Tasmania tops growth on four measures, ahead of Victoria (top on two measures). South Australia and NSW lead the way on one measure each. 

When looking across growth rates for the states and territories, Victoria exceeded the national-average on all of the eight indicators from Tasmania (five) and NSW and ACT (four). 

At the other end of the scale, Northern Territory under-performed the national result on all indicators. Western Australia out-performed the national growth rate on one indicator. 

If new vehicle registrations are added to the list of indicators, then there would be no change to the economic performance rankings. Victoria is the strongest on new vehicle sales, up 17.1% on decade averages. And annual growth of sales is also the strongest in Victoria (up 3.5%). 

Last quarter Victoria topped the economic performance rankings for the first time in the 9-year history of the surveys. And in the latest quarter Victoria remains just ahead of NSW. Both states have broad-based economic strength, underpinned by population growth, construction and investment activity. 

There is little to separate Victoria from NSW. It is possible the two states could exchange rankings over the next year. Strong job markets provide support for local economies although it is expected that home building will soften in the period ahead. 

NSW picked up one spot on dwelling starts but dropped one place on unemployment. Victoria lifted three spots on unemployment but eased one spot on both housing finance and dwelling starts. 

The ACT remains in third spot with changes in positions on five indicators but little change overall. 

Tasmania is still in fourth position but closing in on the ACT. Tasmania has improved its relative performance on four indicators. 

South Australia lifts from sixth to fifth position. Queensland has dropped in its relative position on four indicators. South Australia shifted its relative position on a number of indicators but especially lifted on business investment. 

The Northern Territory remains in seventh spot with Western Australia in eighth position. There has been slippage for both economies in terms of the relative positions with other economies. 

Encouragingly unemployment remains low in Northern Territory and there has been a drop in trend unemployment in Western Australia and a lift in dwelling approvals. 

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Good morning, Australia!

Monday, October 29, 2018

Howdy, USA

Data showed the economy growing at a 3.5% annual pace in the September quarter (forecast 3.3%). Core prices grew at a 1.6% annual pace (forecast 1.8%). The consumer sentiment index fell from 100.1 to 98.6 (forecast 99) in October.   

US share markets fell on Friday, dragged lower by disappointment on earnings from Amazon (down 7.8%) and Alphabet (Google) (down 1.8%). The Vix or so-called 'fear gauge' fell by 0.2%. The Dow Jones ended lower by 296 points or 1.2% after tracking a 471 point range. The S&P500 index fell by 1.7% and the Nasdaq index lost 151 points or 2.1%. Over the week the Dow fell 3%, the S&P 500 fell by 4% and the Nasdaq fell by 3.8%.

US treasuries rose on Friday (yields lower) as investors again embraced safe-haven assets like government bonds in favour of equities and commodities. Lower oil prices reduced inflation concerns while data showed that US core inflation also eased in the September quarter. US 2-year yields fell by 4 points to 2.81% and US 10-year yields fell by 4 points to 3.08%. Over the week, US 2-year yields fell by 10 points and US 10-year yields fell by 12 points.

Major currencies were mixed against the US dollar in US and European trade compared with the Asian close. The Euro rose from lows near US$1.1335 to highs around US$1.1420 and was near US$1.1400 in late US trade. The Aussie dollar rose from lows near US70.20 cents to highs near US71.00 cents and was near US70.90 cents in late US trade. And the Japanese yen eased from 111.36 yen per US dollar to JPY112.10 and was near JPY111.90 in late US trade.  

Bonjour, Europe

European share markets fell on Friday. Disappointing company results weighed on share indexes. The auto and parts sector fell 1%. Results from banks were more mixed. The pan-European STOXX600 index fell by 0.8%. The German Dax and the UK FTSE index also lost 0.8%. In London trade, shares of Rio Tinto rose by 0.2% and BHP fell by less than 0.1%.

Top of the morning, London

Base metal prices were mixed on the London Metals Exchange on Friday. Nickel fell by 2% with other metals down by up to 0.7%. But aluminium rose by 0.4% and zinc rose by 0.5%. Over the week nickel fell by 4.3% and aluminium and copper were lower while metals rose by up to 1%.

Hello, world!

Global oil prices rose again on Friday. Investors focussed on the upcoming sanctions to be applied by the US on Iran, cutting global oil supplies. According to Reuters, two sources said on Friday Iraq will stop trucking crude oil from its northern Kirkuk oil field to Iran in November to comply with US sanctions. Brent crude rose by US73 cents or 0.9% to US$77.62 a barrel, and the US Nymex price rose by US26 cents or 0.4% to US$67.59 a barrel. Over the week Brent fell by 2.7% and Nymex fell by 2.2%.

The gold futures price rose by US$3.40 an ounce or 0.3% to $1,235.80 an ounce. The spot gold price was trading near US$1,233 an ounce in late US trade. Over the week gold rose by US$6.70 or 0.5%. Iron ore rose by US50 cents or 0.7% to US$77.00 a tonne. Over the week iron ore rose by US$3.55 or 4.8%.

G’day, Australia!

In Australia, the State of the States report is released. In the US, personal income and spending figures are issued.

Have a great day!

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The week kicks off …

Friday, October 26, 2018

On Monday, CommSec releases its quarterly State of the States report – an economic performance report of state and territory economies.

On Tuesday

The regular weekly reading on consumer confidence is published by ANZ and Roy Morgan. And the Australian Bureau of Statistics (ABS) releases building approval data for September. 
 And the Reserve Bank Assistant Governor Michele Bullock, will speak at the Commonwealth Bank Global Markets Conference.

On Wednesday

The ABS releases the quarterly Consumer Price Index — the man measure of inflation in the economy. At this stage, we expect that prices rose by 0.3% in the September quarter, causing the annual inflation rate to ease from 2.1% to 1.8%. The “underlying” annual inflation rate may print near 1.9%. Petrol prices rose by 1.5% in the quarter after a 6.9% increase in the June quarter. And the Reserve Bank releases the September private sector credit figures (effectively the value of outstanding loans).

On Thursday

A bevy of indicators are released. CoreLogic releases its latest data on home prices. Home prices may have fallen around 0.5% in the month, with Melbourne prices down 0.7%. 
And the ABS releases data on international trade (exports and imports) as well as data on export and import prices. Also both AiGroup and CBA will issue latest survey results of purchasing managers in the manufacturing sector.

And on Friday.

The ABS will release the September quarter readings on business inflation (Producer Price 
Indexes) as well as retail trade data for both September and the September quarter.

What’s happening in the US?

In the US next week, the focus will be the latest US jobs report on Friday. But there will be indicators covering inflation, manufacturing activity, home prices and auto sales. The Chinese purchasing manager survey results are issued Tuesday and Wednesday.

On Monday

In the US, the September data on personal income and spending are released. But other features of the data are the inflation measures – especially the core personal consumption deflator (excludes food and energy prices). The core PCE deflator is the Federal Reserve’s preferred inflation measure.

On Tuesday

In the US, the S&P/Case Shiller measure of home prices is released together with consumer confidence and the regular weekly chain store sales figures.

On Wednesday

In the US, ADP releases its October report on private sector employment, derived from payroll records. Analysts expect that payrolls rose by around 200,000 in the month. 
Also in the US, the quarterly employment cost index is released together with the regular weekly data on mortgage applications.

On Thursday in the US, the ISM manufacturing index for October is released with data on construction spending, new auto sales and the usual weekly data on claims for unemployment insurance (forward indicator of the job market).

On Friday in the US is the highlight of the week’s reports – the non-farm payrolls or employment report. And it is clear that analysts will scrutinise all the key components. Employment may have lifted by around 180,000, continuing the run of strong job gains. The unemployment rate may have held at a 48-year low of 3.7%. And wages may have lifted 0.3 per cent to keep annual wage growth near 2.8%. 
Also on Friday in the US is data on international trade and factory orders. Analysts expect that the trade deficit narrowed from US$53.2 billion to US452.4 billion in September.

In China

The National Bureau of Statistics releases the “official” purchasing manager survey results for manufacturing and services on Wednesday. The private sector Caixin manufacturing survey data is on Thursday.

Financial markets

Another big week of earnings reports lays ahead. Companies expected to report earnings this week include:

On Tuesday: Baker Hughes, Coca-Cola, General Electric, Pfizer, Ebay, Facebook. 

On Wednesday: General Motors, Yum! Brands, T esla.

On Thursday: DowDupont and Apple. 

On Friday: Chevron and Exxon Mobil.

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Spending is slowing

Tuesday, October 23, 2018

The Commonwealth Bank Business Sales Indicator (BSI), a measure of economy-wide spending, rose by 0.2% in trend terms in September – the weakest growth since May 2017. While spending growth slowed in September, it hasn’t declined in 20 months. The annual trend growth in sales eased from 9.9% to 9.4% in September, although it remains above the decade-average pace of 3.4%.

The more volatile seasonally-adjusted measure of the BSI fell by 1.4% in September – the first fall in nine months. At a sectoral level, 10 of 19 industry sectors rose in trend terms in September, up from nine sectors in August. And sales rose in six of the states and territories in the month.

The Commonwealth Bank BSI is obtained by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities. The BSI covers spending broadly across the economy rather than just retail sales, including spending on automobiles, personal services and airlines.

What does it all mean?

Aussie consumers and businesses are moderating their spending, with the latest business sales indicator increasing at its slowest pace in 16 months in September. Rising petrol prices, falling home prices and higher mortgage rates may all have played a role in restraining spending.

But better job security is still encouraging discretionary spending on “experiences”, such as eating out at cafes and restaurants, and going on holidays. Solid growth of spending is still occurring on domestic travel.

Even though business conditions are just below record highs, business confidence is impacted by ongoing US-China trade concerns, weighing on business services-related spending.

What does the data show?

The Indicator – a measure of economy-wide spending – rose by just 0.2% in trend terms in September. While it was the 20th consecutive monthly lift in sales, it was the slowest sales growth recorded for 16 months. The growth pace started lifting in September 2017 and over the period from October 2017 to June 2018, the BSI consistently lifted by between 0.8-1.0% a month. But growth in sales has slowed for the past five months.

Annual trend growth in sales eased from 9.9% to 9.4% in September, although it remains above the decade-average pace of 3.4%.

The more volatile seasonally adjusted measure of the BSI fell by 1.4% in September – the first fall in nine months.

The Commonwealth Bank BSI is obtained by tracking the value of credit and debit card transactions processed through the Commonwealth Bank merchant facilities. And in line with the practice of the Bureau of Statistics with retail trade data, seasonally adjusted and trend estimates of the BSI are obtained by applying statistical software. The seasonally adjusted and trend BSI results permit analysis of the broader underlying trends that may be hidden in the raw data.

 Across sectors, 10 of the 19 industry sectors rose in trend terms in September. The biggest lift in sales occurred for Amusement & Entertainment (up 1.1%) followed by Retail Stores (up 1%) and Hotels & Motels (up 0.8%). Sales fell most at Business Services (down 0.9%) followed by Automobiles & Vehicles and Mail Order/Telephone Order Providers (both down 0.8%).

The 0.9% fall in sales at Business Services was the biggest drop in 43 months. And the 0.8% fall in sales at Automobiles & Vehicles was the biggest drop in 31 months.

Encouragingly though the 1% lift in sales at Retail Stores was the biggest increase for six months. And the 0.8% lift in sales at Hotels & Motels extends the period of consecutive monthly growth to 5½ years.

In annual terms in September, all but one of the 19 industry sectors recorded gains. Spending fell by 2.5 per cent over the past year in the Clothing sector.

At the other end of the scale, sectors with strongest annual growth in September included Retail Stores (up 16%), Hotels & Motels (up 13%) and Amusement & Entertainment (up 10.9%).

Sales were stronger across all states and territories in September except Northern Territory (down 1.3%) and Tasmania (down 0.1%). The strongest growth occurred in the ACT (up 0.7%), followed by South Australia (up 0.5%); Western Australia (up 0.4%); Victoria (up 0.2%); Queensland (up 0.1%); and NSW (up less than 0.1%).

In annual terms, sales in all states and territories increased. The strongest growth was in Western Australia (up 11.2%) from Victoria and Queensland (both up 11.1%); South Australia (up 9.9%); ACT (up 8.5%); NSW (up 7%); Tasmania (up 6%); and Northern Territory (up 0.8%).

What is the importance of the report?

The data provides a broader perspective of consumer spending. The BSI includes transactions made at traditional retail establishments such as supermarkets, clothing stores and cafes & restaurants and as such is more comparable to the ABS Household Final Consumption Expenditure released on a quarterly basis. The Business Sales Indicator also covers businesses such as airlines, car dealers and utilities such as water and electricity companies as well as motels, business, professional and government services and wholesalers.

What are the implications for interest rates and investors?

If Aussie businesses continue to do well, they will keep on taking on more staff, serving to push down the jobless rate and push up wages. As a result, economy-wide spending should remain positive. But upcoming state and federal elections could contribute to uncertainty, weighing on business investment and hiring. 

CommSec continues to expect stable interest rate settings until late 2019.

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Days of our lives

Friday, October 05, 2018

Monday, Monday…

The week kicks-off when ANZ releases September data on job advertisements. Job ads fell by 0.6% in August after rising by 1.4% in July. Job ads were up 5.1% on a year ago. The number of jobs advertised (seasonally adjusted) was 177,241 in August, just 0.9% down from the 7-year high of 178,768 set in May.

Every other day of the week is fine

On Tuesday, the National Australia Bank releases the September business survey. The business confidence index eased from +7.0 points in July to a 25-month low of +4.4 points in August. And the business conditions index rose from +12.6 points in July to a 4-month high of +15.2 points in August. The rolling annual average business conditions index was broadly unchanged at +17.1 points, not far from the record high of +17.3 points in June. 

Also the regular weekly reading on consumer confidence is published by ANZ and Roy Morgan.

On Wednesday, Westpac and the Melbourne Institute release the monthly variant of consumer confidence using similar questions and survey sample as the weekly survey. In September, consumer sentiment fell 3% to a 10-month low but confidence has lifted since according to the weekly surveys. And the Australian Bureau of Statistics (ABS) releases the June quarter building activity data, including the latest figures on dwelling starts or commencements. 

On Thursday, Luci Ellis, the Assistant Governor (Economic) at the Reserve Bank delivers a speech to the Melbourne Institute 2018 Economic and Social Outlook Conference.

And on Friday, the Reserve Bank (RBA) releases its bi-annual Financial Stability Review. The RBA also releases data on credit and debit card lending. And the ABS issues the August data on housing finance (new home loans). The RBA should give the financial sector a clean bill of health but discussions about the impact of falling home prices will prove interesting. In terms of credit and debit cards, recent revisions have made the data harder to read but consumers remain cautious about taking on new debt. In terms of home loans, the number of loans (commitments) by home owners (owner-occupiers) rose by 0.4% in July. But loans are down by 6.2% on the year – the biggest fall in 15 months.

In Yankee doodle dandy land

In the US in the coming week, the focus is on inflation readings. Meanwhile politically-sensitive trade data is expected in China on Friday together with lending and money supply indicators.

On Monday in the US, the Columbus Day holiday is recognised in some states.

On Tuesday, the National Federation of Independent Business (NFIB) survey of Business Optimism will be issued together ISD/IPP Economic Optimism index. On the same day, the regular weekly data on chain store sales are also released. The International Monetary Fund will also release new global growth forecasts. The Business Optimism index was at record highs in August but the Economic Optimism index was at 3-month lows in September.

On Wednesday the September data on producer prices is released with the monthly budget statement and wholesale inventories. On the same day the regular weekly data on new mortgage applications is also issued. The core measure of producer prices (excludes food and energy) stands 2.3% higher than a year ago.

On Thursday, the September data on consumer prices is issued with the regular weekly data on new claims for unemployment insurance.

In August the core measure of consumer prices (excludes food and energy) rose by just 0.1% in the month with the annual rate easing from 2.3% to 2.2%.

On Friday, the September data on export and import prices is released and the early reading of consumer sentiment for the month of October is also released. Export prices are tipped to have lifted by just 0.2% in September with import prices up 0.1%. Both prices are up near 3.6% over the year.

And in China…

The week kicks off with the results of the private sector Caixin purchasing manager’s survey for September. The survey results are released for the services sector as well as a composite indicator covering both the manufacturing and services sectors.  And on Friday, a raft of money supply and lending indicators are set down for release together with new vehicle sales and the politically-sensitive international trade data. Exports are expected to have lifted 10.1% over the year with imports up 18.7%.

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Friday I have Monday on my mind

Friday, September 28, 2018

Monday mornin' feels so bad

The calendar clicks over from September to October next Monday – the scary thing being that there is less than three months to Christmas. In the coming week, the Reserve Bank Board meets and retail trade and building approvals data are released with international trade. The week kicks-off on Monday when CoreLogic releases the Home Value index. Also Commonwealth Bank/Markit and Australian Industry Group (AiGroup) release their separate purchasing manager indexes (PMI) for the manufacturing sector. Based on the daily data, home prices probably fell by around 0.4% in September, with Hobart and Brisbane prices out-performing other capital cities. Capital city home prices similarly fell by 0.4% in August. The AiGroup PMI rose from 52.0 points to 56.7 in August. And the CBA/Markit PMI rose from 52.4 points to 53.2 in August. Both readings were above 50 points, indicating that the manufacturing sector is expanding.

Coming Tuesday this looks better

The Reserve Bank Board meets but no change in rates is expected for the 26th straight month. Also the regular weekly reading on consumer confidence is published by ANZ and Roy Morgan.

Wednesday just won’t grow

The Australian Bureau of Statistics (ABS) release data on dwelling approvals – approvals of building applications by local councils. Council approvals to build new homes fell by 5.2% in July to be down 5.6% over the year. Also the Federal Chamber of Automotive Industries (FCAI) release the VFACTS report on new vehicle sales. And Commonwealth Bank/Markit and AiGroup release their separate survey results of purchasing managers in the services sector. And new vehicle sales in Australia dropped 1.5% on the same month in 2017, with new registrations totalling 95,221 units.

Thursday goes too slow

The ABS release the August international trade data – the export and import figures for the month. The trade surplus eased from $1,937 million in June to $1,551 million in July. It was the 12th surplus in 15 months. The rolling annual surplus rose from $6.219 billion to $7.408 billion.

I got Friday on my mind

The ABS release the August data on retail trade or sales while AiGroup releases the Performance of Construction index. Retail trade was flat in July after rising 1.3% in the previous three months. Annual spending growth rose from 2.8% to 2.9%.

US jobs data hogs limelight

The monthly jobs data in the US (non-farm payrolls) is generally regarded as the pre-eminent monthly indicator. And it is released on Friday in the coming week. There are also various ‘top shelf’ indicators to watch.

The week kicks off on Monday in the US with the release of the ISM purchasing managers index for manufacturing and data on construction spending. The ISM PMI stands at a 14-year high of 61.3.

On Tuesday, the September data on new vehicle sales will be issued. And on the same day, the regular weekly data on chain store sales are also released.

On Wednesday, the ISM PMI for services is issued – a survey of purchasing managers in the services sector. On the same day the regular weekly data on new mortgage applications is also issued. The ISM services PMI stood at 58.5 in August – well above a reading of 50, signifying expansion. Little change is expected in September.

On Thursday, in the US the Challenger report on planned job cuts is released, Data on factory orders is also issued. And there is the regular weekly data on new claims for unemployment insurance.

Employers announced job cuts of 38,427 in August, the most since March. Factory orders may have risen 0.9 per cent in August after a 0.8% fall in July.

On Friday, in the US, the non-farm payrolls report (employment and unemployment) is issued for the month of September. And on the same day, the August readings on exports and imports (international trade) are also released.

The US job market is strong. In August, employment rose by 201,000 – a record 95th consecutive lift in jobs. Unemployment stood at 3.9 per cent (just above 18-year lows) and annual growth of wages stood at a 9-year high of 2.9 per cent. Economists tip a 185,000 lift in jobs in September with the jobless rate down to 3.8%. But the wage data may get most interest. A further solid lift in hourly earnings would point to further rate hikes ahead as well as a firmer US dollar (or greenback).

And the US trade deficit may have edged higher from $50.1 billion to $50.2 billion in August.

In China, the coming week kicks off on Sunday (September 30) when official purchasing manager index (PMI) results for both manufacturing are services sectors are scheduled. The manufacturing PMI rose to 51.3 points in August, up from 51.2 points in July, remaining above the 50-point mark that separates growth from contraction for a 25th straight month. After these data releases, the next figures aren’t due until Monday October 8.

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Tassie baby boom & baby boomers working more

Friday, September 21, 2018

Overall, Australia’s annual population growth rate fell from a downwardly-revised 1.58% (previously 1.59%) in December 2017 to 1.55% in March 2018. Tasmania’s annual population growth rate rose from 0.96% in December 2017 to 1.02% in March 2018 – the strongest growth rate in 8½-years. Employment rose by 103,600 in the three months to August after a gain of 65,300 in the previous three months. Over the past 12 months, 301,200 people have found jobs, down from 318,100 in the 12 months to May. A record 12.66 million Aussies are employed. And regarding baby boomers, in the year to August, 58.3% of those aged 60-64 years and a record-high 14.1% of those aged 65 years and over were in the job market.

What does it all mean?

There was a lot of fanfare in the lead-up to the Australian Bureau of Statistics’ population clock ticking over 25 million people on August 7. And the Reserve Bank Governor Philip Lowe recently backed Australia’s elevated population growth as a key reason for our economic prosperity. He said, “…with Australia's faster population growth being one of the reasons our economy has experienced higher average growth than many other advanced economies….People living in Australia who were born overseas are more likely than the average Australian to have a post-secondary school qualification.”

Australia’s annual population growth rate remained elevated at 1.55% in March 2018, but it’s the slowest pace in two years. Net overseas migration slowed to 236,786 over the year to March – the lowest intake in 18 months – accounting for 62% of total population growth. In terms of natural increase, annual deaths are the highest on record at 163,220 people. And births rose to 307,156 people in March, up from 304,200 in December.

Once again, Tassie stands-out in another key statistic. While population growth remains strongest in Victoria (up 2.18%) and the ACT (up 2.08%), people additions in the Apple Isle grew by 1.02% over the year to March – the strongest pace since September 2009. And Queensland continues to be a beneficiary of net interstate migration with its population growth lifting to 1.7% in March, up from 1.65% in December. But annual population growth in the Northern Territory is the lowest in three years at just 0.12%.

Jobs growth in Australia is very healthy. Where are the jobs being created? Public Administration & Safety; Transport Postal & Warehousing; Manufacturing; and Construction were the job ‘hot spots’ in the three months to August.

And there is no stopping older Aussies. There are more people aged 60-64 years who are currently working than those not working. The participation in the workforce of those aged over 65 years is at record highs. Senior Aussies are continuing to work due to improved health, technology, more jobs in the services sector, a need to boost superannuation savings and a rise in flexible work options.

The employment details

The participation of seniors is reaching new highs, but workforce participation of those 20-24 years rose fell to 77.1% in August, down from 78% in July. A greater proportion of young married women are also in work. In the year to August, an average of 75.9% of married women aged 25-34 years were in the workforce – just below record highs. In the year to August, the average weekly actual hours worked per person employed was 33.2 hours, up from a near record-low 31.8 hours in July. On average, people are working 1.3 hours a week less than they were a decade ago.

What are the implications?

There is still spare capacity in the labour market, but it is slowly being whittled away. Wages should gradually lift over the year amid emerging skills shortages in some industries – especially information technology and communication, mining engineering, construction and healthcare.  

Australia’s population is growing, albeit a little lower than previously. Migrants to Australia make a significant contribution both culturally, but also in the workforce. Skills shortages can be plugged in some industries. Migrants living in Australia, but born overseas “are more likely than the average Australian to have a post-secondary school qualification”, according to Reserve Bank Governor Philip Lowe.

And with around 580,000 international students currently studying in Australia, the potential boost to the nation’s human capital is enormous. International students account for around 70% of overall net migration.  

Rising numbers of Aussies adds to demand for a raft of businesses across a range of industry sectors. The lift in the growth of the population – and the physical population numbers – increase demand for roads, schools and hospitals, thus boosting the outlook for builders, building material companies and construction companies.

Heightened pressure on infrastructure, housing and transport from rapid population growth is being addressed by governments around the country. It is hoped that increased infrastructure building and new public transport projects will eventually alleviate productivity-sapping bottlenecks in the big cities for workers.

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