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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.

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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Things are looking good

Friday, September 07, 2018

On Tuesday, the weekly consumer confidence survey is released with lending finance data and the NAB business survey. 
Most interest is in the NAB business survey. In July, the business confidence index rose from 20-month lows of +5.6 points in June to +6.6 points. And the business conditions index eased from +14.1 points +12.4 points in July. The long-term average of the business conditions index is +5.7 points so it’s clear that Corporate Australia is in good shape.

On Wednesday, Westpac and the Melbourne Institute release the monthly consumer confidence survey. This is more of a check on the ANZ/Roy Morgan weekly survey – especially as both surveys pose the same questions. But each quarter the Westpac survey poses special questions including a poll on the ‘wisest places’ for new savings. And the latest quarterly results are issued on Wednesday. 
Also on Wednesday the Reserve Bank releases the July credit and debit card activity data. In June the average credit card balance rose by $21.30 to a 5-year high of $3,272.70. The average balance was also up by 4.6% over the year – the strongest annual growth rate in almost eight years.

On Thursday, the August Labour Force figures are released by the Australian Bureau of Statistics. In July, employment fell by 3,900 after an upwardly-revised increase of 58,200 (previously reported as 50,900) in June. The jobless rate fell to a 51⁄2-year low of 5.3%. 
The Commonwealth Bank Group is tipping a 20,000 lift in jobs in August and a further fall in the jobless rate to 5.2%.

What’s happening in the US + China?

‘Top shelf’ economic data is released in both the US and China in the coming week. Sales, production and inflation data are issued in the US. Meanwhile sales, production and investment data are released in China.

The week kicks off on Monday in the US with the release of consumer credit data and a gauge of inflation expectations. 
While in China, data on consumer and producer prices are issued together with an estimate on vehicle sales. Annual consumer price inflation is expected to tick higher from 2.1% to 2.2%.

On Tuesday in the US, the National Federation of Independent Business (NFIB) releases the business optimism index for August. And the JOLTS survey of job openings is also issued together with the regular weekly data on chain store sales.

The NFIB survey of small business was at the second highest level in 45 years in July. The JOLTS survey was also at its second highest level on record in June.

On Wednesday in the US, the measure of business inflation – the producer price index (PPI) – is released. The core PPI measure (excludes food and energy) was at a 2.7% annual rate in July.

Also on Wednesday the Beige Book is issued – a survey of economic conditions across the Federal Reserve districts. The Fed has described the US economy as ‘strong’ – justifying the short odds of a rate hike at the September 25/26 interest rate setting meeting. 
The weekly data on new mortgage applications is also released in the US with the monthly Budget statement.

On Thursday in the US, the consumer price index (CPI) is issued. While not the Fed’s preferred measure of inflation, the results will be closely watched ahead of the next policy-making meeting. The core CPI was up 2.4% on a year ago and a similar result is expected in August. The weekly data on new claims for unemployment insurance is also issued.

The week rounds out with a raft of data to be released in the US on Friday. Retail sales data is released with industrial production, export & import prices, consumer sentiment and business inventories.

Economists tip a solid 0.4% lift in retail sales in August after the 0.5% gain in July. The annual rate of sales currently stands at a hefty 6.4%. Production may have lifted by 0.3% in August after the 0.1% increase in July.

Similarly it’s a big day for new data in China on Friday. Again retail sales and production data are issued, together with investment figures. Lending and money supply figures are also tentatively scheduled for release on Friday.

On Saturday, China’s house price index is released for August. Home prices are currently up 5.8% over the year.

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What’s ahead for Oz and the world economy next week?

Friday, August 17, 2018

Monday 20: August sales up, Chinese tourists up

The week kicks off when the Commonwealth Bank releases the latest Business Sales Indicator – a measure of economy-wide spending. Recent data has indicated firm growth in sales. The Australian Bureau of Statistics (ABS) releases the June data on arrivals and departures – both tourist movements and migration flows. Tourist arrivals rose by 1.4% to 766,300 in May, up from a downwardly-revised 755,800 (previously 756,300) in April. Departures also rose, up by 1.2% in May to a record high of 938,800, up from an upwardly-revised 927,700 (previously 923,400) in April. China was again the largest source of tourists to Australia – 1,432,600 came to Australia from China, ahead of the 1,366,500 visitors from New Zealand.

Tuesday 21 August; Consumer confidence

The Reserve Bank releases the minutes of the meeting held on August 7. Much has already been communicated but analysts will be looking for insights provided by the Bank’s liaison program. The Reserve Bank Governor also delivers a speech in Canberra on Tuesday, at the breakfast event to launch ASIC's National Financial Capability Strategy 2018. Also on Tuesday, the latest weekly reading on consumer confidence is issued by Roy Morgan and ANZ. Consumers are generally positive, with the strength of the job market a key influence.

Wednesday 22 August: Building data and jobs

The ABS releases building data: Construction Work Done for the June quarter. The estimates on residential building is incorporated in the dwelling investment component of the quarter’s economic growth data. Construction work done rose by 0.2% in real (inflation-adjusted) terms in the March quarter – the fifth gain in six quarters. Work done was up 5.0% on a year ago. Residential building rose by 0.4% in the March quarter. Also on Wednesday, the skilled vacancies data is released by the Department of Jobs and Small Business. Job vacancies have fallen for three straight months, suggesting a slowing of the strong job gains. The Reserve Bank Deputy Governor Guy Debelle also delivers a speech at the Economic Society of Australia in Brisbane.

Thursday 23 August: job market estimates

The ABS issues the detailed job market estimates for July, including demographic and geographic data.

THE WEEK AHEAD OVERSEAS

In the US, the release of minutes from the last Federal Reserve meeting will attract interest while housing dominates the data docket. The week kicks off on Tuesday when the usual weekly data on chain store sales is released.On Wednesday the Federal Reserve releases minutes of the last policy-setting meeting held over July 31/August 1. Analysts will be looking for anything that confirms views that a rate hike will be delivered next meeting.In terms of economic data, existing home sales figures are expected on Wednesday. In June, data showed a 0.6% fall in sales to a 5.38 million annual rate – a five month low. Home sales still stand 2.2% higher than a year ago.Also on Wednesday in the US, weekly data on new mortgage applications is issued.

On Thursday in the US, data on new home sales is released. In June sales were down by 5.3% to a 631,000 annual rate – an eight month low. Not only were sales down, but the stock of homes increased and the average sales price was down on a year earlier. Sales may have lifted 0.6% in July. Also on Thursday, the weekly data on new claims for unemployment insurance is also issued, together with the influential Kansas Federal Reserve manufacturing gauge. The Markit “flash” purchasing manager survey estimates are also issued on Thursday for the US, France, Germany, the Eurozone and Japan. On Friday in the US, the July data on durable goods orders is released – a measure of business investment. Orders rose by 1% in June, led by transport, after two months of declines. In July economists tip another 1% lift in orders.

COMPANIES REPORTING NEXT WEEK

The peak of the earnings season (profit-reporting season) has arrived. Amongst the Aussie companies expected to report earnings include:

On Monday are: Woolworths Group, Fortescue Metals Group, Ansell, Beach Energy, Greencross Ltd, NIB.

On Tuesday: Oil Search Limited, BHP Billiton Limited, Altium, Healthscope, Super Retail Group.

On Wednesday: A2 Milk Company Limited, Seven Group Holdings, Sydney Airport, Newcrest Mining Limited, Adelaide Brighton Limited, LendLease Group, South32 Limited, Ardent Leisure, APA Group, APN, Coca Cola Amatil, Worley Parsons

On Thursday: Qantas Airways Limited, Santos Limited, Qube Holdings Limited, Flight Centre Travel Group, Stockland, Alumina. Webjet, Village Roadshow, South32.

On Friday: Medibank Private Limited, Tassal, Sims Metal, Nine Entertainment, Mayne, Brambles, Afterpay.

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Investor Signposts: Are wages on the rise?

Friday, August 10, 2018

The release of the June quarter Wage Price Index dominates the local agenda in the coming week. The semi-annual update on average weekly earnings will also be keenly observed together with the July jobs report.

The week kicks off on Monday with the Reserve Bank estimates of credit and debit card lending.

On Tuesday, the NAB business survey is issued. Business confidence fell to the lowest level in 20 months in June. But business conditions are just below the best levels on record, supported by the lower Aussie dollar, with profits near all-time highs.

Also on Tuesday, the latest weekly reading on consumer confidence is issued by Roy Morgan and ANZ.

On Wednesday, arguably the most important data release for the inflation and interest rate outlook is scheduled – the wage price index (WPI). The WPI rose by 0.5 % in the March quarter. Annual wage growth remained steady at 2.1 %.

But wages including bonuses rose to a 3-year high of 2.7 % over the year to March. An increase in the minimum wage and new Enterprise Bargaining Agreements are expected to push wages up by around 0.6 % during the quarter.

Also on Wednesday, the monthly Westpac and Melbourne Institute consumer confidence reading is released. The gauge rose by 3.9 % to 106.1 in July – the highest level in 4 1⁄2 years – with improving job security a key influence.

On Thursday, the ABS issues the July employment report. The unemployment rate is at 51⁄2-year lows of 5.37 % with a blockbuster 50,900 jobs created in June.

Strong population growth and a robust labour market have pushed the participation rate to near record highs of 65.7 %. CommSec tips an increase in total jobs of around 10,000 during the month.

The average weekly earnings data is released every six months by the ABS. The figures, also released on Thursday, are important as they provide dollar estimates of wages in the economy across states and industries.

On Friday the Reserve Bank Assistant Governor (Economic), Luci Ellis, delivers a speech at the Sir Leslie Melville Lecture Series Event in Canberra.

Overseas: China monthly activity data in focus

Over the coming week, China investment, production, retail sales and house price data are all issued. In the US, retail spending, housing, industrial production, business and consumer activity gauges will be in focus.

The week kicks off on Tuesday when China issues its monthly retail sales, investment and production activity data. During July, the Chinese government announced a “more proactive” fiscal policy stance, pledging to deliver additional tax cuts and quicken the issuance of local governments’ special bonds to support infrastructure spending. But domestic demand was hampered by extensive flooding and US auto import tariffs took effect on July 6, likely impacting sales.

Also on Tuesday the US export and import prices, weekly data on chain store sales and the small business sentiment gauge – the NFIB business optimism index – are all released.

On Wednesday China house prices data are issued by the National Bureau of Statistics. New house prices rose by 1.1 % in June, up from 0.8 % in May. It was the strongest growth rate in 21 months.

Also on Wednesday in the US, industrial production and retail sales data are issued. Household consumption rose by 4 % in the June quarter, boosting overall economic growth to 4-year highs of 4.1 %. Retail sales and industrial production are both tipped to lift by 0.3 % in July. Also, the National Association of Home Builders releases its August survey with the New York Federal Reserve manufacturing gauge and weekly data on new mortgage applications.

On Thursday, US housing starts and building permits data are issued for July. US homebuilding eased to a 9- month low in June and permits declined for a third successive month amid an acute shortage of homes available for sale. The weekly data on new claims for unemployment insurance is also issued, together with the influential Philadelphia Federal Reserve manufacturing gauge.

On Friday, the US Conference Board leading economic index and the University of Michigan consumer confidence survey are both released.

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Investor signposts: RBA dominates the agenda

Friday, August 03, 2018

Australia: The Reserve Bank dominates the agenda

·         The Reserve Bank dominates the local agenda in the coming week. In overseas markets, inflation data is in focus in both the US and China.

·         The week kicks off on Monday with the release of the ANZ measure of job advertisements. Job ads have been choppy in recent months. In June, ads fell 1.7% from 7-year highs after rising by 1.4% in May. Job ads are still up 6.9% on a year ago. The number of jobs advertised (seasonally adjusted) was 175,660 in June while the trend level of job ads stood at a 7-year high of 177,692.

·         On Tuesday, the Reserve Bank Board meets to decide interest rate settings. The last move in rates was two years ago in August 2016. And given the recent tame inflation data, the period of inaction on rates should continue.

·         The Performance of Construction index is also released on Tuesday.

·         On Wednesday, the Australian Bureau of Statistics (ABS) will release the June data on housing finance.

·         In May the number of loans (commitments) by home owners (owner-occupiers) rose by 1.1 % – the first increase in six months. And the value of new housing commitments (owner occupier and investment) rose by 0.5%. Owner-occupier loans rose by 0.7% and investment loans fell by 0.1%.

·         Based on data from the Bankers Association, the value of home loans may have fallen by 1 % in June, signalling a flattening of home loan demand.

·         Also on Wednesday, the Reserve Bank Governor, Philip Lowe, delivers a speech to the Anika Foundation lunch in Sydney. The title of the speech is “Demographic Change and Recent Monetary Policy”. The Reserve Bank Governor will no doubt provide some top-level views given the recent tame inflation data and then these will be fleshed out on Friday with the monetary policy statement.

·         That quarterly Statement on Monetary Policy will be released at 11.30am Sydney time on Friday. The main focus will be the forecasts on inflation and economic growth (GDP) but no major changes are expected.

·         Also on Friday, the ABS will release the June lending finance figures. This data covers not just new home loan commitments but commercial, personal and lease loans.

·         In May, total new lending commitments (housing, personal, commercial and lease finance) fell by 1.4% to $67.4 billion. Commitments are down by 1.5% on the year. In trend terms, lending fell for the fifth straight month, down by 1.3% in May.

Overseas: Inflation in the spotlight

·         Inflation figures will be released in the US and China over the week. The sensitive Chinese international trade data (exports and imports) is also issued.

·         The week kicks off on Tuesday in the US when the JOLTS data is released – the Job Openings and Labour Turnover Survey. This survey is conducted by the Bureau of Labour Statistics and attempts to measure the level of labour demand or job vacancies. Vacancies eased by 202,000 in May but this was from record levels – the 6.64 million jobs waiting to be filled remains significant.

·         Also on Tuesday consumer credit data is released in the US. And the regular weekly data on chain store sales is issued.

·         On Wednesday in China, international data is issued. In June, exports were up by 11.3 % on a year ago with imports up 14.1%. The trade surplus stood at US$41.6 billion. In July, economists expect that imports rose at a 20.8 % annual rate with exports up 10%. Greater imports from the US combined with a smaller trade surplus would be viewed positively by White House officials.

·         On Wednesday in the US, the regular weekly data on new mortgage applications is issued.

·         On Thursday in China data on consumer and producer prices is expected. Consumer prices are currently up 1.9 % on a year earlier with producer prices up 4.7% – the latter boosted by higher commodity prices, especially petroleum products.

·         The US data on producer prices will be released on Thursday with data on wholesale inventories. The data on consumer prices is issued on Friday.

·         Also on Friday in the US is the monthly data on the federal budget (for the month of July). In China the July data on vehicle sales will be released.

 

 

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Investor signposts: Which state will come out on top?

Friday, July 27, 2018

Australia: Which state will come out on top?

·        The handover from July to August occurs with a data deluge. The CommSec State of the States quarterly report is followed by housing, manufacturing and service-sector gauges, new vehicle sales and the retail trade report.  

·         The week kicks off on Monday with the release of the CommSec State of the States report. The report tracks the economic performance of the states and territories across eight key indicators. 

·         On Tuesday, building approvals, private sector credit, new home sales and the regular weekly gauge on consumer confidence from Roy Morgan and ANZ are all released. 

·         On Wednesday, CoreLogic releases the July data on home prices. Based on daily data released so far, home prices have fallen by 0.5 per cent in the five mainland capital cities to stand 2.3 per cent lower than a year ago.

·         Also on Wednesday both AiGroup and the Commonwealth Bank release survey results on manufacturing activity. And the Bureau of Statistics (ABS) issues its Selected Cost of Living indexes for the June quarter, detailing changes over time in the purchasing power of the after-tax incomes of Aussie households.  

·         On Thursday Australia’s international trade balance for June is issued. The trade surplus rose from $472 million in April to $827 million in May. It was the tenth surplus in 12 months. Annual exports to China rose to US$102.65 billion in May – a new record high.

·         On Friday the Federal Chamber of Automotive Industries releases the July sales data for new vehicles. And the ABS issues June data on retail trade. The growth in retail spending has lifted over the past nine months, led by the food and clothing categories. And as tax return time draws closer, the end of financial year new car sales will be closely monitored. SUV sales are at record highs, but passenger vehicles sales are declining.

·         Also on Friday both AiGroup and Commonwealth Bank release their services sector activity gauges.

Overseas: The US Federal Reserve and jobs data trumps China manufacturing activity

·         Over the coming week the US Federal Reserve meets to hand down its latest interest rate decision. And the US non-farm payrolls (employment) report is released. The Chinese manufacturing survey is also a key release. 

·         The week kicks off on Monday in the US when the June index of contract signings to purchase previously-owned homes (pending sales) and the influential Dallas Federal Reserve manufacturing index are issued.

·         On Tuesday China’s official purchasing manager’s indexes are released. A further slowdown in manufacturing activity is tipped. In the US, attention will turn to the S&P/Case-Shiller 20-city home price gauge, the Conference Board’s consumer confidence index and the regular weekly data on chain store sales.

·         Also on Tuesday, the influential Chicago manufacturing survey and the personal income/spending report are issued. The Fed’s preferred measure of inflation – the personal consumption expenditure deflator – will be keenly observed. The deflator is expected to increase by 0.2 per cent for a second successive month in June.

·         On Wednesday policymakers at the US Federal Reserve hand down their interest rate decision. No change in the Federal Funds rate target range of 1.75-2.00 per cent is expected by economists after June’s increase. Additional rate hikes are forecast in September and December.  

·         Also on Wednesday weekly data on new mortgage applications, the ISM manufacturing index and the ADP private sector employment report are issued. Earlier in the day, China’s Caixin manufacturing survey is released. 

·         On Thursday US factory orders are scheduled for June. Manufacturing activity has been supported by strong domestic demand. But growing worker shortages and import tariffs are starting to strain the supply chain. The regular weekly data on new claims for unemployment insurance and the ISM New York index are also issued.

·         On Friday China’s Caixin services gauge is released for the month of July, together with the June international trade data (exports and imports), the ISM services index and the all-important US non-farm payrolls (jobs) report. In June, 213,000 jobs were created and economists expect a further 195,000 jobs were generated in July. Average hourly earnings are tipped to lift by 0.3 per cent, with annual growth remaining at 2.7 per cent.

Financial markets

·         The Australian earnings season is approaching, coming at a time when the Aussie sharemarket has been trading at 10½-year highs. With a valuation of 15.5 times estimated earnings, the ASX200 index is trading around its 5-year average. And at 4.1 per cent, dividend yields for the benchmark are twice that of equivalent US benchmarks.

·         Corporate balance sheets are in good health, profits are near record highs and the lower Aussie dollar may boost the offshore earnings of some companies. Earnings growth expectations are broadly improving, supported by the resources sector. 

·         On Tuesday Credit Corp Group and Alacer Gold report. On Wednesday, BWP Trust, Genworth Mortgage Insurance and Rio Tinto all report. On Thursday, earnings are due from ResMed.

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Will consumer and business prices lift?

Friday, July 20, 2018

Australia: Will consumer and business prices lift?

·         The focus of investors this week will be on consumer and business inflation. Trade (export/imports) prices are also released. Further information on the jobs market will be keenly observed.

·         The week kicks-off on Tuesday with the regular weekly gauge on consumer confidence from Roy Morgan and ANZ.

·         On Wednesday the Bureau of Statistics (ABS) releases the much-anticipated June quarter Consumer Price Index – the main measure of inflation in Australia.

·         We expect that headline consumer prices lifted by 0.6 % in the June quarter to be up by 2.3 % over the year. But “underlying” measures of inflation are tipped to be more subdued, lifting by 0.5 % for the quarter and 1.9 % for the year.

·         Significant contributions are forecast from rising petrol prices of around 0.2 percentage points and health (around 0.15 percentage points), while alcohol & tobacco prices are expected to lift too. Falling recreation, communications and fruit prices will keep overall prices in check. With core inflation tipped to remain anchored near the bottom of the Reserve Bank’s 2-3 % target band in the near term, an extended period of interest rate stability is likely for the remainder of this year.

·         Also on Wednesday the latest skilled internet job vacancy index is issued by the Department of Jobs and Small Business. Vacancies fell by 0.9 % in May, but are up 5.8 % over the year.

·         On Thursday trade prices are released for the June quarter. Both export (down 1.0 %) and import prices (down 2.0 %) are tipped to decline, but are up 4.9 % and 2.1 % annually.

·         Also on Thursday the ABS issues detailed job data, including information on employment by industry.

·         On Friday the Producer Price Indexes – measures that will provide a guide on inflation across the business sector – are issued. In the June quarter, the ‘final demand’ measure was up 0.5 % to stand 1.7 % higher over the year. According to the ABS “the past several quarters have shown significant input price pressures evident across a number of industries.”

Overseas: US economic growth and housing in the spotlight 

·         It is relatively quiet in China over the coming week in terms of new economic data. However, there will be data on industrial profits on Friday. In the US, housing market indicators and economic growth are of most interest.

·         The week kicks off on Monday in the US with data on existing home sales to be released alongside the Chicago Federal Reserve National Activity index. After a 0.4 % fall in May, economists are tipping a 1.5 % lift in home sales in June. A chronic lack of stock on the market is constraining sales, but boosting prices.

·         On Tuesday, the influential Richmond Federal Reserve survey and the regular weekly data on chain store sales are both released, together with home prices. Home prices have are tipped to edge up by 0.1 % for a second consecutive month in May. The annual growth rate was a healthy 6.4 % in May.

·         Also on Tuesday, the Markit organisation releases “flash” readings for activity in manufacturing and services sectors in the US, Europe and Japan. In terms of the US readings, an easing in services sector activity is expected to be offset by a small lift in manufacturing activity.

·         On Wednesday weekly data on new mortgage applications are released, together with new home sales. Economists believe that new home sales may have fallen 2.8 % in June after surging by 6.7 % in May. Sales in the South, which accounts for the bulk of transactions, jumped to their highest level in 10½ years. 

·         On Thursday the influential Kansas Fed Manufacturing Index for July is released alongside a key measure on business investment – orders for ‘durable goods’. Durable goods are generally described as items with lifespans longer than three years – like cars and aircraft. And economists believe that orders may have risen by 2.5 % in June following a 0.4 % decline in May.

·         Also on Thursday the ‘advance’ June data on trade in goods is released. A deficit of US$64.9 billion was posted in May and the big trade deficits are ‘front of mind’ for investors given the Trump Administration’s tariff measures.

·         And on Friday the ‘advance’ reading on US economic growth in the June quarter is released alongside the June quarter Employment Cost index (ECI). Economists expect that the US economy grew at a bumper 4.0 % annual pace in the quarter after 2.0 % annualised growth in the March quarter. The included data on prices will be watched carefully together with the ECI, which is tipped to increase by 0.7 % in the June quarter.

·         Also on Friday, China is scheduled to release industrial profits for June. Total profits expanded slightly in May and annual growth was broadly stable. Revenue growth moderated on lower real sales growth in the industrial sector, despite higher producer prices.

Financial markets

·         The US company earnings season continues for the June quarter.

·         On Monday Alphabet, Kaiser Aluminium and Whirlpool report.

·         On Tuesday, 3M, AT&T, Biogen, Harley-Davidson, Lockheed, and Verizon Communications are amongst those reporting.

·         On Wednesday, Boeing, Coca-Cola, Facebook, Ford, Freeport-McMoRan & Qualcomm and Visa report.

·         On Thursday, earnings are due from Allergan, Amazon, American Airlines, ConocoPhillips, Intel and McDonald’s.

·         On Friday, Chevron, Colgate-Palmolive, Exxon Mobil, Merck and Weyerhaeuser are all scheduled to report.

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The week ahead: Money for nothing

Friday, July 13, 2018

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Australia: Money for nothing 

·         The mid-winter lull in economic data continues in Australia. However, the all-important June employment report is issued on Thursday. Tourism and business sales data will also be keenly observed.

·         The week kicks-off on Monday with the “Overseas Arrivals & Departures” publication from the Australian Bureau of Statistics (ABS). As well as providing data on tourist arrivals and departures, there are figures on longer-term migration flows. Tourist arrivals fell by 1.9% to 756,300 in April, down from a downwardly-revised record high of 770,800 (previously 771,600) in March. Departures rose by 1.3 per cent in April to a record high of 923,400, up from 911,200 in March. Over the past year a record 800,240 permanent and long-term migrants moved to Australia, up by 4.0 per cent. 

·         On Tuesday the minutes of the last Reserve Bank Board meeting are released. Each meeting there is a special issue or topic that is discussed. And that discussion can prove useful in gauging member views on interest rate sensitivities. For example, wages growth remains a key focus of Board members. In the July 3 policy Statement, the commentary highlighted that, “there are increasing reports of skills shortages in some areas”. Economists will be keeping an eye out for some evidence of this development through its business liaison program.

·         Also on Tuesday is the regular weekly gauge on consumer confidence from Roy Morgan and ANZ.

·         On Thursday the ABS issues the June employment report. Job-creation has slowed in recent months, with 12,000 full-time jobs added in May. The unemployment rate is at six-month lows of 5.4 per cent and the last time it was lower was 5½ years ago in January 2013. And key leading employment indicator – the Bureau of Statistics’ job vacancies – was at record high levels in May with the strongest annual growth rate in 7½ years. Economists tip an increase in total jobs of around 15,000 during the month.

·         On Friday the CBA Business Sales Indicator is released for June. Growth in economy-wide spending slowed in May, growing at the weakest trend pace for over a year. The BSI rose by 0.3 per cent in trend terms in May. And the annual trend growth in sales held at 7.7 per cent – the fastest growth for 3½ years.

Overseas: China data blockbuster 

·         Over the coming week China economic growth, investment, production, retail sales and house price data are all issued. In the US, retail spending, housing, industrial production and the US Fed’s Beige Book will be in focus. 

·         The week begins in China on Monday when the much-anticipated June quarter GDP report is released, together with the June monthly retail sales, investment and production activity data. Growth appears to have decelerated in most industries, including construction, consumption, service, manufacturing, employment and trade. 

·         Chinese production was strong in April, but weakened in May. And the June official manufacturing purchasing managers index was softer, signalling weaker growth momentum. A rebound in retail sales is tipped in June after annual spending growth was the slowest in 15 years in May. Fixed asset investment is expected to moderate further as the economy rebalances. Overall, annual GDP growth is tipped to fall by 0.1 per cent to 6.7 per cent.

·         Also on Monday, US retail spending data and the New York Fed purchasing managers’ index is released. Consumer spending surged 0.8 per cent in May and a further 0.6 per cent lift is forecast in June.  

·         On Tuesday China house prices data is scheduled to be issued. Out of the 70 cities the National Bureau of Statistics monitors, more cities saw housing prices increase in May compared with April. 

·         Also on Tuesday in the US, the National Association of Home Builders releasing the activity survey for July, industrial production and weekly data on chain store sales are issued. Sentiment among US homebuilders fell in June to equal the lowest level this year, reflecting sharply elevated lumber costs. And industrial production is tipped to rebound by 0.5 per cent in June after a contraction in manufacturing output in May.

·         On Wednesday the US Federal Reserve takes centre stage. In the most recent Beige Book – a national survey – Fed officials characterised the economy as performing well. Manufacturers raised production, banks reported stronger loan demand and home builders’ activity was robust. Trade worries will be a key focus in June’s edition. 

·         Also on Wednesday US housing starts and building permits are issued for June. In May, starts posted the biggest increase since July 2007, up 5 per cent, led by a 62 per cent surge in the US Midwest.   

·         On Thursday the weekly data on new claims for unemployment insurance is issued, together with the influential Philadelphia Federal Reserve manufacturing gauge and Conference Board's Leading Economic index. Seven of ten leading indicators increased in May, with building permits, manufacturing workweek and initial claims down.   

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