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Investor Signposts: Federal Budget in focus

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by Craig James

It generally only dominates attention for one day of the year, but the Federal Budget will be in focus in the coming week. But there are also plenty of ‘top shelf’ indicators to watch, including retail trade.

The week kicks off on Monday with the release of building approvals data from the Australian Bureau of Statistics (ABS) as well as the job advertisements data from ANZ. The approvals data – council approvals to build new homes – is volatile. But overall, it appears that the building cycle has peaked. In February new approvals rose by 8.3% and we expect that they eased 5% in March.

Job ads have followed a zig-zag course over the past four months, lifting 0.3% in the latest month of March. Business surveys suggest that hiring is starting to lift again.

On Tuesday, there is a raft of data during the day to be followed by the release of the Federal Budget at 7.30pm. The National Australia Bank business survey is released with weekly consumer confidence and retail trade.

In March, the NAB business conditions index rose from +9.3 points to +14.2 points (long-term average +5.0 points), a 9-year high. The business confidence index eased from +6.7 points to +6.1 points. The latest Performance of Manufacturing survey suggests businesses continue to do well.

Retail trade may have lifted by 0.3% in March after a 0.1% gain in February. Certainly, the Business Sales index from Commonwealth Bank pointed to an uptick in spending in the month. Consumers are generally cautious about spending with low nominal wage growth dominating focus rather than the modest growth of consumer prices.

The Federal Budget

The Federal Budget will get the usual attention from the media on Tuesday night and Wednesday. The key point being that budget announcements are just the start of a long process of securing agreement from the Senate. The global and domestic economies continue to improve and this will hopefully translate to firmer growth of revenues.

After the raft of economic events on Tuesday, there is then a gap to the next data offerings on Friday. The ABS releases the Overseas Arrivals and Departures publication that has information on both tourism and migration flows. And on the same day, the Reserve Bank releases the monthly credit and debit card statistics that include data on the use of automatic teller machines (ATMs)

Tourist arrivals rose by 0.4% in February. And departures fell by 2.3%. Arrivals are up 10.5% on the year with departures up 4.7%. Tourists from China and Hong Kong rose to a record 1,483,400 over the past year, up 13.5% over the year.

Consumers continue to cut back of credit card debt. In smoothed terms (12-month average) the average balance was down by 1.1% in February.

Overseas: US inflation; China trade and inflation

Overseas, inflation data will be released in both China and the US. Retail sales data will also of interest in the US. And in China, trade figures will attract attention.

The week begins on Monday with trade data (exports and imports) slated for release in China. And in the US, the employment trends index is issued.

On Tuesday in the US, a number of indicators are released that would be best described as “second tier”. The National Federation of Independent Businesses (NFIB) release the business optimism survey. Revised data on wholesale sales and inventories is also released. A forward-looking gauge on the job market is also scheduled – the JOLTS survey of job openings. And the usual weekly figures on chain store sales are issued.

In China on Wednesday, the April data on producer prices and consumer prices is released. Producer prices are up 7.6% on a year ago – just off the fastest rate in eight years. But consumer prices are only 0.9% higher than a year ago.

In the US on Wednesday, the usual weekly data on mortgage applications is released together with data on import and export prices and monthly figures for the Federal Budget.

On Thursday in the US data on producer prices is issued with the usual weekly data on claims for unemployment insurance.

And on Friday, the consumer price index is issued with retail sales and consumer sentiment. The core measure of prices (excludes food and energy) may have lifted 0.2% in April, leaving the annual rate at 2%. And just like in Australia, US consumers are spending only cautiously with non-auto (car) sales largely flat in March. Interestingly, the softness of spending stands in contrast to healthy consumer sentiment.

There are approximately five speeches by US Federal Reserve presidents over the week.

Financial markets

The Australian share market has generally done well during the month of May – not great, but not badly either. Over the past 70 years, the share market has lifted 46 times for an average monthly gain of 0.5%. The extra piece of good news is that the share market has lifted in May over the past three years.

Published: Friday, May 05, 2017


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