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Investor Signposts: Pieces of the economic puzzle

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By Craig James

The December quarter economic growth data is released on March 1. But in the coming week, pieces of the puzzle start to be put together. The other data focus domestically is on wages. But once again, it will be the Reserve Bank that draws the most attention, with a speech by the Governor on Wednesday before he fronts the House of Representatives Economics Committee on Friday.

The week kicks off on Monday, with the release of the business sales index from Commonwealth Bank. In contrast to the retail trade data from the Bureau of Statistics (ABS), the BSI is a measure of economy-wide spending.

On Tuesday, minutes of the last Reserve Bank Board meeting are released. The RBA has a ‘neutral stance”, but the focus is more likely to be on a number of the “hot button” issues like homes sales and prices.

Also on Tuesday the weekly consumer confidence data is released. Consumer sentiment eased by 0.9% last week.

On Wednesday, the ABS releases the Wage Price Index – the main measure of wage costs in Australia. Lower growth of wages has encouraged employers to take on more staff. And while low nominal growth of wages is positive for employers, wages are still growing at a faster pace than prices – positive for consumers. In fact, inflation is just 1.5% and wages are growing at a 1.9% annual rate. It is clear that real wage gains are still boosting consumer purchasing power. For the record, we expect that wages growth remained tame in the December quarter, lifting by 0.5% in the quarter and by around 2% on the year.

Also on Wednesday, preliminary data on construction work is released for the December quarter. The data on residential work completed is an input into the calculation of economic growth.

The Reserve Bank Governor, Philip Lowe, will deliver a speech to the Australia-Canada Economic Leadership Forum on Wednesday (8:30am AEDT).

On Thursday, the ABS will release the December quarter estimates on business investment. This data is also an input into the calculation of economic growth. But also insightful are the estimates of planned investment for the coming year.

Overall, we expect that investment rose by 1% in the quarter, reflecting the improvement in the global economic outlook and lift in business conditions. The Reserve Bank will be interested in estimates of non-mining investment. In addition, the ABS will release more detailed demographic and regional estimates on employment alongside the semi-annual estimates of average weekly earnings – the dollar estimates of wages in the economy.

On Friday, the Reserve Bank Governor is scheduled to appear before the House of Representatives Economics Committee. There are a number of ‘hot button’ issues at present and it is likely committee members will ask the Governor’s views on the housing sector, Australian dollar and inflation outcomes.

US housing sector under the spotlight

In the US, there is the usual bevy of economic indicators to be released with the focus on the housing sector. There’s only one piece of data to note in China this week: January estimates of home prices, released on Wednesday.

The week kicks off on Tuesday with the Markit “flash” estimates of manufacturing activity in US, Japan and Europe.

On Wednesday, in the US, existing home sales data is issued alongside the minutes of the last Federal Reserve meeting. Most interest will be in the timing of rate hikes. A number of Fed officials haven’t essentially confirmed that the upcoming March meeting is a “live option” and even economists are divided on a March rate hike, so the commentary will be closely dissected. Existing home sales may have risen by 1.1% in January after easing by 2.8% in December.

On Thursday, the influential Chicago Federal Reserve National Activity index is released together with the usual weekly data on new claims for unemployment insurance (jobless claims) and a number of home price measures are slated for release. The most interest will be on the FHFA home price index. The annual growth rate of home prices may have edged up from 6.1% to 6.2% in December.

And on Friday, new home sales data is issued alongside the University of Michigan consumer confidence reading.

Share markets, interest rates, exchange rates and commodities

The Australian profit reporting season lifts into top gear in the coming week. On Monday, earnings are scheduled to be released by BlueScope Steel, Brambles, Charter Hall, GWA, nib and Worley Parsons.

On Tuesday, earnings announcements are expected from Altium, BHP Billiton, FlexiGroup, Monadelphous, Oil Search, Seek, Seven Group, and Senex.

Among those expected to report earnings on Wednesday are APA Group, Coca-Cola Amatil, Fletcher Building, Fortescue Metals, Fairfax Media, G8 Education, Healthscope, IAG, Iress, Stockland, Woolworths and Woodside Petroleum.

On Thursday, a raft of companies is expected to issue results including: Ardent Leisure, Adelaide Brighton, Aconex, Alumina, Cardno, Crown Resorts, Flight Centre, InvoCare, MYOB, Nine Entertainment, Perpetual, Qantas and Southern Cross Media.

On Friday, Automotive Holdings is among those listed to issue earnings with Billabong, Super Retail Group, Link and Charter Hall

Published: Friday, February 17, 2017


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