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Investor signposts: RBA dominates next week

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By Craig James

If it wasn’t for the Reserve Bank, the coming week would be largely devoid of market-moving events. There are three speeches scheduled by Reserve Bank officials, in addition to the publication of minutes of the last policy-making Board meeting. There are also figures on car sales and jobs to watch.

In Australia the week kicks off on Tuesday with the Australian Bureau of Statistics (ABS) releasing data on new vehicle sales. The industry data has already been released by the Federal Chamber of Automotive Industries and that showed that sales in June were the highest on record for a June month.

Clearly both businesses and consumers have been active in buying new vehicles. In June, 52% of sales went to private buyers; 40% of vehicles were bought by businesses; and the remainder were purchased by government or rental companies.

Also on Tuesday the Reserve Bank releases details (“minutes”) of the Board meeting held on July 4. There was much conjecture that Board members would make take on a more ‘hawkish’ posture at the meeting – that is, raise the prospect of higher interest rates ahead.

Instead the text of the rate decision deviated little from that used in the past couple of months. Still, analysts will look closely at the Board minutes in the hope of uncovering some subtle changes in rhetoric.

In addition, ANZ and Roy Morgan release the weekly consumer sentiment survey on Tuesday. Lower fuel prices are serving to boost sentiment although offset by on-going political wrangling.

On Wednesday, the Head of the Reserve Bank’s Economic Analysis Department, Alex Heath, will participate at the Women in Economics panel at the Australian Conference of Economists.

On Thursday, the ABS will release the monthly job report. In May, employment surprised all and sundry by rising by 42,000 in May after rising by 46,200 in April (previously reported as a rise of 37,400 jobs). Full-time jobs rose by 52,000 while part-time jobs fell by 10,100. By contrast, economists had tipped a near 10,000 increase in jobs. And not only did jobs lift, but hours worked rose by 1.9% in May (biggest rise in 11 years) and the unemployment rate fell from 5.7% to a 4-year low of 5.5%.

In June we suspect employment rose by a more pedestrian 15,000 while the jobless rate probably held stable. Another month of strong job growth would start to generate speculation that higher wages lay ahead. The implication is that this could lead to higher price inflation and higher official interest rates.

Also on Thursday the Commonwealth Bank will release the June results of its Business Sales Indicator – a measure of economy-wide spending derived by assessing credit and debit card transactions.

On Friday, there are two speeches from senior Reserve Bank officials. In Adelaide, Deputy Governor Guy Debelle delivers a speech – “Global Influences on Domestic Monetary Policy” – at the CEDA/University of Adelaide luncheon.

And in Melbourne on Friday, Michele Bullock, Assistant Governor (Financial System), speaks at the Melbourne Institute/The Australian Economic & Social Policy Conference.

Chinese economic growth figures take centre-stage

In the coming week, investor attention will be dominated by the release of the Chinese economic growth figures.

In fact the week kicks off in China on Monday with these June quarter economic growth figures. While some may question the veracity of the data given that it is issued just 17 days after the end of the quarter, it still has the potential to move financial markets, especially currencies.

In the March quarter, the Chinese economy – the world’s second largest – grew at an impressive 6.9% annual rate and 6.8% growth is tipped in the June quarter.

Also on Monday, the Chinese National Bureau of Statistics will release monthly data on retail sales, production and investment.

In the US on Monday, the New York Federal Reserve releases its influential regional manufacturing survey.

On Tuesday in China, the June data on house prices is released. Annual growth has likely peaked, although growth was still lofty at 10.9% in the year to May.

In the US on Tuesday, there is a bevy of data to be released – although to be honest, it is unlikely to cause a ripple in financial market pricing. The National Association of Home Builders releases its July Housing Market index. In addition, June figures on import and export prices are released together with May data on capital flows and the usual weekly data on chain store sales.

On Wednesday, in the US the June data for building permits and housing starts are released. The figures provide early guidance on housing market and retail activity. The problem is that the data can prove volatile from month-to-month. In May, starts fell by 5.5% but an 8% rebound in commencements is expected in June.

On Thursday, the weekly figures on claims for unemployment insurance are released together with the June leading index and the influential Philadelphia Federal Reserve business index. The leading index may have lifted by 0.3% in June after a similar rise in May. But the Philly Fed index is tipped to ease from 27.6 to 22.9 in July.

Also on Friday, data on business inventories is issued, alongside industrial production, and the University of Michigan confidence reading.

Published: Friday, July 14, 2017

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