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Investor signposts: Reserve Bank and economic growth

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By Craig James

The week kicks off on Monday with the Australian Bureau of Statistics (ABS) releasing the September quarter Business Indicators publication, which includes data on profits, sales, inventories and wages. Solid profit growth has been achieved by Australian businesses over the past year. In the year to June, profits hit a record $304 billion, up by 20.9% on a year ago.

Also released on Monday is data on job advertisements from ANZ. While job seekers have more choices on where to look for work, online and newspaper job ads are still regarded as key leading indicators for the job market. Job ads are at 6-year highs.

The Reserve Bank Board meets on Tuesday for the final time this year. No change in monetary policy settings are expected. Interest rates are firmly on hold until at least the end of 2018 due to constrained inflation. Earlier, Assistant Governor (Business Services) Lindsay Boulton speaks at the High Security Printing Asia conference.

Also on Tuesday, the ABS issues the broader trade data for the September quarter – the balance of payments and foreign debt figures. The current account deficit widened to $9.6 billion in the June quarter which equates to around 2.1% of GDP, the lowest level since the mid-1970s.

Retailers have been successful in cutting costs, allowing prices to fall. But strong local and global competition is also serving to keep prices low. Retail trade data was flat in September after falls in the previous two months. Data on new vehicle sales and the weekly survey of consumer sentiment are also released on Tuesday.

Also on Tuesday, the ABS releases the government finance data. The spending figures (consumption and investment) are a key input into the following day’s economic growth estimates.

On Wednesday, the September quarter National Accounts are released. The main interest is in the economic growth figures (the change in GDP) but the data also includes other estimates such as household consumption. The economy probably grew by 0.5% in the quarter and 2.8% over the year.

On Thursday, the ABS releases international trade (exports and imports) for the month of October. Australia is now paying its way in the world with higher volumes of iron ore, coal and liquefied natural gas boosting exports together with increased foreign demand for Australia’s high quality agricultural products and services, such as education. In September, the trade surplus doubled to $1.75 billion, driven primarily by a surge in iron ore exports.

On Friday, the October data on home loans is released. Based on data from the Bankers Association, total lending for housing fell by 3.0% in the month. The value of loans for investors fell by 6.2% in September, with loans 13.1% below the most recent peak in January due to tighter lending restrictions.

Overseas: US employment and China inflation in focus

There are several data standouts in the US and Chinese economic calendar over the coming week. The US employment report and Chinese trade and inflation figures are of major interest.

In the US, the week kicks off on Monday with the release of the ISM New York index and data on factory and ‘final’ durable goods orders.

On Tuesday, the October US trade figures are released with the November ISM purchasing manager’s survey for the services sector. Economists expect that the ISM index fell to 59.3 in November from 60.1. Any reading above 50 indicates expansion of the services sector. Data on chain store sales will also be released.

On Wednesday, the private sector (ADP) employment report for November is released and 214,000 jobs are expected to have been generated over the month. Revised September quarter figures on labour costs and productivity in the US are also due.

On Thursday consumer credit data for October, Challenger data on job layoffs for November and the usual weekly data on jobless claims (new claims for unemployment insurance) are released.

On Friday, the keenly-awaited US employment (non-farm payrolls) report is released for November. The unemployment rate is tipped to stay near 16-year lows at 4.1/4.2% with a further 185,000 jobs forecast.

Also on Friday wholesale sales and inventories figures are scheduled for release, together with the preliminary reading of consumer confidence for December. Consumer confidence is at 17-year highs in the US.

Major November China indicators to watch include the private sector focused Caixin purchasing manager’s services survey (Monday), trade data (Friday) and inflation data – producer and consumer prices (Saturday).

Financial markets

The end of the year is fast approaching with a little over a month left of 2017. The ASX 200 is up by around 5.6% over 2017 so far with the All Ordinaries up 6.1%. But total returns on shares are up 10.5%, highlighting the importance of dividends.

The Aussie dollar started the year at its low point of US72.36 cents. The high point of US81.21 cents occurred in early September. The Aussie dollar is up around 5% in 2017.

And 90-day bills started 2017 at 1.82% with 2-year bonds at 1.91% and 10-year bonds at 2.77%. Currently 90-day bills are at 1.73% with 2-year bonds at 1.75% and 10-year bonds at 2.51%. The yield curve has flattened.

Published: Friday, December 01, 2017


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