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Ryan Felsman
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Weekly round up!

Friday, November 16, 2018

The Reserve Bank Board’s November monetary policy meeting minutes and a speech by Governor Philip Lowe at the CEDA annual dinner are the highlights next week. Data releases are mostly second tier: tourism, skilled internet job vacancies and the CBA’s ‘flash’ manufacturing and services’ gauges feature.

The week kicks off when CommSec releases the Home Size Trends Report. Changes in the size of homes has implications for builders, developers and retailers of home appliances. If bigger homes are built, this may result in fewer homes that are needed to be constructed to absorb increases in population. And the Bureau of Statistics (ABS) releases the September overseas arrivals and departures data. The weaker Aussie dollar is supportive of overseas tourism demand. Over the year to August a record 1,435,700 tourists came to Australia from China, up by 7.7%

On Tuesday

The regular weekly reading on consumer confidence is published by ANZ and Roy Morgan. And the Commonwealth Bank’s Business Sales Indicator for October is issued. Sales have lifted for 19 successive months. The Reserve Bank Governor Philip Lowe speaks about “Trust and Prosperity” at the CEDA Annual Dinner in Melbourne at 7.20pm AEDT.

And the ABS releases the “National Accounts: Distribution of household income, consumption and wealth (2003/04-2017/18)” publication. Supplementary data on household income and wealth, access to goods and services, population, housing, government benefits and taxation will be of particular interest, given the impact on overall living standards.

On Wednesday,

The Department of Jobs and Small Business issues its monthly skilled internet job vacancies data. The Internet Vacancy Index fell by 0.6% in September, but is still 1.6% higher than a year ago. Job vacancies are at 6½-year highs in Tasmania, up by 16 % from a year ago. 

On Thursday

The ABS releases its population projections for states, territories, capital cities and state regions. According to the ABS, “the projections are not predictions or forecasts, but are illustrations of the growth and change in population which would occur if certain assumptions about future levels of fertility, mortality, internal migration and overseas migration were to prevail over the projection period. 

On Friday

The CBA releases the ‘flash’ manufacturing and services purchasing managers’ indexes for November. Business activity rose at the slowest pace in the survey’s short history in October.

In Trump land

In a holiday-shortened week in the US, a raft of housing-related data are issued. Durable goods orders feature with the ‘flash’ purchasing managers’ manufacturing indexes from developed economies, such as the US, Japan, UK and Eurozone.

The week kicks off in the US, with the release of the National Association of Home Builders (NAHB) Housing Market Index. The index has held steady at around 70 points since June. NAHB Chief Economist Robert Dietz has said, "Favourable economic conditions and demographic tailwinds should continue to support demand, but housing affordability has become a challenge due to ongoing price and interest rate increases."

On Tuesday

The usual weekly data on US chain store sales is released, along with October monthly housing starts and building permits figures. Housing starts fell by a greater-than-expected 5.3% in September as construction activity in the South fell by the most in nearly three years (down 13.7%) due to Hurricane Florence disruptions. But starts are forecast by economists to rebound by 1.6% in October. US building permits fell by 0.6% in September – the second straight monthly decline – as permits for the construction of multi-family homes declined by 7.6% to 390,000 units. Permits are tipped to fall by 0.8% to 1.26 million units in October. 

On Wednesday

In the US, the October consumer durable goods data will be issued. In September, the data was volatile, distorted by a 120% surge in orders of defence aircraft. Business equipment investment rebounded in the September quarter, but economists don’t expect this to be sustained with a 2.5% decline in orders tipped in the preliminary read for October.

And weekly MBA mortgage applications and monthly existing home sales data are issued. Sales of previously-owned homes fell to the weakest level (5.29 million) in almost three years in September – the sixth straight monthly decline. US mortgage rates have lifted to the highest level in almost eight years. And the Conference Board’s Leading Index for October is also scheduled. The index, which takes into account building permits, the ISM index of new orders and share market prices, has lifted for 12 consecutive months. 

On Thursday

US markets are closed for the Thanksgiving Day public holiday.

On Friday

Markit’s ‘flash’ manufacturing purchasing managers’ indexes are issued for November across developed economies.

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Down, down, petrol prices down

Tuesday, November 13, 2018

According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 6.7 cents a litre last week to 149.4 cents a litre – the biggest weekly fall since the week ended 30 November 2008 (down 7 cents a litre).

What does this mean?

It was only two weeks ago that petrol prices were at decade-high levels. But unleaded prices have fallen by 11.1 cents a litre over the past fortnight. And last week the national average petrol price fell by 6.7 cents a litre. Pump prices in Adelaide (down 19.2 cents a litre), Brisbane (down 9.6 cents a litre), Sydney (down 9 cents a litre) and Melbourne (down 8.8 cents a litre) all plunged. But prices still remain around the “new normal” price of $1.50 a litre on average across Australia. 

Will prices keep falling? 

The regional Singapore benchmark gasoline price has fallen by 21 cents a litre from recent highs and Australia’s wholesale petrol price has fallen by 15 cents, implying a further fall of around 5-7 cents a litre over the next fortnight, subject to the vagaries of the retail petrol price discounting cycle. The average motorist may now end up paying around $18 less to fill a 70 litre tank compared with the beginning of October.

Why have prices fallen?

The catalyst for falling petrol prices has been the near 20% decline in Brent crude and USNymex oil prices after reaching 4-year highs in early October. In fact, the Nymex price has fallen for 10 successive days – the longest stretch of declines since July 1984.

Last week, the price of Brent crude oil fell by 3.6% to US$70.18 a barrel and the Nymex price declined by 4.7% to US$60.19 a barrel. With the US, Russia and Saudi Arabia pumping near record-high crude at 33 million barrels per day, supply has outpaced demand. And Iranian supply constraints will be less-than-expected with the US granting waivers to several countries.

What are the implications for investors?

The weakening in fuel prices is timely. It also coincides with a sharp fall in electricity prices in Sydney, Brisbane and Adelaide, in particular, over the year to September. Combined with declining childcare prices, Aussie consumers may have a bit more spare change to put to work at shopping centres for the upcoming Christmas trading season. That said, concerns about falling home prices may act as a deterrent.

It was only a few weeks ago that some oil market analysts were forecasting a return to US$100 a barrel crude oil prices, but investor sentiment has turned sharply. The volatility in prices serves to highlight that motorists remain captive to OPEC producers. With prices plunging, OPEC has announced over the weekend that they may cut oil supply in 2019. In fact, Saudi Arabia has already said that it will export 500,000 fewer barrels a day in December than November with Iranian waivers coming into effect. But Russia appears unconvinced, with Energy Minister Alexander Novak reported as saying “it’s hard to say” whether oil markets will be oversupplied next year.  

While OPEC’s meeting in Vienna next month will be closely observed by oil analysts, the vagaries of the retail unleaded petrol price discounting continues. Pump prices may lift from cyclical lows next week as the discounting cycle comes to an end in Sydney, Brisbane and Adelaide. 

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Good morning, Australia!

Monday, October 22, 2018

Howd’y USA

In US economic data, existing home sales fell by 3.4% to a 5.15 million annual pace in September (forecast 5.3m). US share markets ended mixed on Friday. Shares in Procter & Gamble soared by 8.8% in response to strong quarterly sales figures, buoying the Dow Jones index. But investors remained concerned about the Sino-US trade dispute and US-Saudi Arabia tensions. The Dow Jones rose by almost 65 points (or 0.3%), after holding in a 259 point range. The S&P500 index was flat and the Nasdaq index lost 36 points (or 0.5%). Over the week, the Dow was up 0.4% with the S&P 500 flat but the Nasdaq lost 0.6%.    

US long-term treasuries fell on Friday (yields higher). Traders trimmed safe-haven trades on hopes for a resolution of the Italian budget dispute. US 2-year yields rose 2 points to 2.91% and US 10-year yields rose by 1 point to 3.20%. Over the week, US 2-year yields rose by 5 points and US 10-year yields rose by 3 points.

Major currencies were mixed against the US dollar in US and European trade compared with the Asian close. The Euro rose from lows near US$1.1435 to highs around US$1.1525 and was near US$1.1515 in late US trade. The Aussie dollar rose from near US71.05 cents to US71.50 cents and was near US71.20 cents in late US trade. The Japanese yen held between 112.32 yen per US dollar to JPY112.61 and was near JPY112.54 in late US trade.   

Zao shang hao, Asia

In Chinese data on Friday, figures showed the economy grew at a 6.5% annual pace in the September quarter (forecast 6.6%). 

Bongiorno, Europe!

European share markets generally ended modestly lower on Friday. The construction and materials sector fell 1.7% and autos fell 2.7%. The on-going focus was on the size of the Italian budget deficit. The pan-European STOXX600 index fell by 0.1% on Friday but rose 0.7% over the week. The German Dax index lost 0.3% but the UK FTSE index rose by 0.2%. In London trade, shares of Rio Tinto fell by 1.5% and BHP fell by 0.7%.

Top of the morning, London!

Base metal prices were mixed on the London Metals Exchange on Friday. Aluminium, lead and zinc fell by up to 2%. But other metals rose up to 1.1%. Over the week metals fell by up to 4.5% with lead down the most. But zinc was flat and tin rose 0.4%. 

G’day Australia –  on fuel and the glittery ‘stuff’

Global oil prices rose modestly on Friday. Investors were encouraged by data showing that refinery throughput in China rose in September to a record 12.49 million barrels per day. Also Reuters cited sources that said an OPEC and non-OPEC monitoring committee found that oil producers' compliance with a supply-reduction agreement fell to 111% in September, from 129% in August. Brent crude rose by US49 cents or 0.6% to US$79.78 a barrel and the US Nymex price rose by US47 cents or 0.7% to US$69.12 a barrel. Over the week, Brent fell by US65 cents or 0.8% and Nymex fell by US$2.22 or 3.1%.  

The gold futures price fell by US$1.00 an ounce or 0.1% to $1,229.10 an ounce. The spot gold price was trading near US$1,226 an ounce in late US trade. Over the week gold rose by US$7.10 or 0.6%. Iron ore fell by US85 cents or 1.1% to US$73.45 a tonne. Over the week, iron ore rose by US$1.95 or 2.7%.

Have a great day, Australia!

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All quiet on the data front

Friday, October 19, 2018

Deputy Governor Guy Debelle hits the speaking circuit for a second successive week. And a bevy of Reserve Bank officials partake in panel discussions at the Sibos Conference in Sydney.

Monday, Monday

The week kicks off in Australia when the Commonwealth Bank releases the latest Business Sales Indicator – a measure of economy-wide spending. Recent data has indicated firm but moderating growth in sales and Deputy Governor at the Reserve Bank, Guy Debelle, delivers a speech at the Walkley Business Journalism Awards in Sydney.

On Tuesday 

The regular weekly reading on consumer confidence is published by ANZ and Roy Morgan and the Deputy Governor at the Reserve Bank, Guy Debelle, delivers a speech to the 2018 ISDA Annual Australia Conference in Sydney.

On Tuesday & Wednesday

The Reserve Bank panellists participating at the Sibos 2018 Conference in Sydney include: Lindsay Boulton (Assistant Governor, Business Services), Michele Bullock (Assistant Governor, Financial System), Guy Debelle (Deputy Governor), Greg Johnston (Head of Payments Settlements) and Tony Richards (Head of Payments Policy).

And also on Wednesday, the Department of Jobs and Small Business releases its monthly Internet Vacancy report. Skilled job vacancies rose by 0.6% in August – the strongest growth rate in six months. The index is 4.5% higher than a year ago – still near six-year highs.

Overseas: US economic growth takes centre stage

In the US in the coming week the focus will be on the September quarter economic growth or gross domestic product (GDP) report. And a raft of business and consumer confidence surveys are due together with housing data and durable goods orders while the US Federal Reserve Beige Book is released.

On Monday

In the US, the Chicago Federal Reserve National Activity Index is issued. 

On Tuesday

And another influential manufacturing gauge from the Federal Reserve Bank of Richmond is released. And the regular weekly chain store sales figures are published in the US.

On Wednesday

The Markit “flash” purchasing manager index (PMI) survey estimates are issued for the US, France, Germany, the Eurozone and Japan. And the US Federal Reserve’s Beige Book is released together with the weekly data on new mortgage applications. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its district through reports from bank and branch directors and interviews with key business contacts, economists, market experts and other sources. The report is published eight times a year.

Also, the Federal Housing Finance Agency (FHFA) home price index is tipped to increase by a further 0.3% in August from the previous month. Over the year, prices are up by 6.4%. But new home sales are forecast by economists to fall by 0.2 per cent in September as 30-year fixed mortgage rates lifted to 5.05% last week, the highest level since February 2011.

On Thursday        

The data deluge continues in the US. Pending home sales, weekly new claims for unemployment insurance, the ‘advance’ September data on trade in goods, durable goods orders, wholesale inventories and the Kansas Federal Reserve Manufacturing Index are all issued.

On Friday

In the US the ‘advance’ GDP report for the September quarter is released. Annual GDP growth is expected to decelerate to 3.3 per cent from four-year highs of 4.2%. And the University of Michigan’s final reading on consumer confidence for October is expected to lift by 0.5 to 99.5 points. 

And on Saturday

Chinese industrial profits data are scheduled.

Financial markets

While the majority of US S&P 500 companies will report earnings results for the September quarter over the next few weeks, around 5% of the companies in the index (around 24 companies) have already reported. Interestingly, the majority has cited US dollar strength as the most negative influence on profits, ahead of rising input costs from tariffs and wages pressures.

Companies expected to report earnings this week include:

On Monday: Halliburton, Kimberly-Clark and Moelis.

On Tuesday: Allegheny Technologies, Biogen, Caterpillar, Harley-Davidson, Lockheed Martin, McDonald’s, Wynn Resorts.

On Wednesday: Advanced Micro Devices, AllianceBernstein, AT&T, Boeing, Ford, Freeport-McMoran, Hilton, Legg Mason, Microsoft, Nasdaq, Packing Corp., UPS, Visa and Whirlpool.

On Thursday: Alphabet, Amazon, American Airlines, Baker Hughes, Dow Chemical, Intel, Merck, Snap and Xerox.

On Friday: Alliance Media, Colgate-Palmolive, Goodyear, NextGen Healthcare, Moody’s, Philips 66 and Weyerhaeuser.

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Good morning, Australia!

Monday, October 15, 2018

Howd’y, America!

In US economic data, export prices were flat in September (forecast +0.2%) with import prices up 0.5% (forecast +0.2%). Consumer confidence fell from 100.1 to 99 in October (forecast 100.4). The 5-year outlook for inflation eased from 2.5% to 2.3% — tying with the lowest observation on record.

US share markets rose on Friday by over 1%. Technology stocks led the gains with both Apple and Microsoft lifting by over 3.5%. In response to earnings results JPMorgan Chase fell by 1.1%, Citigroup rose by 2.1% and Wells Fargo rose by 1.3%.  The Dow Jones rose by 287 points or 1.2% after holding in a 467-point range. The S&P500 index lifted by 1.4% and the Nasdaq index gained 168 points or 2.3%. Over the week, the Dow lost 4.2% with the S&P 500 down 4.1% and the Nasdaq lost 3.7%.

US long-term treasuries fell modestly on Friday (yields higher). Equities recovered and investors trimmed some exposure to safe-haven assets like government bonds and gold. US 2-year yields were steady near 2.86% and US 10-year yields rose by 1 point to 3.167%. Over the week US 2-year yields fell by 2.5 points and US 10-year yields fell by 4 points.

Major currencies were mixed against the US dollar in US and European trade compared with the Asian close. The Euro fell from highs near US$1.1610 to lows around US$1.1535 and was near US$1.1560 in late US trade. The Aussie dollar fell from highs near US71.35 cents to lows near US71.00 cents and was near US71.20 cents in late US trade. The Japanese yen rose from 112.48 yen per US dollar to JPY111.88 and was near JPY112.20 in late US trade.  

Bonjour, Europe

European share markets ended modestly lower on Friday. But autos and technology both rose by 0.5% The pan-European STOXX600 index fell by 0.2% on Friday and lost 4.8% over the week. The German Dax index lost 0.1% and the UK FTSE index fell by 0.2%.  

Zao shang hao, Asia

On Sunday, China's central bank governor Yi Gang said he still sees plenty of room for adjustment in interest rates and the reserve requirement ratio.

Top of the morning, London

In London trade, shares of Rio Tinto rose by 1.3% and BHP lifted 0.8%.

Base metal prices were generally firmer on the London Metals Exchange on Friday. Lead rose by 2.7% and zinc rose by 1.6%. But tin lost 1.6% and nickel lost 0.2%. Over the week all metals rose except aluminium (-4.4%). Lead rose by 4.6%.

G’day Australia –  on fuel and the glittery ‘stuff’

Global oil prices rose modestly on Friday. The International Energy Agency said that the market looked "adequately supplied for now" and trimmed forecasts for global oil demand. Brent crude rose by US17 cents or 0.2% to US$80.43 a barrel and the US Nymex price rose by US37 cents or 0.5% to US$71.34 a barrel. Over the week Brent fell by US$2.29 or 2.8% and Nymex fell by US$1.91 or 2.6%. 

The gold futures price fell by US$5.60 an ounce or 0.5% to $1,222.00 an ounce. The spot gold price was trading near US$1,217 an ounce in late US trade. Over the week gold rose by US$16.40 or 1.4%. Iron ore rose by US45 cents or 0.6% to US$71.50 a tonne. 

Over the week iron ore rose by US$1.90 or 2.7%.

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What’s going on next week?

Friday, October 12, 2018

Ruby Tuesday

The week kicks-off when the regular weekly reading on consumer confidence is published by ANZ and Roy Morgan and lending finance data is issued the same day by the  Australian Bureau of Statistics (ABS). Total new lending commitments (housing, personal, commercial and lease finance) rose by 0.1% in July to $70.5 billion. But commitments are down by 0.1% on the year. And the minutes of the last Reserve Bank Board meeting will be released. The Board’s neutral policy stance remains intact, with the record period of interest rate stability expected to extend for the foreseeable future. Commentary on the housing market, business investment and wages growth will be keenly observed.

Waiting for Wednesday

Overseas arrivals and departures data is issued by the ABS. Over the year to July, a record 1,433,300 tourists came to Australia from China, up by 9.4% on a year earlier. And a record 339,200 Indian tourists travelled to Australia, up by 19.5%. And the Deputy Governor at the Reserve Bank, Guy Debelle, delivers a speech to the 2018 Citi Conference in Sydney.

Sweet Thursday

The September job market figures are released by the ABS. CBA Group economists forecast jobs growth of 30,000 in September. The unemployment rate is tipped to remain steady at 6-year lows of 5.3% with the workforce participation rate also unchanged at 65.7%.

Looking overseas…

In the US next week, the focus will be on the US Federal Reserve meeting minutes, retail sales, industrial production and housing market data. Meanwhile, the much-anticipated economic growth (GDP) report together with inflation and economic activity indicators headline the ‘top-shelf’ data releases in China.

On Monday in the US, retail sales, business inventories and the New York Empire State Manufacturing Index are released. Economists tip a solid 0.5% lift in retail sales in September.

On Tuesday, Chinese inflation data is scheduled. Adverse weather conditions and pig disease pushed up fresh food prices in August. Annual consumer prices are expected to lift from 2.3% to 2.5% in September. And US data on industrial production, the JOLTS survey of job openings, National Association of Home Builders (NAHB) survey, capital flows and the regular weekly chain store sales figures are all issued.

On Wednesday, the US Federal Reserve’s Open Market Committee (FOMC) releases minutes from its 25-26 September meeting. The FOMC raised the target range for the federal funds rate by 0.25% to 2-2.25%. And data on building permits, housing starts and the regular weekly mortgage applications are released.

On Thursday, in the US the influential Philadelphia Federal Reserve manufacturing gauge, weekly claims for unemployment insurance and the US Conference Board leading economic index are all scheduled.

On Friday, existing home sales round-out a busy data docket in the US. Following four successive months of declines, sales of previously-owned homes were unchanged in August as buyers continued to grapple with rising home prices and tight inventories. Sales are expected to have fallen by 0.3% in September. Similarly it’s a big day for data releases in China on Friday. Retail sales and production data are issued, together with investment figures. But the most anticipated data release is the September quarter economic growth (GDP) data. Annual GDP growth is expected to moderate to 6.6%, down from 6.7%.

And on Saturday, Chinese house prices are scheduled for release. Annual growth of house prices lifted to a 1-year high in August.

US companies reporting

The US earnings (profit-reporting) season moves up a gear in the coming week. According to FactSet, S&P500 company earnings are estimated to have grown by 19.2% in the September quarter. Amongst the companies expected to report earnings:

Monday: Bank of America, Biomerica and Charles Schwab.

Tuesday: BlackRock, Domino’s, IBM, Johnson & Johnson, Goldman Sachs, Morgan Stanley, Netflix and UnitedHealth.

Wednesday: Abbott Laboratories, Alcoa, Kaiser Aluminium, Kinder Morgan, Northern Trust, Steel Dynamics and US Bancorp.

Thursday: American Express, Bank of New York Mellon, Delta Airlines, E*Trade, eBay, Nucor, PayPal, Philip Morris, Snap-on and Travelers. 

Friday: Honeywell, Manpower, Procter & Gamble, Schlumberger, State Street and USA Technologies.

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Heavy, heavy fuel

Tuesday, October 09, 2018

According to the Australian Institute of Petroleum (AIP), the national average retail diesel petrol price rose by 1.6 cents to 160.4 cents a litre over the week – the highest level in four years. The national average Australian price of unleaded petrol fell by 1.2 cents to 155.8 cents a litre – the second highest level in four years – according to the AIP. The petrol figures have implications for retailers, especially petrol marketing groups. 

What does this mean?

Parts of rural Australia may have received some much-needed rain last week, but the cost of doing business on the land continues to increase. Already under pressure from the drought, diesel prices – one of the biggest input costs for farmers – have hit four-year highs.

Unleaded petrol prices are just below last week’s four-year high, but are still at the second highest level since July 2014. Pump prices are hovering around $1.60 a litre across the country. And there is unlikely to be any near-term respite for motorists returning home from the school  holidays. The weaker Aussie dollar is increasing the cost of imported crude oil (purchased in US dollars), with the benchmark Singapore gasoline price also at fresh four-year highs. Household budgets are continuing to be stretched. 

What prices are being paid state by state?

The metropolitan petrol price fell by 2.2 cents to 155.3 cents per litre, but the regional price rose by 0.7 cents to 156.9 cents per litre. The gross retail margin rose by 0.4 cents to 12.00 cents a litre.

Average unleaded petrol prices across states and territories over the past week were: Sydney (down by 7.0 cents to 154.1 c/l), Melbourne (down by 4.4 cents to 158.7 c/l), Brisbane (down by 2.7 cents to 149.3 c/l), Adelaide (up by 11.8 cents to 158.3 c/l), Perth (up by 1.8 cents to 155.1 c/l), Darwin (up by 1.3 cents at 158.4 c/l), Canberra (up by 2.5 cents to 162.8 c/l) and Hobart (up by 1.4 cents to 162.1 c/l).

Yesterday, the national average wholesale (terminal gate) unleaded petrol price stood at 145.8 cents a litre, up by 2.8 cents over the week to 4-year highs. The terminal gate diesel price stands at 151.3 cents a litre - a 4½-year high - up by 4.3 cents over the past week.

The national average diesel petrol price rose by 1.6 cents to 160.4 cents a litre over the week. The metropolitan price rose by 1.4 cents to 160.8 cents a litre with the regional price up by 1.7 cents to 160.1 cents a litre.

Last week, the key Singapore gasoline price rose by US$1.95 or 2.1% to near 4-year highs of US$93.50 a barrel. In Australian dollar terms, the Singapore gasoline price rose by $5.58 or 4.4 per cent last week to a 4-year high of $132.34 a barrel or 83.23 cents a litre.

What’s ahead?

Brent crude oil surged to four-year highs of US$86 a barrel in London trading last week, but has eased a little in recent days. Over the weekend, Saudi Arabia’s Crown Prince Mohammed bin Salman, pledged to increase production by around 1.3 million a day to offset expected declines in Iranian crude exports due to looming US sanctions.

It is hoped that a lift in OPEC and Russian crude output will eventually rebalance the oil market, placing downward pressure on oil prices. However, this is of little comfort to Aussie households paying around $1.60 per litre at the pump for both unleaded petrol and diesel prices – about the most in four years. The impact of rising petrol prices on headline consumer prices will be something to look out for later this month when the Bureau of Statistics releases its inflation data for the September quarter. 

And as an aside, CommSec expects interest rates to remain unchanged until late 2019.

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Good morning, Australia!

Monday, October 08, 2018

Howd’y, America!

In US economic data, non-farm payrolls (jobs) rose by 134,000 (survey: +185,000) in September. Payrolls were revised up by 87,000 in the prior two months. The unemployment rate fell by 0.2% to a 48-year low of 3.7% (survey: 3.8%). Annual average hourly earnings fell by 0.1% to 2.8% (survey: 2.8%). The trade deficit rose by US$3.2bn to -US$53.2bn (survey: -US$53.5bn) in August.

US share markets were lower on Friday, weighed down by rising US Treasury yields following the release of a generally solid September jobs report. The Dow Jones index fell by 325 points during the session, pulled lower by shares of Intel (-2.3%) and Caterpillar (-2.2%). The Dow Jones eventually finished down by 180 points or 0.7%. The S&P500 index was down by 0.6% and the Nasdaq index fell 91 points or 1.2%. For the week, the Nasdaq fell by 3.2%, its biggest drop since the week ended March 23. The Dow fell just 0.04% and the S&P500 fell by 1.0%.    

 US treasuries fell (yields higher) on Friday following the jobs report release. The 10-year yield rose by 4 points to 3.2328% after hitting a 7-year peak at 3.248% during trading. The 30-year yield reached a 4-year high at 3.424% and the US 2-year yield rose by 1 point to 2.8891%. Over the week, US 10-year yields rose by 17 points and US 2-year yields rose by 6 points. 

The US Treasury market is closed today for Columbus Day.

Global oil prices were little changed on Friday. US drillers cut two oil rigs in the week to October 5, according to Baker Hughes. Brent crude fell by US42 cents or 0.5% to US$84.16 a barrel, but the US Nymex price rose by US1 cent or 0.01% to US$74.34 a barrel. Over the week, Brent crude rose by US$1.44 or 1.7% and the Nymex rose by US$1.09 or 1.5%.

Bonjour, Europe

European share markets fell on Friday, led lower by shares of Denmark's Danske Bank (-6.2%) after a rating cut by broker Credit Suisse. Danske is facing a US criminal investigation into a €200 billion money laundering scandal at its Estonian branch. The pan-European STOXX600 fell by 0.8%, the German Dax was down 1.1% and the UK FTSE fell by 1.4%. In London trade, shares of Rio Tinto fell by 4.0% and BHP was down by 3.9%.

Zao shang hao, Asia

Major currencies were mixed against the US dollar in US and European trade compared with the Asian close. The Euro rose from lows near US$1.1484 to highs around US$1.1535 and was near US$1.1521 in late US trade. The Aussie dollar fell from highs near US70.82 cents to lows near US70.43 cents and was near US70.52 cents in late US trade. The Japanese yen strengthened from 114.04 yen per US dollar to JPY113.55 and was near JPY113.70 in late US trade.  

The China Caixin services purchasing managers index is scheduled.

Top of the morning, London

Base metal prices were mixed on the London Metals Exchange on Friday. Copper (-1.9%) fell on concerns that lifting interest rates could weigh on global growth and reduce demand for the "red metal". Nickel (+1.1%) was the strongest performer. Aluminium (+3.9%) rose over the week on Brazilian supply concerns, but lead (-2.3%) and copper (-1.5%) fell by the most.

Have a great day, Australia!

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Hard core property and jobs data screening soon

Friday, September 14, 2018

The week kicks-off on Tuesday when the Roy Morgan-ANZ weekly consumer confidence survey and the Bureau of Statistics’ (ABS) quarterly home prices data are both released. 
The ABS releases its publication “Residential Property Price Indexes” each quarter. The data is relatively “old”, focusing on the three-month period to June 30. Apart from home prices, there is other data covering the average value of homes and changes in the number of homes in each state. Annual Australian home price growth is the weakest in six years. 

And the minutes of the last Reserve Bank Board meeting are released. Each meeting a special issue or topic is discussed. And that discussion can prove useful in gauging member views on interest rate sensitivities. Commentary on the housing market will also be keenly observed.

On Wednesday, the Department of Jobs and Small Business releases the August skilled internet job vacancies data. Vacancies are up by 4.7% over the year to July, led by 
 Western Australia (up 16.3%) and Tasmania (up 13.6%).

On Thursday the ABS releases population data and detailed labour market figures. The Reserve Bank releases its quarterly Bulletin. And Commonwealth Bank releases the Business Sales Indicator – a measure of economy-wide spending.

Australia’s population is growing at a 1.6% annual rate – one of the fastest growth rates in the developed world. And the ABS labour market data will include the latest estimates of industry job creation.

What about the US?

attention will be on US housing data releases in the week prior to the all-important US Federal Reserve meeting on September 25-26, where interest rates are expected to lift.

On Tuesday, the US National Association of Home Builders releases its September survey, together with the regular weekly data on chain store sales. The monthly index of builder sentiment fell one point to 67 points in August, the lowest level in eleven months and down from highs of 74 points in December. Mortgage applications to purchase a home have been falling as interest rates have lifted. Buyer traffic dropped two points to 49 points in August, the only component of the index in negative territory (below 50 points).

On Wednesday in the US, housing starts and building permits are issued for August. Despite rising building costs, property prices and mortgage rates, housing demand is supported by the strong labour market, lower taxes and improved finances. Around 175,000 homes were approved, but not yet started in July, the most since February 2008. And single-family permits in the South were the highest since July 2007. Economists tip starts to lift by 5.2% in September. Building permits are forecast to increase by 0.8% for the month.

On Thursday, US existing home sales, the influential Philadelphia Federal Reserve manufacturing gauge, weekly claims for unemployment insurance and the US Conference Board leading economic index are all issued.

Existing home sales fell for a fourth straight month in July – the longest stretch of monthly declines since 2013. Supply constraints continue to drag on overall sales and push up home prices. The lower inventory and high prices on available inventory are crimping affordability, especially for first home buyers. The median house price increased 4.5% from a year ago to US$269,600 in July.

The Conference Board's Leading Economic Index increased by 0.6% in July after increasing 0.5% in June. Another 0.5% lift is forecast by economists in August, signalling a sustained pace of economic expansion in the near term.

Initial jobless claims for the week ending September 1 decreased by 10,000 to 203,000 – the lowest level of 
claims since December 6, 1969. The US unemployment rate is near 18-year lows at 3.9%. 

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A rush of economic data ahead

Friday, August 31, 2018

The “Spring tsunami” gets underway on Monday. Around a dozen indicators will be released in the first two weeks of September, with economic growth and the Reserve Bank Board meeting in focus next week.

Monday 2 September

1. The week kicks-off with the release of five economic indicators. Both AiGroup and the Commonwealth Bank issue survey results on manufacturing activity early in the day.

2. CoreLogic releases the much-anticipated August data on home prices. Based on daily data released so far, home prices have fallen by 0.4% in the five mainland capital cities to stand 2.7% lower than a year ago. 

3. ANZ releases the August data on job advertisements on Monday and the Bureau of Statistics (ABS) releases the quarterly Business Indicators publication and retail trade data.

4. Job ads rose by 1.5% in July after falling 1.7% in June. Hiring has slowed from the frenetic pace of 2017.

5. The ABS business indicators publication includes data on sales, profits, wages and inventories so the data is important in rounding out our knowledge of the economy.

6. Retail trade may have lifted by a modest 0.2% in August.

Tuesday 3 September

1. The Reserve Bank Board convenes for what is expected to be an uneventful meeting with interest rates likely to remain unchanged for a 25th straight month (23rd meeting). In the evening Governor Philip Lowe speaks in Perth.

2. The weekly consumer confidence, government finance and the quarterly balance of payments data are due for release.

Wednesday 4 September

1. The ABS releases the June quarter estimate of economic growth – as judged by the change in gross domestic product (GDP). There are a number of components of the GDP equation still to be revealed, but on current information it seems like the economy grew by 0.6-0.8% in the quarter. The Reserve Bank is expecting annualised economic growth to lift to around 3.25% over the coming year.

2. New car sales data are scheduled. In July, 85,551 new vehicles were sold, down 7.8% over the year. In the 12 months to July, sales totalled 1,187,883 units, up 0.6% on a year ago. And the both the AiGroup and the Commonwealth Bank services gauges are issued.

Thursday 5 September

The ABS releases the July data on exports and imports. The trade surplus rose from $725 million to $1,873 million in June. It was the 11th surplus in 13 months. A July surplus of around $900 million is tipped.

Friday 6 September

AiGroup releases its construction industry gauge for August. And housing finance data is issued for July. The number of loans (commitments) by homeowners (owner-occupiers) fell by 1.1% in June. The total value of new housing commitments fell by 1.6% in June. Investor loans are at five-year lows.

What’s ahead overseas?

On Monday

The week kicks off in China when Caixin releases its manufacturing survey. Manufacturing activity grew at its slowest pace in eight months in July amid shrinking export orders due to trade tensions with the US.

And Tuesday… 

1. The ISM manufacturing index is issued in the US. Manufacturing demand is strong and new orders have increased for 15 successive months, but input and raw materials prices are elevated.

2. The regular weekly data on chain store sales is scheduled together with the construction spending figures. Spending is expected to have fallen by around 1 per cent in July.

Then Wednesday…

1. China’s Caixin services gauge is released for the month of August. In July, new business growth was the weakest since December 2015, but remained expansionary.

2. Weekly data on new mortgage applications, vehicle sales and international trade data are issued in the US. The June trade deficit was the biggest in more than18 months as the boost to exports from soybean shipments faded and higher oil prices lifted imports. A deficit of US$46.4 billion is tipped in July.

Come Thursday…

The Challenger job cuts, ADP private sector employment report, factory orders and the weekly data on new claims for unemployment insurance are issued. In June, factory orders lifted by 0.7%, but business spending plans on equipment were not as strong as expected.

By Friday…

The much anticipated US non-farm payrolls (jobs) report is issued. In July, 157,000 jobs were created. Economists expect that a further 180,000 jobs were generated in August, but the unemployment rate may have held at 3.9%. Average hourly earnings are tipped to lift by 0.3% in August, with annual growth remaining at 2.8%.

And finally on Saturday…

China’s trade data for August is scheduled.

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Are we growing or slowing?

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