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Investor Signposts: Week Beginning October 2 2017

Investor Signposts: Week Beginning October 2 2017

By Expert Panel 03.10.2017

Craig James – Chief Economist - CommSec

Rate hikes ahead?

• The Reserve Bank Board meets on Tuesday amidst a number of ‘top shelf’ indicators. Some analysts believe that the Reserve Bank could lay the groundwork for a surprise November rate hike. However most believe that rate increases are some way off. The text of the rate decision will determine what outcome is most likely.

• The week kicks off on Monday with the release of home price data – the CoreLogic Home Value index for September. Home price increases have slowed in most capital cities except Melbourne. On current indications the measure of capital city prices may have edged up just 0.2 per cent in September.

• Also on Monday both CommBank and Australian Industry Group will release their surveys of manufacturing activity.

• On Tuesday the Reserve Bank Board meets for the third last time in 2017. No change in rates are expected, But as usual the text of the decision will be closely watched. There are whispers of another Melbourne Cup Day move in rates. But the Reserve Bank Governor continues to stress that a rate hike is still “some time” away.

• On Tuesday, the Australian Bureau of Statistics (ABS) releases the August building approvals data – an important leading indicator of home building. ANZ releases the September job ad count also on Tuesday while the Housing Industry Association releases data on new home sales for August.

• ANZ and Roy Morgan are expected to release the weekly consumer confidence report also on Tuesday.

• On Wednesday both Australian Industry Group and CommBank plan to release their surveys on activity in the services sector.

• On Thursday the Federal Chamber of Automotive Industries releases the September data on new vehicle sales. In the year to August vehicle sales were at record highs, underpinned by sales of sports utility vehicles (SUVs) and utes.

• Also on Thursday the ABS releases both international trade and retail trade data for August.

• In July the trade surplus narrowed from $888 million to $460 million. But the rolling 12-month surplus rose from $12.2 billion to $14.4 billion (biggest surplus in 6 years). And exports to China hit a record $96.2 billion in the year to July. In August the trade surplus may have widened to $1200 million.

• Meanwhile retail trade was unchanged in July after posting average gains of 0.6 per cent a month in the previous three months. Despite the flat result, retail trade stands 3.6 per cent over the year, well above the rate of inflation. And non-food retailing fell 0.5 per cent in July after averaging gains of 0.8 per cent a month in the previous three months. Non-food retail spending is now up 3.4 per cent on a year ago. In August, we expect that bottom-line retail sales rose by 0.4 per cent.

Overseas: US employment data hogs the limelight

• There is the usual raft of statistics for release in the US in the coming week. As usual for the first week in the month, the highlight is the non-farm payrolls (employment) data on Friday.

• In the US, the week kicks off on Monday with the release of both the ISM manufacturing index and data on construction spending. Any reading for the manufacturing index above 50 signifies growth in the sector. In September the manufacturing gauge may have eased from 58.8 to 57.5. And a modest 0.1 per cent increase in construction spending is expected in August.

• On Tuesday, new vehicle sales data for September will be issued alongside the ISM New York index and the usual weekly data on chain store sales. Vehicle sales may have lifted from a 16.14 million annualised rate to 16.16 million in September.

• On Wednesday the ADP national employment measure of private sector payrolls will be released together with the ISM services gauge. Economists tip a more modest 172,000 lift in jobs in September, down from the 237,000 gain in August. The services gauge may have eased from 55.3 to 54.6 in September. The weekly data on housing finance is also issued on Wednesday.

• On Thursday there are a number of indicators set for release. International trade figures are scheduled together with the Challenger series of job layoffs, factory orders and the usual weekly data on claims for unemployment insurance. The trade deficit may have edged up from US$43.7 billion to US$44 billion in August.

• And on Friday, the non-farm payrolls data for September is set for release. While economists tip only a modest down-tick in job creation, down from 156,000 to 140,000 in the month, there is more than the usual uncertainty associated with the data due to the hurricane activity in the month.

• The unemployment rate is expected to be unchanged at 4.4 per cent while wage growth (average earnings) may have lifted by 0.2 per cent in the month. Federal Reserve policymakers will be especially interested in the wage data as another tepid 0.1 per cent increase would reduce the chance of a December rate hike.

• Also on Friday in the US, data on consumer credit and wholesale sales & inventories are scheduled for release.


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