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Investor Signposts: Week Beginning June 11 2018

Investor Signposts: Week Beginning June 11 2018

By Expert Panel 11.06.2018


Investor Signposts: US Federal Reserve tipped to raise rates next week

CommSec Senior Economist Ryan Felsman previews the economic data scheduled for the week ahead including the US Federal Reserve Meeting, the NAB Business Survey and Housing Finance data.

 


Australia: Jobs, business and consumer surveys dominate

• Following the Queen’s Birthday public holiday on Monday, ‘tier 1’ economic data releases feature prominently in the coming week. The all-important May employment report is issued on Thursday. Monthly business and consumer surveys together with housing and lending finance data cap-off a busy, but holiday-shortened week. 

• The week kicks-off on Tuesday with the release of the National Australia Bank business survey. The NAB business conditions index rose to a record high of +21.1 points in April, up from an upwardly-revised +15.4 points in March (previously +14.1 points). The business confidence index rose to +10.1 points in April from an upwardly-revised +8.0 points in March (previously +7.4 points).

• There are good reasons to expect that business conditions and confidence remained robust in May. Investors will also look for any signs of nascent wage or price pressures given the fairly benign inflation outlook.

• Also on Tuesday data on home loans (housing finance) and broader lending finance are issued with credit and debit card lending. Demand for loans, especially from investors, has weakened in line with softening home prices and tighter bank lending standards. Data from the Bankers Association implies that the value of home loans may have fallen by 5 per cent in April.

• On Wednesday the Reserve Bank Governor delivers a speech “Productivity, Wages and Prosperity”. Investors will be looking for any new views on the economy that could influence the timing of the next interest rate change.

• The weekly consumer sentiment index is scheduled to be released by Roy Morgan and ANZ on Wednesday.

• Also on Wednesday, the monthly Westpac and Melbourne Institute consumer confidence reading is released. The gauge fell by 0.6 per cent to 101.8 points in May. Still, the index remained above its long-term average of 101.5 points. A reading above 100 points denotes optimism. Most interest is on the quarterly survey of ‘wisest place for savings’.

• On Thursday the ABS issues the May employment report. The record-breaking job-creation machine has slowed in recent months. However, a still-healthy 32,700 full-time jobs were added in April. A key leading indicator – the ANZ job advertisements series – was at the highest level in seven years in May. And the number of hours worked rose by 1.1 per cent in April and were up by 5.4 per cent over the year – the strongest annual gain in 18 years – highlighting the underlying strength of the job market.

• The unemployment rate remains ‘sticky’ at 5.6 per cent due to an increase in the participation rate – now at 65.6 per cent. More females and older Aussies are working or looking for work than ever before. Economists tip an increase in total jobs of around 20,000 during the month.

• On Friday, Reserve Bank Assistant Governor Luci Ellis delivers a speech.

Overseas: The US Federal Reserve takes centre stage

• All eyes will be on the US Federal Reserve monetary policy meeting commencing on Tuesday. US inflation data will also be keenly observed. Monthly sales, production and investment data feature in China.

• The week kicks off on Monday in China with money supply and lending data expected.

• On Tuesday, the US Federal Reserve begins its two day monetary policy meeting. With core inflation breaching the US Federal Reserve’s 2 per cent target and the unemployment rate at an 18-year low of 3.8 per cent, the Federal Reserve Funds Rate is expected to be increased by 0.25 per cent to 1.75-2.00 per cent target range.

• Also on Tuesday US consumer prices, the monthly budget statement, weekly data on chain store sales and a measure of small business sentiment – the NFIB business optimism index – are all released. Core inflation is tipped to increase by 0.2 per cent to 2.2 per cent. Headline consumer prices are forecast to lift by 0.2 per cent to 2.6 per cent due to rising gasoline, shelter and food prices.

• On Wednesday in the US, data on producer prices and the weekly mortgage lending figures are expected. The core measure of producer prices (excludes food and energy) stands at a 2.6 per cent annual rate. A 0.2 per cent increase in prices is tipped in May.

• On Thursday Chinese investment, production and retail sales are issued for May. The official manufacturing purchasing managers’ index rose to its highest level in nine months in May due to unseasonably warm weather and rising upstream commodity prices. Investment and production are tipped to maintain stable annual growth rates of 7 per cent. Retail sales may be up 9.5 per cent over the year.

• Also on Thursday US retail sales, trade (export/import) prices and inventories data are released. A 0.4 per cent lift is tipped in May after a winter ‘soft patch’ in the March quarter. 

• On Friday China house prices are issued for May. Prices in Tier 1 cities are decelerating as the government clamps down on property speculation.

• Also on Friday US industrial production, consumer confidence and the New York Fed purchasing managers’ index are issued.


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