It’s a very busy week ahead for Australia – there’s the Reserve Bank’s monetary policy meeting tomorrow, the June quarter GDP figures the day after, data on retail sales, and trade for July as well as car sales for August.
Globally the European central Bank meets later in the week – China releases its latest trade data for August on Friday, there’s US trade figures for July as well and the Beige Book from the Fed.
In Australia the RBA is expected to leave interest rates on hold for the 13th month in a row at tomorrow’s meeting.
Strong business confidence and jobs growth, the RBA’s expectations for a growth pick up and worries about the Sydney and Melbourne property markets argue against a rate cut.
But record low wages growth, low underlying inflation, the impending slowdown in housing construction, risks around the consumer and the high level of debt, and the rise in the $A argue against a rate hike, according to the AMP’s chief economist and head of investment, Dr Shane Oliver.
So he says it makes sense to leave the cash rate on hold at 1.5% and this is likely to remain the case out to late next year at least.
Wednesday sees the June quarter GDP data released Wednesday by the Australian Bureau of Statistics.
Ahead of that there’s data later today on wages, salaries and business sales and inventories, the June quarter current account tomorrow and Government finance data for the quarter as well.
“Our expectation is for 0.5% quarter on quarter with strong retail sales driving a boost to consumer spending and a slight rise in business investment but a flat contribution from net exports.This will see annual growth slip to 1.5%,” Dr Oliver predicted at the weekend.
He says the June quarter data on wages, company profits and inventories on Monday and for net exports which are expected to be flat and public demand on Tuesday will help firm up GDP estimates.
Expect July data to show a 0.2% gain in retail sales (Thursday), while a larger trade surplus is expected as well the same day. Friday should see a slight rise in housing finance.
In the corporate area the company reporting season is over, but there will be a few stragglers this week, especially among the speculative miners. Sigma Healthcare reports its half year figures on Thursday.
And next Saturday sees local government elections in parts of NSW.
Chinese trade data for August on Friday is expected to show import growth slowing to around 10% year on year and export growth slowing to around 6% year on year. That could prove to be a little on the low side if the solid rise in manufacturing activity last month is any guide.
China’s July inflation data will be released on Saturday.
In the US it’s a holiday shortened week with the Labor Day holiday tonight.
Dr Oliver says we expect the service sector activity survey report for August to remain solid and the July trade balance to worsen a bit (both out on Wednesday). Initial jobless claims (Thursday) will likely show a sharp rise due to Hurricane Harvey. The Fed’s Beige Book of anecdotal evidence (also Wednesday) will also be released.
Fed governor Leal Brainard, Dallas Fed president Robert Kaplan, Minneapolis Fed president Neel Kashkari — all voting members of the monetary policy setting Open Market Committee — are due to speak tomorrow night (Tuesday) in the US.
And New York Fed president Bill Dudley and Philadelphia Fed president Patrick Harker, also voting members of the FOMC, are also scheduled to deliver remarks later in the week.
The US Congress returns for its autumn session from tomorrow night – it is likely to be as unpredictable as the earlier sessions this year proved to be. Increasing the US debt ceiling and approving the budget spending bills will be the initial concerns.
In Europe, Thursday’s ECB meeting is unlikely to make any immediate changes to monetary policy and is likely to stress that monetary policy should remain accommodative, according to Dr Oliver.
”While its edging closer to announcing a reduction in its quantitative easing program for 2018 from €60bn a month to maybe €35bn a month it may not do it just yet as it remains in “patient” mode given low inflation and for fear of adding to Euro upside. Some sort of reduction for 2018 has been talked about for so long through that when it is announced it should not come as a surprise to anyone,” he wrote at the weekend.
The third estimate of the eurozone second quarter GDP will be issued on Thursday.
In Asia, besides the Chinese trade and inflation data, the second estimate of Japan’s second quarter GDP will be issued on Friday.
