Even though the election campaign is underway, the economy rolls on and tomorrow and Thursday sees the latest instalment in the continuing ‘will the Reserve Bank cut or will it sit’ speculation.
Chinese economic data, including March quarter GDP growth on Wednesday, will be the most important offshore event this week for Australia.
Thursday’s jobs data for March is the more important – in fact, it is the key bit of regular data the RBA is watching for a sense of the economy’s strength and direction.
The figures from the Australian Bureau of Statistics are expected to show a 10,000 gain in employment and a rise in unemployment back to 5%.
But of greater importance will be the performance of the economy in annual terms – the annual growth rate in new jobs against the historic average.
The jobs market is currently growing by around 2.3%, above the 2.0% estimate of the past two and a bit decades. The RBA is watching for any sign of weakening in that above average growth which could be an early warning of slowing growth ahead and perhaps a kickup in the jobless rate.
The central bank concerned about low growth in household incomes (especially wages), lower than previously thought levels of household consumption and high household debt and weak house prices in many but not all markets.
The continuing strength in the jobs market has helped assure the RBA that those worries are being kept at bay.
The minutes from the last RBA’s board meeting tomorrow will show that the RBA has retained its watch and wait stance on future interest rate moves.
The pressures from weak household income growth, weakening house prices and high household debt are the RBA’s central concerns, but in its first Financial Stability Review of 2019 on Friday the central bank said, after detailing these problems:
”Overall, the financial system appears much better placed to respond to a range of challenges than it was a decade ago.”
So while the risks remain and the pressures from falling house prices -and weak consumption – especially in Sydney and Melbourne – the RBA believes the financial system (and therefore the economy) can cope with added pressures.
Quarterly production and sales reports are due from some big miners such as BHP, Rio Tinto, Fortescue and South 32 (See separate story) and a couple of quarterly or half-year results or trading updates are expected from the likes of Blackmores and Australian Pharmaceutical Industries.
Wednesday sees China release data on production, investment, and retail sales, as well as the March quarter GDP figure.
The AMP’s Chief Economist, Dr. Shane Oliver believes the data “is likely to confirm a further slowing in GDP growth, but also show that momentum is likely to improve a bit going forward.”
“March quarter GDP growth (Wednesday) is likely to show a further slowdown to 6.3% year on year from 6.4% in the December quarter, with quarterly growth slowing to 1.4% from 1.5%.
“However, consistent with recent stimulus and a lessening of trade war fears, March activity data is expected to show a pick up in momentum with growth in retail sales accelerating to 8.4% year on year, industrial production accelerating to 5.9% growth and investment growth picking up slightly to 6.3%,” Dr. Oliver wrote at the weekend.
China’s trade data was mixed – exports rose more than 14% – faster than expected, but imports fell just over 7% (which was steeper than forecast). Car sales fell more than 5% last month and are now down 9 months in a row but bank credit jumped sharply as did Chinese government spending.
In the US it will be the March quarter earnings season that will dominate, plus some key top tier data reports led by March retail sales on Thursday night, our time which are expected to show some modest growth.
Industrial production for March is another key figure likely to confirm a modest rise last month. The trade deficit for is expected to show a slight worsening, while solid readings for April business conditions surveys and a bounce back in housing starts are expected to help lift sentiment about the state of the economy.
The March quarter earnings season starts with more than 30 S&P companies due to report – watch for more big bank reports, IBM, Johnson and Johnson, an airline or two and Netflix (Wednesday morning our time).
Eurozone business conditions PMIs on Thursday night will be watched for more signs of stabilisation in the wake of the uncertainties caused by Brexit and the slowdown in the German and French economies.
Japanese inflation data on Friday is likely to show that core inflation remained weak at 0.4% year on year in March, so no change in the very easy monetary policy stance of the Bank of Japan.