Gauges of business and consumer sentiment are in focus in the week ahead together with measures of personal lending – home loans and credit card debt. In the US, inflation and retail sales data and minutes from the past Federal Reserve meeting are the events to watch.

• On Thursday the Reserve Bank releases August data on credit and debit card lending. In July the average credit card balance fell by $59.90 to a 9½-year low of $3,070.30. In smoothed terms (12-month average) the average balance was down by 0.2 per cent on a year ago. Interestingly usage of credit card limits stood at just 33.7 per cent in July – the lowest level in almost 19 years.
• Also on Thursday the ABS releases the August data on housing finance. In July the number of loans (commitments) for budding home owners (owner-occupiers) rose by 2.9 per cent – the third consecutive month of gains. Loans to buy newly-erected dwellings rose by 1.9 per cent to 38-year highs. And the proportion of first-time buyers in the home loan market rose from 14.9 per cent to a 47-month high of 16.6 per cent in July (long-term average 19.4 per cent).

• On Friday the Reserve Bank releases the six-monthly Financial Stability Review – an assessment of the health of our financial system. Expect to see detailed analysis of housing supply and demand and discussion of the growth of housing debt in relation to income growth. The topics are clearly more complicated than are being portrayed in the mainstream media and the state of play is far more positive.
• Also on Friday the ABS continues with its 2015/16 series on consumer and housing data – this time with a focus on housing occupancy and costs. Understandably more people have chosen to take on greater housing debt at generational-low interest rates. As a result there has been upward pressure on prices in those centres that have been less responsive in building the homes required.

Overseas: Relatively quiet week ahead

• Investors will have to wait until the second half of the coming week for the potentially “market-moving” economic events. Minutes of the last Federal Reserve meeting, retail sales and inflation data are the highlights.
• In the US, the week kicks off on Tuesday in the US with regular weekly data on chain store sales from Redbook.

• On Wednesday the group that sets US interest rates – the Federal Reserve Open Market Committee (FOMC) – releases minutes of the meeting held on September 19/20. Many investors are still uncertain whether the Federal Reserve will lift rates in December. The views and forecasts will be closely dissected by investors.
• Also on Wednesday in the US the weekly data on mortgage applications will be released.

• On Thursday in the US, the September data on business inflation – the Producer Price Index (PPI) – will be issued. Only a small 0.1 per cent lift in “core” prices is expected, leaving the annual growth rate at 2 per cent.
• Also on Thursday is the regular weekly check on conditions in the job market – the data on new claims for unemployment insurance.
• On Friday in the US, data on retail sales and consumer prices for September are released together with the early estimate of consumer sentiment for October. Economists expect sales rose by 0.4 per cent after falling by 0.2 per cent in August. And “core” consumer prices may have lifted 0.2 per cent in the month, causing annual growth to lift from 1.7 per cent to 1.8 per cent.
• Also on Friday in China is the September international trade figures (exports and imports). Import growth continues to outpace exports at present, suggesting firm domestic economic activity.

Financial markets

• Over the past 20 years, October has been the second best month for the Australian sharemarket, falling on just six occasions, second only to December. In fact there has been only one decline in the past seven years in October, rising on average 3.2 per cent over the period. The problem is, when the market does fall, it tends to fall heavily, as evidenced in 1987, 1997 and 2008.

Craig James, Chief Economist, CommSec