Investor Signposts - Thursday’s employment data the highlight

CommSec Senior Economist Savanth Sebastian takes a look at the economic events scheduled for the week ahead, including employment, housing finance and wages data. 

Jobs data in focus

·      After the data deluge in Australia over the past fortnight, including a Reserve Bank Board meeting and the Federal Budget, the coming week continues along the same fashion. New figures on wage growth are released alongside key employment data. Across the globe, investors will focus on the Chinese economic data released on Monday. While in the US, data on the housing market will garner the most interest. Also inflation data will be released across the Eurozone, Canada and even New Zealand over the week.

·      In Australia the week kicks off on Monday with the Australian Bureau of Statistics (ABS) release on housing finance. Despite the tighter lending standards adopted by the banking sector, it is likely that loans for owner-occupiers (those who want to live in the homes) rose by around 2.5 per cent in March after falling by 0.5 per cent in February. And the total value of all new loans may have risen by 1.1 per cent in the month

On Tuesday investors will focus on the release of the minutes of the last Reserve Bank Board meeting. Board members were decidedly more optimistic at the May meeting compared with the prior meeting. , Even the Statement of Monetary Policy - released last week - upgraded near-term growth forecasts. And it is likely that the minutes will convey a similar upbeat tone. Investors will have to wait till the June meeting to see the central banks view on the Federal budget and recent weaker retail data on retail spending.

·      Also on Tuesday, the weekly consumer sentiment reading is released by Roy Morgan and ANZ. The sentiment gauge will attract more than the usual attention given it will be the first reaction of Aussie consumers to the Federal Budget.

·      And the key economic data on Tuesday from the Bureau of Statistics (ABS) are the estimates of new vehicle sales for April. The industry data from the Federal Chamber of Automotive Industries has already indicated that auto sales fell by 5.1 per cent in April on a year ago, with the result affected by the timing of Easter holidays. The ABS measure should in theory remove the seasonality of the result.

·      On Wednesday the ABS releases the March quarter data on wages as well as lending finance figures, while the monthly consumer sentiment survey is also released. Wages grew by 1.9 per cent over the past year to December. In the March quarter wages probably grew by 0.5 per cent, keeping annual growth near record lows. And while the annual growth rate is the lowest on record, it still remains marginally ahead underlying growth of consumer prices. The real wage gains alongside the low interest rate environment on record will serve to support consumer spending over the rest of 2017.

·      Arguably the highlight of the weekly finance diary occurs on Thursday when the ABS releases the job market data for April. Figures have been somewhat more upbeat in the last couple of months with the majority of the growth in full-time jobs. In fact over the past two months full-time jobs rose by over 110,000 – that is, if the data is to be believed.

·      For the record we expect that jobs growth was more sedate, with a flat result in April. But with slightly fewer people looking for work, the jobless rate may have eased from 5.9 per cent to 5.8 per cent. It should be noted that the recent lift in business confidence and condition and strength in job vacancies bodes well for hiring in the second half of 2017.

Overseas: US housing sector; China economic data and home prices

·       So-called ‘top shelf’ economic indicators are released in China in the coming week. And in the US the focus will be on the housing sector. Inflation data will on the agenda across the Eurozone, Canada and New Zealand. Also over the week a number of Federal Reserve speakers are scheduled, including Bullard and Mester.

·       China will actually kick off proceedings over the week – with the release of key ‘top shelf’ indicators on Monday, namely retail sales, production and investment. Annual growth rates are slowing, but that is ‘normal’ for a maturing economy. Also lending and money supply data will be released between Tuesday and Sunday.

·       Also on Monday in the US, the Empire manufacturing gauge and the National Association of Home Builders (NAHB) index are both slated for release alongside capital flows figures.

·       On Tuesday, US industrial production and two key indicators of the housing sector will be released – housing starts and building permits. Annualised US housing starts are tipped to have lifted from a 1.22 million annual rate to 1.25 million in April. New building permits are expected to have edged higher by 0.4 per cent in the month. Industrial production is forecast to have risen by 0.4 per cent in April.

·       On Wednesday, the usual US weekly data on home purchase and refinancing is issued.

·       On Thursday in the US the usual weekly data on claims for unemployment insurance is released together with the Philadelphia Federal Reserve business index and the leading index. The leading indicator index is forecast to lift by a further 0.4 per cent in April.

·       Also on Thursday, China releases data on property prices for April. There will be a lot of interest in the home price data given that authorities have attempted to use a variety of measures to cool a heated property market. The home price restrictions that have been implemented include restrictions on how many houses people can buy in some regions as well as measures requiring 1 60-80 per cent deposit for second-home buyers. So far the measures have yet to have a significant impact with China home prices up almost 12 per cent on a year ago.