Investor Signposts: Week Beginning November 12 2017

A busy week lies ahead in Australia. The labour market dominates the economic agenda with employment and wages data released. The week kicks off in Australia on Monday when the Reserve Bank of Australia (RBA) releases September credit card lending data. Card balances are at the lowest level since December 2007.

·      Also on Monday the Australian Bureau of Statistics (ABS) releases the September data on lending finance. Total new lending commitments (housing, personal, commercial and lease finance) increased by 1.9 per cent in August.

·      The Reserve Bank Deputy Governor, Guy Debelle, also speaks on Monday at the UBS Australasian Conference.

·      The National Australia Bank business survey for October is released on Tuesday. In smoothed terms, business conditions are the best in nine years and company profitability is at 9½-year highs. Confidence is at 6-year highs in smoothed terms.

·      Also on Tuesday, ANZ and Roy Morgan release the weekly survey of consumer sentiment. Recent data shows confidence has been tracking sideways in trend terms,

·      Westpac and the Melbourne Institute release the monthly series on consumer confidence on Wednesday.

·      Also on Wednesday the much-anticipated September quarter Wages Price Index is released by the ABS. Annual wages growth has been stuck at record low levels of 1.9 per cent. The recent 3.3 per cent increase to the national minimum wage from July 1 is expected to lift wages. The reading is important for the inflation outlook.

·      The Reserve Bank Assistant Governor (Economic), Luci Ellis, speaks at the Stan Kelly Lecture in Melbourne also on Wednesday.

·      On Thursday, the ABS releases October employment data. Jobs growth has been strong with 372,000 positions created over the past 12 months. The unemployment rate is at a 4½-year low of 5.5 per cent. Leading indicators, such as ANZ job ads are at 6-year highs and ABS job vacancies are at record highs, pointing to continued robust hiring conditions. Jobs are forecast to lift by 23,000 in October with the unemployment rate unchanged.

·       On Friday, new vehicle sales data for October is released by the ABS. Industry data has already been released showing sales to be up 2.6 per cent on a year ago. Tourist arrivals data is also due on Friday.

Overseas: US inflation and housing in focus; China monthly activity data

·      There are a bevy of ‘top shelf’ US economic indicators to be released over the coming week. Also the Chinese monthly activity indicators are due for release.

·      The week commences in China on Tuesday with the release of October data on retail sales, investment and production. The economy is currently in solid shape with double-digit annual growth of retail sales prevailing.

·      Also on Tuesday in the US, the October data on business inflation – the Producer Price Index – will be issued alongside the NFIB small business index and a speech by Federal Reserve Chair, Janet Yellen.

·      On Wednesday the Consumer Price Index (CPI) data will be released in the US. Headline prices are tipped to increase by 0.1 per cent, to be up 2.2 per cent over the year to October. The core inflation reading, which excludes the more volatile energy and food price components, is forecast to rise by 0.2 per cent to an annualised growth rate of 1.7 per cent in October. Despite the subdued inflation data, the US Federal Reserve is likely to increase interest rates in December due to strong economic and jobs growth.

·      Also on Wednesday US retail sales data for October is released with a 0.1 per cent lift expected after the 1.6 per cent increase in September. The Empire State survey and capital flows data are also issued on Wednesday.

·      On Thursday data on industrial production and trade (export/import) prices for October are announced in the US. Industrial production is tipped to recover in the aftermath of Hurricanes Harvey and Irma, rising by 0.5 per cent.

·      Also on Thursday the closely-watched Philadelphia Federal Reserve survey is released with the weekly data on claims for unemployment insurance (jobless claims).

·      On Friday, the focus will be on the US housing market. Housing starts are expected to have lifted to a 1.19 million annual rate in October from 1.127 million units in September. And building permits are tipped to have lifted 1.8 per cent. Homebuilding had declined to a one-year low due to severe storms in Texas and Florida. The National Association of Home Builders sentiment index is also released on Friday.

Financial markets

·      The US House of Representatives is expected to vote on President Trump’s tax bill during the week, which could be a potential driver for US sharemarkets.

·      The US earnings season is still underway. Several household names such as Home Depot, United Parcel Service, Cisco, Target and Wal-Mart are due to report earnings during the week. Earnings for S&P500 companies in the September quarter are expected to have increased around 8 per cent, well above expectations for a 5.9 per cent increase at the start of October according to Thomson Reuters.

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Ryan Felsman,

Senior Economist, CommSec