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Diary: US Inflation, RBA Stability

Inflation data this week for the US economy won’t impact thinking on the next rate rise from the Fed - in fact some economists reckon it could spike, adding to the pressures for another rate rise this year.

So ignore the headlines for the US jobs report for September which showed non-farm payrolls shrank by 33,000 in September, thanks to hurricanes Harvey and Irma.

Instead concentrate on the news that the unemployment rate fell to 4.2% from 4.4%, while wages increased by 0.5% to an average of $US26.55 an hour, and were up 2.9% from a year earlier, after a 2.7% rise in the year to August.

Now to watch for signs of a strong rebound in job creation in October to make up for the one off impact of the storms. Economists expect that to show up in the jobs data fr October in a month’s time.

The news will see the Fed lift interest rates by the end of the year for a third time.

Data this week will add to that belief with US inflation and retail sales data expected to show the US economy is performing solidly.

The AMP’s chief economist, Dr Shane Oliver forecasts a rise in September core CPI inflation to 1.8% year on year from 1.7% (out Friday) and a 1.2% rebound in retail sales (also Friday) for September after the hurricane depressed fall in August.

US retail sales will be eagerly awaited for clues as to whether Hurricanes Harvey and Irma had dented consumption trends. August’s figures saw the largest monthly drop since February, primarily due to a decline in auto sales, while July data were revised significantly downwards.

While the latest manufacturing surveys indicate that the US economy is solid, the data does suggest that growth could come in just above 2% in the third quarter, down from 3.1% in the three months to June. This week’s retail sales will help support that belief.

Dr Oliver says the minutes from the Fed’s last meeting (out Wednesday) are unlikely to add much that’s new with quantitative tightening underway.

In Europe’s it's a quiet week, although fears are growing the instability in the UK Conservative Governments could mean a crippling ‘hard’ Brexit in 2019 with little in the way of agreement.

There’s the independence crisis in Catalonia and there may be some noise ahead of Austrian parliamentary elections on October 15 with current polling suggesting the currently governing Social Democrats will lose to conservative People’s Party which may form a coalition with the nationalist Freedom Party.

In Asia the start of the flow of data from China for September and the quarter will see the trade data for last month released on Friday.

Dr Oliver sees an acceleration in export growth to 10% year on year (yoy) reflecting the strong global economy and a slight rise in import growth to 15% yoy. Money supply and credit data for last month will also be released, along with car sales figures.

In Australia, the NAB business survey (tomorrow) will be watched for any slippage in decade high business conditions, consumer confidence (Wednesday) is expected to remain relatively subdued and housing finance (Thursday) is expected to rise 0.5%.

The RBA’s semi-annual Financial Stability Review is out on Friday and will be watched for how the RBA views recent progress in reducing financial stability risks around the property market, especially in Sydney.

In terms of corporate events, the Bank of Queensland releases its full year profit this week. As well, BlueScope Steel, Australian Foundation Investment Co, Magellan Financial and Transurban are down to hold their annual meetings this week.

View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



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