The Australian economy dominates the week ahead with the Reserve Bank’s June board meeting on Tuesday and the National Accounts for the March quarter on Wednesday.
Economists say don’t be surprised if there’s no growth or a small drop into negative territory, but equally don’t be surprised in government spending and a build up of unsold stocks pushes growth into positive territory.
But we will also get retail trade and building approvals figures for April, which will give us a look into the current quarter.
Oil and commodity prices will remain the drivers of stockmarket sentiment here and overseas.
We saw on Friday with April’s private credit figures from the Reserve Bank that the momentum in the economy is slowing rapidly.
Personal lending continues to be hit by the spate of margin calls on stockmarket investments, owner-occupied and investor housing is sluggish with growth slowing and likely to slow in the months ahead, while business lending also saw slowing growth (but from very high levels).
This suggests that the retail trade and building approvals figures should be again low to steady for April.
These figures will sit nicely with the impact of the March National Accounts. We know that private credit was slowing during the quarter, along with home building. But construction work rebounded.
However private capital spending fell unexpectedly because of falls in investment in the manufacturing and other industries categories, but not mining where the resource boom powers onwards.
Private consumption is an imponderable: retail sales and housing was weak to sluggish, but jobs growth was 1% in the month and wages were up more than 4%, so it might be the case that this helps drive growth, but with private savings rising at the same time.
The situation with government spending and stocks are two other imponderables and could boost or hinder overall growth.
And the external account will detract from growth simply because exports were hit by the downturn in coal shipments caused by the heavy rains in central Queensland in February and the continuing production problems.
The March quarter’s Balance of Payments figures will be released on Tuesday. One thing to watch in these figures is our international debt position. Even if the dollar has trimmed, the figure will still be uncomfortably high.
In The US it will be oil, oil and more oil.
Airline mergers have been abandoned, companies are starting to cut and reshape businesses and put up prices sharply (Dow and Kodak). The second quarter might end up a tough three months for a lot of business.
If you remove energy and financial companies from the S&P 500 companies reporting first quarter figures, earnings growth is lineball.
US interest rates are above or at their January levels now: over 4% for 10 year Government bonds as inflation renews its warnings to US investors.
May’s jobs figures this Friday will be the big influence on the markets. Another month of large losses would make it five months in a row and could see the number of jobs lost exceeding 300,000.
A better than expected outcome (and watch the April figures for a revision) would see interest rates spike and the market finally take flight.
Market estimates are for 55,000 jobs lost and an unemployment rate of 5.1%.
Apart from the jobs report, there’s also the Institute for Supply Management reports on factory activity and the services sector.
The European Central Bank and the Reserve Bank of New Zealand will also meet to consider interest rates, but both are likely to remain on hold, especially with inflation still high.
European inflation rose again in May to hit 3.6%, up from 3.3% in April. That will be enough to keep eurozone rates on hold at 4%. Inflation in Germany, the biggest economy, hit 3% in May while retail sales fell for a second successive month in April.
In New Zealand all the indicators bar inflation are pointing downwards, but with the Government giving tax cuts which will take the budget into deficit next year, the central bank will leave rates at 8.25%.
MONDAY:
Australian Bureau of Statistics (ABS) releases Business Indicators for the March quarter and Retail Trade figures for April; TD securities/Melbourne Institute Inflation gauge for May; Reserve Bank Commodity Price Index for May; Australian Industry Group/PricewaterhouseCoopers Performance of Manufacturing Index for May; Housing Industry Association new home sales figures for April.
TUESDAY:
Reserve Bank board meets, decision at 2.30 pm; ABS releases March Balance Of Payments figures; Building Approvals for April; NSW 2008-09 Budget; Metcash annual results.
WEDNESDAY:
ABS releases March quarter National Accounts; Overseas Arrivals And Departures for April; Australian Industry Group/Commonwealth Bank Performance of Services Index for May; Seek Employment Index for May.
THURSDAY:
ABS releases Australian demography figures for December quarter; Industrial Disputes March quarter; Wine and Brandy sales for April and International Trade figures for April; BHP Billiton CEO Marius Kloppers speaks in Melbourne at a Lunch.
FRIDAY:
Australian Industry Group/Housing Industry Association Performance of Construction Index.
