A week for important news and reports from around the world: the US, Australia, New Zealand, Europe and China will all see meetings, reports, news or figures that will have a big bearing on economic and investment sentiment.
The Australian economy will get a good going over today when Reserve Bank Governor, Glenn Stevens fronts the House of Representatives Standing Committee on Economics in Melbourne for his regular grilling.
With last week’s cuts in interest rates by the RBA and major banks still fresh in everyone’s minds, and the reasons for those cuts to be found in the June quarter national accounts, there will be ample room for probing question from the pollies about the future direction of interest rates.
Don’t expect too much because many will be looking for political gain and not economic and investment based elucidation.
US developments might overshadow Mr Stevens’ comments.
There’s the takeover by the US Government of Fannie Mae and Freddie Mac, the two troubled US quasi-Government groups that dominate the US housing sector.
They are financially weak and it’s certain that shareholders will take big losses, but it could signal a big rebound in financial stocks and in the US dollar, so more weakness for our dollar and commodity stocks.
Friday’s poor US jobs and employment news for August will see the US dollar rise anyway: a global slowdown is now on the cards and not even booming China will stop it, according to most analysts.
Our dollar will be weak for a while, petrol prices will start rising again if oil prices don’t fall rapidly under $US100 a barrel, and other commodities will be weak.
Friday saw terrible news on the level of home foreclosures in the US which has doubled in the past year.
This week we will get more updates from the US with numbers for pending home sales, the trade balance, consumer sentiment, retail sales and producer prices are due for release.
August retail sales are likely to be soft continuing the pattern seen in June and July, but expectations are producer prices will ease from the 10% annual rate reached in July.
Across the Tasman The Reserve Bank of New Zealand is expected to announce another 0.25% interest rate cut. That will follow the rate cut in July. More figures later this month will confirm the country is actually in a technical recession with negative growth expected for the June quarter.
Chinese August data for inflation and economic activity will start to be released and are likely to show continued softer economic conditions, albeit this may have been exaggerated by Olympic related factory and construction shutdowns in and around Beijing.
A leak last Thursday night suggested consumer inflation fell to below 6% in August, which if true, would be better news than many foreign analysts are expecting.
OPEC also meets to review its oil production quotas with some member countries already arguing for a cutback given the recent slump in the oil price.
Iran wants a cut to maintain oil prices at high levels and its likely to find support from Venezuela, perhaps Algeria and Libya, but will be opposed by the likes of Saudia Arabia and other countries in the Gulf who are looking to the rising US dollar to choke of inflationary pressures.
But some commentators say its likely that at Saudi Arabia could ease back on its promised July/August supply increases it put through given they have helped add downward pressure on oil prices.
In Australia Governor Stevens will probably focus on a message that household demand will remain subdued and that as a result inflation will decline over time which will be interpreted by the financial markets as being consistent with further interest rate reductions at a measured pace.
As well, figures for retail sales, business and consumer confidence, employment and the trade balance will also be released.
The AMP’s chief economist, Dr Shane Oliver says the September consumer confidence is likely to show a further bounce on the back of the cut in interest rates and anecdotal evidence suggests retail sales had a bounce in July, possibly helped by the tax cuts.
The National Australian Bank’s monthly survey, out Tuesday, will be assessed to see how business confidence is travelling, given that it has fallen to the lowest levels in 17 years, but the recent investment figures (and the national accounts) show continuing high levels of business investment, despite that increased caution.
"Anecdotal evidence of job layoffs suggests employment fell in August," Dr Oliver said on Friday. The ANZ jobs ads series is out today and is proving to be a good indicator for employment. Growth in newspaper job ads is falling but has steadied on the internet. Until it starts falling sharply on the net, there won’t be a significant fall in employment in this country.
But there will be a worry about the reliability of the jobs figures from the Australian Bureau of Statistics, and more importantly, the retail sales figures.
Because of penny pinching, the Rudd Government cut $20 million off the ABS 2009 budget, forcing them to cut back in surveys, survey datat and abandon publication of some reports.
Dr Oliver says "Retail sales data are probably the key economic series to watch in Australia right now, but the reliability of the monthly retail trade data produced by the Australian Bureau of Statistics is about to deteriorate dramatically.
"Thanks to Government funding cutbacks announced in the l
