Another week where recession, or its threat, will be the watchword.
In Australia, the Reserve Bank’s 4th quarterly Statement on Monetary Policy is likely to reveal a downwards adjustment to growth forecasts and greater confidence that inflation will fall.
Last week the federal government cuts its key growth forecast to just 2% and boosted its unemployment estimate to 5% by next June (and 5.75% by June 2010). Inflation was cut to 3.5% by midway through next year, still above the 2%-3% of the RBA’s target range
But the bank is expected to maintain a rate cutting stance in today’s report.
Some economists say the RBA will cut cuts by at least 0.50% at the December meeting to give us a bit more room and to allow for the lack of a board meeting in January. Should the economic numbers between now and then worsen (and the third quarter growth figure be a shocker), we can expect another 0.75% cut, just like last week.
Figures on housing finance, the National Australia Bank’s business survey, consumer confidence and wages growth will also be released this week.
The AMP’s Dr Shane Oliver says wages growth is likely to have remained around 4% ”but with the economy falling into a bit of a hole wages growth is hardly a concern now.’
"Consumer confidence may reveal a bit of a bounce after last month’s poor reading which was in the midst of a financial panic and given that interest rates have continued to fall."
In the US, the Federal Reserve will release the minutes of its October meeting and this is likely to support the idea that further rate cuts are on the agenda. As well, data for retail sales, the trade balance and consumer sentiment will be released.
Chinese economic data for October will also start to be released and will be watched closely for further evidence of a slowdown. Trade and inflation figures will be released later in the week. Timing is uncertain.
The collapse of US consumer spending will be highlighted this week with sales and earnings reports from Wal-Mart Stores Inc. They are expected to be solid, but the news from JC Penny, Kohls and smaller chains will be very bad.
Last week we learned that many major US retailers had the worst October same-store sales in 35 years (but not Wal-Mart). Friday saw the unemployment rate reach 6.5%, its highest level since March 1994. 240,000 jobs were lost in the month and September was revised from 159,000 to a loss of 284,000. 1.177 million people have now lost their jobs in the US so far this year, it’s much, much worse than previously thought and will worsen this month and in December.
October’s poor retail sales performance will be documented in the monthly retail sales numbers from the US government.
Meanwhile there will be more interest than normal in the monthly release of economic figures from China this week.
Trade and inflation numbers for October are due for release if the government follows the recent release timetable.
The International Monetary Fund last week cut its estimate for Chinese growth next year to 8.55%, down from 9.3% a month ago. The 2008 forecast was cut 0.1% to 9.7%
Indicators from steel output to auto sales to power consumption and exports are down and a slump in the property market is also threatening growth.
China has averaged 9.9% growth for the past 30 years and was running at that rate in the nine months to the September quarter.
This week’s figures are expected to show a slowing in export growth to around 18% from the 21.5% in September.
MONDAY:
Orica annual results; Reserve Bank produces its 4th quarterly Monetary Policy Statement of the year at 11.30 am; housing finance figures from the Australian Bureau of Statistics; AGMs include Seven Network, IBA Health, Charter Hall Group, Clover Corp, Housewares International and Sunland; Paladin Energy investor update.
TUESDAY:
NAB October business survey; NSW Government mini budget; AGMs include Insurance Australia Group, CBH Resources and Computershare.
WEDNESDAY:
Federal Treasury Secretary, Dr Ken Henry at the National Press Club; Westpac/Melbourne Institute consumer sentiment survey for November; ABS lending finance figures; AGMs for Indophil Resources, Emeco and Fletcher Building.
THURSDAY:
St George Bank shareholders meet to approve Westpac takeover; ABS average weekly earnings for the August quarter; Westpac/Melbourne Institute index of consumer inflation expectations; AGMs from Lend Lease, Fairfax Media, Commonwealth Bank, Austereo, Wesfarmers, BlueScope Steel and New Hope,
FRIDAY:
AGMs from Tooth, Mirvac, Slater and Gordon, Beaconsfield Gold and McPherson’s.
