Interest rates will again be the focus in the week ahead with reductions expected (slashes more like it) in Australia, the UK, Europe and New Zealand.
In the US it will be the retail sales performance from last weekend, a crucial one for retailers, plus jobs figures for November on Friday night, our time.
In Australia, the Reserve Bank is expected to cut interest rates by another 0.75% taking the cash rate to 4.5% in a continuing effort to head off the sort of debt-deflation spiral that now appears to be occurring in the US and UK and to limit the severity of the economic slump now underway.
Some commentators reckon the cut could be 1%, with an isolated muttering about 1.25%. Futures markets pricing has a 1.25% cut priced in.
Since the last RBA Board meeting the global economic outlook has deteriorated further and Australian economic data has remained weak which is all consistent with more interest rate cuts.
There will be more figures this week: retail sales trends for October, and building approvals, plus figures on business indicators and the balance of payments for the September quarter.
The business indicators will include the important estimates on business inventories for the quarter.
They will come today while the rate cut comes a day before the release of the September quarter’s national accounts on Wednesday.
The AMP’s Dr Shane Oliver says he expects GDP growth to be marginally positive at around 0.1% (or 1.8% over the year).
But he warned on Friday that there’s a significant risk it might be negative which of course will fuel worries that Australia has already entered recession, which unfortunately is now only a matter of time anyway.
Goldman Sachs JBWere economists wouldn’t be shocked if the September reading is negative. They also believe the current December quarter will be worse.
The rate decisions in the UK and Europe will probably see cuts of 0.50% by both the European Central Bank and the Bank of England. Eurozone unemployment hit a two year high in October, according to figures on Friday.
The economic performance in the zone is worsening by the day.
Recession is already gripping the major economies and there’s a feeling worse is to come.
In Britain luxury London home prices dropped 3.6% in November, compared with October, to be down 14% over the year.
London commentators say it is a good yardstick by which to judge the health of the London economy and financial sector workers who have been the biggest buyers of houses worth one million pounds or more.
In short the sector is bleeding jobs, profits and revenues with thousands more job losses to come in early 2009. But the loss was smallest in houses worth 5 million pounds or more. They only fell 1.9% in October.
Figures out last week showed that house prices elsewhere in the UK fell in November, but not at the same speed.
In the US in the week ahead, the focus will be on the ISM surveys of business conditions which are expected to have weakened further and on payroll employment data which is likely to show that another 300,000-400,000 jobs were lost in November.
The ISM-type surveys will be released here, China, Europe and the UK this week and will give us a good idea of how this important sector is going globally. We know Japanese manufacturing is tanking after the sharp fall in October reported on Friday.
Japanese industrial production fell 3.1% month-on-month in October and 7.1% over the 12 months to the end of October. The figures reflected a sharp cutback in reaction to declining falling Japanese exports.
In the coming week, the most important US report will be the November non-farm payrolls report on Friday night our time when another big rise in jobless numbers is expected.
Reuters found in a poll of economists that 316,000 jobs were lost last month, sharply up from October’s drop of 240,000 jobs. The US unemployment rate is expected to jump to 6.8% in November from October’s 6.5%.
Data showing store traffic and sales for the Black Friday weekend revealed a rise of 3%, the smallest gain for a “Black Friday” in three years, according to US research group ShopperTrak RCT Corp.
Thursday sees the International Council of Shopping Centers releasing November same-store sales for US retail chains.
Besides the Institute for Supply Management’s November reading on US manufacturing tonight, monthly domestic car and truck sales will be out Tuesday night (our time).
The ISM’s November index of the huge US service sector is also out later in the week (and in other countries as well including Australia, Europe and Asia).
The Federal Reserve’s beige book, an anecdotal survey of regional economic conditions, will be released on Wednesday and is expected to make depressing reading on how wide and deep the slump is across America.
MONDAY:
ABS releases business indicators for the September quarter; RBA releases November’s commodity price index; Australian Industry Group/PricewaterhouseCoopers Performance of Manufacturing Index for November.
TUESDAY:
RBA board meets, interest rate decision at 2.30 pm; ABS releases retail trade figures for October and the balance of payments and international investment position for the September quarter; Metcash interim results.
WEDNESDAY:
ABS releases September quarter National Accounts; Boart Longyear market update.
THURSDAY:
ABS releases figures on October’s international trade figures and building approvals for the same month; The Reserve Bank of New Zealand, the Bank of England and the European Central Bank produce interest rate cuts today and tonight, our time
FRIDAY:
US jobless figures for Novem
