Another packed week.
Earnings results here, in the US and Europe; more economic data that will update us on how a number of economies are travelling, especially employment here and in the US; and interest rate decisions from a number of central banks in the shape of the Bank of England, the European Central Bank and the Reserve Bank of Australia.
In Australia, the Reserve Bank is seen as leaving interest rates on hold yet again (as are the BofE and the ECB).
The bank’s decision will come before Thursday’s release of labour force figures, but it will have building approvals, consumer and business confidence and inflation to use as part of its economic backdrop.
Consumer price inflation fell to 1.5% in the June quarter, but underlying inflation was higher than expected.
After RBA Governor Glenn Stevens’ speech last week in Sydney on housing bubbles, unemployment, debt and not letting go the advantages we have built up from avoiding a bad recession, the betting is that the next move on rates will be up here if the flow of good data continues.
The post meeting statement could be redrafted to signal a watering down, and possibly even the removal of its rate easing bias.
As the bank board will be presented with updated forecasts that will appear in Friday’s new quarterly Statement on Monetary Policy, a significant change in the wording of tomorrow’s post meeting statement can be expected.
The new forecasts are like to be more upbeat and this greater confidence in the outlook and an upwards revision to the RBA’s underlying inflation forecasts are likely to feature in the new Statement on Monetary Policy.
Australian data for job ads is out today in the latest ANZ survey; house prices, retail sales, the trade balance and employment will also be released by the Australian Bureau of Statistics.
The confidence that Australia has dodged the bullet from the recession will again be tested by the data flow.
Various private sector surveys suggest that house prices are likely to have risen by around 3% in the June quarter (Australian property Monitors and Rismark).
The AMP’s Dr Shane Oliver said on Friday that "We expect more jobs to have been lost in July taking the unemployment rate up to around 5.9%".
Reserve Bank figures out Friday showed the economy still operating at low levels with credit growth down, especially for business, with only lending to prospective home buyers, especially first home buyers, keeping it aloft.
Thanks to the first home buyers’ grant, owner-occupied housing is now running at 8.8%, the highest level since last December, when it was slowing, not rising as it is now.
Except for housing, it could be an economy in recession, but it would seem the economy is doing a bit better than that. Building approvals for June rose 9.3% with a 4.9% rise for owner-occupied housing, to be up around 16% over the first half of the year.
Looking at the building approvals and the credit growth figures from the RBA, the economy would appear to be a trick pony at the moment, with the stimulus for home construction and buying keeping overall lending growing; up 0.1% in June after a fall of 0.1% in May.
That left total credit growth for the year to June (2008-09 financial year) at 3.4%, down from the 3.8% rate in the year to May and the 12.0% rate a year ago for the 12 months ending June 2008.
The RBA said housing credit rose 0.6% in June from May (when it rose 0.5% over April).
"Over the year to June, housing credit rose by 7.1 per cent.
"The rise in housing credit over June was mostly due to growth in lending to owner-occupiers, with only weak growth in lending to investors."
A year ago in June 2008, home lending was running at an annual 9.9%, with owner occupied lending growing at 10.5% (8.8% in the year to June 2009) and investor housing lending at an annual 8.5% (3.3% for the year to this June).
The RBA said other personal credit fell by 0.3% over June, following a decline of 0.4% over May and was down 7.0%, in the year to June because of "a large decline in margin lending".
Business credit growth was very weak: it fell 0.5% in June 2009, following a decline of 0.8% in May.
"Since its peak in November 2008, most of the decline in business credit has been due to falls in foreign currency denominated lending.
"These falls reflect both the appreciation of the Australian dollar over this period and some reduction in the stock of foreign currency denominated lending. Over the year to June, business credit rose by 0.5 per cent," the RBA said.
The RBA will take this into its outlook: housing is not bubbling, but it is rebounding. Commodity prices are a bit stronger because of the China rebound. Unemployment is the biggest imponderable.
In the US, the ISM business conditions surveys are expected to show a further improvement and while labour market data is likely to show a further edging up in unemployment to 9.6%, the pace of job losses is likely to slow to 250,000 in July which will be a big improvement from the 467,000 jobs lost in June.
China’s latest survey, out Saturday, showed a small rise in manufacturing activity. It wasn’t much, from 53.2 to 53.3, but it was enough to argue that the economy remains positive.
US data for construction spending, personal spending and pending home sales will also be released.
July car sales are due for release tonight, our time. Same store retail sales for most major American retailers are out midweek.
US new-vehicle sales are expected to post the highest annual sales rate of 2009, with the $US1 billion "cash for clunkers" federal program giving an added boost to results the past week.
The $US1 billion was exhausted by Friday night and the deal stopped, until the US Congress moved to add emergency
