No interest rate increase is expected from tomorrow’s final board meeting of the Reserve Bank for 2010.
A rate rise was never in question after the increase in November, but the weak national accounts for the September quarter, especially in consumption, and the spurt in household savings, will make the issue of a rate increase redundant until February at the earliest, when the board starts its 2011 meeting cycle.
And the October retail sales figures showing a 1.1% fall will have probably pushed thinking on the need for an increase out a bit further, especially if the Christmas retail trade (which we will find out about in early February) is as weak as many traders now expect.
Our unemployment picture won’t impact the RBA’s thinking, the October jobless figures are out on Thursday, and the ANZ job ads data will be issued later this morning.
The AMP’s chief economist, Dr Shane Oliver said on the weekend that RBA Governor Glenn Stevens has clearly indicated that the current level of interest rates is appropriate for the “period ahead”, given the additional increases in bank lending rates last month and the strong Australian dollar.
"The soft patch in the economy indicated by recent economic data also supports the case for interest rates staying right where they are for now.
"Key to watch will be the post meeting statement from the RBA for any guidance as to how long rates are likely to remain on hold.
"We don’t anticipate the next tightening to come until April at the earliest," he wrote.
On Wednesday, RBA assistant governor (Economics) Philip Lowe will address the Australian Business Economists Annual Forecasting Dinner in Sydney.
As well, Australian data for job advertisements (due today), housing finance (Wednesday) and employment (Thursday) will also be released.
Dr Oliver says that housing finance is likely to have remained soft in October, consistent with falling auction clearance rates and anecdotes of continuing softness in the real estate market.
Employment is likely to have increased again in November, but only by 12,000 jobs as various indicators point to a slowing in employment growth after the surge of the past year.
However, unemployment is likely to have fallen back to 5.2% (from 5.4% in October).
The NAB’s monthly business confidence and conditions survey is due out tomorrow.
Elsewhere on Thursday, investors will keep a close eye on the Ten Network AGM, in the wake of recent board changes at the group following large shareholdings purchased by James Packer, Lachlan Murdoch and Gina Rinehart.
The Bank of Queensland is also due to hold its AGM in Brisbane on Thursday.
In the US, more on taxes, jobs and the economy.
US data for the trade balance and consumer sentiment will be released on Friday.
Consumer sentiment is likely to show another modest rise.
Besides these, there is consumer credit on Tuesday and wholesale trade data on Thursday.
Chinese economic data for November will also start to flow with trade figures due on Friday, ahead of economic activity and inflation data due next Monday.
US companies reporting profits include retail giant Costco, computer chip maker Nat Semi, bargain discounter Dollar General and the tax people H&R Block.
European finance ministers meet Monday and Tuesday as the Irish vote on their budget, a contingency for the Irish aid package.
Ireland’s parliamentary vote on the austerity budget will tell us the chances of the budget and bailout package being approved after the polls now expected in late January-early February.
UK food retailer Tesco will release a third-quarter sales update, as will several other retailers.
The Bank of England and the Reserve Bank of New Zealand also meet this week. Neither is expected to move rates.
The UK industrial production and manufacturing production data for October are also due.
The European Central Bank November monthly report is set for release, while in the UK total trade balance figures are due.
The UK producer price index for November is also due.
