Globally the big event this week will be the release of the new Apple iPhone midweek, but in Australia it will be one of those weeks where the Reserve Bank’s latest meeting coincides with the release of the latest GDP figures – and both will sort of cancel each other out.
The RBA will not cut rates after the cut last month, but GDP growth will slow to around from the March quarter, and no doubt prompt some exciteables to wonder why rates weren’t cut.
Overseas, its the start of Chinese economic data for August and the first eight months of the year, the European Central bank’s September board meeting, and the end of the 2016 G20 leaders meeting in China that will add precisely nothing to world economic growth over the next year.
Chinese August trade data and inflation figures for August are out late in the week.
And US markets are closed today and tonight for Labor Day.
In Australia, the Reserve Bank will leave interest rates on hold at its September board meeting tomorrow.
The AMP’s Chief Economist, Dr Shane Oliver says that while the Australian dollar remains a little too high for comfort, economic activity data since the August rate cut has been reasonable and there has been nothing new on inflation.
"As a result the RBA is likely to hold the cash rate at 1.5%. We remain of the view that the RBA will cut rates again but this won’t come until November after the release of September quarter inflation data and when it next reviews its economic forecasts,’’ Dr Oliver wrote at the weekend.
“Another rate cut is a close call though given that the outlook remains for reasonable economic growth."
The June quarter GDP growth on Wednesday is expected to a slowing in the rate of growth slow to around 0.4% quarter on quarter after the March quarter’s unexpectedly strong 1.1% rate.
Weaker export volumes and the continuing drag from the unwinding of the mining investment boom, and weak retail spending will be major factors in the slowdown, according to market forecasts.
Despite the slowdown, annual growth is expected to be around 3.3% year on year though simply because the weak March quarter from last year drops out of the comparison.
In the run up to the GDP report in the National Accounts, we will get job ads and business indicators later today, the June quarter current account deficit and government finance data tomorrow, the trade deficit for July on Thursday and housing finance, also for July on Friday.
Dr Oliver says the July housing finance data will be watched closely to see if finance to property investment has continued to reaccelerate as seen in the previous two months.
And on Thursday, incoming RBA Governor, Dr Philip Lowe makes opening remarks at a finance conference on Thursday and will no doubt be questioned about tomorrow’s rate discussions and decision.
The services sector survey for August is out later this morning.
The flow of corporate results has dried up. Sigma Pharmaceuticals is one corporate due to report results this week.
China’s trade data for August will be released on Thursday, with the inflation figures for the same month the next day. Economists will be watching the import data closely for any signs the economy is slowing.
Japan will see the release of the second estimate of June quarter growth – it could be cut to zero (no growth), or even to a small negative reading.
In China, the G20 leaders’ summit in Hangzhou today and tomorrow will see the usual motherhood commitments to policy co-ordination, structural reforms and avoiding “competitive devaluation.”
Dr Oliver says we would not expect much financial market impact. “Such meetings usually only come up with anything significant at times of crisis (like through the GFC)."
"While there is a market belief that some sort of “Shanghai Accord” to stabilise exchange rate movements was agreed at the G20 finance and central bankers meeting in February this year, this may be tested in the months ahead as the Fed moves towards another rate hike.
“What the G20 should be doing is stepping up efforts to meet the 2% growth boost objective from the 2014 G20 summit (which now looks unachievable) and fighting back against protectionism,” Dr Oliver wrote at the weekend.
In the US, the services sector activity index and data for job openings and hirings are out tomorrow, while the Fed’s Beige Book of anecdotal evidence on the economy on Wednesday will be watched to see what businesses across the US are saying about their current level of activity.
US corporate results will also be few and far between – Kroger, the big supermarket chain will be one releasing figures, along with HP and Hewlett Packard, Valspar (the paint group), Barnes and Noble (the book chain) and truck maker, Navistar.
But the big corporate event globally will see Apple grabbing the spotlight at the Bill Graham Civic Auditorium in San Francisco on Wednesday, where CEO, Tim Cook is expected to present the iPhone 7.
The Bank of Canada announces its latest monetary policy decision midweek.
In Europe, the ECB (Thursday, our time) will maintain a dovish policy stance, but to make no changes to monetary policy.
Dr Oliver says “eurozone economic data has been reasonable and more resilient than expected post the Brexit vote which will likely allow the ECB to delay any decision on extending its quantitative easing beyond March 2017 until maybe it’s December meeting."
The eurozone also sees the release of updated second quarter GDP results.
In Britain, Bank of England governor Mark Carney will make his first public appearance since the central bank unveiled its easing package last month, when he testifies before the UK parliament on Wednesday night, our time.
