Even though the US jobs report on Friday night, Sydney time is the biggest economic or business news this week globally, for Australia the focus moves to the health of the economy with the start of the release of data for next week’s March quarter GDP numbers, as well as early April data.
Markets will pause today and tonight in Asia and Europe, and again tomorrow in Asia because of the holiday Monday in the US for memorial Day, and Bank holiday in the UK. As well there is a holiday in China starting yesterday and ending on Tuesday.
This week also sees the release of the start of the month reports on the health of manufacturing, with the two reports for China being key for Australia (Wednesday and Thursday) while local investors will have to grapple with iron ore prices at 2017 lows.
In Australia though the week sees the release of the important March quarter investment figures, along with the second estimate for the 2017-18 financial year.
They will help set the scene for next week’s current account, government finances and wages, salaries and inventories figures and then the March quarter National Accounts Wednesday week – a day after the June meeting of the Reserve Bank board.
As well, we will see the retail sales, building approvals for April and house prices for May – and these could tell us if the slowing pace of activity in retailing, home building and house prices is continuing.
Already there’s a growing belief that the weak March quarter construction activity and the very weak retail sales and a likely growth detraction from net exports could have pushed the economy close to or into another quarter of negative growth in the March quarter.
AMP chief economist, Dr Shane Oliver says that; “absent a surprise in public spending, equipment investment or inventories, March quarter GDP growth looks likely to be near zero with the risk of another contraction.”
“Reflecting this along with ongoing softness in underlying inflationary pressures, there is far more risk of another RBA rate cut by year end than a rate hike,” he wrote again at the weekend, repeating a warning he issued in early May.
He believes the April building approvals (tomorrow) will show a 3% gain after a sharp fall in March, credit growth also for April (on Wednesday) to have remained “ moderate”, the monthly CoreLogic data to show a further moderation in home price growth in May and retail sales “to show a 0.2% bounce after several soft months” on Thursday.
Dr Oliver also believes the March quarter business investment data will show a 0.5% decline as mining investment continues to fall (Thursday).
But the point to watch from the investment data will be the investment intentions for 2017-18 and especially in the weak non-mining area. Dr Oliver sees the chance of “some improvement” in this area.
It’s a quiet week for results, but one that will attract attention will be from Orion Health, the NZ-based group that has issued several earnings downgrades in the past year.
In the US, the focus is likely to be on the May jobs report on Friday night, and the day before, the release of the manufacturing sector activity data.
Dr Oliver says the jobs data “is likely to have remained strong with a 175,000 rise in payroll employment and unemployment remaining unchanged at 4.4%, but wages growth modest at around 2.7% year on year.” Other estimates are around 180,000 – to 185,000 new jobs.
The US also sees the release tomorrow night (after the holiday Monday tonight) of figures for April consumer spending and inflation as measured by the core personal consumption deflator (which is watched closely by the US Federal Reserve).
End of month figures on consumer confidence (Tuesday), pending home sales (Wednesday) and the April trade deficit will all be examined to see if there are any new signs of a pick up or a further slowing in activity (Friday night with the jobs report).
Last week’s second estimate of first quarter GDP saw a revision to an annual rate of 1.2% from 0.7% in the first estimate.
In Europe we get the Eurozone business and consumer confidence readings for May (tomorrow night) and unemployment (Wednesday night), and inflation data (both for May).
In Britain the June 8 election campaign gets underway after the pause because of the Manchester bom atrocity.
In Asia, Japanese jobs data for April and household spending data are all due tomorrow, while industrial production data is out Wednesday, along with inflation.
And the two Chinese business conditions surveys of manufacturing (tomorrow and Wednesday) are expected to soften slightly, according to Dr Oliver. Today is a holiday in China, as is tomorrow.
India releases its first quarter GDP figures this week.
