Wages, jobs, oil prices, and a febrile market sentiment will make for a difficult mix for local investors in the coming week.
The big slide in oil prices is finally impacting market confidence but they should help keep the Australian economy buoyant and inflation under control (the Reserve Bank confirmed the strength of the economy with its latest forecasts on Friday).
Wages though remain the major weakness, especially in view of the continuing jobs boom. Both come to centre stage this week.
The September quarter wages price index is out on Wednesday is expected to show wages grew 0.6% quarter on quarter thanks to the 3.5% rise in the minimum wage providing a boost. But partly offsetting that will be the loss of penalty rates for many employees, especially part-timers.
While this should see annual wages growth rise to 2.3% year on year from 2.1% in the June quarter, wages would still be stuck at 2% annual growth were it not be for the second 3% plus rise in the national wage in as many years.
And business and the federal government opposed the size of the two increases and will greet the news of stronger growth as a sign their policies are working when it will be nothing of the sort. Stripping out the 3.5% rise, you find wage growth still weak.
October jobs data on Thursday is expected to show a 15,000 gain in employment but unemployment remaining unchanged at 5%.
The AMP’s chief economist, Dr. Shane Oliver said in a commentary at the weekend “the jobs report is always a bit statistically noisy but this one may be more so given the impact of a changing survey sample that seems to be resulting in more variation than normal.”
The NAB business conditions survey will be also be released tomorrow and the monthly consumer confidence data will be released Wednesday.
The corporate reporting and annual meeting seasons stagger on. Figures are expected this week from Elders, Australian Agricutural Co, GrainCorp, RuralCo, DuluxGroup and Incitec Pivot.
In the US October data for inflation and retail sales will be the main focus, but so will be the volatile markets which took a hit on Friday from the continuing slide in oil prices, weakness in tech stocks and emerging fears about the policies of President Donald Trump after the mid term elections.
There’s consumer inflation on Wednesday with the core reading forecast to remain stuck at 2.2% year on year and retail sales growth on Thursday to remain strong.
The Philadelphia and New York regional manufacturing conditions surveys on Thursday are likely to remain solid as is growth in industrial production on Friday. A speech in Texas by Fed Chair Powell also on Thursday will be watched closely for clues on the outlook for interest rates.
In Asia, there’s Japanese September quarter GDP growth on Wednesday. Dr. Oliver says this is expected to dip back into negative territory with a decline of 0.3% quarter on quarter resulting in annual growth of just 0.4% due to weakness in consumer spending.
Wednesday also sees the release of the remaining Chinese economic activity data for October on Wednesday.
Dr. Oliver says this is likely to show a slight pick-up in retail sales growth to 9.3%yoy and investment growth to 5.5% but growth in industrial production unchanged at 5.8%. Data on bank lending and credit will also be released.
In Europe, the Italian budget imbroglio continues with a deadline of Tuesday for Italian to resubmit its spending proposals (which include moves to boost public benefits).
This is likely to see a stand off between the EU and Italy because the budget will exceed the 3% of GDP deficit limit in 2020 and possibly in 2019.
As well the Brexit talks between the UK and the EU continue with negotiators said to be close to a breakthrough on the draft of a Brexit deal, but pressure growing for a parliamentary debate and vote as soon as possible.
The US September quarter earnings season is almost over with just 13 companies on the S&P 500 expected to report results this week – retailers will dominate and that will be led by Walmart on Thursday, along with department store groups, Macy’s on Wednesday and Nordstrom, also on Thursday.
