The May 18 election dominates Australia this week, but amidst all the clamour we will get two very important updates on the health of the economy with the release of two key indicators the Reserve Bank is now concentrating on – the health of the labour market and strength of wages growth.
The latter will be assessed by the March quarter Wage Price Index out on Wednesday and the April jobs data on Thursday. Both will come from the Australian Bureau of Statistics.
The AMP’s Chief Economist, Dr Shane Oliver says jobs data to be released Thursday will attract even more than usual attention given the importance the RBA has attached to a further improvement in the labour market as a key to getting inflation up and heading off rate cuts.
“We expect to see a 12,000 gain in employment but unemployment rising to 5.1%,” he wrote at the weekend.
“March quarter wages data to be released Wednesday will also attract a lot of interest but is expected to have remained subdued at 0.5% quarter on quarter or 2.3% year on year.” Dr Oliver said.
The latter will not be encouraging for the central bank which is worried that household consumption has slowed because of weak growth in household income in the past 18 months to two years. The bank though still sees household income growing through tax cuts later this year.
March housing finance is out later today. Dr Oliver says the figures are expected to show a 0.5% fall after February’s rise.
The NAB’s business conditions survey for April will be released tomorrow and Westpac consumer confidence will be released Wednesday.
Corporate results are few – Ruralco and Dulux Co – it will be the latter’s last release as it is about to be swallowed by Nippon Paint.
Apart from the US/China trade issue, President Trump is also due to make a decision regarding auto tariffs by this Saturday, May 18 but this may be delayed given ongoing talks with the EU and Japan and auto tariffs face wide bi-partisan opposition in Congress.
On the data front, consumer spending is likely to be the focus in the US in the week ahead with retail sales data due Wednesday likely to show a modest rise in April after March’s surprise surge.
The March quarter results season is almost at an end and the results of Walmart early Thursday will be the result everyone will be looking at.
Results from Macy’s, America’s biggest department store group are out the day before and will be watched closely, as well as figures from two other chains, Dillards and JC Penney.
In other US data, Dr Oliver says we can “expect continuing strength in small business optimism (Tuesday), a small rise in industrial production and a further improvement in homebuyer conditions (both Wednesday) and a solid bounce in housing starts (Thursday). Manufacturing conditions surveys for the New York and Philadelphia regions will also be released.”
More Chinese economic data – bank loans and car sales later today and economic activity data on Wednesday – retail sales, investment (especially in property) and production.
Dr Oliver says the figures will be “watched for further improvement after the pick up seen in March. Industrial production is likely to slow back a bit but retail sales and fixed asset investment are expected to hold on to recent gains if not improve slightly further.”
In Europe, the focus will be on GDP data for Germany, and the second estimate of eurozone GDP and industrial production numbers. The German economy appears to be stumbling.
Similarly, GDP data for the Czech Republic and Poland will give clues as to how eastern European countries have fared in the face of slower growth in the euro area.
In the UK, labour market data are the highlight of the week and will be examined to see if the jobs market has remained resilient in the face of the Brexit confusion.
Surveys and other data have hinted that the pace of hiring has eased amid escalating Brexit uncertainty, bringing wage pressures down.
