The Reserve Bank’s April meeting today dominates economics and business events this week in Australia with more evidence of a strengthening economy offset by the unknown of what the ending of JobKeeper will do to unemployment.
The RBA meeting is one of several central bank meetings of key data releases this week. Central banks India and Poland meet while the ECB and US Fed release minutes from their last meetings – the latter will be important because the still nervy feeling in markets about inflation and US interest rates.
The IMF’s spring meeting start later this week with updates to its World Economic Forecasts (the first was overnight Monday, Sydney time).
As well, surveys of service sector activity levels for March will be out this week and will confirm that in some countries – Australia, China and US for example, conditions are booming.
In Australia the RBA meeting is the key to sentiment among investors and business. The central bank will want to see what the withdrawal of JobKeeper does to jobless numbers but this won’t be known until May when the April labour force report is released by the Australian Bureau of Statistics.
For that reason – and the continuing policy stance of no interest rate movement until 2024 at the earliest, the RBA will leave monetary policy on hold at today’s meeting.
The RBA wants to see a much tighter jobs market and much stronger wages growth; that it remains committed to the 0.1% three-year bond yield target; and that it is prepared to make further adjustments to its bond purchases if necessary.
Friday sees the release of the first Financial Stability review of 2021 from the RBA – expect some comments on house prices and debt, but no outright change in the wait and watch policy stance.
The RBA and APRA do not share the level of concern about house prices than the media seems to sharing (even though News Corp and Nine/Fairfax own the two main real estate listings websites in Australia – REA and Domain respectively).
AMP Chief Economist, Dr Shane Oliver says the recent steadying in bond markets here and offshore and some softening in the $A have seen some of the pressures taken off the RBA.
He says the focus will likely be on the RBA’s assessment of the resurgence in the property market which will also be the main thing to watch in the RBA’s Financial Stability Review to be released Friday.
March saw house prices jumped 2.8% in the fastest increase since 1988. Economists say that is an increasing concern but so far regulators like the Reserve Bank and APRA do not seem to be all that alarmed – yes they have expressed concern only for the potential to impact financial stability.
Thursday saw a string of important data releases that confirmed the continuing strength of economic activity. The Australian Bureau of Statistics confirmed that retail sales fell in February but by a less than first reported decline of 0.8% (against the original fall of 1.1%) as lockdowns in Victoria and WA impacted.
Economists though say March will see a rebound given the positive news boosting sentiment and while credit growth was soft (especially for business) there was a noticeable rise in investor home loans for a second month, according to the RBA data.
Building approvals jumped sharply in February for both owner occupiers and units and apartments (though the latter remain down more than 20% on a year ago).
The AMP’s Dr Oliver points to the improvement being driven by HomeBuilder and the tradies support package.
Housing finance commitments were solid – while they fell 0.4% in February that was after a 10.5% surge in January and they are up 49% on a year ago). This means credit growth for housing will improve from now on.
The monthly survey of manufacturing activity in March was very strong, up 1.1 points to a very high 59.9.
The ABS’ survey of job vacancies confirmed the growing strength in the labour market with a 13.7% rise over the 3 months to February leaving them up nearly 27% on a year ago as did a rise in payroll employment above year ago levels and the trade surplus remained big in February, albeit less so than expected.
The trade surplus of $7.35 billion was again large, but it was down from the $8.1 billion surplus on merchandise goods.
This week also sees the release of the service sector activity report – it’s likely to rise from the 55.8 reading in February (which is very solid) but fall short of that high 59.9 reading for manufacturing.
Offshore and service sector activity survey results will dominate the week globally as well as updates to trade, industrial production and inflation.
China’s economy comes under the spotlight with updates to the private Caixin service sector PMI (tomorrow) and on Friday, inflation data for March – strengthening consumer price movements and a rise in producer prices. China’s car sales data for March is due on Saturday.
Besides the ECB minutes eurozone unemployment and industrial production for Germany and France will be released.
Economists say that the release of all PMI data during the week will give an updated view on global economic trends, after February’s surveys showed the recovery gaining momentum but price pressures at the highest for over a decade.
Besides the Fed minutes, the US also sees the release of producer prices on Friday with a sharp rise tipped by economists.
And the US first quarter earnings season approaches with scattered releases this week of smaller company.
The major releases start next week with the big six US banks reporting.
