For Australia, the focus will likely be on the aftermath of Saturday’s Federal election, but while that catches the headlines, all things business and economics will continue.
That’s the influence of offshore factors such as China’s surprise interest rate cut on Friday, the string of weak earnings reports from US retailers (but not the strong retail sales for April), inflation here and offshore, the continuing ripples from the Russian invasion of Ukraine and growing fears of recession in some countries.
Across the Tasman the Reserve Bank of NZ is expected to raise its cash rate again on Wednesday by 0.25% taking it to 1.75%. That will trigger more talk about inflation and comparisons with Australia.
Moody’s economists reckon the rise could be 0.50%, as was the last increase in early April.
On the Australian data front, the regular mid-month business conditions surveys (Tuesday) are likely to remain strong, according to the AMP’s chief economist, Shane Oliver.
But the big data drops will be the lead up to the March quarter national accounts next week with Wednesday’s figures on the value of construction work done in the quarter and Thursday’s quarterly update on private business investment and prospective spending in 2022-23.
Dr Oliver says the March quarter construction data is likely to show a 3.5% gain, business investment data for the March quarter is likely to rise 3% with slight upgrades to business investment plans and April retail sales (Friday) are likely to show a 0.5% gain.
The final group of March 31 companies report earnings this week, starting with rural giant, Elders, Incitec Pivot, ALS (the Brisbane-based testing company), Technology One, Select Harvests and Champion Iron.
In the US the attention will again be on the issues of inflation, weak retail earnings (see separate story) and interest rates.
Inflation watchers will be looking at the minutes from the Fed’s last meeting on Wednesday at which it raised rates by 0.5% are likely to be hawkish.
Fed Chair Jay Powell is due to speak on Tuesday, ahead of the release of the bank’s minutes the following day. That means the focus continues on inflation and interest rates, and recession fears.
Moody’s economists said the minutes “could solidify expectations that the Fed will raise rates by another 50 basis points in June.”
On the data front the early composite business survey for May is out Tuesday with new and pending home sales (due Tuesday and Thursday). Durable goods orders on Wednesday are likely to rise again and the personal spending for April (Friday) is likely to see a solid 0.6% gain.
The core private final consumption deflator inflation (Friday) for April is likely to have fallen back to 4.9%yoy from 5.2%, according to the AMP’s Dr Oliver.
The data on expenditure by consumers will be closely examined to see if there is any messages given the sell off last week after the weak quarterly reports from Walmart, Target, Kohl’s and Ross Stores.
Even though the Fed closely watches so-called PCE inflation, the consumption data will probably hold equal billing this month.
Thursday also sees the second estimate of US March quarter GDP – the first estimate showed a annual fall of 1.4%.
There are few important quarterly results from US retailers this week (see separate story).
In the eurozone business conditions early surveys for May are out on Tuesday are likely to soften as well, according to the AMP’s Shane Oliver.
Japan’s composite business survey for May is also out tomorrow and Dr Oliver says it is likely to show further improvement from April’s reading as reopening from the March quarter’s Covid restrictions continues.
Moody’s says there are monetary policy decisions this week in the Asia-Pacific region as central banks in South Korea, New Zealand and Indonesia review interest rates settings.
“We expect the Bank of Korea to raise the policy rate by 25 basis points to 1.75% at its meeting, building on a rate hike in April. The Reserve Bank of New Zealand is expected to raise the official cash rate by a significant 50 basis points to 2% next week, having already announced a 50-basis point hike in April. We expect Bank Indonesia to leave its policy rate unchanged at 3.5%,” Moody’s said.
