Australia is bracing for a tumultuous week as crucial economic data is set to be released. The June quarter and monthly inflation figures are expected to be particularly challenging, with economists predicting a surge in prices. This could significantly impact the Reserve Bank of Australia's (RBA) monetary policy stance.
AMP chief economist Shane Oliver forecasts a substantial increase in both headline and trimmed mean inflation, primarily driven by rising costs for food, healthcare, housing, utilities, fuel, clothing, and insurance. While some sectors like communication, car prices, and recreation might show signs of easing, the overall inflationary pressure is expected to be substantial.
Oliver suggests that if inflation aligns with or falls slightly below his forecasts, the RBA may opt to hold interest rates steady. However, a trimmed mean inflation figure exceeding his estimate of 1.1% quarter-on-quarter could prompt another rate hike. The RBA's monetary policy meeting is scheduled for the following week on August 5 and 6.
Beyond inflation, investors will be closely monitoring other economic indicators. Building approvals are anticipated to decline, while retail sales are expected to show modest growth after a strong rebound in May. Housing credit is projected to increase slightly, but overall credit growth remains subdued. The housing market is also under scrutiny, with CoreLogic predicting a slowdown in house price growth and a decline in housing finance.
While the domestic economy grapples with these challenges, global markets will be focused on the outcome of the Federal Reserve's two-day meeting and the subsequent release of US jobs data. Additionally, the tech sector on Wall Street continues to experience volatility, with investors awaiting earnings reports from giants like Amazon, Apple, Meta, and Microsoft. Back home, mining behemoth Rio Tinto is set to unveil its half-year results.
This perfect storm of economic indicators, monetary policy decisions, and corporate earnings is expected to create a volatile week for investors both domestically and globally.
Key points:
- Australia to release crucial inflation data, with expectations of a significant increase.
- RBA's interest rate decision hangs in the balance, with a potential rate hike on the table.
- Other economic indicators, such as building approvals, retail sales, and housing data, will also be released.
- Global markets facing uncertainty due to Fed meeting, US jobs data, and tech earnings.
- Rio Tinto to release half-year results.
