The Federal budget dominates the coming week in Australia, but with some much of the detail leaked in the last 10 days, it will be something of an anti-climax.
We know there will be a big deficit as revenue growth falls short and we also know that there will be a lot of hot air and noise from politicians, economists and others that won’t shed much light at all.
Estimates of the deficit are around $17 billion – around 1.1% of GDP, but one that is essentially useless given the September 14 Federal poll will change a lot of things.
It won’t have an impact on the value of the dollar which remains the major area of interest for the markets and investors.
Federal Treasury has already said it seems growth in 2013-14 of 2.7% (which equates to the "bit less than trend’ rate the RBA says the economy is currently growing by). Inflation is estimated at 2.25%, which is what the RBA thinks.
All in all the budget will be a bit of a non-event – more interest will probably be in what Tony Abbott says on Thursday night in his budget reply speech.
Of greater importance for the economy and the market will be the final round of Chinese economic data to be released later today that will tell us how production, investment and retail sales went in April.
Judging by the trade (imports especially), the inflation figures, car sales (which were up) and bank lending (up), China probably had another month of moderate growth and economic activity – but that’s about all.
After the fall in the Aussie dollar on Friday, moderately good news from China will help lift investor confidence.
Business and consumer confidence reports (out tomorrow and Wednesday) are not expected to be something to write home about – they have been mixed to weak in the past month or so and more of the same is expected. Housing finance data from the Bureau of Statistics is also due for release today.
Results this week will come from CSR, Grain Corp and Dulux, plus a smattering of annual meetings. The most notable will be Westfield Retail Trust.
Stockland, the property group, has a strategy update later today. Expect the group to downplay growth in residential and retirement and a move deeper into commercial sectors, such as office blocks.
And, on Wednesday the Commonwealth Bank produces its third quarter update.
CBA to complete bank reports
Offshore, the main focus will eurozone and Japanese first quarter GDP estimates and US, where retail sales and consumer prices for April will be released.
With personal income and wage growth weakening and inflation falling, the US retail sales data for April could be slower than expected and offset some of the increasing optimism about the US economy that helped the US stock market and dollar finish last week with a burst and at another record level.
The US also sees the monthly manufacturing surveys from the Fed branches in New York and Philadelphia (due Tuesday and Thursday respectively) which may be slightly better than last month.
Housing starts for April will show a fall according to most estimates after a surge in activity in recent months. Economists are looking for weak consumer and producer inflation, with core inflation readings down to 1% (annual) or less
In Europe the eurozone economic growth report will again show another three months of contraction.
The eurozone March quarter GDP is out Wednesday and is expected to show a continued recession but with the pace of contraction slowing after the nasty 0.6% fall in the December quarter.
Data for industrial production and inflation will also be released and will reflect the deeply recessed pace of activity.
Watch Germany though where recent data for April seems to be suggesting an improvement after a first quarter weakening.
In Japan there could be more good news from the big change in economic policy in Japan by the government and central bank Japanese which are both trying to end the country’s deflationary squeeze by lowering the value of the yen and boosting inflation (and exports).
Thursday’s March quarter GDP is expected to show a return to growth, with a 0.7% rise forecast, up from the contraction of 0.1% in the December quarter.
The yen has fallen more than 20% this year and the Japanese stock market is by more than 22% with exporters such as Toyota and Sony seeing huge rises in earnings and their share prices. Exporters expect to see another rise this year.
