Investor Signposts: Business investment, house prices & US jobs data due

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Every change in seasons is ushered in with a barrage of economic data. So with the profit reporting season coming to an end, now it is time for the Spring economic data reporting season. Business investment and home prices are the highlights in Australia in the coming week.

  • The week kicks off on Tuesday with the usual weekly consumer confidence survey. Also the Australian Bureau of Statistics (ABS) releases detailed dollar estimates of consumer spending – pivotal figures for a raft of businesses.
  • On Wednesday, the ABS issues preliminary construction work done figures for the June quarter. Also the ABS releases the volatile building approvals data - the collated information of approvals by local councils to build new homes and commercial buildings. The construction data covers residential, commercial and engineering construction, but it is the residential building figures which act as an input to the national accounts – that is, it assists in calculating economic growth for the June quarter.
  • In the March quarter construction work fell by 0.7 per cent, driven by a 4.7 per cent slump in residential work. However engineering work lifted by 2.2 per cent. At present building sector inflation is growing at the fastest pace in eight years, but that is being driven by outsized gains in activity last year and it is likely that inflation will moderate in line with home prices over the coming year.
  • On Thursday, investors and traders will have a lot to focus on with a number of indicators scheduled for release. Arguably the most important release from the ABS will be the March quarter estimates on business investment. This data is also an input into the calculation of economic growth. But also insightful are the estimates of planned investment for the coming year.
  • In the March quarter investment rose by 0.3 per cent, and despite the improvement in the global economic outlook and lift in business conditions, we expect that investment fell by 2 per cent in June. The Reserve Bank will be interested in estimates of non-mining investment as well as future investment plans.
  • Also on Thursday, the Reserve Bank releases data on private sector credit – or loans outstanding. And at the same time the Housing Industry Association issues estimates of new home sales.
  • Private sector credit surprisingly rose by 0.6 per cent growth in June, with annual credit growth rising further from recent 3-year lows. What was most encouraging about the June result was the 0.9 per cent surge in business lending. Policymakers will be hoping the lift in lending translates to a lift in investment over the coming year.
  • On Friday, CoreLogic releases the latest data on home prices together with Commonwealth Bank/Markit Manufacturing gauge.
  • On current indications Australian home prices may have posted another solid rise in August, up by around 0.7 per cent. The daily data indicates that Sydney and Melbourne prices have lifted by 0.8 per cent so far in August with Adelaide prices up by 1.3 per cent.

US housing indicators to watch

  • The key economic data release on international markets in the coming week is the US non-farm payrolls or jobs data to be issued on Friday. Key purchasing manager surveys in the US and China are also in the spotlight.
  • In the US, the week kicks off on Monday with the release of data on wholesale inventories as well as the release of the Dallas Federal Reserve manufacturing gauge.
  • On Tuesday, the CaseShiller home price series is released alongside the Conference Board Consumer Confidence index. Home prices are up 5.7 per cent over the year, driven by a lack of inventory of homes for sale.
  • On Wednesday the ADP national employment report is scheduled, covering private sector jobs. The report is the forerunner to Friday’s jobs report and analysts are tipping a 180,000 lift in private sector jobs.
  • On the same day the second (preliminary) estimate of US economic growth for the June quarter is released. “Advance” data suggested the economy grew at a healthy 2.6 per cent annualised pace in the June quarter.
  • On Thursday the influential Chicago purchasing managers index is released together with data on personal income and spending as well as the Federal Reserve’s preferred inflation measure – the core PCE deflator.
  • And on Friday the US non-farm payrolls data is issued. It is clear that the job market is in good shape with jobs up 209,000 in July and the jobless rate at 4.3 per cent. Economists are tipping more job creation of 185,000 in August. Stronger-than-expected job gains together with higher wages would lift speculation about a December rate hike.
  • Also on Thursday and Friday, the surveys of purchasing managers come into focus. The surveys are released across the globe with much interest in results for China and the US. In China the official manufacturing purchasing manager’s index stands at 51.4 with services at 54.5. The US manufacturing sector appears in better shape, currently standing at 56.3. Any reading above 50 indicates expansion of activity.

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Savanth Sebastian Investor Signposts economic insights

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