In Australia the month of November finishes with a raft of housing data releases. And a key focus for investors will be the private capital expenditure quarterly data which feeds into the Australian economic growth (GDP) report the following week.
The week kicks off on Tuesday when ANZ and Roy Morgan release the weekly survey of consumer sentiment. Recent data shows confidence has risen to 16-week highs due to an upswing on the views for current and future economic conditions.
On Thursday the Housing Industry Association (HIA) releases its latest update on new home sales. Sales fell by 6.1 per cent in September led by a 16.7 per cent decline in apartments.
Also on Thursday building approvals data is released. Approvals rose by 1.5 per cent in September but are just 0.2 per cent higher over the year. While residential approvals are off the peak reached in mid‑2016, they remain at a high level. This suggests residential construction activity will remain firm.
On Thursday the Bureau of Statistics (ABS) releases the “Private Capital Expenditure” survey for the September quarter. Non-mining investment lifted by 2.6 per cent in the June quarter. Record high readings for business conditions and profitability in recent NAB business surveys imply that non-mining business spending plans for equipment, plant and machinery will remain strong. Mining spending fell by 2.8 per cent in the June quarter. The decline in mining investment is nearing a bottom with just a few LNG projects still to be completed.
Also on Thursday, the Reserve Bank releases private sector credit data for October. Annual growth is 5.4 per cent, but is expected to slow due to a moderation in housing credit following a tightening in policy on interest-only loans and investor lending. Traders will be looking for signs of a pick-up in business credit which has lagged upbeat business outlook surveys.
On Friday, the Commonwealth Bank releases the manufacturing purchasing manager’s index for November. Australian manufacturing activity remains solid and expectations for future output are elevated.
Also on Friday, CoreLogic announces the monthly home price data for Australian cities and states. Auction clearance rates in Sydney have remained below 60 per cent since the last week of October, pointing to a softening in prices in Australia’s most populous city. Elsewhere, Hobart’s attractive affordability is driving up home prices.
Overseas: US data deluge and China manufacturing activity in focus
The week commences in the US on Monday with the release of new home sales data for October. US housing supply is extremely lean, limiting more robust sales following hurricane impacts in the south of the country. Sales are forecast to decline to around 620,000 units in October from 667,000 units in September. The Dallas Federal Reserve also releases its October manufacturing activity gauge.
On Tuesday, “advance” data is expected to show that the US trade deficit widened from $64.1 billion in September to US$65.5 billion in October. The Conference Board measure of consumer confidence is also released on Tuesday and is tipped to remain near 17-year highs on upbeat attitudes towards the buoyant jobs market, pointing to potentially stronger consumer spending. The Richmond Federal Reserve survey is also due.
Also on Tuesday two prominent US home price measures are released for September. Both the Federal Housing Finance Agency (FHFA) and the S&P CoreLogic Case Shiller home price gauges should show US home price growth growing around a 6-7 per cent annual pace with home ownership vacancy rates at 16-year lows.
Wednesday is a busy day for economic news in the US with outgoing Federal Reserve Chair Janet Yellen testifying at the US Joint Economic Committee. Her speech will be keenly observed for clues on whether the central bank intends to lift interest rates at its December meeting, as widely expected by the market. The Fed’s Beige Book detailing national economic activity is also released on Wednesday.
Also on Wednesday the second estimate of US economic growth for the September quarter is tipped to show that GDP expanded at a 3.2 per cent annual rate, up from 3.0 per cent in the first estimate.
On Thursday US personal income and spending data is released containing the Federal Reserve’s preferred measure of inflation – the core personal consumption expenditure (PCE) deflator. Economists expect a moderate 0.2 per cent rise in October, keeping annual inflation well below the Fed’s 2 per cent inflation target.
On Thursday attention turns to China with the November manufacturing and services purchasing managers indexes from the National Bureau of Statistics. After reaching 5-year highs, manufacturing activity has moderated in response to a policy clampdown on pollution and property speculation. The private sector focused Caixin gauge on manufacturing is released the following day on Friday.
Also on Friday the ISM releases the US manufacturing purchasing manager survey results for November. In October activity eased modestly, but from 13½-year highs. Also data on construction spending and new auto sales are released on Friday.
The US Senate is expected to vote on President Trump’s tax bill during the coming week after the House of Representatives approved the package. Tax cuts have effectively been “priced in” and since the US election on November 8 last year, the US S&P500 Index has increased by over 21 per cent.
According to Factset data, in the past year there have been nearly three times as many weeks with market gains above one per cent as those weeks with losses of one percent or more. This makes it one of the most profitable markets to have invested in for some time. Overall, the “Trump Rally” is the fifth strongest post-presidential election equities rally since 1950. The “Clinton Rally” of 31.7 per cent from November 5 1996 remains in first place.
Ryan Felsman, Senior Economist, CommSec