AU Data
- Monday 09.30 Services Purchasing Managers Index previous 45.4
- Tuesday 14.30 RBA Interest Rate Decision current 7.25%
- Wednesday 09.30 Construction Purchasing Managers Index previous 40.3
- Wednesday 11.30 Home Loans previous -7.9%
- Thursday 11.30 Employment Change previous 29.8k
- Thursday 11.30 Unemployment Rate previous 4.2%
Last week saw strong evidence that the Australian economy is slowing rapidly as Business Confidence (-8), Building Approvals (-0.7%) and Retail Sales (-1.0%) all came in weaker than expected. Media calls for interest rate cuts as early as Tuesday were somewhat tempered as the TD/MI Inflation Gauge (+4.7%) hit a 17 year high. Current data is indicating a very soft Q3 GDP reading with export activity the only bright spot that was reflected in a June Trade Surplus of $411 million. The RBA interest rate decision will be the focus for the week; an early cut will further undermine the AUD that was sold down by 1.5% on a trade weighted basis the previous week.
NZ Data
- Monday 08.45 Labour Cost Index previous 0.7% q/q
- Tuesday 13.00 ANZ Commodity Prices previous 0.0% m/m
- Thursday 08.45 Employment Change previous -1.3% q/q
- Thursday 08.45 Unemployment Rate previous 3.6%
Building Consents (-20.1%, 22 year low) and Business Confidence (-43.2) gave further evidence last week of a deteriorating NZ economy that may well already be in recession. RBNZ Governor Bollard stoked market expectations by saying there was ‘plenty of room’ for further cuts and another 25 basis points has been fully discounted by the market at the next meeting on September 11.
US Data
- Monday 22.30 Core PCE Price Index previous 0.1% m/m
- Monday 22.30 Personal Spending previous 0.8% m/m
- Monday 22.30 Personal Income 1.9% m/m
- Tuesday 00.00 Factory Orders previous 0.6% m/m
- Wednesday 00.00 ISM Non-manufacturing Composite previous 48.2
- Wednesday 04.15 Federal Reserve Interest Rate Decision currently 2.0%
- Thursday 22.30 Unemployment Claims previous 448k
- Friday 00.00 Pending Home Sales previous -4.7% m/m
- Friday 22.30 Preliminary Nonfarm Productivity previous 2.6% q/q
The US economy continues to avoid the technical definition of a recession (two quarters of negative growth) as reported Q2 GDP grew at an annual rate of 1.9% up from revised growth of 0.9% in Q1. Incredibly Q4 2007 GDP was revised down to -0.2% from +0.6% annualised, and suggests significant revisions will be seen for 2008 GDP data. Other releases continue to show a sluggish at best US economy with Nonfarm Payrolls losing 51k jobs and the Unemployment Rate hitting a 4 year high at 5.7%. Construction Spending (-0.4%) and ISM Manufacturing Index (50.0) offered no indication that the jobs outlook is set to improve in the near-term. This week the Core PCE Price Index and Federal Reserve interest rate decision will be the focus market attention.
JPN Data
- Monday 09.50 Monetary Base previous 0.4% y/y
- Wednesday 15.00 Leading Economic Index previous 92.6
- Thursday 09.50 Core Machinery Orders previous 10.4% m/m
- Friday 15.00 Economy Watchers Current Index previous 29.5
Japanese data continues to reflect the malaise of the global economy as Industrial Production (-2.0%) and the Manufacturing PMI (-47.0) suggest that Japan has most likely entered into recession. Manufacturing activity has contracted now for 5 straight months and continues to suffer from deteriorating domestic demand and rising cost pressures. The PMI surveyed also showed that the pricing pressure on businesses from high steel, energy and other commodity prices is not abating; the Input Prices Index rose to a new series high of 78.5 pointing to another month of considerable cost inflation.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| AUS (RBA) |
7.25% |
+25bps |
04/03/08 |
5th August |
| NZ (RBNZ) |
8.00% |
-25bps |
24/07/08 |
11th September |
| US (FED) |
2.00% |
-25bps |
30/04/08 |
5th August |
| JPN (BOJ) |
0.50% |
+25bps |
21/02/07 |
19th August |