AU Data
- Tuesday 11.30 Home Loans previous -6.1% m/m
- Tuesday 11.30 NAB Business Confidence previous -8
- Wednesday 10.30 Westpac/Melbourne Institute Consumer Sentiment previous 2.7% m/m
- Thursday 11.30 Employment Change previous 25.4k
- Thursday 11.30 Unemployment Rate previous 4.2%
- Friday 13.10 RBA Governor Stevens speech on economic conditions
The RBA left rates on hold as expected and the post-decision statement acknowledged that “considerable uncertainty remains about the outlook for demand and inflation”. This certainly leaves the door open for further hikes if necessary, an option that increased in probability the next day when GDP (+3.6% y/y versus expected 2.8%) beat market expectations. Surprise strength from household consumption (+0.6%) and gross fixed capital expenditure (+1.6%) boosted Q1 GDP number. The ‘uncertainly’ alluded to by the RBA was brought sharply into focus on release of the Construction PMI on Friday, which slumped to 36.9 from 42.6 and highlights that while the overall economy remains strong (led by the booming commodity sector) some areas are really feeling the squeeze of high interest rates. Employment data this week will draw attention from both the market and the RBA as strong labour demand may start to translate into wage inflation.
NZ Data
- Wednesday 08.45 Merchandise Terms of Trade previous 2.9% q/q
- Thursday 08.45 Food Price Index previous 0.3%m/m
- Thursday 10.00 Performance of Manufacturing Index previous 51.4
- Friday 08.45 Core Retail Sales previous -0.5% m/m
- Friday 08.45 Retail Sales pervious -1.2% m/m
The previous week saw the Commodity Price Index surging 1% in May to record a year-on-year gain of 18.7%, driven by beef and apples that offset weaker dairy prices. Rising commodity prices, particularly dairy products, have been a key driver of economic growth but also an inflation concern for the RBNZ. The following day, the RBNZ left rates unchanged at 8.25% but surprised the market with an unexpectedly dovish post-decision statement that said it was likely to lower rates later this year amid a rapidly cooling economy. The NZ dollar was immediately sold down 1% and short term debt yields fell 19 basis points in reaction. Despite signalling rate cuts this year, RBNZ Governor Bollard stated that inflation would not return to the 1-3% target band until 2010 and forecast inflation to peak at 4.7% in the September quarter 2008. A check of all the components of the slowdown versus inflation conundrum will be available this week with release of the Food Price Index, Manufacturing Index and Retail Sales.
US Data
- Monday 24.00 Pending Home Sales previous -1.0% m/m
- Tuesday 10.15 Fed Chairman Bernanke speech on issues in the analysis of inflation
- Tuesday 22.30 Trade Balance previous -58.2b
- Tuesday 24.00 IBD/TIPP Economic Optimism Index previous 40.3
- Thursday 00.35 Crude Oil Inventories previous -4.8m
- Thursday 01.30 FOMC member Kohn speech on lessons for central bankers
- Thursday 04.00 Beige Book
- Thursday 22.30 Core Retail Sales previous 0.5%m/m
- Thursday 22.30 Retail Sales previous -0.2%
- Thursday 22.30 Unemployment Claims previous 357k
- Thursday 24.00 Business Inventories previous 0.1% m/m
- Friday 22.30 Core Consumer Price Index previous 0.1% m/m
For most of the week data releases were USD supportive with the Manufacturing Index (49.6), Factory Orders (+1.1%) and Non-farm Productivity (+2.6%) all beating market forecasts. This was all turned around on Friday with the release of Non-farm Payrolls (-49k) and the Unemployment Rate (5.5%) that was far worse than economists forecast of 5.1%. The Unemployment Rate surge (+0.5%) in May is the largest amount in more than two decades and sits at a four-year high, as the US economy shed jobs for the fifth consecutive month. Construction jobs fell for the eleventh consecutive month, by 34,000, and manufacturing jobs lost 26,000. Manufacturing jobs have not increased in 23 months. Retail jobs fell by 27,000, the fifth straight monthly loss in this sector. The USD was sold down sharply, losing nearly 1% on a trade weighted basis and equity markets slumped as the Dow Jones Index finished down 3.13% on the day and 3.39% down on the week. Retail Sales and Consumer Prices will focus market attention this week as well as Fed Chairman Bernanke talking on inflation analysis.
JPN Data
- Monday 09.50 Money Supply previous 1.9% y/y
- Monday 15.00 Leading Index previous 94.1% m/m
- Monday 17.00 Economy Watchers Current Index previous 35.5
- Tuesday 09.50 Core Machinery Orders previous -8.3% m/m
- Tuesday 16.00 Machine Tool Orders previous 0.4% y/y
- Wednesday 09.50 Final GDP previous 0.8% q/q
- Wednesday 09.50 Corporate Goods Price Index previous 3.7% y/y
- Wednesday 09.50 Current Account previous 2.1t
- Wednesday 09.50 Final GDP Price Index previous -1.4% y/y
- Friday Bank of Japan Interest Rate Decision current 0.5%
- Friday 14.30 Industrial Production revision previous -0.3%
- Friday 15.00 Household Confidence Index previous 35.2
- Friday 16.00 Bank of Japan Monthly Report
A quiet previous week for Japanese data saw Capital Spending fall by 4.9%, this was still better than market forecasts of a fall of 9.6%.The slowing pace of corporate investment reduction in the first quarter to March from the previous quarter, provided enough grounds for a possible upward revision to real GDP for Q1. But economists warned of stronger downside risks to the corporate sector, which has led the longest recovery of the world's second-largest economy in the post World War II period, as the government's survey showed deepening profit problems in corporate Japan, prompting them to slash fresh investments on fixed assets.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| AUS (RBA) |
7.25% |
+25bps |
04/03/08 |
1st July |
| NZ (RBNZ) |
8.25% |
+25bps |
26/07/07 |
24th July |
| US (FED) |
2.00% |
-25bps |
30/04/08 |
25th June |
| JPN (BOJ) |
0.50% |
+25bps |
21/02/07 |
13th June |