AU Data
- Monday 11.30 Housing Finance for March previous -5.9%
- Tuesday Australian Federal Budget
- Wednesday 11.30 Wage Price Index for Q1 previous 1.1%
- Thursday 11.30 Average Weekly Earnings for Q1 previous 0.6%, 4.2% y/y
Inflation, labour and interest rates all contributed last week to volatile and choppy foreign exchange market conditions. Unemployment (4.2%), though slightly up on the month, continues to run at 30 year lows; employment (+25,400 in April), wages growth and productivity gains will be watched carefully by the RBA in their inflation deliberations. In the quarterly Statement on Monetary Policy the RBA signalled that interest rate hikes were on hold to allow the full effect of recent increases to feed into the domestic economy. The RBA acknowledged that, despite expected below-trend GDP, inflation would remain outside their 2-3% target range until 2010. The Federal Budget will hold centre stage this week; just how anti-inflationary can it be?
NZ Data
- Tuesday 08.45 Food Price Index for April previous 0.7%
- Tuesday REINZ House Sales for April previous 3.4% m/m
- Tuesday REINZ House Prices for April previous 1.6%
- Thursday 08.45 Retail Sales for March previous -0.7%
- Friday 08.45 Producer Prices for Q1 previous 1.3%
Employment data released last week rocked the market as 29,000 jobs were shed (the fastest pace in 20 years) in Q1 and unemployment rose by 0.2% to 3.6%. Construction, retailing and hospitality all suffered and the sharp jobs slowdown, even though it is a lagging indicator, spurred some analysts revise their forecasts of a September monetary policy easing to as early as June. The previous day to the employment release, the RBNZ acknowledged that the domestic economy was slowing more sharply than forecast, particularly the housing market, and that any further shocks from the global credit crunch would exacerbate the domestic slowdown. The NZ$ was sold across the board and this was especially visible against the AU$ (-2.31% on the week) as, at least as far as employment is concerned, the two economies are travelling on starkly divergent paths.
US Data
- Tuesday 04.00 Budget Statement for April previous -$48.1b
- Tuesday 22.30 Import Prices for April previous 2.8%
- Tuesday 22.30 Retail Sales for April previous 0.2%
- Tuesday 24.00 Business Inventories for March previous 0.6%
- Tuesday 24.00 IBD Consumer Optimism for May previous 39.2
- Wednesday 22.30 Consumer Price Index for April previous 0.3%
- Thursday 22.30 Empire State Survey for May previous 0.6
- Thursday 23.00 Treasury International Capital System for March previous $72.5b
- Thursday 23.15 Capacity Utilisation for April previous 80.5%
- Thursday 23.15 Industrial Production for April previous 0.3%
- Thursday 24.00 Philadelphia Fed Survey for May previous 24.9
- Friday 03.00 NAHB Builders Survey for May previous 20.0
For the most part of last week, US data releases, apart from the housing sector, supported the notion that the economy was certainly weak but not freefalling into a deep recession. Non-manufacturing ISM Index (52.0 from 49.6)) clambered above the 50 level that signifies growth over contraction with the employment element of the survey particularly encouraging rising to 50.8 from 46.9. The Trade Deficit also narrowed in March (-5.7%) more than expected on a record plunge in the value of imports, even as oil prices surged to new record highs. However, positive equity market sentiment was undermined by a speech from Kansas City Fed president Hoenig that described the inflation outlook as “troublesome” and warned that the Fed must be ready to raise rates to curb inflation. Towards the end of the week, concerns about credit problems and ongoing risk to the US economy were rekindled when AIG, the worlds largest insurer, reported a larger than expected Q1 loss at $7.8b. Plenty of data releases this week will inevitably bring volatility to the market and maybe some clarity as well.
JPN Data
- Monday 10.50 Money Supply for April previous 2.2%
- Monday 15.30 Bankruptcies for April previous 12.8% m/m
- Monday 16.00 Economy Watchers Poll Divergence Indicator for April previous 36.9
- Wednesday 10.50 Trade Surplus for March previous -6.6%
- Wednesday 10.50 Corp. Good Price Index for April previous 0.5%
- Thursday 10.50 Machinery Orders for March previous -12.7%
- Friday 10.50 GDP for Q1 previous 0.9% q/q, 3.5% annualised
- Friday 10.50 GDP Deflator for Q1 previous -1.3%
- Friday 16.00 Consumer Confidence Index for April previous 36.7
Due to Japanese holidays, economic data releases were restricted to Friday, where the Leading Indicator, which is compiled from new job offers, consumer sentiment and Tokyo share prices, plunged to 20.0 in March from 54.5 the previous month. This dramatic drop below 50 suggests economic contraction in the months ahead. Japan’s Nikkei stock average fell 2.1% and marked its first weekly decline in eight weeks. Exporters were sold and Toyota also disappointed with a larger than expected 28% profit decline in Q1; a strong yen, rising input prices and a weak US economy all contributed to the poor performance with little respite seen for the rest of the financial year as Toyota forecast its first net profit decline in 7 years.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| AUS (RBA) |
7.25% |
+25bps |
04/03/08 |
3rd June |
| NZ (RBNZ) |
8.25% |
+25bps |
26/07/07 |
5th June |
| US (FED) |
2.00% |
-25bps |
30/04/08 |
25th June |
| JPN (BOJ) |
0.50% |
+25bps |
21/02/07 |
20th May |