AU Data
- Tue 11.30 NAB Business Confidence previous -2
- Wed 11.00 MI Leading Index previous 0.7% m/m
- Thu 11.30 RBA Monthly Bulletin
- Fri 11.30 Import Prices previous -2.8% q/q expectation -6.0%
As expected the RBA left rates on hold at 3% for the third consecutive month but left the door open for further cuts later in the year if economic and financial conditions do not support a return to a sustainable recovery. The RBA’s caution looks well justified as Job Advertisements (-6.7% m/m) are now down 51.4% from a year earlier and the AIG Construction Index (42.6) registered its 16th straight month sub-50 indicating contracting activity. However, Consumer Sentiment (+9.3% m/m) jumped to its highest level in 19 months as government handouts and low interest rates bolstered consumer confidence. Confidence may yet prove fragile as government stimulus recedes and the employment outlook remains uncertain. For now, employment is holding up well, especially when compared with the US, Britain and Europe; the Unemployment Rate (5.8%) was better than market expectations but is still the highest level since October 2003, with forecasts predicting a peak of 8% by the end of 2010. This week Business Confidence and the RBA Monthly Bulletin will be the focus of domestic data.
NZ Data
- Mon 08.45 Retail Sales previous 0.5% m/m expectation 0.3%
- Mon 08.45 Core Retail Sales previous -0.1% m/m expectation 0.5%
- Thu 08.30 Business NZ Manufacturing Index previous 42.7
- Thu 08.45 Consumer Price Index previous 0.3% m/m expectation 0.5%
- Thu 08.45 Food Price Index previous 0.3% m/m
Last week saw the New Zealand Institute of Economic Research release its quarterly survey of Business Confidence that showed a net 25% of firms expect general business conditions to deteriorate in the next 6 months. This is a sharp improvement on the previous quarter when 65% of respondents expected deterioration and was a 35-year low reading. The survey supports previous data that the worst of the recession may be over and that growth could return by the end of 2009. However, interest rates are not forecast to increase in the next 12 months as the RBNZ will be wary of moving too early and stalling any recovery prospects. Retail Sales and the Manufacturing Index will be the pick of this week’s data releases.
US Data
- Tue 04.00 Federal Budget Balance previous -189.7B expectation 70.1B
- Tue 22.30 Producer Price Index previous 0.2% m/m expectation 0.8%
- Tue 22.30 Retail Sales previous 0.5% m/m expectation 0.3%
- Wed 00.00 Business Inventories previous -1.1% m/m expectation -1.1%
- Wed 00.00 IBD/TIPP Economic Optimism previous 50.8
- Wed 22.30 Consumer Price Index previous 0.1% m/m expectation 0.6%
- Wed 22.30 Empire State Manufacturing Index previous -9.4 expectation -4.8
- Wed 23.15 Industrial Production previous -1.1% m/m expectation -0.6%
- Thu 00.30 Crude Oil Inventory previous -2.9M
- Thu 22.30 Unemployment Claims previous 565K
- Thu 23.00 TIC Long-Term Purchases previous 11.2B
- Fri 00.00 Philly Fed Manufacturing Index previous -2.2 expectation -5
- Fri 00.00 Natural Gas Storage previous 75B
- Fri 22.30 Building Permits previous 0.52M expectation 0.52M
- Fri 22.30 Housing Starts previous 0.53M expectation 0.52M
- Sat 03.00 NAHB Housing Market Index previous 15 expectation 17
The Institute of Supply Management’s Non-manufacturing Index (47) release last week showed that service industries, from retailers to homebuilders, contracted at the slowest pace in 9 months. Service industries account for nearly 90% of the US economy and the index’s 3rd straight monthly improvement reflects signs of stabilisation in housing and consumer spending. However, as unemployment continues to climb and wages stagnate, consumers will inevitably remain cautious in the medium-term and any further steps towards outright growth in this important sector will not be rapid. An indication that the path to growth will not be smooth came with the UoM preliminary estimate of Consumer Sentiment (64.6) that was worse than market expectations (70) and recorded its lowest level since March; higher gasoline prices, falling home values and unemployment all contributed to denting consumer confidence. This week a full data diary will keep traders occupied and the start of the US Q2 company reporting season will also be closely watched for leading indications of growth, or not, in the coming 6-9 months.
JP
N Data
- Mon 14.30 Revised Industrial Production previous 5.9% m/m expectation 5.9%
- Mon 15.00 Household Confidence previous 35.7 expectation 36.8
- Wed Tentative Monetary Policy Statement
- Wed Tentative BOJ Interest Rate Decision previous 0.1% expectation 0.1%
- Thu 09.50 Tertiary Industry Activity previous 2.2% m/m expectation 0.3%
The BOJ Tankan main sentiment index for big manufacturers improved to -48 in Q2 from the record low of -58 in Q1 2009. Although the improvement was less than market expectations, it was the 1st rise in 2½ years as hopes of an improvement in global trade tentatively crept into corporate thinking. However confidence in a sustained recovery in the export dominated Japanese economy is far from robust, as reflected in the capital spending component of the survey that showed big firms intend to cut investment by 9.4% in the year to March 2010. The more positive tone was supported by Industrial Production (+5.9% m/m) that recorded its 3rd straight monthly increase after an unprecedented fall of 35% from its peak in February 2008. Domestic demand remains weak as seen in May’s Retail Sales (-2.8% y/y) that dropped for the 9th straight month as falling wages and employment hurt consumer confidence and capacity to spend.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| AUS (RBA) |
3.00% |
-25bps |
07/04/09 |
4th August |
| NZ (RBNZ) |
2.50% |
-50bps |
30/04/09 |
30th July |
| US (FED) |
0-0.25% |
-75bps |
16/12/08 |
11th Aug |
| JPN (BOJ) |
0.10% |
-20bps |
19/12/08 |
15th July |