AU Data
- Tue 11.30 Monetary Policy Meeting Minutes
- Wed 11.00 Melbourne Institute Leading Index previous -0.2% m/m
- Thu 11.30 RBA Monthly Bulletin
Demand for Home Loans (+1.1% m/m) climbed for the 9th straight month in June and are now 25% higher than a year earlier. First-time home buyers continue to support the market but at a slightly lower proportion than the previous month, 27% in June from 28.5%. This may indicate some cooling in demand for housing that pushed prices higher by 4.2% in Q2. The NAB Business Confidence survey (+10) rose to its highest level in two years as firms reported improvement in sales, profits and employment. Particularly strong gains were seen in construction and manufacturing, which had previously been two of the weakest sectors. The Index has now almost returned to its long-run average with improvement seen across a broad range of sectors. The Westpac/Melbourne Institute Consumer Sentiment (+3.7% to 113.4) showed consumers also considered the worst of the crisis to be over, rising for a 3rd straight month and approaching a 2 year high. In testimony to lawmakers, RBA Governor Stevens gave an upbeat outlook for the economy and warned that normal rates would be noticeably higher than the current record low of 3%. The market is now pricing in a 25 basis point increase as early as November and 185 basis points over the next 12 months.
NZ Data
- Wed 08.45 Producer Price Index Input previous -2.5% q/q expectation -0.9% q/q
- Wed 08.45 Producer Price Index Output previous -1.4% q/q expectation -0.5% q/q
- Fri 08.45 Visitor Arrivals previous -3.8% m/m
- Fri 13.00 Credit Card Spending previous -2.1% y/y
Business NZ Manufacturing Index (+3.2 to 49.7) showed the sector contracted for the 15th straight month in July but there are signs that a recovery is underway. The contraction is the longest period of weakness in the survey’s 6 year history but the Index has now risen in 4 of the past 5 months, with the production sub-index showing an expansion for the first time in 15 months and the new orders sub-index expanding to its highest level in 19 months. Retail Sales (+0.4% q/q) also showed some confidence in the economic outlook returning as sales rose for the 1st time in nearly 2 years in the June quarter. Last week’s improved data will have little impact on interest rates yet, as the RBNZ are still very cautious about the economic outlook and concerned that the high value of the NZD could derail any fragile domestic recovery. Currently the market is pricing the first increase in official rates by mid-2010.
US Data
- Mon 22.30 Empire State Manufacturing Index previous -0.6 expectation 2.8
- Mon 23.00 TIC Long-term Purchases previous -19.8b expectation 17.7b
- Tue 03.00 NAHB Housing Market Index previous 17 expectation 18
- Tue 22.30 Building Permits previous 0.57m expectation 0.58b
- Tue 22.30 Producer Price Index previous 1.8% expectation -0.2%
- Tue 22.30 Housing Starts previous 0.58m expectation 0.60b
- Thu 22.30 Unemployment Claims previous 558k expectation 548k
- Fri 00.00 Philadelphia Fed Manufacturing Index previous -7.5 expectation -1.9
- Fri 00.00 Conference Board Leading Index previous 0.7% m/m expectation 0.6% m/m
- Sat 00.00 Existing Home Sales previous 4.89m expectation 5.03m
- Sat 00.00 Fed Chairman Bernanke Speech
Last week started positively with the IBD/Tipp Economic Optimism Index (+4 to 50.3) climbing above 50 denoting expansion and consolidating well above the 44.4 level seen back in December 2007 when the economy entered recession. Wholesale Inventories (-1.7% m/m) fell for the 10 straight month in June and have recorded the longest run of declines since the series began in 1987. Rebuilding of depleted wholesale inventories in the second half of this year is seen as a significant driver of the economy in the near-term. The Federal Reserve kept rates on hold as expected and gave its clearest statement yet that it sees the recession levelling out and that shattered financial markets are healing. It is the 1st time since August 2008 that the FOMC has not characterised the economy as contracting, weakening or slowing. However with Home Values (-12.1% y/y) posting their 10 consecutive quarterly decline, Mortgage Foreclosures (+7% m/m) at record levels and Retail Sales (-0.1% m/m) far from robust it is hard to see that the return to trend growth is going to be anything other than bumpy and protracted. The indifferent data throughout the week was rounded out with the preliminary UoM measure if Consumer Sentiment (63.2) that fell back for the 2nd consecutive month as job security, incomes and asset values undermined confidence. Housing data will be the main focus of attention this week.
JP
N Data
- Mon 09.50 Preliminary GDP previous -3.8% q/q expectation 1.1% q/q
- Mon 09.50 Preliminary GDP Price Index previous 0.9% y/y expectation 1.8% y/y
- Wed 14.30 All Industries Activity previous 0.7% m/m expectation 0.4% m/m
Core Machinery Orders rose 9.7% m/m in June for the 1st time in 4 months after sinking to a record low the previous month. Machinery orders are a leading indicator of capital spending but the outlook is far from certain as weak demand at home and abroad has left manufacturers with overcapacity and falling corporate profits, which is not an environment for a sustained increase in capital investment. The Reuters Tankan survey showed that both manufacturers and non-manufacturers believe that the worst of the economic crisis is past but the outlook remains uncertain as government stimulus has driven a large portion of production gains and domestic demand is weak. The BOJ kept rates at 0.1% as expected and maintained its cautious view on the economy citing concerns about deflation and weak corporate spending. Preliminary GDP will be watched this week for Japan’s emergence from the deepest recession since World War Two.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| AUS (RBA) |
3.00% |
-25bps |
07/04/09 |
1st Sep |
| NZ (RBNZ) |
2.50% |
-50bps |
30/04/09 |
10th Sep |
| US (FED) |
0-0.25% |
-75bps |
16/12/08 |
23rd Sep |
| JPN (BOJ) |
0.10% |
-20bps |
19/12/08 |
17th Sep |