AU Data
- Monday 10.30 Melbourne Institute Inflation Gauge previous -0.6% m/m
- Wednesday 10.30 Westpac Consumer Sentiment previous 7.5%
- Thursday 11.00 Melbourne Institute Inflation Expectations previous 2.5%
- Thursday 11.30 New Motor Vehicle Sales previous -5.2% m/m
- Friday 11.30 Import Prices previous 5.0%
Last week’s data releases showed the economy holding its own against a worsening global outlook. Owner occupied Home Loans grew by 1.3% m/m in December; demand was buoyed by the government first time buyers’ incentive package introduced late in 2008. Jobs data saw Employment fall by 1,200 in December and Unemployment rise by 0.1% to 4.5%. However, the underlying shift of circa 40K from full-time to part-time employment does not bode well for the future and the worst is still to come in this series. Overall the market is still expecting another 75 basis point rate cut by the RBA on February 3.
NZ Data
- Tuesday 08.45 Consumer Price Index previous 1.5% q/q
- Tuesday 08.45 Food Price Index previous 0.8% m/m
- Wednesday 08.45 Core Retail Sales previous 0.8% m/m
- Thursday 09.30 Business NZ Manufacturing Index previous 35.4
NZIER data showed Business Confidence deteriorated further in Q4 2008 equalling a 33 year low, pointing to a deepening recession and increasing market expectations of further rate cuts to 3% (currently 5%) by mid-2009. Standard & Poor’s weighed in to complete a torrid week for the NZ dollar by placing NZ’s foreign currency rating on negative watch. The negative outlook reflects the likelihood of a downgrade if external balances (highlighted by a current account deficit equal to 8% of GDP) begin to pressure the country’s investment, growth and fiscal performance. The Government is now under increasing pressure to present a credible medium-term plan to control the widening fiscal deficit (currently 3.7% of GDP and widening to 5.6% in 2011) at the next budget.
US Data
- Thursday 05.00 NAHB Housing Market Index previous 9
- Friday 00.30 Building Permits previous 0.62m
- Friday 00.30 Housing Starts previous 0.63m
- Friday 02.00 House Price Index previous -1.1% m/m
Retail Sales data stunned the market as retailers reported a fall of 2.7% m/m (expected -1.2%) in December. Compared to the same period a year ago, sales have plunged by a record 9.8%. Other data showed a continuing pattern of falling manufacturing activity and inflationary pressures. Industrial Production fell by 2% in the month of December and is now down by 7.8% year-on-year. Prospects are no brighter going forward as highlighted by the NY Fed’s Empire State manufacturing survey that saw the future general business conditions index and other forward-looking indicators fall below zero for the first time in the survey’s history. Producer Prices (-1.9% m/m) fell for the fifth straight month mainly due to a record fall in gasoline prices and Consumer Prices contracted by 0.7% m/m leaving the year-on-year rate at its weakest since 1954. A much thinner data diary this week highlights housing activity, which many see as the key to stabilising the slumping US economy.
JPN Data
- Monday 15.30 Revised Industrial Production previous -8.1% m/m
- Tuesday 10.50 Tertiary Industry Activity previous 0.4% m/m
- Tuesday 16.00 Household Confidence previous 28.4
- Thursday BOJ Interest Rate Decision current 0.10%
- Friday 10.50 All Industries Activity previous -0.5% m/m
- Friday 16.00 BOJ Monthly Report
Japan’s reliance on the global economy was highlighted last week as the Current Account Surplus shrank again in November and has now contracted by 65.9% year-on-year. Core Machinery Orders, a function of business confidence and underlying activity, fell by a record 16.2% in November and with wholesale inflation (+1.1% y/y) starting to slow dramatically, pressure is building on the BOJ to use non-traditional monetary policy tools to help slow deflation and a strong Japanese yen. Focus will be on the BOJ this week through the latest interest rate decision and monthly report; however expectations for any radical initiatives are certainly not high.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| AUS (RBA) |
4.25% |
-100bps |
02/12/08 |
3rd February |
| NZ (RBNZ) |
5.00% |
-150bps |
04/12/08 |
29th January |
| US (FED) |
0-0.25% |
-75bps |
16/12/08 |
28th January |
| JPN (BOJ) |
0.10% |
-20bps |
19/12/08 |
22nd January |