Economics | January 27 2017

Investor Signposts: Week Beginning January 29 2017

Upcoming economic and financial market events
Australia
Tuesday January 31
Tuesday January 31
Tuesday January 31
Wednesday February 1
Wednesday February 1
Wednesday February 1
Thursday February 2
Thursday February 2
Friday February 3

Private sector credit (December)

NAB business survey (December)
Weekly consumer sentiment
Selected Living Cost indexes (Dec quarter)
Home value index (January)
Performance of Manufacturing (January)
International trade (November)
Building approvals (November)
New car sales (January)

US Personal income (December)

US Pending home sales (December)
US Federal Reserve meeting
US Case Shiller home prices (November)
US Consumer confidence (January)
US ISM manufacturing (January)
US ADP National Employment (January)
China Purchasing managers (January)
US Challenger job layoffs (January)
US Non-farm payrolls (January)
US Factory orders (December)
US ISM services (January)

Monthly growth of 0.4-0.5 per cent is expected

Confidence & conditions are positive
From ANZ and Roy Morgan
Alternate inflation gauges
Latest data from CoreLogic
The lower currency is boosting activity
Surplus of $3.0 billion is tipped
Aprrovals may have fallen 2.5%
Car sales are at record highs

Overseas
Monday January 30
Monday January 30
January 31/February 1
Tuesday January 31
Tuesday January 31
Wednesday February 1
Wednesday February 1
Thursday February 1
Thursday February 2
Friday February 3
Friday February 3
Friday February 3

Income & spending may have both lifted 0.4%

A gauge on the housing sector
Rates are tipped to lift later in 2017
Annual growth sits at 5.1%
Confidence is at 15-year highs
Index was 54.7 in December
Private sector jobs may have risen 168,000
Covers services and manufacturing
More insights on the job market
Jobs may have lifted by 168,000
A 1.7 per cent rise in orders is expected
December reading was 57.0

A big week for economic data

A flood of new economic indicators is expected over the coming

week. In Australia the latest data on home prices is the highlight.

The week kicks off in Australia on Tuesday, when the Reserve

Bank releases the latest private sector credit figures (essentially
data on outstanding loans). For 14 straight months, credit has
grown by between 0.4-0.6 per cent per month and it is
reasonable to expect a similar result in December, keeping
annual growth at 5.4 per cent.

Also on Tuesday, the NAB business survey and weekly

consumer sentiment data are expected. Consumers remain
generally positive, especially on spending intentions. The
interesting thing to watch is the indicator on inflation expectations
which is at 4-year highs.

On Wednesday, the Australian Bureau of Statistics (ABS)

Craig James, Chief Economist, CommSec

Twitter: @CommSec
Produced by Commonwealth Research based on information available at the time of publishing. We believe that the information in this report is correct and any opinions,
conclusions or recommendations are reasonably held or made as at the time of its compilation, but no warranty is made as to accuracy, reliability or completeness. To
the extent permitted by law, neither Commonwealth Bank of Australia ABN 48 123 123 124 nor any of its subsidiaries accept liability to any person for loss or damage
arising from the use of this report.
The report has been prepared without taking account of the objectives, financial situation or needs of any particular individual. For this reason, any individual should,
before acting on the information in this report, consider the appropriateness of the information, having regard to the individuals objectives, financial situation and needs
and, if necessary, seek appropriate professional advice. In the case of certain securities Commonwealth Bank of Australia is or may be the only market maker.
This report is approved and distributed in Australia by Commonwealth Securities Limited ABN 60 067 254 399 a wholly owned but not guaranteed subsidiary of
Commonwealth Bank of Australia. This report is approved and distributed in the UK by Commonwealth Bank of Australia incorporated in Australia with limited liability.
Registered in England No. BR250 and regulated in the UK by the Financial Conduct Authority (FCA). This report does not purport to be a complete statement or
summary. For the purpose of the FCA rules, this report and related services are not intended for private customers and are not available to them.
Commonwealth Bank of Australia and its subsidiaries have effected or may effect transactions for their own account in any investments or related investments referred to
in this report.

Investor Signposts Week Beginning January 29 2017

releases estimates of living costs (inflation) for different groups in the community such as wage earners and
pensioners.

Also on Wednesday, CoreLogic will release the January estimates on home prices the most comprehensive
monthly report on the topic. In December, capital city home prices recorded a solid 1.4 per cent gain. But on the
data available so far in January, capital city home prices have only lifted by 0.4 per cent. Melbourne prices have
lifted 1.1 per cent in January so far but Perth and Brisbane prices have fallen by around 0.5 per cent. Sydney
prices are up 0.3 per cent in the month.

And the latest gauge on manufacturing activity the Performance of Manufacturing index is also released on
Wednesday. The December reading was encouraging at 55.4 (any reading over 50 indicates expansion).
Investors would hope for similar strength in January.

On Thursday there are two indicators of note to be released by the ABS international trade and building
approvals. In November Australias trade balance improved by $2,362 million to a surplus of $1,243 million. It was
the first monthly trade surplus in 33 months and largely reflected higher coal and iron ore prices. But higher coal
and iron ore volumes and prices as well as higher Liquefied Natural Gas (LNG) revenues should support trade
accounts in coming months. A surplus of $3.0 billion is tipped.

Dwelling approvals have been volatile in recent months up 7 per cent in November after an 11.8 per cent fall in
October. Approvals have peaked, although they are only easing slowly in trend terms from peak levels.

On Friday the Federal Chamber of Automotive Industries will release the January new car sales figures one of
the timeliest economic indicators. Car sales were at record levels for a calendar year in 2016.

Overseas: US interest rates and jobs are in focus

There are two stand-out events in the coming week: the interest rate decision from the US Federal Reserve and
the release of monthly jobs data in the US.

The week kicks off on Monday with the release of US personal income & spending figures together with the
pending home sales index. Economists tip healthy gains of 0.4 per cent for both incomes and spending.

On Tuesday, the US Federal Reserve starts a two-day meeting (decision announced Thursday morning Sydney
time). The Fed is poised to lift rates but not yet, given that inflation is contained. Most economists expect around
three rate hikes this year, but the Fed may hold off a little longer.

Also on Tuesday the Case-Shiller measure of home prices is released alongside consumer confidence and the
weekly data on chain store sales. Confidence is at 15-year highs while home prices are up a healthy 5.1 per cent
on a year ago.

On Wednesday, the ISM manufacturing activity gauge is released with the ADP National employment index and
January auto sales data. Latest data shows solid manufacturing activity (index of 54.5). The ADP survey is also
expected to see a lift in job growth from 153,000 in December to 168,000 in January.

On Thursday, the Challenger survey of job layoffs is released with the weekly data on claims for unemployment
insurance.

And on Friday the all-important non-farm payrolls (employment) data is released with factory orders and the ISM
survey of activity in the services sector. As per the last report it is not just jobs in focus. Average earnings (wages)
rose by 0.4 per cent in December. If we see a similar sort of increase in January, policymakers may start worrying
about potential inflationary pressures. And as a result the Fed may be more likely to lift interest rates.

In China the National Bureau of Statistics releases its purchasing manager reports for manufacturing and
services sectors on Wednesday. And the Caixin manufacturing survey is issued on Friday.

Sharemarkets, interest rates, exchange rates and commodities

The US earnings season is in full swing. And it is a case of

so far, so good. According to Thomson Reuters, December
quarter earnings may have lifted 7 per cent over the year,
the biggest increase in two years.

Of the 146 companies that have reported earnings

through Thursday morning, 69.2 per cent have topped
expectations, compared with the 63.6 per cent average
since 1994.

The Australian earnings season gets underway next week

with Navitas and CYBG Plc to report on Tuesday. There
will be much focus on whether companies are now
experiencing better fortunes than was the case around
mid-2016.

Craig James, Chief Economist, CommSec

Twitter: @CommSec
January 27 2017