Australia, New Zealand and China update

What to Watch, week commencing 11 August 2014

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  • Australia: Monthly NAB Business Survey, consumer confidence and wages data next week
  • NZ: A decent gain for Q2 retail sales
  • China: Industrial production to remain above 9%yoy
  • US: Retail sales and industrial production to edge higher in July
  • Q2 GDP data for the UK, Eurozone and Japan. BoE Inflation report and Canadian housing data also due

Australia:

The monthly NAB Survey for July is released on Tuesday. Confidence has held up well in recent months, edging higher in June to +8 from +7, and not showing any negative impact from the Federal Budget. Meanwhile business conditions rose to +2 in June from -1 in May. There were gains in trading and profitability indices, but the employment index remained weak.

On Wednesday the monthly W-MI consumer confidence data should show further improvement. The weekly Roy Morgan confidence data suggest that confidence levels are back at pre-Budget levels, so after gains of 1.9% in July and 0.2% in June, the monthly series has scope for a moderate gain in August. The main downside risk comes from yesterday’s July unemployment outcome, as it may impact those responding to the Confidence Survey over the next few days.

Also on Wednesday the Q2 wage cost index is released, which should confirm that wage pressures remain subdued. Weak employment growth and rising unemployment has seen modest wages growth since late 2012. Wages rose 0.7% in Q1, and the same outcome is forecast for Q2, keeping the annual pace at 2.6%yoy.

Also next week the ABS house price series for Q2 is released. The monthly RP Data measure points to flat growth in the quarter, for around 8% growth over the year.

New Zealand:

Spending data on show next week in NZ should confirm and highlight the current solid pulse of domestic demand. Thursday’s Q2 retail sales report will likely attract the most attention. We think there is a good chance that we’ll see another decent gain in sales volumes. We are looking for a 0.8% q/q increase, given solid spending indicators and likely muted retail price inflation in the quarter. This would be a solid follow-on from Q1’s 0.7% gain. But note that such an outcome would see annual growth ease to 3.1%, from 3.8% in the previous quarter, as a huge 1.5% gain in Q2 last year drops out of annual calculations.

Monday’s electronic card transactions for July will be a gauge to how consumer spending was tracking early in Q3. Transactions were strong in May and June, following a subdued first four months of the year. We are picking a middling +0.4% m/m for July, which would see annual growth at 5.4%. On Thursday, the Performance of Manufacturing Index will provide the latest pulse-check on the manufacturing sector. The PMI steadied in June, at 53.3, following a dip to 52.6 in May from as high as 58.3 in March. Also, watch for July’s REINZ housing market report, which is likely to be published before the working week closes out.

China:

The monthly Chinese indicators for July are expected to show little movement from the June outcomes. Wednesday’s release of industrial production is expected to print at 9.1%yoy for July, down from 9.2%, while retail sales are forecast to improve to 12.5% from 12.4%. Both series have shown some improvement in the past couple of months and are off the lows seen in April. Also on Wednesday, fixed asset investment is forecast to edge higher to 17.4% from 17.3%. Tomorrow the PPI and CPI for July are released, with the CPI expected to remain steady at 2.3%yoy.

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