Australia, New Zealand and China update

What to Watch: Week commencing 25 August 2014



The GDP partials start to roll in next week ahead of the National Accounts release on September 3, where our current forecast for Q2 GDP is 0.4% (3.0%yoy).

For Wednesday’s Construction Work Done we expect to see a flat outcome in Q2, with the drag from the downturn in mining investment offset by the further gains in residential dwelling construction.

Thursday’s capital expenditure data will also suffer from the mining decline and we look for a 2.0% fall, a bigger decline than the current market expectation of -1%. However the main interest in the capex data will again be the full-year expectations for 2014-15. The March quarter saw estimate two for 2014-15 revised higher to $137bn, and we expect the third estimate to be revised higher to around $142bn.

On Friday, the monthly private sector credit data are expected to be soft. Business credit rose 1.0% in June due to the provision of bridging loan facilities for a domestic re-structure. If that is mostly reversed in July we will see a detraction in business credit growth, with overall credit running at just 0.1% in July if housing continues to run at around 0.5-0.6% per month. A 0.1% outcome would see the annual pace fall to 4.7%yoy in July from 5.1% in June.

New Zealand

We suspect the slump in dairy prices will begin to show up in New Zealand’s merchandise trade figures for July, due Tuesday (10:45am). We’re picking a 5% fall in export values, y/y. The story on July’s imports is that they likely contain a Dreamliner, helping them match last July’s number, which also harboured a big aircraft. The message for traders is that it adds up to a deficit of $979m for the month, compared to the $247m surplus for June. A taste of the negatives to come on this front.

For Tuesday afternoon’s July LVR results, the question is whether they moved up from June’s 6.7% outcome, so closer to the 10.0% ceiling imposed by the RBNZ. We’re expecting Wednesday’s Food Price Index to be up 0.4% for July (+1.0% y/y). This is part of the 0.6% increase we anticipate for the Q3 CPI, which would lower its annual inflation to 1.3%, from 1.6%.

Friday’s NZ data kick off with the 10:45am building consents for July. We expect these retained a strong upward bias/trend. For the ANZ business survey (due 1:00pm) we wonder if it will come off the boil a fraction more, to be less at odds with the GDP growth abatement that most analysts, and the RBNZ, are forecasting. As for the 3:00pm credit aggregates, we expect all forms of them to be still ticking forth at a steady rate in July (while highlighting a continued shift from floating to fixed-rate mortgages as an increasing majority).


No key data releases in China next week. The Westpac-MNI consumer sentiment series (which samples one thousand consumers… out of a population of 1.4 billion!) is released on Wednesday while the industrial profits data is out on Thursday.