Below trend growth to continue
Australia: Building approvals, private sector credit and trade prices highlight the week
Several releases to note next week. On Thursday building approvals and private sector credit are released for June. Building approvals had a large 9.9% rise in May, but that was mostly in response to the falls of the previous three months. Approvals look to be back around trend now, and with population growth still solid we should see an improvement in approvals ahead. So we look for a solid 4% gain in June approvals, stronger than the market’s flat forecast. For private sector credit we expect a 0.4% gain in June, lowering the annual pace from 4.7% to 4.6%. Housing credit will again lead the way with a rise around 0.5-0.6% and we expect a minor improvement in business credit.
Also on Thursday we have import and export prices for Q2. Export prices are forecast to fall 5% after iron ore and thermal coal prices fell in Q2, while the higher AUD is expected to see import prices down 1%. NAB’s online retail index for June is also released on Thursday.
On Friday, RP Data house prices are expected to show a very healthy 1.7% gain in July, with the biggest gains in Melbourne and Sydney. The AiG Manufacturing Index, RBA Commodity Index and Q2 PPI are also released on Friday.
Amid a fairly quiet week for NZ data, note that Fonterra is expected to announce its dividend intentions by Thursday (the end of the month, as earlier promised). Of course, this is a grand opportunity for it to also revise its milk price forecast for the 2014/15 season. A lot has happened since its first forecast, of $7.00, was put on the board in late-May – all of it negative (sharply lower export prices, resilient NZD). Assuming Fonterra does say something on the milk price this week, it will be interesting to see how far it moves toward the $6.20 milk price we envisage for 2014/15, based on our views on export prices and the NZD. Last season’s, recall, was a record $8.40.
Turning to the local data, Wednesday morning’s (residential) building consents for June stand a reasonable chance of expanding, given May’s softening was mainly about apartments reverting to trend. Wednesday afternoon delivers the latest weekly mortgage approvals data. While these have been running about 10% below year-ago levels (post the LVR restrictions) they remain good enough to suggest ongoing credit growth, overall. But nothing too strong, just moderately positive, which is what we’re looking for in Friday’s credit aggregates. Their mortgage book detail will almost surely show an ongoing and clear switch to fixed terms, with the proportion on floating rates likely below a third now.
The week ahead is highlighted by the manufacturing PMIs on Friday. After the HSBC flash manufacturing PMI rose to 52.0 in July from 50.7, markets will be looking for the official PMI to also increase, and build on the monthly gains that have been coming through since March. The final HSBC reading is also due on Friday. Ongoing gains in the manufacturing indices will reassure the markets that Chinese growth is holding up well, and that Q3 is off to a solid start after the 2.0% Q2 GDP growth reported last week. Industrial profits, leading index and MNI consumer sentiment are also released over the next week.
Also included are notes on major US, Eurozone, UK, Japan and Canada releases.
© National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.