That said, we see the possibility that the unemployment rate will surprise markets by remaining at 5.1% against the consensus expectation for a rise to 5.2%. Finally, we see a likely big surprise in the January trade balance. We look for a much smaller surplus relative to the consensus as exports likely took a big hit due to the early timing of the Chinese New Year.
Monday, 5 Marc 2012
Q4 business indicators data will be released. We expect this to give us some indication of strength in private non-farm inventories contribution to Q4 GDP growth, which will be released on Wednesday. But note that farm inventories contributed very strongly to growth in Q3, so the extent of payback will not be fully known until the National Accounts data itself is released on Wednesday. Earlier in the morning, the services PMI and TD monthly inflation gauge for February are scheduled for release.
Tuesday, 6 March 2012
Q4 Balance of payments data to be the focus. Whilst the RBA meeting usually takes centre stage, the unanimous (on-hold) response from analysts surveyed by Bloomberg suggests that this will be a non-event - that is as long as the RBA stick to their script. Given the wide consensus range of forecasts for Q4 GDP (0.0-1.2%q/q), we expect that markets and analysts will be watching the balance of payments report closely for more information on the contribution of net exports on Q4 GDP growth. Released earlier than morning, Feb ANZ job ads are unlikely to receive much market notice, but are nonetheless important for the labour market outlook.
The RBA is set to meet on 6 March for its monetary policy review. We expect the Board to leave the cash rate at 4.25% as essentially every analyst surveyed by Bloomberg expects. Assuming all goes to plan, focus will be on the accompanying statement. That said, we do not expect new information here, we already got plenty of information from the RBA in February. The statement will probably reiterate the Bank's easing bias, though the conditional nature of this will continue to be present; ie. further rate cut will be dependent on a material weakening in conditions. (For more, see: AUD CB PREVIEW: RBA Mar Meeting - OCR seen steady at 4.25%, conditional easing bias in tact)
We expect the current account deficit widened markedly to A$8600mn in Q4 from a deficit of A$5637mn in Q3 (mkt: -A$8050mn). We see the widening to be driven mostly by a narrowing in the trade surplus. Preliminary data from the ABS suggest that there was a 40% decrease in the goods and services trade balance on a balance of payments basis. This was in turn due to a much larger nominal rise in imports than exports. Strong imports were driven by strong capital imports in the quarter in part due to civil aircraft imports and investment tied to the resource boom. More significantly within the Balance of Payments release, we expect to see a 3.0%q/q gain in real exports, which will more than offset a 1.9% gain in imports as reported in preliminary data from the ABS. This points to a net export contribution of about 0.2ppt from Q4 GDP growth (mkt: 0ppt) after a 0.6ppt subtraction from Q3 growth. (For more, see: AUD CB PREVIEW: RBA Mar Meeting - OCR seen steady at 4.25%, conditional easing bias in tact)
Wednesday, 7 March 2012
Q4 GDP will take centre stage. Whilst all the partials would in theory have given analysts and markets a good idea of how this will print by Wednesday, this is still subject to big surprises especially since no indication of how public sector and farm inventories will fair prior to the actual national accounts data. We look for a downside surprise here, which we expect would be sufficient for markets to react to. On the supply side, the AFOM will hold a for the issue of $700 million of the March 2019 Bond line.
Feeding through the softer prints for plant & equipment investment as well as the disappointing read on Q4 construction, released earlier in the week, we look for an underwhelming 0.5%q/q gain in GDP for Q4, after a solid 1.0% gain in Q3 (mkt: 0.7%q/q). This would see the annual rate of growth slow to 2.2%y/y from 2.5% at the end of Q3 (mkt: 2.3%). Importantly, this would see annual GDP growth miss the RBA's Dec-11 year-ended growth forecast of about 2.75%. As a result of disappointing preliminary investment data, we looking for a 0.2% contraction in private final demand even if we see private consumption growing at a fairly robust pace of 0.8%. We look for stronger consumption than the real retail report suggests due to the tendency for consumption to overshoot the retail report in the last two years (as the latter report does not properly account for a stronger growing retail service industry). Of course, this is just a preliminary estimate and subject to revisions following next week's balance of payments, government spending and private non-farm inventories data. We expect public final demand grew by 0.9% as the drag from public investment has mostly run its course. Meanwhile, net exports look set to contribute about 0.2ppt to growth after subtracting 0.6ppt in Q3. We will firm up our forecasts following the balance of payments report on Tuesday. Inventories are seen contributing 0.2ppt to growth. (For more, see: AUD DATA PREVIEW: Due 7 Mar: Q4 GDP seen 0.5%q/q (mkt: 0.7%), 2.2%y/y)
Thursday, 8 March 2012
Another top tier release due on Thursday; Feb labour force data is due for release. The labour market probably added approximately 5K of jobs in February (mkt: 5.0K). This would see the annual rate of jobs growth inch higher to 0.5%y/y from 0.3%, though remain well-off its long-run average of around 2% annual growth. We look for continued soft employment growth, consistent with leading job indicators as well as job cuts announced at the start of the year by the airline and finance industries. Based on soft monthly population growth, we expect the labour force to continue to grow at a similarly slow pace. Assuming an unchanged participation rate at 65.3% (mkt: 65.3%), we see just a 13K increase in the labour force. Given our forecast of 10K employment, should in theory be sufficient to hold the unemployment rate steady at 5.1% (mkt: 5.2%) (at least at the first decimal). As we said following January's bumper result that there were some weaker details which were uncomfortable with. Keep an eye on the broad trend for hours worked (ignore month-to-month swings). We expect to see continued sub-trend growth here. (For more, see: AUD DATA PREVIEW: Due 8 Mar - Feb Employment seen +5K, unemployment rate steady at 5.1%)
Friday, 9 March 2012
We see most potential for a big market reaction from the Jan Trade data; we look for a sharply narrower surplus mostly due to the early timing of the Chinese New Year. On the supply side, the AOFM will hold a tender for the issue of $700 million of the February 2017 Bond line.
We look for a marked narrowing in the trade surplus in January. We forecast a narrowing to a surplus of just A$700mn from A$1709mn in December (mkt: 1500mn). We expect this will be primarily due to a sharp fall in exports. We expect the fall in exports to outstrip the 2% fall in imports as suggested by preliminary ABS data. We expect lower commodity prices to account for some of this weakness; but more significantly, we see the early timing of the Chinese New Year to have tempered with exports. China's imports from Australia dropped 16%m/m in January according to Chinese customs data. Whilst the Australian trade data is seasonally adjusted, Chinese New Year usually occurs in February, hence the traditionally seasonal adjustment will likely not account for this. If anything, the bring forward of exports to China in January that is typical when Chinese New year occurs in February should see seasonal factors looking for a seasonal gain in January. If this is so, could see usual seasonal factors wrongly adjust the export figures lower, exacerbating the downside in exports. Adding to our very weak forecast for exports is our anticipation for a drop in non-monetary gold. Non-monetary gold exports have surged a cumulative 74.3% in the last two months of 2011. Non-monetary gold exports and imports have had a loose relationship over time due to the fact that these imports traditionally get re-exported. Hence the current large divergence between the two is unusual and hints at a potential payback in non-monetary gold exports that would have a large overall effect on the headline
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