Australia & NZ weekly

Transcription

Australia & NZ weekly
Week beginning 9 February 2015

RBA forecasts make the case for lower rates: technical assumptions are
key.

Australian data: Westpac-MI Consumer Sentiment, housing finance,
house prices, labour force survey.

RBA Governor parliamentary testimony.

NZ: retail electronic card spending, REINZ house prices and sales.

Euro: Q4 GDP.

US: retail sales, consumer confidence.

Key economic & financial forecasts.
Information contained in this report was current as at 6 February 2015
Economic Research
Sydney +61 2 8254 8720
economics@westpac.com.au
New Zealand +64 9 336 5671
London +44 20 7621 7061
Westpac weekly
RBA forecasts make the case for lower
rates: technical assumptions are key
The Reserve Bank Board decided to lower the cash rate by 25bps
to 2.25% on February 3. This has been Westpac’s forecast since
December 4 when it became clear that demand conditions in the
Australian economy had deteriorated more sharply than we expect
the Bank had anticipated. The Governor’s post meeting statement
confirmed that assessment, as he referred to growth as being below
trend but more importantly “domestic demand growth overall quite
weak”.
In the all-important final paragraph of the statement, where the bias
of policy is usually communicated, the commentary was backward
looking, concluding that based upon assessments of the economy
and in particular the updated forecasts (subsequently released in
the Statement on Monetary Policy [SOMP], of which a great deal
more will be said below), a cut in the cash rate was appropriate.
The language in the final sentence which might have referred to “a
period of stability” or “scope to cut further” studiously avoided a
judgement on the appropriateness of the “stance” (i.e. the level of
interest rates and the mix of financial conditions) or the provision
of any forward guidance, simply making the obvious point that “this
action adds some further support to demand”. This approach gives
the Bank full flexibility to determine its next policy move without
making any commitment to the market.
Moving forward to the SOMP, the Bank has lowered its forecasts
for growth and inflation in 2015 despite the fact that the figures
were compiled in such a fashion as to include both the February
cut and “the assumption that the cash rate moves broadly in line
with market pricing at the time of writing”. Market pricing currently
envisages a further full 25bps cut plus another possible 10bps. In
short, the Bank is expecting that growth in 2015 will still be below
trend despite the current rate cut and the market’s expected further
rate cuts.
Regarding the medium-term projections (noting that the lag
between activity and interest rates can be as long as 18 months),
growth in the year to June 2016 is still expected at 3.25% (midpoint)
which is the generally accepted trend growth pace for the Australian
economy. Even accepting that the forecast growth reduction is due
to an extended weak spot at the end of 2014 and in the first half
of 2015 (when monetary policy enacted this year can hardly be
expected to have much impact), the fact that the Bank is assuming
that, with the recent cut along with the market’s expected cuts,
growth in the zone when monetary policy changes can be expected
to have an impact will only reach trend points to the need for lower
rates. Presumably if the Bank had made its forecasts on the basis
of steady rates then it would have been forecasting below trend
growth next year as well as this year.
indicates that domestic inflation is expected to hold around the
bottom of the forecast range. These forecasts are a reasonable
signal that the Bank forecasts that lower interest rates will be
required to return growth to trend, while the inflation outlook has
improved despite lower rates and a lower currency.
Not surprisingly, the general discussion in the Statement is
downbeat. Prospects for consumption, non-mining investment and
the labour market have been revised down. On the other hand the
Bank remains constructive on exports and the housing market.
Note the following quotations: “consumption will continue to grow
at a below average pace”; “the lower oil prices will contribute
around 0.75 percentage points to real disposable income … but
will be offset by lower labour incomes”; “the expected recovery
in non-mining investment has been pushed out to later in 2015”;
“a number of indicators suggest that spare capacity in the labour
market has increased, consistent with below trend growth”; “the
unemployment rate is expected to rise a little further and peak a
little later”; “many firms expect to see a period of low and stable
wage growth ahead”; ”unit labour costs will remain well contained”;
and “weaker near term outlook ... more than offset the upward
price pressures from further exchange rate depreciation”.
Back in December we forecast 25bp rate cuts in both February and
March. We expected that if the economy evolved as anticipated over
the subsequent months the Bank would see the case for easing
policy. A single cut was considered unlikely given that policy had
been on hold since August 2013. Two consecutive cuts seemed to
be the appropriate approach. The SOMP forecasts do nothing to
dissuade us from that view. Despite considerably more supportive
financial conditions (both realized and assumed) growth beyond
the near term is not expected to be any stronger than the forecasts
when the Bank was on hold. That suggests that the Bank is likely to
cut again at the next opportunity.
Bill Evans, Chief Economist
Prospects for inflation have also been revised down. In November,
the Bank forecast underlying inflation at 2.25-3.25% in 2015;
this estimate has been revised down to 2-3%. That is despite the
assumption around the AUD being revised down from 86¢ in
November to 78¢ in February. The Bank is confident that domestic
inflationary pressures will remain subdued. The Statement notes
that “the direct effects of the exchange rate depreciation since
early 2013 are expected to add a little under 0.5ppts to underlying
inflation over each year of the forecast period.” That calculation
Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken
to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or
unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.
2
Westpac weekly
Data wrap
Dec dwelling approvals
• Dwelling approvals came in slightly above expectations in Dec
with a 3.3% fall vs market and Westpac expectations of a 5%
decline. Annual growth slowed to 8.8%yr.
• The Dec reading follows a 7.8% jump in Nov which was driven by
a spike in Melbourne unit approvals associated with the $1.5bn
Batman’s Hill project. While this spike reversed in Dec (total Vic
approvals down 26%) this was partially offset by a 26.9% jump
in NSW that also appears to be a major project-related spike (it
was concentrated in Sydney units and the ‘high rise’ segment).
Accordingly, the underlying trend is likely much softer than the
headline indicates and probably a touch softer than was implied
by the market expectation leading in.
• Private sector house approvals were flat in the month, up just
4.8%yr vs 8.8%yr for total approvals. This segment has been a
good guide to trends in the past but in our view has become less
reliable due to a structural shift towards greater construction of
units. Indeed, the shift, which is seeing more work concentrated
in volatile multi-unit projects, is making analysis more difficult.
'High rise' approvals accounted for 25% of all approvals in 2014
compared to 14% ten years ago and just 5% twenty years ago. By
contrast, other units (i.e. ‘medium density’ housing) have made
up a relatively steady 20% of approvals.
• By state, volatility makes trends difficult to pin-point in NSW and
Vic. Approvals ex high rise appear to be tracking slightly lower in
both states. Qld and WA both recorded slight rises in approvals
while a jump in units gave a bigger boost to SA.
Dec trade balance
• In December, Australia's trade account remained in deficit
for a 9th consecutive month, although there was a modest
improvement. The deficit narrowed to $0.4bn from $1.0bn in
November, (revised from –$0.9bn.)
• Imports declined by 0.7%, meeting our expectations (Westpac
f/c –0.8%). Exports surprised to the high side, increasing by 1.4%
(Westpac f/c –1.2%).
• Net exports are likely to make a positive contribution to growth in
Q4, continuing the trend of recent times, as resource exports rise
on expanding capacity and with imports soft at present.
• The terms of trade, having declined sharply in Q2 and Q3, fell a
little further in Q4, declining by around 1.5% on our estimates.
That has the terms of trade 10% lower in 2014. This double digit
fall has significantly dented Australia's national income, reducing
the spending power of business, households and government.
Dec retail trade
• Retail sales nudged 0.2% higher in Dec, a touch below the
consensus expectation of a 0.3% gain but above Westpac’s
forecast of a 0.1% dip. Quarterly real retail sales were a more
substantive upside surprise with a 1.5% surge well above the
consensus forecast of a 1% gain.
• Our forecast was based on an expectation that an 11% surge
in electronic goods retailing over the previous three months –
largely attributed to the launch of the iPhone 6 – would start to
reverse in Dec. Electronic goods retail instead posted a further
0.6% gain to be up 12.7% since Aug. This sub-category alone
accounts for 0.8ppts of the 2% rise in nominal retail sales since
Aug.
• Retail sales ex electronic goods were up a modest 0.1% in Dec
following gains of 0.2% in Nov, 0.3% in Oct and 0.7% in Sep (up
a cumulative 1.3% since Aug). Within this, a strong month for
clothing (+2.7%mth) was offset by a decline for department
stores (–0.9%mth) and mixed spending on food.
• For the quarter as a whole, the main surprise was around retail
prices. Nominal sales rose 1.4%qtr, only slightly above our
expectation of a 1.3% gain. However the retail implicit price
deflator was dead flat in the quarter vs expectations of a 0.5%
rise. Although the headline CPI was also very weak in Q4 this was
largely due to petrol prices. With petrol not covered by the retail
survey, retail prices were expected to be a bit firmer.
• The real puzzle with the retail survey is working out what it
means for the broader measure of consumer spending in the
national accounts. In simple terms, the 0.5% upside surprise on
Q4 real retail sales is worth about 0.1-0.2ppts on total consumer
spending. However, the retail survey has proven to be a poor
guide in recent years – most recently in Q3, total spending rose
just 0.5%qtr vs a retail sales volume gain of 1%.
• Accordingly we urge caution in putting too much weight on the
retail result – while consumer spending does appear to have lifted
in Q4, a big chunk of this appears to be a temporary productrelated boost and the gain in spending overall may not be nearly
as strong as the retail survey indicates.
Round–up of local data released over the last week
Date
Release
Mon 2
Jan AiG PMI
Jan CoreLogic RP Data home value index
Jan TD–MI inflation gauge, %yr
Dec dwelling approvals
Dec trade balance, AUDbn
RBA policy announcement
Jan AiG PSI
Dec retail trade
Q4 real retail trade
Tue 3
Wed 4
Thu 5
Previous
Latest
Mkt f/c
46.9
0.9%
1.5%
7.8%
–1.0
2.50%
47.5
0.1%
1.0%
49.0
1.3%
1.5%
–3.3%
–0.4
2.25%
49.9
0.2%
1.5%
–
–
–
–5.0%
–0.85
2.50%
–
0.3%
1.0%
3
Westpac weekly
New Zealand: week ahead & data wrap
Staying on course
Following recent sharp falls in oil prices and the related softening in
the inflation outlook, there has been speculation about the potential for
interest rate reductions by the RBNZ. RBNZ Governor Wheeler used his
annual speech to the Canterbury Employers' Chamber of Commerce
to clarify his thinking on this. He effectively poured cold water on the
likelihood of near-term rate cuts, noting that the "most prudent option"
at the current time is “a period of OCR stability”. This is very much
in line with our own view. On our forecasts, the most likely scenario
is that we won’t see any change in the OCR until June 2016 at the
earliest.
So what underlies this outlook?
First of all is the current composition of inflation. It’s true that
inflation will be very weak in the near term. But this is in large
part a result of sharp falls in international commodity prices which
the RBNZ looks through when setting policy. This is because OCR
reductions to offset the effects of oil price declines that have
already occurred would have only a limited impact on near-term
inflation. However, they could have unintended and more significant
consequences down the track, particularly in terms of conditions in
the housing market. In addition, as we’ve seen over the past week,
oil prices can swing rapidly. After falling more than 50% last year,
prices bounced over the past week, pushing prices at the pump
back up by around 10¢/ltr – just in time for the long weekend in
New Zealand.
More fundamentally, the current softness in inflation is not a reflection of
underlying softness in the domestic sectors of the economy. Indeed, the
outlook for domestic growth is still firm. This is likely to result in a gradual
increase in longer-term inflation, which is the key focus for the central
bank when setting rates.
Underpinning this strength in the domestic economy is a strong
outlook for housing and construction, particularly in Auckland and
Canterbury. Recent building consents data signal that building
activity is increasing. However, there is still a way to go before
supply catches up with demand. What’s more, there have been
continued gains in house prices. Barfoot and Thompson data
showed that median house prices in Auckland grew by around 2%
(seasonally adjusted) in January to be up 21% over the year. Data
from QV showed that prices are also rising in other cities and
provincial areas, though to a lesser degree.
jobs gains were spread across the economy, with particularly
strong increases in professional services and in government related
sectors. The unemployment rate did pick-up in late 2014, rising
to 5.7% in the December quarter. However, rather than reflecting
any fundamental weakness in underlying economic conditions,
this actually reflects that New Zealand’s strong economic outlook
has encouraged more people to enter the labour force, with the
participation rate rising to a record high of 69.7%.
While the Governor hosed down speculation about rate cuts, he also
emphasised that rate hikes were a long way off. Governor Wheeler
noted that before any rate hikes occurred, the RBNZ would have to
be "confident that capacity utilisation and labour market pressures
were generating, or about to generate, a substantial increase in
inflation." And last week’s labour market data did not indicate
that this is likely in the near term. Indeed, despite solid growth in
employment, wage inflation has remained stubbornly low, with the
private sector ordinary time Labour Cost Index increasing by only
1.8% over the past year.
While our central expectation is for an extended pause, rates cuts are
still an outside possibility. The economy is being buffeted by a range
of forces that could significantly affect domestic activity. Of particular
concern are the dry conditions affecting agricultural production in
parts of the country. Fonterra has already significantly lowered its
forecasts for milk production over the first half of 2015, and sheep
and beef farmers have brought slaughter forward as low prices make
the use of supplementary feed uneconomical. Although recent rains
may help some farmers, production is still likely to be down on last
year.
Tightness in supply resulting from dry conditions is helping to push
up prices for dairy exports (prices rose by an average of 9.4% in
the latest GlobalDairyTrade auction). As a result, we have revised
up our forecasts for Fonterra’s farmgate milk price to $5.00/kg
in 2014/15 and $6.40/kg in 2015/16 - both up 20 c/kg on our
earlier estimates. Nevertheless, overall earnings and spending in
the agricultural sector will be a drag on growth over 2015. Should
conditions in the agricultural sector worsen, or adversely affect
confidence in the economy more generally, this could bring cuts back
onto the RBNZ’s radar.
But it’s not just the housing market that is looking firm. The wider
economy has also been growing at a robust pace. Recent labour
market data showed that employment rose by 3.5% over 2014.
While much of this was due to strength in the construction sector,
Round-up of local data released over the last week
Date
Tue 3
Wed 4
Fri 6
Release
Jan commodity prices
Jan QV house price index %yr
GlobalDairyTrade auction
Q4 employment change
Q4 unemployment rate
Q4 labour cost index
Waitangi Day
Previous
–4.4%
4.9%
1.0%
0.8%
5.4%
0.5%
–
Actual
–0.9%
5.7%
9.4%
1.2%
5.7%
0.5%
–
Mkt f/c
–
–
–
0.8%
5.3%
0.5%
–
4
Westpac weekly
Data previews
Aus Q4 residential property price index
Feb 10, Last: 1.5%, WBC f/c: 2.0%
Mkt f/c: 1.9%, Range: 1.0% to 2.5%
• The ABS residential property price index posted another meaty
1.5% rise in Q3 following a 1.9% rise in Q2 and a 1.4% rise in
Q1. Annual price growth cooled a touch from 10.1% in Q3 to
9.1% in Q3.
• In Q4, available private data on 'all dwelling' measures show
gains of 2.3%qtr, 7.1%yr (APM), 1.8%qtr, 7.9%yr (Residex),
and 1.7%qtr, 8.1%yr (CoreLogic RP Data). The ABS measure
tends to track the APM series more closely due to their similar
construction. Accordingly we expect it to show a strong 2.0%
with annual price growth easing back to just over 7%.
Residential property price index, ABS measure
40
% qtr
% ann
qtrly (rhs)
30
10.0
annual (lhs)
7.5
*established house price
index prior to 2004
20
5.0
10
2.5
0
0.0
Sources: ABS, Westpac Economics
-10
Sep-90
-2.5
Sep-94
Sep-98
Sep-02
Sep-06
Sep-10
Sep-14
Consumer Sentiment Index
Aus Feb Westpac-MI Consumer Sentiment
Feb 11, Last: 93.2
• In January, the Westpac-Melbourne Institute Consumer
Sentiment Index rose 2.4%, recovering some of December's
sharp 5.7% fall but leaving the Index still firmly in pessimistic
territory below 100.
130
• The Feb survey is in the field from Feb 2 to 8 and will capture
reactions to the RBA's surprise 25bp rate cut. While ordinarily
this would be a positive for sentiment, the impact is less clear
cut when easing is in response to a downgraded economic
outlook. Other potential positives include lower petrol prices
(pump prices down –6½¢ a litre since the Jan survey) and a
strong surge in the ASX (up 9.7% since the previous survey).
Against this, the continued slide in the AUD may tend to weight
on sentiment (down 4¢ against the USD since the previous
survey), as will the return of political 'tensions' after the
summer break (including a change of state government in Qld).
index
index
120
120
110
110
100
100
90
90
80
80
Sources: Westpac Economics, Melbourne Institute
70
Jan-99
70
Jan-03
Jan-07
Jan-11
Aus Dec housing finance (no.)
Owner-occupier finance & the rate cycle
Feb 11, Last: –0.7%, WBC f/c: 2.0%
Mkt f/c: 2.0%, Range: –0.1% to 4.0%
'000
• Housing finance softened in Nov, both for owner-occupiers
(–0.7%) and investors (value of new finance –2.2%). Stepping
back from the monthly move, finance for the purchase of
existing dwellings is trending a lower, down 8.8%yr while
finance for construction is trending higher (+7.6%yr) as is the
value of finance to investors (+13.0%yr).
• We expect this modest downtrend in owner-occupier activity to
carry into early 2015 before Feb's interest rate cut generates
some renewed momentum. That said, industry data suggests
Dec approvals were up a touch – as such we expect approvals
to show a decent 2% gain in the month.
130
50
%
owner-occupiers
housing finance * (lhs)
Jan-15
* excluding refinance
11
mortgage rate, standard variable (rhs)
9
40
7
30
5
2000’s avg
1995-1999 avg
20
Nov-98
Nov-02
Nov-06
Nov-10
3
Nov-14
• Note that the ABS has recently revised up estimates of first
home buyer (FHB) approvals from this survey. Incorrect
reporting was found to have been understating this segment by
20%. Even with the mark up, FHB activity remains weak.
5
Westpac weekly
Data previews
Aus Jan employment, '000
Feb 12, Last: 37.4k, WBC f/c: 10k
Mkt f/c: –5k, Range: –20k to 20k
• Total employment rose 37.4k in Dec compared to Westpac’s
forecast for a 10k fall. The market had been expecting a 5k rise
with a wide range of estimates from –20k to 25k.
• As 2014 ended there was an uptick in employment with the
annual pace of employment growth lifting to 1.9%yr. Total
employment grew 213.9k through 2014.
• The details highlight broad based strength in the labour market
in the month. Full-time employment lifted 41.6k following a
2.6k rise in Nov while part-time employment moderated –4.1k
following a 42.3k surge in Nov.
Jobs Index peaked as 2014 ended
6
%yr
Index=50
5
64
60
4
56
3
2
52
1
48
0
44
-1
40
-2
-3
-4
Dec-94
employment (lhs)
Westpac Jobs Index (rhs)
Dec-98
Dec-06
36
32
Dec-02
Dec-10
Dec-14
• The Jobs Index suggests that labour demand peaked at the end
of 2014 and eased a bit heading into 2015. Our 10k forecast
for employment has the annual pace slowing to 1.8%yr.
Aus Jan unemployment rate
Feb 12, Last: 6.1%, WBC f/c: 6.2%
Mkt f/c: 6.2%, Range: 6.1% to 6.3%
• In Dec, the participation rate was basically flat at two decimal
places (64.75% from 64.74% in Nov) with a relatively modest
21.2k rise in the labour force. This limited the improvement
in the unemployment rate to a fall of just 0.1ppt to 6.1% (Nov
was revised from 6.3% to 6.2%) leaving the unemployment rate
only marginally higher than where it ended 2013 (5.9%). Youth
unemployment also eased back to 13.1% from 14.5%.
Unemployment and participation rates
67
%
%
9
participation rate (lhs)
66
unemployment rate (lhs)
Average since March 2008
7
65
Still well above the post
GST peak
64
5
63
• If we hold the participation rate flat at 64.8%, this will generate
a 18.6k rise in the labour force. Given our forecast for a
modest 10k rise in total employment, this will generate a
0.1ppt rise in the unemployment rate to 6.2%.
62
Dec-98
NZ Jan retail electronic card spending
• A strong underlying spending pulse is consistent with
other indicators of consumer demand at the start of the
year, including rising consumer confidence and an ongoing
resurgence in Auckland’s housing market.
Dec-06
Dec-10
3
Dec-14
Card transactions, annual % change
Feb 11, Last -0.1%, Westpac f/c: 0.4%
• Advance data from Paymark (New Zealand’s largest cards
processor) suggest that electronic retail spending rose 0.4% in
January. That would be a very strong outturn in the context of
plunging petrol prices. We estimate that seasonally-adjusted
petrol prices fell 10% in the month, which on its own would
have slashed in the order of 1.5% off the value of spending.
Dec-02
14
%
%
Core retail
12
14
12
Total retail
10
10
8
8
6
6
4
4
2
2
Source: Statistics NZ
0
2004
0
2006
2008
2010
2012
2014
6
Westpac weekly
Data previews
NZ Jan REINZ house prices and sales
REINZ house prices and sales
Feb 13 (tbc), Sales Last: +5.5%, Prices Last: 6.0%yr
• The housing market has had a strong resurgence in recent
months. The waning influence of high-LVR lending restrictions,
lower fixed-term mortgage rates and migration-led population
growth appear to have generated a great deal of pent-up
demand, which was unleased once pre-election uncertainties
were cleared in September.
12
sales 000
%yr
30
25
10
20
15
8
10
6
5
0
• Early indications are that the market may have taken a breather
in January, which is the low point of the year for sales in any
case. However, strong mortgage approvals suggest that house
sales are set to resume their climb in February.
• Annual house price inflation has also begun to accelerate,
although the gains have been overwhelmingly centred in
Auckland. In contrast, there are signs of the Christchurch
market starting to settle down, as repairs and rebuilds increase
the effective housing stock.
4
-5
2
Source: REINZ
0
1993
US Jan retail sales
Sales (lhs)
-10
REINZ house price index (rhs)
-15
-20
1996
1999
2002
2005
2008
2011
2014
US retail sales: is momentum topping out?
Feb 12, Last: –0.9%, WBC f/c: –0.3%
• Retail sales reportedly fell 0.9% in December, and November
was revised down from 0.7% to 0.4%. That left the annual
growth impulse at 3.2%yr, well below the 5.0%yr August peak.
• The decline in the price of oil has been a key contributor to the
weakness in total sales, with gasoline station sales down 6.5%
in December and 14.2% over the year. That said, weakness is
apparent elsewhere, with eight of the remaining 12 store types
also seeing declines in December.
• The fall in the price of oil has produced a material improvement
in confidence and household income expectations, which
should support spending. Yet reports of soft conditions over
the holidays point to the spending response being restricted by
weak actual wage growth and existing debt liabilities. With the
oil price declining further in January, we expect another decline
in total sales, circa –0.3%.
9
% ann
% mth
6
6
4
3
2
0
0
-2
-3
mthly ex-autos & gas (rhs)
-6
Retail sales
-9
-6
Retail ex autos & gas
-12
Sep-09
Sources: Ecowin, Westpac Economics
Sep-10
Sep-11
Sep-12
Sep-13
-4
-8
Sep-14
13
Euro Area Q4 GDP
Contribution to Euro area annual growth
Feb 13, Last: 0.2%, WBC f/c: 0.2%
• Q3's 0.2% headline outcome was a positive surprise, albeit only
just at 2 decimal places (0.16%).
2.5
annual average growth
ppts
2.0
1.5
• By country, the surprise came from France, where activity
jumped 0.3% in Q3 following a 0.1% fall in Q2. Also, Spain
posted another quarter of solid growth, 0.5%. Elsewhere
amongst the majors, momentum was decidedly absent.
• Q4 is likely to see an improved performance on the part of
Germany (growth circa 0.3%); and Spain has already reported a
robust 0.7% gain. Unfortunately the impetus provided by these
nations will be mitigated by flat outcomes in Italy and France.
• Overall, the above constellation of results will most likely produce
another 0.2% aggregate outcome, and leave annual growth for the
region unchanged at a meagre 0.6%yr.
ppts
HH consumption
Investment
Gov't consumption
Net exports
2.5
2.0
1.5
GDP growth
1.0
1.0
0.5
0.5
0.0
0.0
-0.5
-0.5
-1.0
-1.0
-1.5
-1.5
-2.0
-2.0
Source: Westpac Economics
-2.5
-2.5
2011
2012
2013
2014
2015
2016
14
7
Westpac weekly
Key data & event risk for the week ahead
Last
Sun 8
Chn
49.61
48.0
1695
697
12.2%
2200
1364
12.2%
RBA Governor Stevens speaking
Feb Sentix investor confidence
Jan Halifax house prices
Jan Labour market composite index
–
0.9
0.9%
6.1
–
–
0.0%
–
–
–
0.2%
–
Tue 10
Aus
Q4 ABS residential property prices
Jan NAB business survey
Chn
Jan CPI %yr
Jan PPI %yr
UK
Jan BRC like-for-like sales
Dec industrial production
US
Jan NFIB small business optimism
Dec wholesale inventories
Feb IBD/TIPP economic optimism
Dec JOLTS job openings
1.5%
4
1.5%
–3.3%
–0.4%
–0.1%
100.4
0.8%
51.5
4972
1.9%
–
1.0%
–3.8%
–
0.2%
101.0
0.1%
51.5
–
2.0%
–
–
–
–
–
102.0
0.2%
52.0
–
Strong gain in Q4 but annual growth moderating to ~7%.
In Dec: conditions around LR avg at +4, but confidence below LR avg.
Administrative energy price adjustments are now more frequent.
Tiers of deflation: raw, then basic materials, capital goods, csr durables.
Will softer tone of Q4 continue into the new year?
Construction surprised to downside in Nov; oil & gas also weighed.
Notable improvement as oil price has fallen.
Inventories were big support for growth in Q4.
Confidence has received strong support from oil and labour market.
A longer survey period and broader report than payrolls, but is dated.
Wed 11
Aus
Feb Westpac-MI Consumer Sentiment
Dec housing finance
NZ
Jan Retail card spending
US
Jan monthly budget statement, $bn
93.2
–0.7%
–0.1
2.0
–
2.0%
–
–2.6
–
2.0%
0.4
–
What impact will RBA rate cut have? Drag from PM leadership turmoil?
Dec to show slight kick up with-in a clear gradual downtrend.
Strong underlying spending growth, tempered by plunging petrol prices.
Return to marginal deficit after marginal surplus in December.
Thu 12
Aus
Jan employment, '000
Jan unemployment rate
Feb MI Consumer Inflation Expectations
NZ
Jan Business NZ PMI
Jpn
Dec machinery orders %mth
Inr
Dec industrial production %yr
Jan CPI %yr
Php
BSP policy decision
Eur
Dec industrial production
UK
Bank of England inflation report
Jan RICS house price balance
US
Jan retail sales
Initial jobless claims
Dec business inventories
Can
Jan house prices
37.4
6.1%
3.2%
57.7
1.3%
3.8%
5.00%
4.00%
0.2%
–
11%
–0.9%
278k
0.2%
–0.2%
–5
6.2%
–
–
–
–
–
4.00%
0.3%
–
–
–0.4%
–
0.2%
–
10.0
6.2%
–
–
–
–
–
4.00%
–
–
–
–0.4%
–
0.2%
–
Employment picked up as 2014 ended but the Jobs Index has peaked.
If participation is falt, 10k employment will see a rise in unemployment.
Down from 4.1% in Nov, falling petrol should have dragged them further.
Business conditions are expected to remain firm.
Modest growth foreign segment, private domestic still weak, public firmer.
Capex is on the turn trendwise, but infra. sectors slowed in mth of Dec.
Another instalment in the disinflation story that has emboldened RBI.
With Q4 GDP bounce & oil crash, Goldilocks is loose on the archipelago.
Down 0.4%yr; weaker Euro should support hence, world perhaps less so.
Focus is on current disinflationary concerns, not inflation further out.
Fell to its lowest level in 19 months in Dec; suggests price g'th waning.
Petrol price weakness to continue in Jan; but core likely soft.
Trend rise in jobless claims likely as oil price fall sees job losses.
Inventories were big support for growth in Q4.
Teranet/ National Bank measure.
–
0.3
5.5%
6.0%
–6.8
0.2%
20
98.1
–1.4%
–
–
–
–
–
0.2%
–
98.1
–1.0%
–
–
–
–
–
0.2%
15
98.5
–
Parliamentary Testimony, 9:30am.
Poor growing conditions could boost some prices.
Due this week. Sales have rebounded strongly in recent months.
House price acceleration has been dominated by Auckland.
Main interest in the funding side given the current global environment.
Another soft quarter as ECB policy impeded by state of union.
Weaker Euro to continue to provide boost to region's exporters.
Uni of Mich measure; lower oil price equates to stronger to confidence.
Jan decline led by motor vehicles; third decline in four months.
Chn
Mon 9
Aus
Eur
UK
US
Fri 13
Aus
NZ
Idr
Eur
US
Can
Jan trade balance, USDbn
sometime this week
Jan total credit RMBbn
Jan new loans RMBbn
Jan M2 money supply %yr
Market Westpac
median forecast Risk/Comment
RBA Governor Stevens speaking
Jan Food Price Index
Jan REINZ house sales
Jan REINZ house price index %yr
Q4 current account, USDbn
Q4 GDP
Dec trade balance, €bn
Feb consumer confidence, prelim
Dec manufacturing sales
– X expected to slow seasonally, M likewise, but workday impact +ive.
– Annual pre-funding splurge an important marker for the year ahead.
– Policy stance has eased, but has prospective borrower sentiment lifted?
– Liquidity tightened over January into early Feb leading to RRR cut.
Remarks, RMB Clearing Bank launch ceremony, Sydney 11:15am.
ECB decision strong support for markets; but duration open question.
Tentative date; prices up 7.8%yr, momentum waning?
The Fed's composite labour indicator.
8
Westpac weekly
Economic & financial forecasts
Interest rate forecasts
Latest (6 Feb)
Mar 15
Jun 15
Sep 15
Dec 15
Mar 16
Cash
2.25
2.00
2.00
2.00
2.00
2.00
90 Day Bill
2.40
2.20
2.20
2.20
2.22
2.25
3 Year Swap
2.22
2.20
2.20
2.40
2.50
3.00
10 Year Bond
2.40
2.40
2.50
2.70
2.90
3.20
59
50
50
50
40
40
0.125
0.125
0.125
0.250
0.500
0.750
1.81
1.90
2.00
2.20
2.50
2.80
10 Year Spread to US (bps)
International
Fed Funds
US 10 Year Bond
US Fed balance sheet USDtrn
4.54
4.54
4.54
4.54
4.54
4.54
ECB Repo Rate
0.05
0.05
0.05
0.05
0.05
0.05
Cash
3.50
3.50
3.50
3.50
3.50
3.50
90 day bill
3.64
3.70
3.70
3.70
3.70
3.75
2 year swap
3.54
3.50
3.60
3.70
3.80
4.00
10 Year Bond
3.19
3.30
3.40
3.50
3.70
3.90
10 Year spread to US
138
140
140
130
120
110
Latest (6 Feb)
Mar 15
Jun 15
Sep 15
Dec 15
Mar 16
AUD/USD
0.7799
0.75
0.77
0.78
0.79
0.81
NZD/USD
0.738
0.71
0.73
0.74
0.75
0.77
USD/JPY
117.50
118
120
122
124
124
EUR/USD
1.1475
1.14
1.15
1.15
1.16
1.17
AUD/NZD
1.0540
1.05
1.05
1.05
1.05
1.05
New Zealand
Exchange rate forecasts
Australian economic growth forecasts
2014
GDP % qtr
annual change
2015
Calendar years
Q2
Q3
Q4f
Q1f
Q2f
Q3f
Q4f
2013
2014f
2015f
2016f
0.5
0.3
0.6
0.7
0.7
0.8
0.8
2.1
2.7
2.7
3.5
2.7
2.7
2.5
2.2
2.4
2.8
3.0
–
–
–
–
Unemployment rate %
6.0
6.1
6.2
6.2
6.4
6.4
6.4
5.8
6.2
6.4
6.0
CPI % qtr
0.5
0.5
0.2
–0.1
0.6
1.0
0.6
–
–
–
–
3.0
2.3
1.7
1.1
1.2
1.8
2.1
2.7
1.7
2.1
3.0
0.7
0.4
0.7
0.5
0.5
0.6
0.5
–
–
–
–
2.8
2.5
2.2
2.2
2.1
2.3
2.2
2.6
2.2
2.2
2.5
annual change
CPI underlying % qtr
annual change
New Zealand economic growth forecasts
2014
2015
Calendar years
Q2
Q3
Q4f
Q1f
Q2f
Q3f
Q4f
2013
2014f
2015f
2016f
GDP % qtr
0.7
1.0
1.0
0.4
0.4
1.0
1.0
–
–
–
–
Annual avg change
2.8
2.9
3.3
3.3
3.2
3.1
2.9
2.2
3.3
2.9
3.6
Unemployment rate %
5.6
5.4
5.7
5.5
5.3
5.0
4.8
6.0
5.7
4.8
4.3
CPI % qtr
0.3
0.3
-0.2
-0.3
0.3
0.4
0.2
–
–
–
–
Annual change
1.6
1.0
0.8
0.2
0.3
0.3
0.7
1.6
0.8
0.7
2.3
9
Disclaimer
Things you should know: Each time someone visits our site, data is captured so that we can accurately evaluate the quality of our content and make
improvements for you. We may at times use technology to capture data about you to help us to better understand you and your needs, including
potentially for the purposes of assessing your individual reading habits and interests to allow us to provide suggestions regarding other reading
material which may be suitable for you.
If you are located in Australia, this material and access to this website is provided to you solely for your own use and in your own capacity as a
wholesale client of Westpac Institutional Bank being a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (‘Westpac’). If you
are located outside of Australia, this material and access to this website is provided to you as outlined below.
This material and this website contain general commentary only and does not constitute investment advice. Certain types of transactions, including
those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you
seek your own independent legal or financial advice before proceeding with any investment decision. This information has been prepared without
taking account of your objectives, financial situation or needs. This material and this website may contain material provided by third parties. While
such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or
completeness of any such material. Although we have made every effort to ensure the information is free from error, none of Westpac or its related
entities warrants the accuracy, adequacy or completeness of the information, or otherwise endorses it in any way. Except where contrary to law,
Westpac and its related entities intend by this notice to exclude liability for the information. The information is subject to change without notice and
none of Westpac or its related entities is under any obligation to update the information or correct any inaccuracy which may become apparent at
a later date. The information contained in this material and this website does not constitute an offer, a solicitation of an offer, or an inducement to
subscribe for, purchase or sell any financial instrument or to enter a legally binding contract. Past performance is not a reliable indicator of future
performance. The forecasts given in this material and this website are predictive in character. Whilst every effort has been taken to ensure that the
assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks
and uncertainties. The ultimate outcomes may differ substantially from these forecasts.
Transactions involving carbon give rise to substantial risk (including regulatory risk) and are not suitable for all investors. We recommend that you seek
your own independent legal or financial advice before proceeding with any investment decision. This information has been prepared without taking
account of your objectives, financial situation or needs. Statements setting out a concise description of the characteristics of carbon units, Australian
carbon credit units and eligible international emissions units (respectively) are available at www.cleanenergyregulator.gov.au as mentioned in section
202 of the Clean Energy Act 2011, section 162 of the Carbon Credits (Carbon Farming Initiative) Act 2011 and section 61 of the Australian National
Registry of Emissions Units Act 2011. You should consider each such statement in deciding whether to acquire, or to continue to hold, any carbon
unit, Australian carbon credit unit or eligible international emissions unit.
Additional information if you are located outside of Australia
New Zealand: The current disclosure statement for the New Zealand division of Westpac Banking Corporation ABN 33 007 457 141 or Westpac
New Zealand Limited can be obtained at the internet address www.westpac.co.nz. Westpac Institutional Bank products and services are provided
by either Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (New Zealand division) or Westpac New Zealand Limited. For
further information please refer to the Product Disclosure Statement (available from your Relationship Manager) for any product for which a Product
Disclosure Statement is required, or applicable customer agreement. Download the Westpac NZ QFE Group Financial Advisers Act 2008 Disclosure
Statement at www.westpac.co.nz.
China, Hong Kong, Singapore and India: Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary
Authority of Singapore. Westpac Hong Kong Branch holds a banking license and is subject to supervision by the Hong Kong Monetary Authority.
Westpac Hong Kong branch also holds a license issued by the Hong Kong Securities and Futures Commission (SFC) for Type 1 and Type 4 regulated
activity. Westpac Shanghai and Beijing Branches hold banking licenses and are subject to supervision by the China Banking Regulatory Commission
(CBRC). Westpac Mumbai Branch holds a banking license from Reserve Bank of India (RBI) and subject to regulation and supervision by the RBI.
U.K.: Westpac Banking Corporation is registered in England as a branch (branch number BR000106), and is authorised and regulated by the
Australian Prudential Regulatory Authority in Australia. WBC is authorised in the United Kingdom by the Prudential Regulation Authority. WBC is subject
to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority in the United Kingdom. Details about
the extent of our regulation by the Prudential Regulation Authority are available from us on request. Westpac Europe Limited is a company registered
in England (number 05660023) and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the
Prudential Regulation Authority. This material and this website and any information contained therein is directed at a) persons who have professional
experience in matters relating to investments falling within Article 19(1) of the Financial Services Act 2000 (Financial Promotion) Order 2005 or (b)
high net worth entities, and other persons to whom it may otherwise be lawfully communicated, falling within Article 49(1) of the Order (all such
persons together being referred to as “relevant persons”). The investments to which this material and this website relates are only available to and
any invitation, offer or agreement to subscribe, purchase or otherwise acquire such investments will be engaged in only with, relevant persons. Any
person who is not a relevant person should not act or rely upon this material and this website or any of its contents. In the same way, the information
contained in this material and this website is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial
Services Authority and is not intended for “retail clients”. With this in mind, Westpac expressly prohibits you from passing on the information in this
material and this website to any third party. In particular this material and this website, website content and, in each case, any copies thereof may not
be taken, transmitted or distributed, directly or indirectly into any restricted jurisdiction.
U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency.
Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated
with, a Futures Commission Merchant registered with the US CFTC. Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac,
is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory
Authority (‘FINRA’).
Disclaimer continued
This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6
under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail
investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication.
All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein,
please contact WCM on +1 212 389 1269.
Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of nonU.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or
related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements
comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments
denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or
income from such securities or related derivative instruments.
The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated
person under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise
specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by
Westpac and/or its affiliates.
For the purposes of Regulation AC only: Each analyst whose name appears in this report certifies that (1) the views expressed in this report
accurately reflect the personal views of the analyst about any and all of the subject companies and their securities and (2) no part of the
compensation of the analyst was, is, or will be, directly or indirectly related to the specific views or recommendations in this report.
For XYLO Foreign Exchange clients: This information is provided to you solely for your own use and is not to be distributed to any third parties.
XYLO Foreign Exchange is a division of Westpac Banking Corporation ABN 33 007 457 141 and Australian credit licence 233714. Information is
current as at date shown on the publication. This information has been prepared without taking account of your objectives, financial situation or
needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation
or needs. XYLO Foreign Exchange’s combined Financial Services Guide and Product Disclosure Statement can be obtained by calling XYLO Foreign
Exchange on 1300 995 639, or by emailing customercare@XYLO.com.au.
The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no
responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability
for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any
inaccuracy which may become apparent at a later date. Past performance is not a reliable indicator of future performance. The forecasts given in
this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are
reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may
differ substantially from these forecasts.
WIB IQ is here.
Start receiving your usual Westpac research
and strategy reports in a new format from our
e–portal WIB IQ.
https://wibiq.westpac.com.au

Australia & NZ weekly

Transcription

Similar documents

Submittal Sheets - Westpac Materials

Westpac Credit Card Application Migrant cover sheet

Christopher F. Wood USCGC CHASE ship roster.pub

agricultural services

Seven for All Mankind

Australia & NZ weekly Week beginning 10 November 2014

ARTIFACT FROM A TIN CAN SAILOR

I run for fitness. I run for health. I run for

Management Seminar Enterprise Risk Capturing the Upside

3bMeteo