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Don't neglect RBA data

Craig James
15 July 2013

A fair bit of economic and financial information is released each week. Some of the information is readily dissected by analysts and investors. But there is also a healthy amount of information that gets neglected. 



And included in the latter category is a raft of statistical information that is produced by the Reserve Bank. When the Bulletin was issued monthly, data had less chance of being missed. But with new statistics and information released irregularly online, it requires more diligence to check the changes.



In late June the RBA issued detailed data on bank lending. The figures showed that the weighted interest rate of loans less than $2 million stood at a record low of 7.00 per cent in the March quarter, while the interest rate on loans above $2 million was also at a record low of 5.15 per cent. Businesses may be complaining about weak consumer spending but there can be few complaints on interest costs.



But businesses aren’t rushing for the cheap rates. New credit approvals in the March quarter were down 9.5 per cent on a year ago. However the rush to reduce outstanding debt has come to an end. The value of outstanding debt hit a four year high of almost $698 billion, up 9.3 per cent on the low reached in June quarter 2011.



The construction sector now accounts for just 4.0 per cent of all outstanding loans, a record low, and well off the highs of 6.3 per cent set 20 years ago. The share of loans to the manufacturing sector also stands at a record low of 5.7 per cent while agriculture accounts for 8.4 per cent of lending. The biggest grouping is “other” at 49.5 per cent, followed by finance and insurance at 14.9 per cent and retail, wholesale trade, transport and storage at 14.8 per cent.



Interesting to note that operating income of banks peaked at $24.4 billion in the June quarter 2010 and is currently down almost 6 per cent. So to maintain profits, banks have had to keep cutting costs. Operating expenses have been pared back by 13.4 per cent over the same period. And interestingly, the other challenge that banks have had in trying to maintain profits is a rising tax take. Income tax paid by banks hit a record $12 billion in the year to March 2013, up 21.5 per cent on the year to March 2010.


The week ahead

In Australia, there are few highlights in the coming week. Economic data is basically drawn from the “second shelf” but the Reserve Bank will issue minutes of the July 2 Board meeting on Tuesday. In China a gamut of key economic data is released on Monday including June quarter economic growth data. And there is the usual bevy of US economic data over the week including testimony from the Federal Reserve chairman.



In Australia, the week kicks off on Monday when the Bureau of Statistics (ABS) publishes lending finance and new vehicle sales data. The lending finance figures are the most comprehensive compilation of new lending or commitment data, covering personal, business, housing and lease loans. At present new lending commitments are travelling sideways.



The data on new vehicle sales is basically a recast of the industry figures that have already been released from the Federal Chamber of Automotive Industries. The ABS will merely present the sales data in seasonally adjusted and trend terms. In June, new vehicle sales were at record highs and up 5.5 per cent on a year ago. Government incentives to business to purchase vehicles as well as end of year sales underpinned activity in the month. And Australia’s top selling vehicle? The Toyota Hilux.



On Wednesday the ABS issues data on imports of goods (merchandise imports) for June as well as figures on building work in the March quarter and a census of motor vehicles as at January this year. The imports data may give insights into the strength of consumer and business spending.



On Thursday the ABS releases detailed data on the job market. Included are regional estimates of unemployment as well as unemployment and participation rates for different age groups. And on Friday the ABS issues a survey of physical activity that should be of interest to businesses in the health sector.



Turning our attention outside Australia, the week kicks off on Monday when China issues major data for the month of June and the June quarter. The economic growth figures for the quarter are issued together with indicators such as retail sales and industrial production for the month. Clearly this data has the potential to move share and currency markets.



In the US, the week kicks off on Monday with data on retail sales and business inventories to be issued alongside the Empire State index. Economists expect the healthy pace of consumer spending to continue with the retail sales measure that excludes car sales, gasoline and building materials expected to rise by 0.3 per cent.

On Tuesday a bevy of data is slated for release in the US. As well as the customary weekly report on chain store sales, data on consumer prices, industrial production and capital flows are also issued. Economists expect that inflation remained contained in June with core consumer prices (excludes food and energy) tipped to lift 0.2 per cent in the month and 1.6 per cent over the year. Economists also expect that industrial production rose by 0.3 per cent in June.



On Wednesday the Federal Reserve chairman, Ben Bernanke, delivers semi-annual monetary policy testimony before the House Financial Services Committee with follow-up testimony to the Senate Banking Committee on Thursday. Bernanke will be under pressure to explain his views on tapering monetary policy stimulus.

On Wednesday the Beige Book is issued – a summary of conditions across the Federal Reserve district offices. More than likely comments will refer to healthy demand for homes and firmer construction activity. But the main uncertainties concern the state of consumer spending as well as labour market conditions.

Also on Wednesday, data on housing starts is issued. Economists are tipping a near 4 per cent lift in starts in June to a 950,000 annual rate. A firmer job market, firmer population growth and low interest rates support housing activity.



On Thursday the weekly estimates of claims for unemployment insurance (jobless claims) are issued together with the leading index and the influential Philadelphia Federal Reserve survey.


Sharemarket, interest rates, currencies & commodities

The US profit-reporting season kicked off on Monday with Alcoa the first of the S&P 500 stocks to report earnings. Three stocks followed on July 10 and, at the time of writing, JP Morgan Chase and Wells Fargo were due to report on July 12.



Of stocks in the S&P 500 index, Citigroup is scheduled to report earnings on Monday while seven stocks are listed to report on Tuesday including Goldman Sachs, Coca Cola, Yahoo and Johnson and Johnson.



On Wednesday, amongst the 16 stocks listed to issue profit results are American Express, Bank of America, eBay, Intel, and US Bancorp. On Thursday, 29 companies from the S&P 500 index are due to report earnings including Advanced Micro Devices, Google, Microsoft, Safeway and Verizon. And on Friday, 12 companies are expected to issue profit results including General Electric, Honeywell and State Street Corp.



And in Australia over the coming week the major mining houses issue production reports covering the June quarter.

Upcoming economic and financial market events

Australia

  • July 15 - Lending finance (May) - Covers personal, business, housing and lease loans
  • July 15 - New vehicle sales (June) - Sales hit record highs; up 5.5 per cent over the year
  • July 16 - Reserve Bank Board minutes - Minutes of meeting held on July 2
  • July 18 - Detailed employment (June) - Detailed jobs data including regional unemployment
 

Overseas

  • July 15 - Chinese economic data - Includes economic growth, retail sales & production
  • July 15 - US Retail sales (June) - Non-auto sales may have lifted 0.4 per cent
  • July 16 - US Consumer prices (June) - Core prices are expected to lift by 0.2 per cent
  • July 16 - US Industrial production (June) - Analysts tip a 0.3 per cent increase
  • July 17 - US Testimony by Fed chairman - Testimony by Federal Reserve chairman Ben Bernanke
  • July 17 - US Housing starts (June) - Economists tip a lift from 914,000 to 950,000
  • July 17 - US Federal Reserve Beige Book - Covers conditions across Federal Reserve districts
  • July 18 - US Philadelphia Fed survey (July) - Influential regional survey

Craig James

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