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What to Watch - Week of 29 July

Inflation, inflation, inflation is the name of the game this week. AU Q2 CPI data is released on Wednesday, NAB sees the trimmed mean print to come in at 1%, but a hotter number could see the chance for an RBA rate hike come into focus. Globally it’s all about central banks and tech earnings with the FOMC on Wednesday (hold), the BoJ (50% chance of a hike) and the BoE on Thursday (50% for a cut).
NAB Markets Research
29 July 2024
Created by potrace 1.15, written by Peter Selinger 2001-2017 3 min read

Tapas Strickland | Markets Research

Comment - Australia is not Canada

  • Australia and Canada have seen a surge in population growth with the civilian 15 years plus population increasing by 2.9% in Australia and by 3.4% in Canada over the past year
  • However, what is different is the rise in population has been fully absorbed by the Australian labour market with little change in the employment to population ratio. This may be a nod to the amount of excess/unmet demand in the economy
  • In contrast in Canada, the rise in population growth has not been as well absorbed with the employment to population ratio declining and unemployment rising sharply

Past Week

  • There has been little Australian data flow with markets firmly focused on Q2 CPI on 31 July
  • Offshore it has been a big week for markets with three very important themes: (1) the Yen has appreciated sharply; (2) concerns around the US surfaced, but against that Q2 GDP printed strongly; and (3) the first big tech earning and outlooks disappointed

Week ahead

  • Australia has a big week with Q2 CPI (Wednesday). Could it be strong enough to force the RBA to hike rates this late in the cycle? NAB forecasts trimmed mean inflation at 1.0% q/q and expects the RBA to remain on hold
  • Offshore, it is all about central banks and tech earnings. The US FOMC (Wednesday) is expected to be on hold. However, it is likely to be a closer decision for the BoJ (Wednesday) where markets are around 50% priced for a hike, and for the BoE (Thursday) where markets are around 50% for a cut
  • In the US the key pieces are the Manufacturing ISM (Thursday) and Payrolls (Friday) where focus will be on the unemployment rate given the rise in the unemployment rate to 4.1% over the past four months from 3.8% in March. The ECI (Wednesday) also worth a look given last quarter's lift to 1.2% q/q
  • In Europe, Q2 GDP (Tuesday) and Prelim CPIs (Wednesday) will help frame the narrative ahead of the ECB’s September meeting. In Asia, China has the Official PMIs (Wednesday) as well as the Caixin Manufacturing PMI.
  • Across the Ditch in NZ, Employment indicators (Monday), the ANZ Business Survey (Wednesday) and Building Consents are the main pieces.

Chart 1: Rise in population being broadly absorbed by the labour market in Australia, not so in Canada

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