The big picture

• One of the sleeper issues at present is population growth. The latest data showed that Australia’s population grew by 1.6 per cent in the year to September, the slowest growth rate in four years and well down from the peak growth (40-year high) of 2.2 per cent in December 2008. Slower immigration is the culprit here, not the number of babies being born, and largely due to Government policy.
• Now those in favour of a ‘small Australia’ would conclude that the slowdown in population growth is a favourable development. But they may not hold those views next time interest rates go up, especially if the Reserve Bank singles out the tight job market as one of the prime drivers behind the decision. Because the strong global demand for our resources and demographics both indicate that demand for labour will remain strong in coming years. The challenge for Australia is to ensure that labour supply lifts to meet that higher demand. If it doesn’t then the one thing that economics shows is that something has to give – and most likely that means higher wages, and potentially higher prices.
• As noted by Professor Peter McDonald, one of the best demographers in Australia, “barring a major downturn in the world economy, labour demand is likely to remain very strong into the future.” McDonald argues that there needs to be urgent action on skills development, the need for significant growth in public infrastructure, and a “planned, well-managed immigration program.”
• McDonald notes that the government’s permanent migration program and domestic sources of workers have been insufficient to meet the strong demand for labour so the gap has been filled by temporary migrants. The question is whether this is a desirable or sustainable situation. But whatever is eventually decided by policymakers, the simple fact is that the Government must ensure that an efficient, streamlined system is in place so that businesses can get the staff they need. Supply of labour has to lift to meet strong demand otherwise the consequences will be higher inflation, slower economic growth or both.
• The other point by McDonald is that “substantial future population growth” over the coming decade is embedded in the economy. The higher population growth must be planned for, especially in terms of infrastructure demands.

The week ahead

• A busy week lies ahead with a speech by the Reserve Bank Governor probably the stand-out. Meanwhile there is a bevy of ‘top-shelf’ economic indicators for release in the US and the latest monthly readings on the Chinese economy will be released on Friday.
• On Thursday morning Australian time (Wednesday lunch-time in New York) the Reserve Bank Governor will deliver a speech simply titled “Economic Conditions.” Clearly the RBA Governor will have a broad canvas to paint on, but it will be a timely update of the latest views on the economy. No doubt businesses have been giving RBA liaison officers fairly down-beat views on the economy. The question is whether the Governor will remain upbeat about 2011/12.
• In terms of economic data, most eyes will be on the NAB business survey on Tuesday and the consumer sentiment report on Wednesday. While the business sector is generally finding life difficult at present, it still is largely positive about the future. And consumer confidence may have improved a tad, but nothing too dramatic. People still haven’t got the sense that things are back to ‘normal’.
• In terms of the other economic indicators, data on lending finance kicks off the week on Monday. Consumers and businesses are more inclined to save, rather than spend, but there has been a modest pick-up in new lending in the past few months that deserves to be monitored.
• On Wednesday, the Bureau of Statistics and Federal Treasury will publish the quarterly data from Treasury’s TRYM economic model. At face value this seems exceedingly dull, but the data will contain the latest estimates on wealth – most likely at record highs.
• And on Thursday, the Bureau of Statistics will recast the latest industry figures on car sales to take account for seasonal factors. The industry data indicated that 93,984 vehicles were sold in March, just under 1 per cent lower than a year ago. However when seasonal factors are taken into account, we believe that car sales rose by 1 per cent in the month. Still, the broad trend is that car sales are going largely sideways.
• In the US, there is a bevy of ‘top shelf’ indicators due for release in the coming week. Data on retail sales is released on Wednesday with producer prices (business inflation) set down for Thursday while figures on consumer prices and industrial production are both issued on Friday.
• Overall the results should be reasonably healthy. Economists tip a 0.5 per cent lift in retail sales (up 0.6 per cent if car sales are excluded) while production is expected to have lifted by 0.5 per cent in March after a flat reading in February. The prices data should confirm that deflation is no longer a concern, but – at present anyway – inflation is not an issue either. Core rates of both producer and consumer prices probably rose by 0.2 per cent in March.
• Of the other data/events, on Tuesday, trade figures are released alongside import & export prices and the monthly Budget results. On Wednesday the latest Federal Reserve Beige Book is issued – covering conditions across Fed districts. And on Friday consumer sentiment, capital flows and the Empire State survey are other indicators to watch.
• The other event to keep on the radar screen is the usual monthly download of Chinese economic statistics. On Friday, figures on retail sales, production, investment and inflation are all issued. Interestingly the Chinese trade data is also issued – on April 10 – this Sunday.

Sharemarket

• The Australian sharemarket is a mere 10 per cent away from record highs. Sounds too good to be true? What we are tracking is the value of all shares – the amount of stock on issue multiplied by the share price. This accounts for the fact that companies raised equity capital in the global financial crisis as well as the fact that share prices have recovered post GFC. The value of all shares stands at $1,583 billion, down from the highs of $1,772 billion in late 2007. But some sectors have done even better. Market capitalisation of the ASX 200 Resources sector stands at $388 billion, just under 2 per cent below the record high of $395 billion set in May 2008. Notably 25 per cent of the entire sharemarket is accounted for by the top 200 resource stocks, a smidgen below the record high set in July 2008.

Interest rates, currencies & commodities

The Aussie dollar has had an amazing rebound in a short time period, lifting from US97.25c on March 17 to US104c on April 4 – a gain of around 7 per cent. Clearly sharemarkets across the globe similarly rebounded from lows, highlighting the fact that the Aussie is very much a ‘fair weather friend’. When there are concerns about the health of the global economy the Aussie dollar is one of the first to be sold, but it is quickly back in favour when sentiment improves. Consumers would expect that the strong Aussie translates into lower prices for gadgets and indeed that has proved correct. Australia is the fifth cheapest of 26 countries in the world to buy the new Apple iPad 2 device according to our new CommSec index. The CommSec iPad 2 index is a modern way of looking at purchasing power theory. That is, the theory that the same good should be sold for the same price across the globe once taking into account exchange rates. As it turns out there are still significant differences in prices across the globe.

The post Investor Signposts: Week Beginning April 10 2011 appeared first on AdviserVoice.

• Australia’s population grew by 345,500 people over the year to September. Population growth increased by 1.57 per cent over the past year – the weakest growth rate in four year and well below the 40-years highs reached in the year to March 2009.
• A total of 185,800 people migrated to Australia over the year to September – marking the weakest result in just shy of four year and a slide of 41 per cent on migration growth pre-GFC (December 2008).
• There were 301,500 babies born in the year to September – holding just shy of the highest reading since quarterly records began 28 years (303,500 – March 2010).
• Across the state and territories, it was the mining states of Western Australia and Queensland that recorded the fastest annual population growth rates – a trend that is likely to gain traction in coming years.

What does it all mean?

• Australia’s population growth rate continues to moderate, easing further away from the 40-years highs reached 18 months ago. And the blame can be placed squarely on slide in migration that has occurred in the past year. In fact, a record 102,200 less people called Australia home over the past year, robbing the economy of momentum at an important time and keeping job markets tight.
• It is understandable that migration levels came off the boil during the global financial crisis. A similar result took place in previous downturns, and has largely to do with the uncertainty surrounding job prospects during a downturn. However Federal policy makers need to also take some of the blame. Migration targets were cut and while they are being slowly reinstated the slide in migration is still being felt.
• Contrary to popular belief it isn’t just skills shortages in the mining sector that is driving the demand for additional workers. In fact the Department of Immigration’s occupational shortages list, highlights that a whole manner of workers are needed from Engineers, Accountants, IT experts, Pharmacists, Dentists, Nurses and Doctors. Interestingly the demand for medical related professions makes up a significant proportion of that list. And given that Australia’s population is still growing and at the same time it is an aging population the demand for medical related skills will continue to gain traction.

• The Reserve Bank believes that a pickup in skilled migration will be the key to ensuring that Australia continues to have a relatively balanced job market. But given the rebuilding that is currently underway in flood damaged towns, and the anticipated pickup in economic growth the risks are clearly around a sustained slide in unemployment over the coming year.
• The Federal government certainly has a role in controlling migrant inflows, however further liaisons with businesses will be important in judging the scope and depth of the labour shortage over the coming year. Proactively raising migration targets will also ensure that there isn’t exacerbating tightness in the job market in the years to come. And ensure that the Reserve Bank will have one less thing to worry about in terms of wage growth pushing up inflation and in turn adding further upward pressure to interest rates.
• It can’t be stressed enough that Australia’s strong migration levels is a big deal. Not just in boosting economic growth in the short-term but also in addressing the longer-term implications of Australia’s ageing population. Rising population growth hasn’t resulted in higher unemployment, rather it’s been instrumental in driving economic growth and contributing to firmer job markets.
• Overall population growth of 1.57 per cent is still healthy. Interestingly the result is being driven by the current baby boom that is taking place. Economic prosperity – low unemployment, rising incomes and greater prosperity have prompted more couples to start families. In fact in the past year more than 300,000 babies were born – holding near the highest reading in records going back 28 years.

What do the figures show?

Population Statistics:

• Australia’s population expanded by 345,500 people over the 12 months to 22,407,700 people. Overall, Australia’s population grew by 1.57 per cent over past year, easing further away from the 40 year record pace of 2.16 per cent recorded in the year to March 2009.
• A total of 185,800 people migrated to Australia over the year to September – falling further away from the biggest annual total since European settlement which was recorded in the year to December 2008 (315,700). An additional 509 people called Australia home each day over the past year.
• Over the year to September, 56,069 migrants settled in NSW, followed by Victoria (52,334), Queensland (33,827), Western Australia (25,475), South Australia (13,243), ACT (2,101), Tasmania (1,571), and Northern Territory (1,144).
• There were 301,500 babies born in the year to September – just shy of the year to March (303,500) which was the highest reading in records going back 28 years.
• Population growth eased in all states and territories. Over the past year population growth was fastest in Western Australia (2.09 per cent), followed by Queensland (1.85 per cent), ACT (1.70 per cent), Victoria (1.65 per cent), NSW (1.33 per cent), Northern Territory (1.27 per cent), South Australia (1.07 per cent), and Tasmania (0.81 per cent).

What is the importance of the economic data?

• Demographic Statistics are issued by the Bureau of Statistics each quarter. The figures include estimates of births, deaths, in-bound and out-bound migration movements and estimates of population change by State.

What are the implications for interest rates and investors?

• The solid pace of population growth will continue to underpin housing demand. While the sharp lift in the number of births will translate to an increased demand for childcare places over the next five years, and a greater demand for school places over the next 5-20 years.
• Not surprisingly population growth is strongest in the mining states, with Western Australia and Queensland leading the charge. No doubt as the global economic recovery gains traction and mining investment is increased a further demand on labour resources will be required.
• The Reserve Bank is likely to remain on the interest rate sidelines over the next few months, given the near term weakness of the economic data.

The post Record migration slump dampens population growth appeared first on AdviserVoice.

• Record lift in credit card use. The number of purchases and cash out transactions made on credit cards lifted by 13 per cent in November – the biggest increase for a November month.
• Credit card balances are growing at the slowest annual pace in a year. The average credit card balance in November was up just 2.6 per cent on a year ago. The average balance recorded the usual seasonal lift in the month, up $35.90 to $3,280.70.
• Credit card cash advances rose sharply. While it appears an aberration, the number of credit card cash advances lifted 9.6 per cent in November. If the result isn’t reversed next month this may indicate that the recent rate hike has put consumer finances under stress.
• A surprise improvement in tourism numbers. Tourism arrivals have risen for eight months in trend terms while departures are now falling. Given the high level of the dollar, the results are encouraging.

What does it all mean?

• Consumers appeared to take out their credit cards and spend with gusto in November. Credit card use usually does start to lift each November, peaks in December and then falls sharply in January. But the lift in credit card use this November was the biggest ever recorded. That may be a worry for retailers. Because if credit card use soared and retail trade only managed to rise 0.3 per cent in the month, then the December sales figures may prove even softer. Consumers were no doubt enticed to spend by massive discounts on offer by retailers.
• The average credit card balance is barely growing at present with consumers much preferring to live within their own means. The average balance is up just 2.6 per cent on a year ago, the slowest annual pace in a year. And once inflation is taken into account, the average credit card balance hasn’t budget over the past year.
• There were some odd movements in consumer cash and credit transactions in November. Purchases made on both credit and debit cards spiked higher while there was also a sharp surge in one of the most expensive forms of finance – taking cash advances on credit cards. We can’t read too much into one month’s numbers as previous large spikes have generally been quickly reversed the next month. But it is worth watching just to ensure that the November rate hike hasn’t created stress on household balance sheets.
• The good news is that tourism arrivals are showing modest signs of recovery despite the high value of the currency. In fact tourist arrivals have been consistently rising in trend terms for eight months while departures actually turned negative in the latest month.
• The Federal Government simply needs to be doing more to lift migrant numbers and thus prevent skill shortages in the economy. In November, net migrant numbers stood at just over 5,000 people – the second lowest result recorded over the past decade. After the floodwaters recede in Queensland, a substantial rebuilding operation will be needed, thus putting pressure on the job market. To meet the demand for workers, the government will clearly need to look overseas or risk forcing wages and prices up.

What do the figures show?

Overseas arrivals/departures

• Net permanent and long-term arrivals to Australia fell to 206,900 people in the year to November, down 33.8 per cent or 105,530 people on a year ago. Departures from Australia rose by 43,320 while arrivals plunged by 62,210.
• The net number of permanent settlers entering Australia (arrivals less departures) stood at 5,020 in November – the lowest monthly total in 11 months and second lowest result in a decade.
• Tourist departures rose by 0.7 per cent in November to 602,100 after falling by 1.3 per cent in October. It was only the second rise in departures in five months.
• Tourist arrivals rose by 1.1 per cent in seasonally adjusted terms in November to 504,800 after falling by 2.1 per cent in October. It was the third rise in arrivals in four months.
• In seasonally adjusted terms the tourism deficit – the gap between departures and arrivals – stood at 97,300 in November, down 1,200 in the month and below the record (34-year history) deficit of 125,900 in June.
• In trend terms, tourism arrivals have risen for the past seven months. Tourism departures fell 0.1 per cent in trend terms in November – the first fall in 18 months.

Credit & debit card activity:

• Figures released from the Reserve Bank show that the average credit card balance recorded its usual seasonal increase in November, lifting by $35.90 to $3,280.70. But the average credit card balance is only up 2.6 per cent on a year earlier – the slowest annual growth in a year. Over the past five months, the average credit card balance has fallen by $3.10.
• Of credit cards attracting interest charges, the average outstanding balance again recorded the usual seasonal increase in November, up by $45.70 to $2,395.50. The average balance accruing interest is up 4.3 per cent on a year ago (slowest growth in nine months).
• The number of credit card cash advances surprisingly rose by 9.6 per cent in November but was still down 1.8 per cent on a year earlier. Credit card advances have been largely falling in annual terms for four years.
• The number of purchases made on credit cards soared by 13.1 per cent in November after falling 2.9 per cent in October. It was the biggest increase in credit card purchases for a November month.
• The number of purchases made on debit cards rose by 1.6 per cent in October to stand 20.1 per cent higher than a year ago – the fastest annual growth rate in almost eight years.
• The number of just EFTPOS transactions (excludes cash out) rose by 1.4 per cent in November to stand 23.7 per cent higher than a year ago – the fastest annual growth rate on record.
• Cash withdrawn from ATMs in November rose in annual terms in November for the first time in 20 months. The number of cash withdrawals was up 0.7 per cent on a year ago while the value of withdrawals was up by 0.9 per cent.

What is the importance of the economic data?

• The Australian Bureau of Statistics releases data on overseas arrivals and departures is produced monthly and is an indicator of the health of the tourism sector.
• The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
  What are the implications for interest rates and investors?
• The spike in credit card purchases and cash advances is probably an aberration, but it’s worth watching to ensure that consumer finances aren’t being stressed by higher interest rates.
• The continued easing in migrant numbers must be addressed by the Government or it will risk a lift in inflationary pressures. But the increase in short-term tourism arrivals is certainly encouraging when you consider the heady levels of the Aussie dollar.

The post Record credit card use; Surprise lift in tourism appeared first on AdviserVoice.

Australia’s immigrant population on a per capita basis is almost double that of the United States, and more than twice that of the United Kingdom.

England and New Zealand remain the two major source countries of migrants to Australia, attracting around 30 per cent of total migrants.  In the 10 years to 2006, China toppled Italy for third spot, accounting for 5 per cent of total migrants to Australia.

Against this backdrop, the AMP.NATSEM Income and Wealth Report: Calling Australia Home explores the characteristics and contributions of Australia’s overseas born population, examining aspects of the migrant experience including education, work, wealth and wellbeing.

AMP Financial Services Managing Director Craig Meller said Australia’s recent history and current landscape is very much one of migration, with generations of migrants having influenced the country’s economic wellbeing and cultural diversity.

“Modern Australia is a nation built from the labour, skills and traditions of migrants. Almost all of us has either experienced arriving here from elsewhere, or have heard the stories of our friends, colleagues, parents or grandparents who have made Australia their home,” Mr Meller said.

“The major shifts in Australia’s immigration policy over the years have resulted in a rich and culturally diverse nation and migrants have also made a significant contribution to the nation’s productivity,” Mr Meller added.

Key Report Findings:

The AMP.NATSEM report differentiates migrants into two groups. Migrants born in the main English speaking countries – Canada, New Zealand, Ireland, the United Kingdom, United States and South Africa – are referred to as “Born in MESC” and migrants born in non-main English speaking countries are referred to as “Born in non-MESC”.

According to the report, most migrants arrive in Australia when they are young, with 40 per cent of recent permanent adult migrants moving here aged 25-34 years, and 22 per cent aged 34-44 years.

Over the past decade, an increasing number of migrants have entered Australia under the skilled migration program – approximately 115,000 permanent migrants came to Australia in 2008 under this category, accounting for 62 per cent of total migrants.

Education levels among migrants tend to match or even exceed those of the Australian born population. 46 per cent of males born in non-MESC aged 25-34 years have a bachelor agree or above, compared with 20 per cent of Australian-born men in the same group.

Most migrants are urban dwellers. More than 60 per cent of migrants who were born in MESC live in Sydney, Melbourne, Brisbane and Perth, with an even higher figure of 79 per cent for non-MESC migrants, but only 49 per cent of the Australian-born population.

Asylum seekers make up a very small proportion of migrants. Australia’s humanitarian migration program, through which refugees are accepted, makes up around 7 per cent of Australia’s total migrant intake, and asylum seekers make up only around one-fifth or less of this group.

Overall, Australia has a ratio of 10 refugees per 10,000 head of population compared to 87 per 10,000 in Sweden and 50 per 10,000 in Canada.

NATSEM author and Research Fellow Riyana Miranti said migrant participation in the labour market is one indicator of the successful contribution of migrants to the economy. Around 50 per cent of migrants are in the prime working age population of 25-54 years, compared to only 39 per cent of Australian born.

“With most migrants arriving here during the prime working age, it is not surprising that they have a high level of participation in the labour market, which is a clear indicator of their successful contribution to the economy,” Dr Miranti said.

However in some cases the skills of many migrants have not been fully utilised with many highly educated non-MESC migrants working in low or medium skilled occupations. Only 19 per cent of Australian-born tertiary educated people aged 35-54 years are working in a low or medium skilled occupation, and 20 per cent of MESC migrants, compared with 38 per cent of non-MESC migrants. Similar differences are apparent in the 25-34 years age group.

“Labour market barriers may be experienced by this group of well-educated migrants, possibly including difficulties in having their qualifications recognised, or competing with those with native English-speaking backgrounds,” Dr Miranti said.

For the working age population of 25-64 year olds, migrants born in MESC have the highest earnings per week at $1,358, followed by Australian-born at $1,266.  Non-MESC migrants earn the least with average earnings of $1,145.

Overall, non-migrant households with an average net worth per adult of $387,200 are about 5 per cent wealthier than migrant households at $370,400.

Non-migrant households take the lead in superannuation savings and investments with $143,600 in total compared with $124,600 for non-migrant households.

While non-migrant households are wealthier than migrants in general, migrant households are ahead of their Australian-born counterparts in terms of property-related assets with $262,700 in property compared to $250,800 for non-migrant households.

“The report suggests that this difference could be due to migrants living in urban areas where property is more expensive,” Mr Meller said.

“Meanwhile non-migrant households may have been able to accumulate superannuation and investments over a longer period of time,” Mr Meller added.

The image of Australia as a land of opportunity is also captured in the data around job satisfaction, with a large majority of people being happy with their employment opportunities, especially in the younger age groups. Only a small minority of both Australian born and migrant individuals are ‘dissatisfied’ with their sense of being part of the local community.

“Migration is embedded in our history, has significantly contributed to the country’s economic wellbeing and culture, and will undoubtedly play a significant role in shaping Australia’s long-term future,” Mr Meller added.

Calling Australia Home is the 27th AMP.NATSEM Income and Wealth Report. Since 2001, AMP and NATSEM have produced a series of reports that open windows on Australian society, the way we live and work – and our financial and personal aspirations. AMP publishes these reports to help the community make informed financial and lifestyle decisions and to contribute to important social and economic policy debate.

The post A land of opportunity – Australia leads the way as a multicultural nation appeared first on AdviserVoice.

The big picture

• It never ceases to surprise how many people treat budget figures as facts rather than estimates. The Mid Year Economic and Fiscal Outlook (MYEFO) didn’t contain much that was new. The economic assumptions were tweaked and the bottom-line budget numbers barely budged, but still the Treasurer and many commentators claimed that Australia’s finances were solidly on track to returning to the black. In the year to September the budget deficit stood at just over $63 billion, and the rolling annual deficits are still increasing, not improving, so the path to surplus is hardly a smooth one.
• The Government also claimed that the rising Australian dollar was to blame for wiping $10 billion off revenue estimates over the next four years. Perhaps. But while the Aussie dollar has been rising, making life difficult for exporters and the tourism sector, and crimping returns for mining producers, Federal Treasury also lifted economic growth estimates while cutting the forecast for the jobless rate. Apparently the economy will be growing at a faster pace but the Government will extract less in revenue. And if the Aussie dollar is indeed rising, the expectation is that commodity prices would also remain strong, and indeed the terms of trade are tipped to rise by 15.5 per cent this financial year, well up from the estimate at budget time.
• And when it comes to estimating the impact of the Australian dollar on the economy, the latest tourism figures have thrown something of a curve ball into the calculations. In September a record number of foreign tourists visited our shores. In seasonally adjusted terms, tourist arrivals hit 511,400 in September, up 1.8 per cent on the previous month and the fourth increase in five months. Tourist arrivals are now 7.7 per cent higher than a year ago and slightly ahead of long-term average annual growth.
• Certainly there are still more Aussies travelling abroad than people visiting our shores – almost 100,000 more in the latest month. And it will get even harder to attract visitors to Australia in coming months with the Aussie dollar at parity against the greenback and historically high against a raft of other countries. But the fact that more visitors came to our shores in September than ever before is clearly encouraging.
• However what isn’t encouraging is that the number of migrants coming to Australia continues to fall. In the year to September, 218,400 migrants came to Australia, down by over 110,000 people on last year’s annual total. If we want to keep the Australian economy growing at a sustainable rate and move the budget into surplus, we need to keep attracting foreign workers from abroad. Federal Treasury estimates that full-employment is consistent with a jobless rate between 4.5-5.0 per cent.

The week ahead

• The Australian economic calendar has been well populated over the past week, but by contrast the US calendar has been very quiet. Well in the coming week the tables are turned with most interest in the top-shelf indicators due for release across the other side of the Pacific.
• In Australia, the week kicks off with car sales and lending finance figures on Monday. On Tuesday the Reserve Bank releases minutes of the November Board meeting. On Wednesday, the main gauge of wage pressures is issued – the Labour Price Index. On Thursday the average weekly earnings data will provide a different take on wages, showing how much we earn in actual dollars. Figures on imports are also released on Thursday while Reserve Bank Deputy Governor Ric Battellino delivers a talk in Perth to a CEDA function. And on Friday the state accounts are issued – showing how the state economies fared over 2009/10.
• Car sales probably fell by 1.5 per cent in October – the first fall in three months. While car affordability is the best since the 1970s, buyer caution is emerging. Certainly lending has been soft in recent months – down 6.5 per cent in August alone. So analysts will be closely watching the latest data for signs of any improvement.
• While there will be the usual interest in the Reserve Bank Board minutes, it is questionable how many new insights will be gleaned given that the quarterly monetary policy statement was released just three days after the rate decision.
• The wage data should prove interesting. Certainly the job market has tightened and that suggests upward pressure on wages. But conditions vary significantly across industries and state and territory economies. We expect that wages lifted by 1.2 per cent in then quarter and by 3.4 per cent over the year.
• In the US, a bevy of top-shelf indicators will be released over the week. On Monday, retail sales figures are due with producer prices and industrial production on Tuesday and housing starts and consumer prices on Wednesday. Also thrown in for good measure during the week is the Empire State index on Monday with the leading index and Philadelphia Fed survey slated for Thursday.
• Overall the results should be encouraging with firmer activity readings expected as well as a dose of higher prices – serving to downplay some of the concerns about deflation. In terms of the activity indicators, economists tip a solid 0.7 per cent lift in retail sales for October, underpinned by higher car sales. Strip out autos and a 0.3 per cent lift is expected. Industrial production probably rose 0.3 per cent in the month given the guide provided by the ISM manufacturing gauge. And housing starts were probably little changed near a 608,000 annual pace.
• And turning to the inflation gauges, rising agricultural prices probably pushed up producer prices by 0.7 per cent in October with consumer prices up 0.3 per cent. But excluding food and energy, core prices probably rose just 0.1 per cent for each measure.

Sharemarket

• Sharemarket investors had been hoping for some stability, but things don’t always turn out as planned. The US mid-term elections are out of the way and similarly the US earnings season, Federal Reserve quantitative easing and US non-farm payrolls report have all come and gone, leaving something of a vacuum. But beware idle hands at work.
• Some media commentators and financial analysts have merely sought to revisit the European debt woes in the hope of conjuring up a fresh bad news story. There really isn’t anything new here – the issue has been bubbling beneath the surface over recent months but US issues have hogged the headlines. Simply, there isn’t much else to focus on at present and there are empty column inches to be filled.
• Investors should ignore the hype. The big picture story of the global economy continues to improve and small economies such as Ireland and Greece serve as no threat to the recovery process.

Interest rates, currencies & commodities

• In the US and Europe, policymakers and businesses are worried about disinflation – slowing rates of inflation – as well as deflation – falling prices. In fact many retailers in Australia are similarly concerned about these price trends. But in developing nations, it is inflation concerns that remain in focus – more specifically the issue of agflation or soaring prices for agricultural commodities.
• However what is clear is that Commodity Boom MkII is well underway. The Commodity Research Bureau spot index has now recovered all the ground lost in the global financial crisis (GFC) and is back at record highs.
• Amazingly the index has rebounded 63 per cent from the February 2009 lows, thus replicating the lift from October 2005 to June 2008. But the important point is that the rebound has occurred in a far shorter time frame.
• While gold, oil and base metals generally grab the headlines; it has been the agricultural commodities that have recorded stellar gains in recent months. The CRB foodstuffs index is up 20 per cent from the recent July lows with both the textiles and raw industrials indexes showing similar gains over that period. In fact the raw industrials index – which includes cotton, wool, rubber and scrap metals – has soared 71 per cent since the December 2008 lows, thus exceeding the 63 per cent lift from November 2005 to April 2008 in Commodity Boom Mk1.

The post Investor Signposts: Week Beginning November 14 2010 appeared first on AdviserVoice.

• The release of the building approvals and home price data is an opportune time to focus on the latest trends in the housing market. Dwelling approvals, new home sales and home prices all fell again in the
  latest month, raising hopes that the Reserve Bank will delay any rate hike for at least a month.
• Amongst the key trends: there are fresh doubts about the apparent under-supply of homes in Australia –in fact non-NSW housing approvals were at record highs in the year to August; Victoria is the clear leader in home building while NSW activity is again slipping back towards record lows; home prices have softened in response to a slowdown in demand for property; and buyers are switching from free-standing homes to units and townhouses in many states and territories.
• Exacerbating the decline in housing demand has been the shortsighted reduction in migrant numbers by the Federal Government. The slowdown in migrant inflows over the past year has been the biggest ever recorded.

Click here to download this document (pdf)

The post Housing slowdown may delay rate hike appeared first on AdviserVoice.