Tracking the Economy
Australian Financial Review
Monday November 16, 2009
US retail sales for October will be released today and market watchers will use the result to gauge how the US economic recovery is faring. In September, retail sales fell 1.5 per cent as the government's "cash for clunkers" car program wound down. For October, economists are expecting sales to gain 1.2 per cent, but if car and gasoline components are excluded, retail sales probably rose by just 0.3 per cent in October.Window on RBAThe Reserve Bank of Australia releases the minutes of its November board meeting tomorrow, and investors will be looking at them closely to see how quickly the central bank plans to raise rates over the coming months. In a statement that directly followed the November meeting, the RBA aired concerns about monetary policy being too accommodative. The market is expecting interest rates to rise by 2 percentage points during the next 12 months.Wages subduedWage growth typically lags behind developments in the labour market, so economists are expecting weak growth when the wage price index for the third quarter of 2009 is released on Wednesday. The unemployment rate rose most rapidly in the first half of 2009, the effects of which are likely to flow through to third-quarter figures. Westpac Banking Corp is forecasting a lower WPI result of 0.7 per cent, taking growth to 3.5 per for the year, which is below its historic average and the lowest since 2004.Little to fearIt€™s hard to make the case for any looming inflation threat in the US after retail sales fell by 1.5 per cent in September. Westpac Banking Corp forecasts core inflation will have risen by just 0.3 per cent for October when a government report comes out on Wednesday. Higher gas prices will likely lift core inflation, but minor declines in food, recreation and rent should offset any pressure from gas.ECONOMISTS' VIEWOffshore, there is going to be a lot of anticipation ahead of US Federal Reserve chairman Ben Bernanke€™s speech today. Locally, we will be watching the wage cost index on Wednesday. We do expect mild growth in wages but no major declaration, given the unemployment rate fell only 0.1 per cent in the September quarter.With the Reserve Bank of Australia€™s renewed focus on controlling inflation rather than growth, wage data will be an important indicator of future inflation. Meanwhile, the RBA minutes will give us the latest update on what it is thinking on rates. It€™s pretty much settled that they will continue to raise rates gradually, removing the policy stimulus by 25 basis points a meeting from December to March.
© 2009 Australian Financial Review