Australia: Critical employment report ahead – ANZ

ANZ analysts suggest that in their view, the December employment report of Australian economy could be the key to whether the RBA cuts in February.

Key Quotes

“A gain of 10k or less for the month would confirm a sharp slowing in employment growth since Q2 and Q3 last year. While employment is a lagging indicator, a sharp slowdown will cast doubt on the sustainability of the economy’s modest revival.”

“Following the strong retail sales report for November, which was published on 10 January, the market reduced its view of the probability of an RBA rate cut in February to around 40%. It has since crept back up to around 50%, in part due to speculation that November sales were exaggerated by the growth of Black Friday retail activity. ANZ card data suggest that this may indeed be the case. November strength does not appear to have continued, and in fact Christmas retail sales look to have been very weak.”

“The Q4 2019 CPI report due at the end of January will, as always, provide key information for the RBA ahead of its February meeting; but only a major surprise would upset the RBA’s outlook. We expect headline inflation for the quarter to jump to 0.7% q/q and 1.9% y/y. Trimmed mean inflation is expected to be more restrained at 0.4%and 1.6% in quarterly and annual terms, respectively.”