Economic wrap: a busy day ahead - Westpac

Analysts at Westpac offered an economic wrap.

Key Quotes:

"US durable goods orders rose 1.8% in Jan (vs 1.6% expected), although ex-transportation was slightly disappointing at -0./2% (vs +0.5% expected). Overall the report is modestly supportive of GDP forecasts. Dallas Fed manufacturing survey rose from 22.1 to 24.5 (vs 19.4 expected). Pending home sales fell 2.8% in Jan (vs +0.6% expected), possibly affected by insufficient supply. Following the recent housing data updates, the Atlanta Fed’s GDP model now predicts a 2.5% annualised rise in Q1 (vs 2,4% previously).

Event Risk

NZ: Jan’s trade balance is expected to be close to flat, dairy and meat exports buoyant. The ANZ business confidence survey usually grabs market attention, both the headline and its inflation related components.

Australia: current account deficit narrowed markedly to $11.4 bn from $15.9 bn in Q3 as commodity prices bounced sharply off their lows. For Q4, we expect it to shrink to $5.0bn. At 1.2% of GDP this will be the smallest deficit since March 1980 (then recession-related).

Q4 real net exports are estimated to add 0.1ppts to Q4 GDP growth. Export earnings rose by about 12% in Q4, while the import bill increased by around 1.5%. We estimate that the terms of trade increased by about 10%, on higher commodity prices whilst import prices were broadly flat.

We expect Q4 public demand increased modestly by 0.4%. In Q3, public demand contracted by 0.6%, a correction to a 2.8% jump in Q2 - the largest quarterly increase since March 2010 which was associated with the fiscal stimulus package.

January private sector credit is expected to come in at 0.5%. Credit to the private sector ended the 2016 year on a firmer note, with a gain of 0.7% in December. The result included a 1.1% jump in business credit, an outcome that is likely to be a one-off.

Eurozone: Feb CPI is out, the last few months seeing the headline rate increase to 1.8%yr on the back of energy gains. However, core inflation remains weak at 0.9%yr.

US: The highlight for markets today (arguably this week) will be President Trump’s address to a joint sitting of Congress at 9pm EST. Any details on fiscal plans and their timing will be closely scrutinised.

Datawise we have Q4 GDP, likely to be revised slightly higher in the second estimate. We will be watching the Case-Shiller 20-city measure to see whether higher mortgage rates have any effect on house prices in December. February consumer sentiment is also due."