Economic wrap: eyes on Australian employment figures - Westpac

Analysts at Westpac offered an economic wrap.

Key Quotes:

"We had a strong trifecta of US data: business surveys holding their ground, a solid broad-based gain in retailing and a stronger core CPI. The Empire survey rose from 6.5 to +18.7 (consensus +7.0), new orders and number of employees firming. Core CPI gained 0.3%, to 3-decimal places was 0.308% (ie a real 0.3%), vs 0.2% expected. Note that the core CPI gain was not especially broad-based, though, owners’ equivalent rent a touch softer at 0.2% (usually closer to 0.3%) while medicare was trend-like at 0.2%. The upside surprise in the core was mostly in apparel. In the retail sales data, the core control group was a solid 0.4% and the prior month was revised up +0.2ppts to 0.4%. This implies upward revisions to Q4 actual GDP and probably a few upward revisions to Q1 GDP forecasts. 12 of 13 spending categories in the headline retails sales rose. Markets will firm up 15 March FOMC hike odds on this data (which interestingly is on the same day as the Dutch elections).

Economic Event Risks Today

NZ: Consumer confidence (ANZ) and Finance Minister Joyce’sspeech are unlikely to ruffle markets but worth watching nevertheless.

Australia: Employment figures for Jan are released. The 13.5k Dec increase in employment came with a 0.1ppt gain in the unemployment rate to 5.8% due to a 0.06ppt lift in the participation rate. This lift in participation was in response to 28.2k gain in the labour force. Annual employment growth moved from 0.7%yr to 0.8%yr, but our Jobs Index is suggesting it should be about 2%yr. Westpac's forecast for a 20k gain in employment in Jan and a flat participation rate should see the unemployment rate drop to 5.7%. However, due to a steady decline in participation, we are cautious interpreting the unemployment rate.

RBA Assistant Governor Ellis is speaking at the Housing Researchers Conference.

US: Housing starts and building permits. Housing starts posted a strong rebound in Dec of 11.3% offsetting most of November’s fall, though single-family starts fell 4%. On the back of strong housing price growth, starts have trended higher over the year, up 5.7%yr. Building permits were down -0.2% on the month with annual growth at 0.7%yr, suggesting future starts growth will be softer. The market is expecting 0.3% for housing starts and 0.2% for building permits in Jan."

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