Calendar watch: July 15 for the second-quarter growth and other economic data from China. First-quarter growth was 11.9%; the best estimate so far for the June quarter is about 10.5%, with the pessimists at 10%, with some seeing growth of 11% or a bit more at the other end of the range. We will also get figures on retail sales, industrial production, housing loans, inflation and house prices, plus iron ore imports and steel output.
Another calendar watch: July 20, RBA governor Glenn Stevens speaks at the Anika Foundation in Sydney, a regular gig for him. August 17; Stevens’ next public appearance with a set-piece speech in Perth. It’s the the Shann Memorial Lecture. It will come two weeks after the August board meeting, which is now the key one on rates. Next Tuesday’s meeting won’t touch them. August 17 will also be after the minutes for the August 3 board meeting are released, so we will know a lot about the thinking of the bank after Stevens’ speech. His speech will also come after the August 6 release of the third Statement of Monetary Policy for the year from the RBA, which will contain the bank’s updated forecasts for growth and inflation. On August 27, Stevens is in Canberra for the House of Reps Standing Economics Standing Committee hearing.
More calendar watch: According to the Australian Bureau of Statistics calendar, the June quarter Consumer Price Index is out on July 28, which will form the basis for what happens at the August 3 RBA board meeting. The June quarter growth figures are out September 1, the September RBA board meeting is on September 7.
Drum Ireland out of Club Austerity? Ireland has emerged from recession with the economy growing in the March quarter for the first time after eight straight contracting quarters. The government said GDP rose a sharp 2.7% from the December quarter, thanks to a surge in exports, which rose 6.9% as exporters pushed more product offshore, especially to the US. The Irish Central Statistical Office said that based on the GNP measure of growth (which is based on excluding income flows from residents and non-residents, such as the profits of foreign companies), the economy fell by 0.5% in the quarter from December. Capital investment such as construction spending and purchases of plant and machinery by companies, slumped by almost 14%, retail sales were weak and unemployment remains a problem at 13.4% in June, from May’s rate of 13.2%, a 16-year high.
US housing still sliding: The 30% slide in pending home sales in May confirms that the US housing sector is cactus. US mortgage applications for new home purchases fell 3.3% last week, after a 1.2% fall the week before. Mortgage applications are falling; down about 15% for all of last month, after the 18% drop in May. So there’s just no new demand out there for housing. Refinancing remains strong as people refinance to cut their interest costs and generate more disposable income. Refinancings rose 14% in the last full week of June and are up 144% (yes, 144%) in the past year. That’s the only positive out of falling bond market and mortgage interest rates. Think of it as desperate cash-strapped home owners cashing in their equity by refinancing and getting lower repayments. But few people want to buy a new home and of those who do, nearly one in three buy a repossessed home at a knock-down price, keeping a lid on prices and forcing millions of home owners a little further underwater (negative equity).
Growth alert: Sweden lifted its main interest rate by 0.25% to 0.5% overnight, but lowered its projection for future rises because of growing concerns about Europe’s austerity drive and the damage it could do to growth. Sweden’s Riksbank became only the second western European central bank after neighbouring Norway’s to lift rates since the global financial crisis. They are on the edge of the eurozone and seem to be the counterweight to the profligate and mostly broke southern edge (Portugal, Spain, Greece and perhaps Italy).
And finally: a new worry for Europe: the new conservative government in Slovakia has taken power with the policy of not backing the €110 billion bailout of Greece, or the €440 billion EU back-up facility agreed to in May. It campaigned on a policy of no European bailouts. Its take in the back-up facility is a guarantee of €4.4 billion. This opposition from just one of the 16 members of the eurozone could be enough to convince worried investors that there are holes in the support package, which could be approved once 90% of all governments approve (14 governments).