Economic wrap: watching Aussie Trade ahead - Westpac

Analysts at Westpac offered an economic wrap.

Key Quotes:

"German CPI (harmonised) rose from 1.9% yoy to 2.2% in Feb, above expectations at 2.1%. While the passing of weak energy prices is an explanation, for now, ECB officials are taking not. Weidmann said inflation projections will need to be raised.

In the US personal income report for Jan, income was slightly stronger (0.4% vs 0.3%) and spending was slightly weaker (0.2% vs 0.3%) than expected. The core PCE deflator, favoured by the Fed as an inflation gauge, remained at 1.7% yoy. ISM manufacturing was solid (57.7 vs 56.2), which had earlier been flagged by the regional PMIs. Note that new orders rose a strong 4.7pts to 65.1 but the employment and prices sub-indices were weaker, prices at 68 from 69 while employment fell from 56.1 to 54.2. The Fed’s Beige Book of regional economic conditions reiterated the “modest to moderate” expansion remained on track.

Yesterday’s Fedspeak from Williams and Dudley was market moving. The latter, usually characterised as a dove, said the case for higher rates had become “a lot more compelling”.

Event Risk

Australia: Jan dwelling approvals is expected to see a further 1% decline, essentially reconfirming the downtrend over the second half of 2016. Dec posted a slight 1.2% decline with trend approvals down 13%yr. While the high-rise story is tracking our expectations, weaker than expected non high rise approvals are an area to watch. That said, the data is prone to wild swings in Jan – raw figures are marked up 25-30% in the month.

Australia's trade account is expected to post a surplus of $3.9bn In December. The surplus widened to $3.5bn from $2.0bn. Export earnings are forecast to rise by 1.2%, +$0.4bn, on higher prices (coal and rural goods) and volumes (iron ore and LNG), partially offset by a pull-back in gold. Imports are expected to be flat, with a slightly firmer dollar placing downward pressure on prices.

Eurozone: Jan unemployment is out. Dec printed 9.6%, marking a 0.8% drop over 2016 as the labour market maintains momentum.

US: Fedspeak includes Kaplan in Dallas, followed by Brainard at Harvard on the economic outlook and monetary policy with audience Q&A (10:00 am Sydney time)."