Daily Commentary BY THE CURVE TEAM –

Data Rich Week to Provide Insight to the Outlook

15th of June, 2020

Data out this week should provide some insight into the economic recovery as restrictions continue to ease around the country.

The shock to the economy that was the Covid-19 lockdown is one of the largest the nation has ever seen and will have long lasting effects. Any insight into the speed at which the nation is recovering will be critical to the medium-term outlook. Local data out this week will be headlined by the May Labour Force release and minutes of the RBA June board meeting.

Data from last month on the effect of the lockdown on jobs in April showed a significantly smaller than expected impact on the official unemployment figure, which only rose to 6.2%. This was due to a significant reduction in the number of people in the work force as a result of those out of work simply choosing not to look for new work with businesses closed. The crucial factor in this month’s release will be if those out of work begun looking for new roles as things began reopening in middle to late May. Should that have occurred then it is likely we will see a reversal of some of the changes in the participation rate, which should see the headline unemployment rate rise. Current market forecasts are for the particiaption rate to rise to 63.7% and unemployment to rise to 7%. Given the variance in last month’s forecasts to the actual results it wouldn’t be too surprising to see larger than normal forecast errors in Thursday’s May release.

We are also set to hear from the RBA tomorrow with the release of the June Meeting Board minutes. Given the stability of the Board’s policy decisions since the emergency March meeting, we will likely see another confirmation of their stance. Given the lack of change in policy setting, the minutes will be more important as a source of economic context and the Board’s view of the economy as it begun reopening.

Offshore this week, we will see meetings by the Bank of Japan and Bank of England. US Fed chairman Powell will also testify before a senate committee, which given equity market volatility is likely to be market moving one way or another.

Matthew Dunshea

Client Relationship Manager