1 00:00:08,070 --> 00:00:10,200 Sean Aylmer: Welcome to Fear and Greed, The Week Ahead. I'm Sean Aylmer, 2 00:00:10,679 --> 00:00:14,070 Sean Aylmer: and for the first time in 2024, I'm joined by 3 00:00:14,070 --> 00:00:18,450 Sean Aylmer: economist Stephen Koukoulas. You'll find him at thekouk. com T- H- E- K- O- U- K. 4 00:00:18,690 --> 00:00:23,310 Sean Aylmer: com, T-H-E-K-O-U k.com, and on X using the handle TheKouk. Stephen, welcome 5 00:00:23,310 --> 00:00:24,540 Sean Aylmer: to 2024. 6 00:00:25,440 --> 00:00:27,900 Stephen Koukoulas: Hooray. Happy New year, Sean. And to all the listeners 7 00:00:27,900 --> 00:00:29,340 Stephen Koukoulas: out there, what a year it's going to be for 8 00:00:29,340 --> 00:00:29,700 Stephen Koukoulas: us all. 9 00:00:29,940 --> 00:00:33,299 Sean Aylmer: It'll be a great year. We started off last week 10 00:00:33,299 --> 00:00:36,209 Sean Aylmer: with some pretty interesting economic news that we had consumer 11 00:00:36,390 --> 00:00:38,970 Sean Aylmer: sentiment which was week. We had labor force figures and 12 00:00:38,970 --> 00:00:41,280 Sean Aylmer: we also had, well, maybe a little bit of a 13 00:00:41,280 --> 00:00:43,470 Sean Aylmer: hawkish US federal governor. 14 00:00:44,820 --> 00:00:48,899 Stephen Koukoulas: It was a week with there being something for everybody. 15 00:00:49,590 --> 00:00:52,979 Stephen Koukoulas: Yeah, consumer sentiment. We know we consumers are gloomy. The 16 00:00:52,979 --> 00:00:56,130 Stephen Koukoulas: interest rate increases are impacting on our cash flow. There's 17 00:00:56,130 --> 00:00:58,890 Stephen Koukoulas: still a cost of living issue out there and well, 18 00:00:58,980 --> 00:01:02,820 Stephen Koukoulas: interlinked, perfectly dovetailing to the labor force numbers, the weakness in the labor market could 19 00:01:03,750 --> 00:01:05,639 Stephen Koukoulas: well be having an impact on how people are feeling. 20 00:01:05,700 --> 00:01:07,860 Stephen Koukoulas: If you're losing your job or at threat of losing 21 00:01:07,860 --> 00:01:10,410 Stephen Koukoulas: your job, your optimism is not going to be that 22 00:01:10,410 --> 00:01:14,250 Stephen Koukoulas: great. So the labor force numbers saw a big fall 23 00:01:14,250 --> 00:01:16,500 Stephen Koukoulas: in employment. Now it must be noted that it's in the 24 00:01:16,500 --> 00:01:19,650 Stephen Koukoulas: context of the last couple of months being very strong. 25 00:01:19,650 --> 00:01:23,279 Stephen Koukoulas: So the ABS acknowledged, which is good that they did 26 00:01:23,280 --> 00:01:25,469 Stephen Koukoulas: it, that there's a bit of a problem of seasonally 27 00:01:25,469 --> 00:01:30,690 Stephen Koukoulas: adjusting numbers between October, November, December. The Black Friday sales 28 00:01:30,690 --> 00:01:33,240 Stephen Koukoulas: we know have impacted retail sales, but they've also appear 29 00:01:33,240 --> 00:01:37,620 Stephen Koukoulas: to be impacting employment. But that aside, if we look 30 00:01:37,620 --> 00:01:39,809 Stephen Koukoulas: at the trend and cut through that volatility month to 31 00:01:39,809 --> 00:01:43,649 Stephen Koukoulas: month, you're still seeing employment slowing. The unemployment rate while 32 00:01:43,650 --> 00:01:45,750 Stephen Koukoulas: it stayed at 3. 9, it's still up half a 33 00:01:45,750 --> 00:01:47,790 Stephen Koukoulas: percentage point on where we were a year ago. So 34 00:01:48,059 --> 00:01:51,450 Stephen Koukoulas: the labor market's weakening, the economy's slowing down, and that's 35 00:01:51,450 --> 00:01:54,780 Stephen Koukoulas: just been confirmed in the early part of 2024. 36 00:01:55,410 --> 00:01:57,960 Sean Aylmer: Okay, so as we look at the week ahead, plenty 37 00:01:57,960 --> 00:02:01,230 Sean Aylmer: going on overseas, but before we get there, the National 38 00:02:01,230 --> 00:02:04,260 Sean Aylmer: Australia Business Survey. Tell us what you think will happen, 39 00:02:04,260 --> 00:02:06,450 Sean Aylmer: but firstly, tell us why you think it's important. 40 00:02:06,870 --> 00:02:10,650 Stephen Koukoulas: It's my favorite survey because it's contemporary. This is going 41 00:02:10,650 --> 00:02:14,550 Stephen Koukoulas: to have business sentiment being reflected right up until the 42 00:02:14,550 --> 00:02:16,440 Stephen Koukoulas: last couple of weeks. I think the survey was conducted 43 00:02:16,440 --> 00:02:19,950 Stephen Koukoulas: in the first 10, 12 days of January. So it's really 44 00:02:19,950 --> 00:02:24,989 Stephen Koukoulas: what businesses were feeling in that Christmas, New Year period. 45 00:02:25,080 --> 00:02:29,880 Stephen Koukoulas: So it's brand new data. And for example, the most recent GDP numbers are relying on for the September 46 00:02:29,880 --> 00:02:33,570 Stephen Koukoulas: quarter. My goodness, that's a long time ago. So they're up- to- 47 00:02:33,570 --> 00:02:35,699 Stephen Koukoulas: date, but also the questions they ask, this is Alan 48 00:02:35,700 --> 00:02:38,160 Stephen Koukoulas: Oster, the NAB Chief Economist, who I've got a huge 49 00:02:38,160 --> 00:02:40,619 Stephen Koukoulas: amount of time for, he's framed the questions from the 50 00:02:40,619 --> 00:02:44,940 Stephen Koukoulas: perspective of things that matter. So what's happening to you 51 00:02:44,940 --> 00:02:48,570 Stephen Koukoulas: as a business person? Your purchase costs, a great indicator 52 00:02:48,570 --> 00:02:51,209 Stephen Koukoulas: of inflation. What are your hiring intentions? So what are 53 00:02:51,210 --> 00:02:53,699 Stephen Koukoulas: you planning to do in terms of hiring? A great 54 00:02:53,700 --> 00:02:57,659 Stephen Koukoulas: leading indicator for employment. And just the big picture use, 55 00:02:57,690 --> 00:03:00,720 Stephen Koukoulas: what's your consumer sentiment like? What's your optimism like? And 56 00:03:00,720 --> 00:03:03,180 Stephen Koukoulas: if people are feeling gloomy in their business, it's a 57 00:03:03,180 --> 00:03:05,520 Stephen Koukoulas: great leading indicator where the economy's going. So I'll be 58 00:03:05,520 --> 00:03:08,160 Stephen Koukoulas: watching that very closely. Just as a bit of background, 59 00:03:08,400 --> 00:03:12,150 Stephen Koukoulas: it had been resilient up until about September, October last 60 00:03:12,150 --> 00:03:15,450 Stephen Koukoulas: year. Just in the last couple of months it's started to track 61 00:03:15,508 --> 00:03:18,449 Stephen Koukoulas: lower in line with the weakening in the economy. Be 62 00:03:18,449 --> 00:03:20,669 Stephen Koukoulas: interested to see if there's any more deterioration coming through in 63 00:03:20,669 --> 00:03:23,130 Stephen Koukoulas: the next survey, which comes out this week. 64 00:03:24,000 --> 00:03:27,149 Sean Aylmer: Okay. We also have a bunch of global central banks 65 00:03:27,540 --> 00:03:29,430 Sean Aylmer: meeting about interest rates this week. 66 00:03:30,090 --> 00:03:34,410 Stephen Koukoulas: That's the big issue. So this will dominate market sentiment, 67 00:03:34,410 --> 00:03:37,470 Stephen Koukoulas: market pricing ideas. So because we're at this, what do 68 00:03:37,470 --> 00:03:40,410 Stephen Koukoulas: we call it, this inflection point from where we've had 69 00:03:40,410 --> 00:03:44,819 Stephen Koukoulas: the aggressive rate hikes through 2022 and 2023 from most central banks, 70 00:03:45,179 --> 00:03:48,869 Stephen Koukoulas: and as we chatted late last year, markets are pricing 71 00:03:48,870 --> 00:03:51,869 Stephen Koukoulas: in interest rate cuts in 2024. So here's a really 72 00:03:51,870 --> 00:03:55,200 Stephen Koukoulas: good stock take from some of the big important central 73 00:03:55,200 --> 00:03:58,529 Stephen Koukoulas: banks. China, it's a little bit different because their economy's 74 00:03:58,530 --> 00:04:00,780 Stephen Koukoulas: been very weak and they actually have deflation. Prices are 75 00:04:00,780 --> 00:04:04,380 Stephen Koukoulas: falling in China, and we had numbers last week confirming 76 00:04:04,380 --> 00:04:07,889 Stephen Koukoulas: their population's also falling. So China is likely just to 77 00:04:07,889 --> 00:04:11,879 Stephen Koukoulas: trim its interest rates as it deals with the deflation 78 00:04:11,879 --> 00:04:14,250 Stephen Koukoulas: and what do we call it, the really sluggish growth 79 00:04:14,250 --> 00:04:16,800 Stephen Koukoulas: that's going on. But more importantly for an economy like 80 00:04:16,800 --> 00:04:21,479 Stephen Koukoulas: Australia, European Central Bank, the Bank of Canada, the Bank 81 00:04:21,480 --> 00:04:25,139 Stephen Koukoulas: of Japan, are all meeting. And while there's probably not 82 00:04:25,139 --> 00:04:26,789 Stephen Koukoulas: going to be a change in interest rates, in any 83 00:04:26,790 --> 00:04:29,159 Stephen Koukoulas: of them, it's what they say rather than what they 84 00:04:29,160 --> 00:04:33,270 Stephen Koukoulas: do that'll be most interesting. Are they going to be starting to flag the idea 85 00:04:33,690 --> 00:04:36,630 Stephen Koukoulas: that these big central banks around the world are genuinely, 86 00:04:37,290 --> 00:04:39,180 Stephen Koukoulas: genuinely thinking about interest rate cuts? 87 00:04:39,630 --> 00:04:41,670 Sean Aylmer: And we'll find out more about that in a fortnight's 88 00:04:41,670 --> 00:04:44,460 Sean Aylmer: time. So it's a couple of weeks away, the CPI figures for Australia? 89 00:04:45,029 --> 00:04:48,450 Stephen Koukoulas: Yeah, they're next week, that we get the December month 90 00:04:48,480 --> 00:04:53,820 Stephen Koukoulas: and December quarter CPI, absolutely critical. The two elements that 91 00:04:53,820 --> 00:04:56,549 Stephen Koukoulas: I'm really focusing on for our own reserve back, and 92 00:04:56,550 --> 00:04:58,859 Stephen Koukoulas: they've effectively said this, so we know this from decades and decades 93 00:04:59,428 --> 00:05:02,009 Stephen Koukoulas: of looking at the RBA, it's inflation in the labor 94 00:05:02,009 --> 00:05:04,770 Stephen Koukoulas: market that are the key drivers. Yeah, house prices have 95 00:05:04,770 --> 00:05:08,279 Stephen Koukoulas: bitten, retail sales have bitten, all these other things feed 96 00:05:08,279 --> 00:05:11,100 Stephen Koukoulas: into the mix, but they're not going to adjust interest 97 00:05:11,100 --> 00:05:14,760 Stephen Koukoulas: rates if the labor market is strong and inflation's too 98 00:05:14,760 --> 00:05:18,119 Stephen Koukoulas: high, which is where we have the weakness in the 99 00:05:18,120 --> 00:05:20,758 Stephen Koukoulas: labor market. That's half ticking a box that the next 100 00:05:20,759 --> 00:05:23,008 Stephen Koukoulas: moving rates is down. We need another couple of months 101 00:05:23,010 --> 00:05:26,190 Stephen Koukoulas: to confirm that weakness. But the inflation numbers, we've had 102 00:05:26,190 --> 00:05:30,089 Stephen Koukoulas: that fall on inflation through the course of 2023. Another 103 00:05:30,089 --> 00:05:32,760 Stephen Koukoulas: step lower is likely, but we can talk about that 104 00:05:32,760 --> 00:05:33,359 Stephen Koukoulas: next week too. 105 00:05:33,809 --> 00:05:35,970 Sean Aylmer: We can. Stephen enjoy the week. 106 00:05:36,450 --> 00:05:37,409 Stephen Koukoulas: Will do, Sean. Thank you mate. 107 00:05:37,678 --> 00:05:40,169 Sean Aylmer: That was economist, Stephen Koukoulas, better known as The Kouk. 108 00:05:40,170 --> 00:05:42,479 Sean Aylmer: You can find him at Thekouk. com and follow him 109 00:05:42,480 --> 00:05:45,120 Sean Aylmer: on X, using the handle TheKouk. I'm Sean Aylmer and this 110 00:05:45,180 --> 00:05:47,490 Sean Aylmer: is Fear and Greed, The Week Ahead.