Even though reporting season winds down this week, there is plenty of action to keep an eye on for ASX investors.
These are the three critical developments to watch, according to eToro market analyst Farhan Badami:
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1. Multiple economic statistics
There are a lot of numbers coming out in the coming days, said Badami.
"This week features a significant run of economic health indicators, including the monthly consumer price index (CPI) and commodity prices reports, as well as monthly retail sales and home loans."
The 12 recent interest rate rises are really starting to bite Australian consumers and businesses, and these statistics will give an idea as to what the Reserve Bank of Australia could do next week.
"As it stands, the broad market is tipping another pause from the central bank but if CPI indicators in particular come in higher than expected – last month's number was 5.4% – this could easily change outlooks."
2. Will construction woes continue?
On Wednesday, the latest Construction Work Done report will be released.
"Released quarterly, it's a vital indicator of the construction sector's overall health, which shapes our understanding of the broader economy, population and employment," said Badami.
"Generally, it also helps analysts to forecast the GDP data released in the following days to weeks."
Economists are pessimistic about what they will see from the report.
"In short, all indicators suggest that Wednesday;s release of data may not be the bastion of hope economists are seeking," Badami said.
"Australian construction companies are collapsing at a record rate presently, dragged down by exceptionally high demand, significant labour shortages and the ripples of the pandemic continuing to affect materials supply."
The last 18 months have been "historically bad" for the industry, he added.
"The last few months, in particular, have been punctuated by a series of notable insolvencies.
"Adding to the pain, on Wednesday last week, the Housing Industry Association (HIA) reported a 2.4% July decline in new home sales, bundled with a forecast for a weak 2024."
3. Michele Bullock's last speech before taking the hot seat
On Tuesday night, the incoming Reserve Bank governor will speak at the Australian National University in her final comments as deputy.
"Economists will be listening carefully as she addresses the environmental implications for the economy, including the transition to net zero," Badami said.
"While there aren't any surprises anticipated, traders will be paying close attention to any subtle clues about future monetary policy from the impending RBA head."
Bullock will begin her seven-year term as governor on 18 September.
Badami reckons it will be a tough job, given the circumstances.
"Inflation still persists despite a year-long hawkish tilt by her predecessor, Philip Lowe.
"A difficult hand to manage at the best of times, Michele will also be expected to balance her advocacy for slowing wage growth with turmoil within the RBA, where a 10.5% pay rise was rejected as inadequate by staff and unions earlier this week."
The speech at ANU is open to the public and includes a Q&A session, so could potentially see some probing questions about where interest rates might head.
"Whether these questions result in satisfactory insights, given Lowe will still be in charge when the RBA makes their September rate call, is another matter."
