Sentiment is a big part of what drives the economy.

Key points: With the June rate cut left consumers worrying about the economy, the RBA is hoping the July cut will be received better

With the June rate cut left consumers worrying about the economy, the RBA is hoping the July cut will be received better Business felt more confident after the first cut and Federal election, despite conditions falling

Business felt more confident after the first cut and Federal election, despite conditions falling Falling job vacancies and ads and rising unemployment are becoming a concern

Positive sentiment and a strong economy is mutually reassuring and beneficial, what biologists would call a symbiotic relationship.

Pessimism and a slowing economy is a far nastier thing; gnawing away at each other, a parasitic pact of mutual destruction.

So where does the Australian economy stand after a couple of rate cuts have been delivered and the uncertainty of a Federal election is out of the way?

We should get a better understanding of things this week with the latest readings from both consumers and business.

The Westpac Melbourne Institute survey — to be released on Wednesday — will track consumer sentiment in the first week in July.

It will take into account the emotional impact of the RBA's back-to-back rate cuts and the Coalition's tax packages being waved through parliament.

Given consumers account for around 60 per cent of the economy, it is important they are confident and have a fistful of dollars they are happy to spend.

The May retail sales figures released last week were disappointing (again).

"Looking forward, the outlook for Australian retail is mixed," J.P. Morgan's retail analyst Shaun Cousins said. "The consumer is heavily indebted and there are rising cost of living pressures."

"House prices have fallen in some cities, notably Sydney, yet the bottoming of the housing market is arguably closer now, while household assets have increased faster than household debt and consumers are generally ahead of their mortgage repayments."

So it could be better, it could be worse out in consumer-land.

RBA hoping for a better reception

The June consumer survey was a fizzer as the idea 'things might not be so great if the RBA is cutting' sunk in.

Pessimism accelerated markedly in the aftermath of the cut, indicating a chunk of any savings from lower rates would be squirrelled away rather than showered on struggling retailers.

NAB's survey of business conditions and confidence taken in June won't take into account the second rate cut, but it will give the deeper insights into the post-election thoughts of business.

The May survey reported a bounce in confidence, while actual business conditions slumped to their lowest level in six years.

Retailers in particular were suffering, reporting life for them was as tough as it was in the GFC.

Jobs still the worry

The economic news flow of late has been marginally more positive.

The fall in dwelling prices seems to have stabilised — particularly in the bigger markets of Sydney and Melbourne — the US-China trade war appears to have entered a period of detente and the stock market has ground higher in line with renewed global love affair with risk.

While the surveys' headline numbers will gain most of the attention, responses relating to future employment — both employers' intentions and employees' anxieties — will, perhaps, be the most important.

Forward looking jobs indicators, job ads and vacancies, have been weakening.

The ANZ job ads series fell sharply in May and is 15 per cent down on this time last year. The June survey will be released on Monday.

Last week's ABS release of job vacancies was equally worrying. The May decline was the first fall in three years and was totally driven by conditions in the private sector (public sector vacancies showed a solid increase).

The falls in job vacancies were pretty broad, with the construction (-19 per cent) and accommodation and food (-16 per cent) sectors facing the biggest downturn in opportunities.

"Although vacancies had held up against falling ANZ job ads for some time, this decline in vacancies, along with other leading labour market indicators, suggests an imminent slowdown in employment growth," ANZ economist Catherine Birch noted.

"The recent rise in the unemployment rate has come despite an acceleration in employment growth, so weaker jobs growth is a concern."

US jobs data puts a brake on Wall St

The latest US jobs data appeared to be a mixed bag.

The good news was the creation of 224,000 new jobs last month was well ahead of expectations.

The bad news was the unemployment rate crept up a notch to 3.7 per cent, wage growth was weak and the already soft April and May jobs figures were revised down further.

Wall Street went with the good news and promptly started selling, reasoning that it reduced the likelihood of the Federal Reserve cutting rates at its next meeting later this month.

Some more dire manufacturing data from Germany didn't help sentiment either.

Markets on Friday's close: ASX SPI 200 futures -0.2pc at 6,678, ASX 200 (Friday's close) +0.5pc at 6,751

ASX SPI 200 futures -0.2pc at 6,678, ASX 200 (Friday's close) +0.5pc at 6,751 AUD: 69.8 US cents, 61.7 euro cents, 55.7 British pence, 75.7 Japanese yen, $NZ1.05

AUD: 69.8 US cents, 61.7 euro cents, 55.7 British pence, 75.7 Japanese yen, $NZ1.05 US: Dow Jones -0.2pc at 26,922 S&P500 -0.2pc at 2,990 NASDAQ -0.1pc at 8,162

US: Dow Jones -0.2pc at 26,922 S&P500 -0.2pc at 2,990 NASDAQ -0.1pc at 8,162 Europe: FTSE -0.7pc at 7,553 DAX -0.5pc at 12,569 EuroStoxx50 -0.5pc at 3,528

Europe: FTSE -0.7pc at 7,553 DAX -0.5pc at 12,569 EuroStoxx50 -0.5pc at 3,528 Commodities: Brent oil +1.5pcat $US64.23/barrel, Gold -1.1pc at $US1,400/ounce, Iron ore $US123.16/tonne

Nonetheless, global equity markets continued their rollicking run over the week.

The US, China, Japan and Australia gained around 2 per cent. Even Europe picked up a handy 1.6 per cent despite its biggest economy appearing to run of puff.

The ASX200 is now just 100 points, or 1.5 per cent, off a record high. Futures markets have priced that gap to narrow on Monday.

In terms of sentiment, Germany appears to be 'long pessimism' and 'short optimism'. It is something to keep an eye on.

"Devastating new orders data just undermined any hopes for an industrial rebound. We are starting to lose our optimism," ING Germany chief economist Carsten Brzeski, said.

"Combined with the weakest June performance of the labour market since 2002 and disappointing retail sales, today's new orders wrap up a week to forget for the German economy. The fear factor is back."

Oil prices rose on simmering tensions in the Middle East. The British seizure of an Iranian super-tanker off Gibraltar drew inevitable threats of retaliation from Iran.

OPEC and Russia's decision to extend production cuts also pumped up the oil price.

Gold went the other way, sinking along with the hopes of an imminent rate cut from the Fed.

Australia

Date Event Comment Monday 8/7/2019 Job ads Jun: ANZ series. Forward looking employment indicators, like job vacancies, are softening Tuesday 9/7/2019 Business survey Jun: NAB survey. Key insights into business conditions and confidence, will include the impact of the June rate cut Perseus Mining FY result FY profit from the West Arica focussed gold miner Wednesday 10/7/2019 Consumer confidence Jul: Westpac/MI survey. Will gauge households' reaction to rate cuts Thursday 11/7/2019 Housing and business lending May: Pre-rate cuts. Likely to be another flat outcome for home loans RBA speech Deputy governor Guy Debelle discusses the US economy and global markets Whitehaven coal update Quarterly production and sales report from the big thermal and met coal miner

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