Economy focus of week's activities

By ELLEN READ markets writer

With the company reporting season now over, equities will be out of the limelight this week and economic releases will take centre stage.

As current account and gross domestic product figures are due (on Thursday and Friday respectively), the economy will provide the week's focus.

Salomon Smith Barney economist Annette Beacher is forecasting the current account deficit to widen to 2.6 per cent of GDP from the previous quarter's 2.2 per cent.

"If the current account deficit is around 2.5 per cent of GDP, it is likely to be ignored," she said.

"[The currency] may soften on the announcement of a deteriorating deficit, but equities and fixed income rarely react to current account data."

On the GDP figures, Beacher is at the high end of the forecasts, picking 1.5 per cent growth for the quarter.

"While we again expect to see solid domestic demand, the trade sector is also expected to add to growth.

"Our prediction of 1.5 per cent lowers the year-on-year growth rate from 4.0 per cent to 3.7 per cent," she said.

"If GDP comes out as we expect, it still has no implications for cash rates.

"Recall we now expect the OCR [official cash rate] to remain on hold. The emphasis remains on weak overseas conditions and lower commodity prices, hence the strong first half outcome is unlikely to be matched in the second half of the year."

On Thursday, an equity item manages to sneak on to the radar screen.

Internet service provider and toll call operator Compass Communications holds its annual general meeting.

Topics of conversation probably will include returning capital to shareholders following the decision by the new capital market-listed company not to go ahead with its key transaction.

Compass said the process would have been too costly.

Optimism is likely to be expressed at regulatory change on the way in the telecommunications sector, which may help the company's toll-call business further down the track.