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Economies of Note - 13th November

Written by Edited by Ian Dobbs on November 13th, 2015.      0 comments

The data week in Australia was dominated by the release yesterday of October employment data. The number was very strong beating the 15k consensus as 58.6k jobs were added for the month, of which 40k of the positions were full-time. The unemployment rate was seen dropping to 5.9% from 6.2% (6.2% exp.). 315k jobs have now been created over the last 12 months, the biggest annual job gain recorded in the past 7 ½ years. However, the ABS employment data has been volatile over recent months and has many exercising caution about taking the number at face value, expectations of further cash rate cuts naturally took a hit after the strong numbers. Earlier in the week saw Australian ANZ Job Ads for October rise just 0.4% (3.8% prior), whilst NAB business confidence was seen dipping in the month. Although home credit growth for September grew strongly at +2.0%, investment lending for homes was seen falling sharply (-8.5%). Chinese data releases saw exports fall 6.9% in October over the weekend. Deflationary pressure was seen intensifying in October as CPI inflation eased further to 1.3% y/y, the PPI at -5.9% y/y remained sharply negative reflecting weak domestic demand and falling global commodity prices. Chinese retail sales were seen accelerating to its fastest rate this year (11% y/y). Whilst Chinese Industrial Production rose 5.6% from a year earlier. Next week is quiet, with only the release of the RBA minutes on Tuesday being of any note.

New Zealand
Trade in the NZD this week has been dominated by offshore developments with only second tier data being released in NZ. It has been a subdued week after the local currency took a sharp downwards adjustment on Friday as investors chased USD’s after the strong U.S. October non-farm payrolls employment report. This saw the addition of 271k jobs (182k exp.) and the U.S. unemployment rate fall to its lowest since 2008 (5.0%). Locally the Financial Stability report released on Wednesday saw the RBNZ continue to express concern over the risks posed by dairy lending and a strong Auckland and surrounding regions property market. During the week ANZ consumer confidence for November was seen rising to six month highs at 122.7 (+6.8% m/m). The Food Price Index release for October fell 1.2% whilst the NZ Manufacturing Purchasing Managers Index for October fell to 53.5 from 55.4. Next week will be dominated by the release of NZ Q3 retail sales data on Monday and the latest GDT dairy auction on Wednesday morning.

United States
It has been a relatively quiet week out of the U.S. this week after the USD surged higher on Friday after the release of much better than expected labour market data. This saw expectations for a December Fed rate hike lift to 70% after the unemployment rate fell to its lowest level since 2008 (5.0%). Initial jobless claims released overnight disappointed somewhat after they were unchanged at 276k in the week of 7 November (270k exp.). JOLTS job openings rose to 5.526M in September, the second highest level on record, a result which backs up the strength seen in last week’s non-farm employment report. The USD has eased over the week given the void of critical data as the market now awaits the more key U.S. retail sales data tonight. Other pending data releases include University of Michigan confidence and producer price data (also tonight). Next week will see the release of October inflation data, building and housing start data, weekly initial/continuing jobless claims and various regional manufacturing surveys. Industrial production and capacity utilization data on Wednesday will also be of some interest.

United Kingdom
The U.K. data calendar has been dominated this week by Wednesday’s release of the U.K. Q3 labour market data. The data showed strong momentum in jobs growth which helped push the unemployment rate down to 5.3% (5.4% exp.), near seven year lows. The U.K. economy added 177k new jobs in the 3 months to September. The data has helped the GBP recover somewhat from last week’s poor showing which occurred after the release of much better than expected U.S. employment data on Friday. Weak U.K. industrial production data that fell 0.2% m/m in September also placed pressure on the pound into the end of the week. Next week will see key releases which include October U.K. inflation and producer price data on Tuesday, the inflation report hearings also on Tuesday, and October retail sales data on Thursday.

Market sentiment towards the Euro this week again centred on the discussion of ECB monetary policy and the weak euro area inflation dynamics. The diverging monetary policy paths of the U.S. Fed and ECB again saw the Euro come under pressure, especially early in the week as the market continued to absorb the implications of Friday’s strong U.S. labour report. Media reports at the start of the week suggested that the ECB are preparing for rate cuts at the December 3rd ECB meeting, currently the market expects at least a 10 bps cut in the deposit rate at the meeting. In a speech overnight ECB president Draghi expressed concern over the inflation dynamics and subdued price pressures present in the euro-zone. He added that the ECB is prepared to use all instruments available to it within its mandate to achieve its medium-term price stability objective. Data released during the week showed September French industrial production (IP) surprising to the upside. The Italian IP disappointed rising just 0.2% m/m, lower than the 0.5% expectations. The euro-area IP was weaker than expected falling 0.3% against the 0.1% decline expected. Focus will now turn to the Q3 European wide GDP data tonight. Next week will see the release of German/Euro area ZEW confidence data, low impact German producer price and euro-zone construction output data, and the release of euro area inflation figures.

Last week’s strong U.S. employment data which has heightened expectations of a December Fed interest rate lift-off has dominated sentiment towards the Yen this week. In Japan preliminary machinery tool orders for October fell 23.1% y/y. September Machinery orders beat the +3.3% expectations however rising 7.5% m/m. Current account data for September at 1.47 Tn JPY missed the 2.235 Tn JPY expectations. Of interest today will be the release of September industrial production data although the main focus will now turn to next Thursday’s key BOJ monetary policy meeting. Other data releases next week include Japanese trade data also on Thursday and the preliminary release of Japanese Q3 GDP data on Monday.

Oil price declines this week (WTI $41.65 last) which have contributed to a near 10% fall in prices this month alone, have seen the CAD continue to slide. This follow a sharp fall after Friday’s the release of the strong U.S. October non-farm payrolls employment report. Canadian employment data also released on Friday saw employment rise by 44k in October, beating the 10k market consensus- although part-time rolls (35.4k) dominated the data. Canadian housing starts data for October released this week printed near expectations at 198.1k y/y whilst new house prices rose just 0.1% m/m in October against the 0.2% rise expected. Next week will be dominated by the release of Canadian September retail sales data and October inflation data on Friday. Energy market developments will also be pivotal.