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Economies of note - 27th September

Written by Ian Dobbs on September 27th, 2013.      0 comments

1:00PM (NZT)
There has been no top tier economic news in Australia this week. Better than expected Chinese manufacturing numbers on Monday helped sentiment to start the week, but there is nothing of domestic relevance. Next week will see a return of focus for the Australian economy in the form of the RBA monetary policy announcement on Tuesday. Whilst no change to the current 2.50% cash rate, the accompanying statement will provide important further insight to the monetary policy environment. The previous statement was more neutral than expected and a continuation of this theme would likely provide an increase in latent demand for the Australian dollar. Retail sales data earlier on Tuesday will also be closely watched along with the latest building approvals and trade balance data on Wednesday.

New Zealand
This week has been a very quiet one on the data front for New Zealand. Wednesday saw the release of trade balance figures which were a little disappointing. Imports were up, exports were down, and as a result the overall balance came in below expectation. This saw the NZD trade down a little, but the impact was muted. We did get some more positive news from Fonterra who have upped their forecast milk price for the season from $7.80 to $8.30. The 50 cent jump takes the price per kilogram of milk solid to a record high. The payout for this season will now be $5bln greater than last season and that’s good news for the economy. Next week is another light one on the data front with only business confidence and building consents of any note.

United States
US data this week has been less than inspiring. The best of it was weekly jobless claims released last night which declined to 305k vs an expectation of 319k. But this data has been affected by reporting issues in California for the last few weeks, so it shouldn’t carry too much weight. Aside from that we have seen the consumer confidence index miss expectation, durable goods orders (ex aircraft) a touch weak, and August pending home sales showed a third monthly decline. None of this data is supportive of the Fed starting to taper in October and that wasn’t lost on Fed member Jeffrey Lacker. He was quoted last night as saying market have a right to be disappointed with Fed communications, and it would be difficult for the Fed to Taper in October without losing face. We are fast approaching some deadlines in regard to the US debt ceiling. If an agreement isn’t reached by midnight on Monday 30th Sep, the government will likely begin a limited shutdown. Then by no later than Thursday Oct 17th, they will have completely exhausted borrowing capacity and could start defaulting on debt payments. Unless politicians decide to work together, the USD could be in for a wild ride over the coming days and weeks. The highlights of next week’s calendar will be data on the manufacturing and nonmanufacturing sectors, a speech by Ben Bernanke, and the all-important employment report.

It has been another week of patchy data from Europe signalling that the road to recovery will be long, slow and very gradual for the region. Early in the week we got improved numbers on the service sector, but disappointing data from the manufacturing sector. German business climate came in below expectation and only marginally better than last month. We also had ECB president Draghi quoted as saying the central bank will undertake further LTRO’s (long term refinancing operations) if needed. On a positive note, the Spanish government have revised up slightly their forecasted growth for 2014 to 0.7% from 0.5%. Upward revisions make a nice change from years of downward ones for some of the peripheral nations. Next week we have retail sales, unemployment, and the ECB rate decision to focus on.

United Kingdom
It has been another week of generally solid data for the United Kingdom with mortgage approvals came in at their highest level since May 2009. We also got CBI realised sales data (a survey of activity by retailers and wholesalers) which came in well above expectation. It actually printed at the second highest level in two and a half years. There have been a lot of BOE speakers out this week and most have been singing the same positive tune. Bank of England board member Miles was very upbeat saying news on the economy was overwhelmingly positive. He tempered things a bit by adding the improvement doesn’t mean the economy is back to normal, and it would be misguided to think a sharp increase in rates was needed. Last night the current account data came in a touch weaker than expectation as did the final reading of GDP.  The focus next week will be on surveys from the manufacturing, construction, and service sectors.

It has been a very quiet week on the Japanese data front that started with another bank holiday on Monday. The most interesting release was an announcement that PM Abe will release details of economic stimulus measures at the same time as he releases his decision on the sales tax increase, which will be October 1st. This saw the Yen immediately under pressure when it hit the wires yesterday. There is plenty of data next week to digest with industrial production, retail sales, household spending, manufacturing and nonmanufacturing index’s, and the Bank of Japan monetary policy statement.

The only data out of Canada this week has been retail sales which has come in on the strong side. The headline number was bang on expectation at +0.6%, but the core number which excludes automotive sales was up 1.0% against an expectation of 0.6%. Next week there is GDP on Tuesday and Purchasing Managers Index on Friday to draw focus.