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Economies of note - 30th August

Written by Ian Dobbs on August 30th, 2013.      0 comments

2:00PM (NZT)
Australia
It has been a very quiet week for Australian data releases and the few figures that have hit the wires haven’t made great reading. Construction work completed came in well below expectation and was overall a very poor result. It is especially concerning as it’s a component of GDP. New home sales showed a decline of 4.7%, although this does come on the back of gains for the four previous months. RBA board member John Edwards was quoted in an article in the Wall Street Journal as saying the Australian dollar is still too high. He believes it needs to fall further to cushion the economy from the rapid cooling of the mining boom, and at current levels it remains a brake on economic growth. Next week is a much bigger week for Australia, with building approvals, retails sales, GDP, and the RBA policy meeting to digest.


New Zealand
The week started off with some very average trade balance numbers for the NZ economy although they didn’t have too much impact. The markets attention was focused on the developing situation in Syria with a potential strike on the cards, and the continued pressure in emerging markets. These two issues saw the NZD under pressure as risk aversion swept through the market. We did get good news from Fonterra. They have again revised higher their pay-out by 30 cents taking the total to $8.12. Although 30 cents doesn’t sound like much, it does equate to an increase of more than $400 million flowing into the NZ economy. Then yesterday we got business confidence data and although it fell nearly 5 points, it was over all still a very strong result. The previous reading was very high and the pullback could well be attributed to the time of year. People are just less optimistic in winter. Sentiment across all sectors is still well above average and that points to continued economic expansion. This morning we have also had building consent data that showed a drop of 0.8%, although most of the decline is due to dwindling demand for apartments. There is very little out next week domestically, however focus will continue to be on the pressures in emerging markets and the potential strike on Syria.


United States
This week has been a bit of a mixed bag on the data front for the US. The week started off with very poor figures on durable goods orders, but this was followed by better than expected consumer confidence numbers. Next we got very weak data on pending home sales, followed last night by second quarter GDP which was revised higher from 2.2% to 2.5%. Weekly jobless claim were also out last night and they have held at a low levels, which are consistent with solid employment gains. So a bit of something for everyone this week, but not enough to really alter anyone's near term expectations. The USD has had a choppy week, having been influenced not only by the data but also by safe haven flows due to the pressure on emerging markets and the impending strike on Syria. Overall the USD is heading into the weekend on the front foot, having made gains across the board last night. Next week is a big week for data with the highlights being surveys on the manufacturing and non-manufacturing sectors and the monthly employment.


Europe
The week started off well for Europe with German business sentiment showing good gains and printing above expectations. This helped to support the Euro early on. However as the week progressed the data took a turn for the worse. German consumer sentiment missed expectations as did Euro-zone private loans data. Then last night we got a soft reading on German inflation that came in flat and a surprise jump in unemployment. This data has weighed on the Euro which is now heading into the weekend on the back foot. The highlight of next week’s data will be the European Central Bank rate decision on Thursday. Before that we get readings on the manufacturing and service sectors, retail sales, and German factory orders.


United Kingdom
The focus for this week in the UK was a speech delivered by Governor Carney on Wednesday night. Overall he was somewhat optimistic saying the signs are that the UK recovery is broad based and set to continue. Although he had plenty of warnings for the market as well, saying the BOE would consider further stimulus should financial conditions tighten, or the recovery risks falling short. One interesting announcement he made had to do with the required liquid holdings of banks. For major banks that meet the 7% capital threshold, the BOE will reduce the level of required liquid holdings. This is significant as it will release up to GBP 90 billion and help increase normal credit flows. This morning we had consumer confidence data that showed a small improvement coming in just above expectation. There is plenty to focus on next week, with the release of indexes from the manufacturing, service, and construction sectors, as well as the BOE policy meeting.


Japan
It has been an interesting week for the Yen with a big rally on Tuesday and Wednesday as safe haven flows saw it outperform almost all other currencies. As Asian shares fell in line with pressure on emerging markets (most notably India and Indonesia) the Yen was the biggest beneficiary. Tensions over Syria and a potential strike on the country added to the safe haven flows and kept the Yen well supported. On Thursday we got retail sales data that was disappointing coming in below expectation and showing a decline on the month. In the last few hours we have seen inflation data that came in higher than expectation at 0.7%, household spending data disappointing at +0.1%, and the unemployment rate drop a touch to 3.8%. This data has had little impact on the Yen so far. The highlight for next week will be the Bank of Japan monetary policy statement on Thursday.


Canada
The highlight of the week for Canada will be the GDP data set for release tonight. The only other release of note this week was the current account data. That hit the wires last night and showed a widening of the current account deficit which was broadly in line with expectation. There was little impact on the currency. Next week should be much more interesting with trade balance, the Bank of Canada rate announcement, and employment data all set for release.
 

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