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Economies of note : 10th August

Written by Sam Coxhead on August 10th, 2012.      0 comments

The Australian Economy:
It has been an interesting week for the Australian economy. The RBA monetary policy was as expected for the most part. The unchanged cash rate was accompanied by a expectedly measured, and possibly more neutral statement than some of the speculative community were looking for. The result was a pickup in demand for the AUD, following the statement that was very similar to previous rhetoric.  Yesterday’s employment numbers were mildly better than expected and the unemployment rate remains at an impressive 5.2%. Today saw the release of the quarterly RBA Monetary Policy Statement. Again, it offered little in the way of surprise insight, but confirmed the thinking from the RBA. The current risk to economic growth from an international perspective still emanate from Europe. Chinese growth has stablised at more sustainable levels around 7-8% and this is viewed as positive. The RBA remained poised to react when need to foster growth while maintain a low inflation rate. Also of note were the as expected Chinese inflation numbers for July.
The US Economy:
It has been a relatively uneventful week in the US, with little in the way of top tier economic data. Whilst Fed Chairman Bernanke has spoken a couple of times, no reference to monetary policy has been made. Interestingly the quarterly “unit labour costs” increased 1.7% vs an expectation of a +.5% rise. This fore shadows increasing labour market activity and will be a welcome indicator to the FED. Last night’s trade balance numbers revealed a wider deficit than expected, mainly due to falling exports. This is indicative of the issues that the UK face, with Europe being such a closely aligned economy. Next week sees a more busy economic calendar. Retail sales numbers in Tuesday start the focus. These are followed by the latest inflation numbers Wednesday, and Manufacturing and consumer sentiment numbers on Friday.
The UK Economy:
The focus this week in the UK has been the BOE inflation report. Points of note from this report were the lowering of economic growth forecasts for 2012 and 2013. With lower growth, the lowering of inflation expectations was of little surprise. This opens the way for further stimulatory monetary policy in the coming year. Interestingly, BOE Governor King all but discounted any easing to the cash rate, a signal that further quantitative easing is the most likely tool. As political pressure builds on the Government to end their period of austerity, it was notable that the BOE took time to  support the coalitions ongoing austerity drive. Interestingly the GBP has recovered some of its recently lost ground against a number of its trading partners, this has been supported by the bounce back in demand for the EURO, as Europe’s problems remain the major hamstring restricting the recovery of the UK’s economic growth. Next week we get to see the latest UK inflation, employment and retail sales numbers. These come along side the release of the minutes from the last BOE monetary policy meeting.
The New Zealand Economy:
This week has seen the sole focus come from the rather disappointing 2nd quarter employment numbers released yesterday. The unemployment rate increased from 6.7% to 6.8%, and came as a surprise against the expectation of a fall to 6.5%. Interestingly, the detail reveals that Christchurch was the primary drag on the numbers, with other regions seeing flat employment growth. The Christchurch rebuild is dragging out and the boost to the economy when it finally starts will be very much appreciated. The New Zealand dollar traded heavy before and after the release of the employment numbers, and this weakness was seen on a number of different pairings. Next week sees the domestic focus fall upon the volatile retail sales sector, with the data being released on Tuesday.
The Canadian Economy:
It has been a relatively interesting week so far for the Canadian economy, and we still have the latest employment numbers to digest later on today. The numbers of building permits issued fell by less than expected and the monthly manufacturing numbers displayed a material bounce from their previous number. Trade balance numbers overnight reveal a small deficit that was very much in line with expectations. Next week sees the release of the latest inflations numbers on Friday, so for the bulk of the week the lead will come from the wider market appetite for risk.
The Japanese Economy:

The Japanese current account surplus was released on Wednesday and was higher than expected. The much anticipated BOJ monetary policy statement saw monetary policy once again left unchanged. Next week sees the preliminary GDP numbers released on Monday, and these along with the minutes from today’s monetary policy meeting will provide the economic data highlights for the week.
The European Economy:
This week has seen little in the way of top tier economic data released in Europe. Interestingly German industrial production numbers were again weak, illustrating that even the power house is not immune to the slow economy. The real focus continues to be the yield on peripheral member bonds (essentially their cost of borrowing). Whilst the markets continue to see periods of volatility, the levels are materially lower than a couple of weeks ago and shows the building confidence in the ECB efforts to stablise the Euro-zone. Next week will see the latest quarterly GDP and inflation numbers released for Europe and this will provide the focus, along with the ongoing efforts in the government debt markets.