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Economies of note : 14 oct 2016

Written by Sam Coxhead on October 14th, 2016.      0 comments

2:00 PM (NZT)
This week has been a quiet one in Australia which started with numbers on owner occupier lending which fell by a larger than expected 3% in August. Business confidence numbers released by NAB remained above average as the monthly survey pointed to business conditions that edged higher recording their 19th straight month of above average conditions. Business confidence remained steady with notable strength again being seen in the service sector and subdued conditions in retail. Westpac Consumer confidence rose for the third straight month, increasing 1.1% in October. Due this afternoon is the RBA Financial Stability review, although look for events in the US to once again set the tone of trade into the weekly close.
New Zealand
With little in the way of news on the domestic front, trade in the NZD has once again been dictated by the theme of a firm USD this week. Low tier data started with electronic card retail sales on Tuesday which rose by a stronger than expected 1.9% rise in September. The Manufacturing PMI Index posted its highest read since January, whilst food prices were seen posting their largest monthly fall in nearly three years on the back of falling fruit and vegetable and chicken pricing. Consumer confidence data from ANZ-Roy Morgan showed sentiment lifting again in October to its highest level since mid-2015. Comments from RBNZ Assistant Governor McDermott which indicated that further policy easing will be required has the market placing a very high likelihood of another cut to rates in November. Dominating news next week will be Tuesday’s Q3 inflation report whilst overnight Tuesday will see the next in the GDT dairy price auction series. Look for a US focus to again close the week out as we receive data from the US retail sector and a much awaited speech from Fed Chair Janet Yellen.

United States
The USD has continued to march higher in trade this week. The move reflects a continuation of the momentum which starting during last week’s reel of largely stronger than expected local data. This week so far has been dominated by Wednesday’s FOMC minutes which conformed to expectations by continuing to lend weight to the argument for a rate move in December. This is especially given the proximity of the next FOMC meeting to the US presidential election and lack of any signs of an overheating in the labour market. Data releases this week are mainly skewed towards tonight’s data (retail sales and Michigan consumer sentiment and Yellen speech), although so far we have had numbers on JOLTs job openings which fell sharply in August (-6.7%, a number which was well below expectations), jobless claims which remained flat, and NFIB small business optimism which eased last month as the series continued to stagnate ahead of the US election.
United Kingdom
This week has marked another week of messy trade in the pound sterling as headlines on the Brexit issue once again dominated. Dominating the news on the topic was the historic legal action that is taking place to prevent UK PM Theresa May from triggering Article 50 (which will invoke formal EU exit talks) without parliamentary approval. The GBP surged mid- week on comments that PM May had accepted that Parliament should be allowed to vote on her plan to take Britain out of the EU. Data releases have been of little consequence this week. They included the BRC retail sales monitor that rose against expectations of a decline and the RICS house price balance indicator which showed new buyer enquiry numbers turning positive last month for the first time since February. The number of properties coming to market fell for the seventh consecutive month. Look for a much busier week next week on the data front. Indicators include releases on inflation, employment and retail sales amongst others.
This week has seen the direction of the Euro (lower) dictated largely by the increased demand for the USD over the course of the week. The looming Italian constitutional referendum and prospect of an extension of QE from the ECB were also likely factors behind its slide. Data during the week has been low impact and started with numbers on German trade which exceeded expectations on the back of a solid gain in exports. The German ZEW current conditions index rose strongly in its latest read which supports recent data which has shown the economy rebounding from its summer hiatus. Economic sentiment in the survey also beat expectations in Germany and across the euro area. Industrial production across the euro area marginally exceeded forecasts in August and German harmonised inflation remained unchanged in September at a lowly 0.5% year-on-year. In focus to conclude the week are other regional inflation reads and the latest EU trade balance, although expect the much weightier US data and Fed Chair Yellen’s speech to drive trade into the weekly close.
Few domestic leads and largely as expected US FOMC minutes has seen the Yen sidetrack in trade against the greenback this week. Bank of Japan (BoJ) Governor Kuroda noted in an interview that the BoJ still had room to increase monetary stimulus and that it didn’t intend to reduce its bond buying soon. Press reports also pointed to the likelihood of the BoJ reducing its 2017/18 inflation forecasts (and timing of reaching its inflation target) in its next quarterly report. Data this week started with the August current account which beat expectations and volatile machinery orders data which fell by less than expectations in the month of August. Banking lending rose 2.2% year-on-year (2.0% expected) last month which was the fastest rate of growth since May. Look for US data (and the Fed’s Yellen speech) to set direction for the weekly close and next week to start with numbers on industrial production and capacity utilization on Monday.
This week has been a reasonably uneventful one for incoming Canadian data. Housing starts were seen surging in September. The 220.6k result was well above analyst expectations and should help boost Q3 economic growth which looks set to rebound from the contraction seen in the second quarter. New house prices edged higher in August on the back of strength in the Toronto market, although the gain was slightly less than that expected. Developments this week in the energy markets initially proved a positive for the CAD and oil after news emerged that Russia was set to join the OPEC group of producers in limiting production, although later news of a large unexpected build in US crude inventories has capped any further gains. Focus to conclude the week will be on tonight’s US data (and Yellen speech), whilst next week we look forward to the BoC Monetary Policy Report on Wednesday. Canadian inflation and retail data will come on Friday.