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Economies of Note : 15th August

Written by Sam Coxhead on August 15th, 2014.      0 comments

It has been a relatively uneventful week for the Australian economy, albeit a positive one for the most part. Tuesday saw the release of quarterly house price data and this saw an increase of 1.8% on the quarter against an expectation of a more modest 1.1% rise. The housing markets remain a bone of contention in many economies around the world, especially when compared to wage growth. To this end the Wage Price Index released on Wednesday showed a quarterly appreciation of .6%, against a market expectation of a .7% result. These two statistics clearly display the difficulty many central banks find themselves in. Looking forward to next week the primary focus comes in the form of the Reserve Bank of Australia (RBA) monetary policy meeting minutes when released on Tuesday.

New Zealand
After a quiet start to the week for NZ economic news, the market got to focus on the important 2nd quarter Retail Sales data yesterday. The 1.2% increase in activity came against an expectation of a 1.0% result. This saw the NZD react positively as the number came not long after the latest positive result from the Business NZ Manufacturing Index. Also of note are the results from the ASB Survey of Housing Opinion. The survey showed confidence in the housing market has fallen to the lowest level since 2007. Next week sees the calendar empty for top tier economic news in New Zealand, but the results of Tuesday’s Global Dairy Trade auction will be keenly watched, to see if dairy prices continue their tumble.

United States
It has been another interesting week of mixed news for the US economy. The latest retail sales figures show 0.0% growth for the month, against expectations of a +.2% increase. This kind of result has given the bond market no reason to change its recent move in pushing yields lower and overnight trade saw yields make new lows for the year, whilst the wider market showed signs of increased risk appetite follow lowering tensions in the Ukraine. It seems like this kind of confused market dynamic will continue until a path becomes clear for the US Federal Reserve’s monetary policy. Later today we get further manufacturing numbers, industrial production and consumer confidence numbers. Next weeks flora of economic news includes the latest inflation, house sales and manufacturing numbers. Also of note will be the insight provided by the minutes from the Fed’s last monetary policy meeting, when released on Wednesday.

United Kingdom
The week has seen the Bank of England (BOE) inflation report reveal Governor Carney’s concern over the lack of earnings growth. This lack of growth motivated Governor Carney to state that BOE officials will not be pushing for increases in the cash rate, as some in the market thought they would. It seems that 2014 is off the agenda for interest rate rises, and this has undermined demand for the GBP across the board. Employment numbers also revealed on Wednesday an on expectation unemployment rate of 6.4%, as the jobs growth continues its solid performance in the last calendar year. Next week should prove to be interesting. Inflation numbers on Tuesday come ahead of the BOE monetary policy meeting minutes and vote split on Wednesday, and the latest retail sales data on Thursday. 

The dismal economic news continues unabated in Europe. This week has seen economic sentiment, industrial production, GDP and inflation numbers all fail to meet modest expectations. Of developing concern being the increasing vulnerability of the core economy of Germany. Upcoming data releases from Germany will be of increasing importance. A continued decline in the data sets would materially increase the chances of further policy accommodation from the European Central Bank (ECB). Whilst soft economic news continues to flow, the EURO will remain vulnerable. Next week sees the focus come from the manufacturing and services PMI’s that are scheduled for release on Thursday.

The focus in the Japanese economy this week was the preliminary release of the 2nd quarter GDP numbers. The quarterly fall of 1.7% was close to expectation and can mostly be attributable to the increases in the sales tax rate in April. Whilst this fall in activity is expected to be transitory, the focus intensifies as the success or failure of Abenomics will come down to the performance of the economy in the coming months. Further policy accommodation cannot be ruled out and this should undermine demand for the YEN, in the absence of increasing global geo-political tensions. Next week the Japanese economic calendar is bereft of potentially market moving economic news, with just the trade balance to offer passing interest.

Both housing starts and national house price data has come in close to expectation so far this week. Both releases were of limited impact to Canadian dollar demand and the final focus for the week comes later on today when the monthly manufacturing sales numbers are released. Next week is a busier one, with wholesale sales data on Wednesday coming in ahead of the latest inflation and retail sales numbers on Friday. Do not expect any material changes in expectation for policy changes from the Bank of Canada (BOC), on the back of these releases.