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Economies of note : 28 September 2012

Written by Sam Coxhead on September 28th, 2012.      0 comments

4:00 PM (NZT) The Australian Economy:
It has been a relatively quiet week for data this week in the Australian economy. Today’s private sector credit number has provided mild focus and the number revealed a +.2% number against an expectation of a .3% rise . The Reserve Bank of Australia decision on Tuesday garners attention. The interest rate market currently has priced a 70% chance of a 25 point reduction to the current 3.50% cash rate. Whether they decide to cut at this meeting or the next is beside the point. It seems likely they will not disappoint market expectations for a 3.00% cash rate by year end. Given the undecided nature of expectations, there will likely be some reaction following Tuesdays decision. Later on next week we have the trade balance Wednesday and retail sales and building approvals on Thursday. All in all, next week will provide an interesting start to the final quarter of 2012. Also of note has been ongoing rumours of a large stimulus package about to be announced in China, should this eventuate there would be a direct positive impact on demand for Australia’s exports.
The US Economy:
The economic data in the United States has been mixed this week. Regional manufacturing indexes has posted conflicting results. Consumer confidence numbers bounced nicely and this set a positive tone for markets earlier in the week. Housing sales numbers hit a soft patch this week, but are materially stronger on activity a year ago. The weekly jobless claims numbers were demonstrably better than expected. On the negative side of the equation were the final GDP numbers for the 2nd quarter. Weakness came through from lower agricultural production because of the prolonged drought in many areas in the US. Next week sees another busy week for economy watchers. The latest manufacturing and employment numbers provide the focus in what will be an interesting week.
The UK Economy:
It has been a relatively quiet week for economic news in the UK. Data released about the start of the Bank of England (BOE) funding for lending scheme(FLS) revealed some strong uptake which is positive. This scheme is designed to increase the supply of credit and will be watched closely by other central banks considering non-standard forms of monetary policy.  Yesterday’s final 2nd quarter GDP numbers revealed a slightly better than expected result. The headline number came in at -.4% versus an expectation of a larger .5% fall. Next week sees manufacturing and construction numbers come ahead of what should be an unchanged BOE monetary policy decision on Thursday.
The New Zealand Economy:
It has been a curious week in the New Zealand economy. A increasingly active Minister of Finance Bill English continued his efforts to jawbone the NZ dollar lower. He commented that the RBNZ can cut rates to ease monetary policy if needed. He also pledged ongoing commitment to fiscal constraint and stated that it was important that public services were kept at sustainable levels. The final Fonterra results held few surprises for the important dairy sector, with payouts down a material 19% from last year’s record payout. The data focus of the week was the NBNZ Business Confidence survey and this revealed a slight pull back in this latest survey. Next week is quiet again with no top level economic data due for release. This week has seen good levels of demand for the NZ dollar at times, and this should continue in the short term, especially if sentiment in the wider market increases.
The Canadian Economy:
Canadian retail sales numbers were better than expected and provided the sole focus for the Canadian economy so far this week. Monthly GDP numbers later on today will round out the week, and are expected to come in showing modest +.1% growth for August. Next week is busier as manufacturing, construction and employment numbers provide the focus. The CAD has seen some pressure from the Australian and New Zealand dollars this week, especially as speculation around large Chinese stimulation efforts surfaced. If the speculation proves correct, the pressure will remain on the CAD from the Australasian duo in the short term.
The Japanese Economy:
The Bank of Japan (BOJ) monetary policy meeting minutes on Monday re-iterated the fact that the BOJ will continue to aggressively ease monetary conditions if it deems necessary to stimulate growth. This means they will attempt to undermine the strength of the YEN through quantitative easing as much as they think they need to. Unfortunately for the Japanese exporting sector, they are not likely to succeed to any great extent. The just released flora of data reveal increased household spending and retail sales numbers. However de- inflationary pressure, and weak industrial production numbers will not be welcomed. Next week sees manufacturing numbers released Monday and the BOJ announce what should be unchanged monetary policy on Friday.
The European Economy:
The reality of the issues in Europe have re-emerged this week. Spain has continued to be the central focus, ahead of last night’s annual budget announcement. With regional finances looking increasingly desperate, it is a matter of time before the state requests EU assistance. The budget was fiscally constrained, but with growth non-existent , there is little opportunity for an increased tax take for the Government. The important German business confidence declined more than expected. European Central Bank (ECB) head Mario Draghi has publically pushed for further governmental efforts to stem the issues following the recent ECB initiatives. Expect increased political tensions to continue across Europe as populations become increasingly antagonized by austerity measures. Next week sees European manufacturing, employment and retail sales come ahead of what will be an unchanged ECB monetary policy announcement on Thursday.