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Economies of note this week :

Written by Sam Coxhead on March 8th, 2013.      0 comments

3:50 PM (NZT)
Mixed is the best description of economic news in Australia this week. Building approval number and a materially wider than expected trade deficit provided fuel for the AUD bears. However, the retail sales number was demonstrably strong than expected and the 4th quarter GDP numbers came in on expectation at +.6%. Improving the GDP figure was an upward revision of the 3rd quarter result from .5% to .7%. These figures came with a back drop of the unchanged RBA monetary policy decision. The widely expected decision continues the theme from the previous meeting. A wait and see approach remains in place with an easing bias in place enabling the RBA to move to cut rates, should conditions deteriorate. From there the domestic focus shifts to the labour market and next week 4th quarter employment report on Thursday.
New Zealand
It has been a week devoid of statistical economic releases in New Zealand. However, of noteworthy news were the latest results from the Global Dairy Trade auction. Prices leapt 10.4% on a trade weighted basis, with whole milk powder up a massive 18%. This comes as the dry conditions continue in the North Island and drought conditions are declared in increasing regions. Next week sees the domestic focus rest solely on the RBNZ monetary policy decision on Thursday. No change to the 2.50% cash rate is expected, but the rhetoric from the Governor will be closely followed. This comes after Governor Wheeler flagged increased transparency in an on the record speech this week. Expect more frequent on the record comments from a wider array of RBNZ officials to increase the communication from the RBNZ going forward.
The positive sentiment in the US continues this week. The equity markets again forge to record levels as non-manufacturing survey's and private employment numbers beat expectations. Today's wider than expected trade balance came as a slight reality check for the USD, and this comes ahead of the important employment numbers later today. The USD appears to be undergoing a paradigm shift at the moment. Increasing demand in the "risk off" as well the "risk on" environment highlights the US economy is in relatively good shape. Expect this trend to continue in the coming months, albeit not at breakneck pace. This grinding appreciation is likely to come even though the FED will maintain its ultra-easy monetary policy stance until the labour market materially normalises to an unemployment rate of around 7.00%. 
This week has seen further mixed results for the wider European economy. Fourth quarter GDP was confirmed to give a .6% contraction in activity and Spain remains closely watched as unemployment remains at record levels. S&P moved the Portuguese credit outlook from negative to stable and this enabled the Spanish to raise debt cleanly as the market sentiment improved. The ECB left monetary policy unchanged as expected. Comments acknowledged that a cut was discussed and inflation pressure is falling, and growth is forecast to recover later in 2013. Supported by some positive words and the successful Spanish debt raising, the EURO has recovered from the week's lows across the board. Next week sees industrial production and inflation numbers due for the release, these and the EU summit will offer the primary focus in Europe.
The UK building sector remains under pressure with the latest survey showing a larger than expected contraction in activity. On a more positive note the services sector saw monthly activity increase by more than analyst forecasts. The primary focus this week was the BOE monetary policy announcement. There was speculation that the quantitative easing program would be increased, but this was not to come and the GBP saw demand following the unchanged monetary policy decision. The GBP remains under pressure across the board, albeit back from its recent lows. Manufacturing numbers next Tuesday provide the primary economic data focus for the next week.
The BOJ monetary policy decision has provided the primary focus for the week so far. The unchanged decision was not unanimous with two of the nine members voting to increase their stimulus program at the meeting. This is of note because both of these voters will continue to sit on the voting board as the new leadership takes over. Following the announcement the YEN has weakened as the prospect of increased stimulus becomes more real. Today will see the current account and final GDP numbers released, but these should be of limited impact to the price action. Next week sees the BOJ monetary policy meeting minutes and the latest manufacturing numbers provide the focus.
It has been an interesting week for the Canadian economy. The latest manufacturing numbers made for dark reading with growth materially slower than expected. The economic data has been soft over the last couple of months and this saw the BOC alter their bias at this weeks unchanged monetary policy announcement. The bias towards a hike in the cash rate has become less imminent over recent meetings and now the bias can be classed as neutral with "rates to stay on hold for a period of time". So expect the BOC to be side lined for the remainder of 2013 at least. To round out this week the latest employment numbers are due for release later on today. Next week sees little in the way of domestic economic data in Canada, so expect the lead to come from the wider markets risk appetite.