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Economies of note this week : 1st February

Written by Sam Coxhead on February 1st, 2013.      0 comments

3:25 PM (NZT) Australia
It has been a relatively quiet week for economic news in Australia. The NAB Business Confidence survey revealed a solid bounce back to positive sentiment at +3 from the previous reading of -9. New home sales have also climbed according the latest HIA Home Sales Survey, with an increase of 6.2% on the month. Private sector credit numbers have also improved on the month, and these are in line with the boosted business sentiment. All eyes will be on the RBA monetary policy decision next week. To my mind it seems increasingly unlikely that they will decide to ease the cash rate to 2.75% at this meeting. With global financial stability having materially improved since the last meeting and the continuation of the improved numbers in China, it appears there is room for the RBA to await further assessment before moving the cash rate lower.
 
New Zealand
The big focus in New Zealand this week has been the RBNZ meeting. The brief statement accompanying the unchanged cash rate was pretty much in line with expectations. It seems unlikely that we will see a change in the cash rate in 2013, as the slack in the economy poised to be taken up by improving growth boosted by the Christchurch rebuild. Of note was the Governors mention of the demand and supply issue for housing. A lack of supply in key areas has seen increased prices being fetched for housing. The RBNZ are likely to investigate prudential tools to curb lending (and therefore demand), whilst the supply side of the market catches up. This remains a separate, but somewhat overlapping issue to monetary policy, and may indirectly effect demand for the NZ dollar overtime. This afternoon Governor Wheeler gave a speech to the Canterbury Manufacturers Association, There was no direct reference to monetary policy but the NZD saw demand following the release of the speech. With no direct reason for the increased demand, the absence of reference to the overvalued dollar may have provided impetus for the move.
 
The United States
It is a busy week for news in the US economy. The surprising piece of data so far has been the materially lower than expected 4th quarter GDP number, albeit the detail not as weak at the -.1% results (against expected +1.1% rise) suggests. Along with many other economies the US hit a speed bump in growth towards the end of 2012, but indicators are expected to improve in the first quarter of the new year. The FED left their monetary policy stance unchanged as expected with running quantitative easing of 85 billion per month to help maintain low longer term interest rates. Interestingly, the job will get harder as the economy and sentiment improves. Ten year US interest rates breached  the important 2.00% level this week, in line with moves in other markets. The employment number later on today remains the final piece of the puzzle for this week with the unemployment rate expected to be steady at 7.8%.
 
The United Kingdom
Finally the UK has had some positive economic news this week. Improved personal lending numbers and house prices has curbed the recent run of weak data and the GBP has stabilised correspondingly. Manufacturing numbers later on today will round out a relatively quiet week in the UK. Next week sees construction, services and trade balance numbers come ahead of Thursdays BOE monetary policy decision. No change is expected from the BOE at this meeting. Certainly the recent GBP weakness will be well received by the BOE, given their vocal support of the Pound Sterling to lower levels.
 
Europe
It has been a bit of the mixed week in Europe. Peripheral debt markets have taken a breather from their recent trend lower in interest rates. This has seen the demand for the EURO settle down after what has already been a considerable move in 2013.  Important data from economic power house Germany has painted an interesting picture this week. Unemployment rates matched post-unification lows at 6.8%, but retail sales numbers again disappointed. This points towards the global trend of personal deleveraging that has taken place over the last few years. Spanish and Italian manufacturing numbers are joined by European inflation and unemployment data due for release later today to round out the week. Next week sees the focus return to the ECB and their monetary policy decision on Thursday. No change is expected at this meeting, albeit the pressure conference comments will be closely followed as usual.
 
Japan
News in the Japanese economy has been mixed this week. The YEN depreciation trend remains in place and is likely to continue in the coming months at least, albeit at a slower pace than in the last two months. Retails sales numbers for December were as expected at +.4%. Industrial production numbers have underperformed at just 2.5% against an expectation of a +4.2% result. Household spending numbers are expected to remain subdued when released later today. Next week is a quiet one for Japanese economic news with just the current account numbers on Friday to garner attention.
 
Canada
It has been a relatively quiet week for Canadian economic news this week. Yesterday’s monthly GDP numbers have provided the primary focus and came in slightly above the +.2% expectation, at +.3% for November. Month end flows have seen the USD under some pressure and this has weighed on the CAD, especially against the Australasian currencies this week. Next week sees a busier economic calendar with manufacturing, building, employment and trade balance numbers all due for release.
 

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