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Economies of note this week: 25 May

Written by Sam Coxhead on May 25th, 2012.      0 comments

5:00 PM (NZT)
The Australian Economy:
This week has been light on domestic economic data in Australia. Global commodity prices have continued to soften, and this directly effects earnings for Australia’s main export earners. An unofficial but respected key Chinese manufacturing index (the HSBC Chinese Manufacturing PMI),  saw its seventh month of declines and contraction in the sector. Chinese officials have made several statements pledging their commitment to providing support to the slowing Chinese economy. The speeding up of infrastructure investment will be key, and directly benefits Australian miners. Next week the focus returns to the domestic Australian economy with retail sales, building and private capital expenditure numbers.
The US Economy:
This week has been relatively quiet in the US from a economic data perspective. Existing and new homes sales numbers were both relatively upbeat, whilst lower than expected durable goods sales data was balanced by an upward revision of the previous number. Next week is a big week for data, with GDP , employment and top level manufacturing numbers due for release. The US dollar has had a huge week of demand, as investors aggressively sold “risk/growth” assets and retrenched to safe haven investments. In currency terms, both AUD and NZD are both “risk/growth” assets, with the USD and JPY being safe haven assets.  
The UK Economy:
It has been an interesting week for the UK economy. The yearly inflation rate was released at 3.0% against an expected rate of 3.1%. Retail sales numbers for May were much weaker than expected at -2.3% and the final read of the first quarter GDP number was revised down from -.2% to -.3%. The Bank of England meeting minutes were a little more dovish than expected and most certainly maintain additional quantitative easing as an option if required. Next week the UK economic calendar is quiet, with just manufacturing data on Friday to hold focus.
The New Zealand Economy:
It has been a very quiet week for news in the NZ economy, with the annual budget the main focus. The budget was unexciting to say the least, as the National Government maintains its fiscally disciplined approach. The trade balance showed a lower surplus than expected, with lower value diary and log exports highlighted in the numbers. NZ diary giant Fonterra has also revised down payout forecasts for the current season and next. But positively, they predict that global milk prices have bottomed out at current levels, and will increase in the coming months. Next week is again quiet on the economic calendar with just the NBNZ Business Confidence number on Thursday to hold attention. The NZD has seen periods of considerable pressure throughout this week as investors exit the NZD as an asset. The relatively shallow liquidity in the NZ dollar market has again been exposed, and eases the way for accentuated moves.
The Canadian Economy:
The focus in Canada this week has been the weaker than expected retail sales numbers on Wednesday. However these were of limited impact as the Bank of Canada are unlikely to change monetary policy in the coming ,months. Next week sees the focus shift to the release of the monthly GDP numbers on Friday. Investors are hopeful of a bounce back to growth from the previous -.2% fall in activity.
The Japanese Economy:
 The Bank of Japan made no changes to monetary policy at their meeting this week. Further monetary easing cannot be ruled out in the coming months should the global economy see further European inspired slowing of growth. This maybe a case of keeping the powder dry until more is known about the fate of Greece’s Euro-zone membership and any fallout should a
“Greek exit” be made. Deflation of -.8% was reported today, which will further the cause for more stimulatory efforts in the coming months. Next week sees various second tier economic data due for release, but nothing that will be of material impact.
The European Economy:

There has been ample noise out of Europe this week. Another EU summit has passed with little achievement of any real note. Various officials are increasing pressure on Germany for a single European debt instrument, or Euro-bond. This seems very unlikely for a number of reasons, and its surprising the topic has been on the agenda. Access to emergency funding has been made to various Greek banks as pressure on the banking system increases along with the uncertainty ahead of elections on June 17th . It seems plausible that the Greek electorate will be made to sweat by European officials, ahead of the elections, so voters may be more inclined to place votes to pro-bail out politicians. Expect the uncertainty and noise to continue in the short term.