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Update on economies of interest

Written by Sam Coxhead on September 30th, 2011.      0 comments

4:35 PM (NZT)
The New Zealand Economy:
There has been little in the way of scheduled economic data so far this week in New Zealand. This morning’s Building Consent showed a 13% increase which continues last month’s increase, albeit these numbers coming from historically low levels. The NBNZ Business Confidence survey just released showed a dip in confidence from 47.6 the previous month, to 34.4, with inflation expectations also lower in the coming 12 months. The news of the week has been the credit downgrade of NZ by ratings agency Fitch from AA+ to AA. Fitch leave their outlook as stable after the downgrade. Moody’s have subsequently affirmed their AAA rating for New Zealand. S&P have now joined the party with a downgrade of their own for NZ this afternoon. Next week looks to be equally quiet from the economic data perspective for NZ, with just the NZIER Quarterly Survey of Business Opinion on Tuesday.
The European Economy:
The focus in Europe remains almost entirely on the debt crisis, with particular focus on Greece. The ECB/IMF/EU “Troika” are currently back in Greece to finish their investigations of the Greek books. It is expected Greece with placate them in order to obtain the next tranche of bailout funds to the tune of 8billion EURO’s. Overnight the German parliament authorized the extension of the European Financial Stability Fund (EFSF) which was expected, but is a positive development. The big question seems to be when Greece does default, how well managed will it be, what loss on bonds with investors have to take, and how well the European banks  weather the losses on debt considering that they hold much of the Greek debt. Obviously the wider implications of these issues are huge, and is why this sage is ongoing and will continue to be so. Next week the focus with be the European Central Bank meeting (ECB) where the market has pared back expectations of a 50% cut to the cash rate from 88% to 20%, a 25% cut is fully priced.
The Australian Economy:
The only piece of data of partial note this week is the private sector credit release this afternoon, and will be of limited impact. The credit situation in Europe is dragging on AUD sentiment as a large portion of Australian bank funding is offshore based. The gloomy outlook for the global economy is also weighing on the outlook for Australia. If the European and US economies remain under pressure, that will feed through to the Asian economies that Australia is so reliant on for growth. Next week sees building approvals, the RBA cash rate announcement (expect unchanged at 4.75%) and retail sales. These will provide further insight and interest for the market.
The US Economy:
The data in the US economy has come in close to expectation for the most part this week. But overnight there were positive weekly jobless claim numbers, and an upward revision of the Q2 GDP number from 1.2 to 1.3%. This has again lowered the chances of further quantitative easing in the future, and provided further demand for the US dollar. Tomorrow we have inflation indicators, manufacturing and consumer sentiment numbers which will be of interest. Next week undoubtedly the focus will be in the Fed Chairman Bernanke’s testimony to the joint economic committee in Washington on Tuesday and the employment numbers on Friday. In between we have the Federal Reserve’s monetary policy meeting minutes and these watched closely.
The UK Economy:
The UK economic data flow has been fairly limited this week. Much of the focus for the UK economy has been based around comments from  its central bankers with regards to the extension of its quantitative easing policy. The Bank of England (BOE) currently has a 200 billion GBP program in place and the market now expects this to be increased by 75 billion at the November meeting and up to 150billion over time. The GBP has been weaker against the US dollar over the last two weeks and much of this will have been priced in as the rhetoric has flowed from various BOE members. Next week returns to a bust economic calendar with various housing, manufacturing and services releases. Of focus will be the BOE monetary policy announcement on Thursday.
The Canadian Economy:
The Canadian economy is another to have a relatively light week of economic data. Of focus will be today’s monthly GDP number with the market expecting .3% growth after last month’s .2% increase. The CAD has been under pressure as the commodities markets have been under pressure in the risk aversion environment. Last night’s positive US weekly jobless claims numbers and upward revision of GDP are  slightly encouraging for Canada’s largest trading partner. Next week the market will focus on the building , manufacturing and most of all employment numbers on Friday.