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What has happened in economies of note so far this week: 11 Nov 2011

Written by Sam Coxhead on November 11th, 2011.      0 comments

5:20 PM (NZT)
The Australian Economy:
The economic data flow in Australia started on Tuesday with the NAB Business Confidence Survey. The result was a slight recover in the survey, after two months of decline. Wednesday saw the monthly home loans data released and this showed a 2.2% increase, against an expectation of a 1.7% increase. Thursday saw the all important employment numbers  and the focus of the week. The unemployment rate was a touch better than expected at 5.2% (5.3% expected), and was driven by an increase in fulltime employment. Of influence to the Australian economy is also the numbers released in China. Inflation numbers were pretty much as expected at 5.5% and are expected to fall back over the coming months. Interestingly the Chinese Trade Balance revealed that imports had grown more quickly than expected and this is a good sign for the global economy over the medium term.
The New Zealand Economy:
The week there has been little in the way of top tier economic data releases. However, one interesting release was the BNZ/Business NZ Manufacturing Purchasing Managers Index. This dropped dramatically in October compared to September, coming out at 46.5 vs 50.5 previously. A reading below 50.0 means a contraction. This was the weakest number since June 2009. It remains to be seen whether or not this is a down ward trend, or a speed bump related to the Rugby World Cup distractions. Also of note was the news the RBNZ has decided to extend the period of the time the NZ banks have to lengthen their funding profiles. This is because of the issues in the credit markets, due to the escalation of the European debt crisis. These types of eventualities will weigh on the need for the RBNZ to lift the cash rate anytime soon. Most economists estimate the RBNZ will not be forced to increase the cash rate until June 2013 at the earliest.
The US Economy:
In the US the week has been light on top tier economic data so far . Most of note was the drop in the wholesale inventories data of -.1% for September. This has seen the likes of JPMorgan downgrade the 3rd quarter GDP estimates from 2.3%, to 1.6%. The trade balance for October revealed that a lower than expected trade deficit, which was driven by increased exports. The equity markets have been weak throughout the week as the negative sentiment flowing from Europe has impacted, with financials leading the market lower. The focus for the remainder of the week will be on the preliminary consumer sentiment numbers late on Friday.
The European Economy:
High levels of broad based uncertainty remain in Europe. The uncertainty surrounding the political situations in both Greece and Italy are of real concern. Greek PM Papandreou has stepped down and stated the unified interim government will pass the EU austerity conditions into law. Overnight Greece announced that Lucas Papademos will lead the interim unity Government. He is an ex-ECB member and the news has been well received by the markets. Compounding issues is the fact that the market has taken aim at Italian debt with increasing vigor. Yield on Italian 10 year bonds soared over 100 pts to a high of 7.50% on Wednesday, before settling back down below the 7% mark overnight. Above the 7% level is unsustainable over time, and has triggered bailouts in Ireland, Portugal and Greece. PM Berlusconi has stated he will step down after the EU austerity conditions are passed into law. The longer an election can be pushed out the better. Needless to say, this will be a continuing saga that is starting to materially undermine global sentiment and growth prospects. The European Monetary Union will have to structurally change at some point in the medium term future to survive for the longer term. There are rumours that one of the PIIGS (Portugal, Ireland ,Italy ,Greece, Spain) central banks has started to reprint its old currency in earnest, as a precaution as events unfold. The focus for the remainder of the week will be the progress or lack of, in Italy. In circumstances such as these there is also a chance of some kind of emergency meeting and monetary policy change being made by the European Central Bank (ECB). Unfortunately the economic impact of this financial crisis are really starting to hit home. The EU Commission have revised down the growth forecast for 2012 from 1.8%, to just .5%, for the Euro-zone.
The UK Economy:
The UK economy has been somewhat off the radar so far this week, as the focus has been predominantly across the channel in Europe. Housing and manufacturing data has been at or above expectations, albeit those coming from a very low base. The real focus was last night’s Bank of England (BOE) monetary policy decision, which saw the announcement that monetary policy would remain unchanged this month.
The Japanese Economy:
In Japan, Prime Minister Noda has asked the nation to support tax increases that are needed to pay for the recovery from the March earthquake without adding to the countries debt burden. He intends to increase taxes temporarily by 11.2 trillion YEN (USD 148 billion). The government also intends to sell its shares in the Japan Tobacco Inc and Japan Post Holdings Co. to help finance the disaster rebuild. Meanwhile the Bank of Japan have not re emerged in the currency markets since their intervention last week and the YEN is again in demand and has pushed through levels they initially defended. The current European debt debacle is the last thing they needed in the plight to weaken the currency that is still massively impacting on the exporter sector of Japans economy. The earthquake rebuild momentum will start in full 2012 and this have a welcomed positive effect over time.
The Canadian Economy:
Economic data in Canada this week has been light, with just housing numbers and the trade balance released. Both were more positive than expected. The increasing oil price will be having a positive effect on the economy also, if the elevated levels can be sustained overtime.