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Whats happening in the economies of interest around the globe this week?

Written by Sam Coxhead on September 15th, 2011.      0 comments

3:30 PM (NZT) The Australian Economy:
This week sees the Australian economy in the background, with little in the way of economic data due for release. Probably the most influential information so far has been the changing of the inflation calculation methodology from the  Australian Bureau of Statistics. The new methodology will reduces the inflation read and has seen interest rates move lower to the tune of over 15pts after the release, and the AUD under pressure. The market stress in Europe also has an effect on the AUD, as the uncertainty surrounding a possible Greek default has affected credit markets, and may lead onto higher funding costs for Australian banks, which in turn leads to higher lending rates. Higher lending rates means there will be further room for cash rate cuts in the future. Next week the RBA monetary policy meeting minutes will be released on Tuesday, and is the only significant release of the week but these will be closely watched.
The US Economy:
This week has been a little light on US economic data so far. Retail sales and producer price numbers have come in slightly lower than expectations interestingly. This continues the theme of a slowing economy in the US and forecasts for annual growth rates for both 2011 and 2012 have been revised down. There is further data to come in the form of inflation, manufacturing, and consumer sentiment numbers which should ensure that focus remains intense for the remainder of the week. Interestingly the US dollar has been reasonably well supported as the European debt fears continue to remain at elevated levels. In the face of the recent US credit downgrade, auctions of US debt continue to be very well supported, starkly contrasting those of Europe, and in particular non German or French debt auctions. The focus next week is undoubtedly the Federal Reserve’s monetary policy decision on Wednesday.
The European Economy:
The European debt issue has remained under intense focus this week. Greek debt is yielding record levels and it seems a very slim chance they will avoid default at some stage towards the end of the year. Subsequently further European bank credit downgrades have eventuated, and expect these to keep coming. Overnight the Italian parliament passed further austerity measures, keeping in line with European Central Bank expectations, as the have been buying their debt. Greece has once again pledged to cut costs to appease the ECB, EU and IMF and ensure the extended bailout fund conditions are met, albeit the market sees this as highly unlikely. Do not expect tensions to lessen in the coming months, and of primary concern is the state of the global credit markets (where all banks do their funding), and the potential for tighter credit to accentuate the softening global economy.
The UK Economy:
UK inflation numbers came in as expected at 4.5%. House prices remain under pressure and the consumer conservative with their spend as the UK economy struggles with low growth. Weekly unemployment claim numbers were lower than expected this week, on a positive note. The Bank of England bias moving towards an increased quantitative easing program has seen periods of Pound Sterling pressure since last week. Interestingly, during the periods of fear around European debt issues early in the week the GBP saw periods of decent support. Looking forward, the spending discipline from the UK Government makes for slow economic growth in the short term, medium to longer term prospects are less grim. Monthly retail sales numbers are due for release and this is the final focus for this week. Next week the focus is the Bank of England monetary policy meeting minutes from two weeks ago. This will be closely watched for any insight to the timing or triggers of any further quantitative easing measures in the coming months.
The New Zealand Economy:
The primary focus for this week was this morning’s RBNZ monetary policy statement. The cash rate was left unchanged as was widely expected. Whilst Governor Bollard stated that the domestic economy had performed above previous forecasts, the international outlook at deteriorated at a faster pace than expected. Along with the lower global growth profile, the tensions in the international credit markets are of primary concern. If funding for NZ banks becomes tighter, these higher costs are passed onto the borrowers across the economy and this would dampen activity. Bollard expects the cash rate to rise in the coming year, but it is obvious than rises may not be as fast as previously thought. The focus for next week will be the 2nd quarter GDP on Thursday.
The Canadian Economy:
There has been an absence of Canadian economic data this week. The hangover from the Bank of Canada’s cash rate statement last week (no rise expected this year) and lower than expected employment growth has seen the CAD under some intense pressure at times. Not helping the Canadian economies cause is the continuing  weak economic data flowing from its neighbor and largest trading partner, the US. Next week sees the release of the monthly inflation and retail sales numbers and these will be closely watched as usual.