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Whats happening in the economies of interest this week - 16 March 2012

Written by Sam Coxhead on March 16th, 2012.      0 comments

3.:33 PM (NZT)
The Australian Economy:
The Australian economy has had no top tier economic data this week. However the monthly home loans data at -1.2%, was weaker than the market expectation of -.5%. The NAB Business Confidence Survey fell from 4 to 1 (above 0 indicates improving conditions), and the Westpac Consumer Sentiment Survey dipped to -5.0%, from +4.2%. It is of no doubt that the Australian economy has slowed and is feeling the affect’s of slowing growth in its Asian neighbours. How much of an influence the falling chances of further stimulation from various central banks has, the US FED in particular, remains to be seen. Its effect on the Australian dollar is twofold. Not only do the commodity markets experience reduced demand, but also the interest rate differentials finally start to contract. Both of these factors are AUD negative in the short term.
 
The US Economy:
A busy week economic data release wise in the US. Retail sales numbers we reasonably robust as expected at 1.1% for the month. The FED Monetary Policy Statement (MPS) was slightly more upbeat than expected, and continues to discount the likelihood of further QE in the coming months. This was coupled with a prepared statement from FED Chairman Bernanke, again pointing towards the frustratingly slow recovery. Whilst the MPS has not ruled out further QE, the falling chances of it has seen what looks to be a material shift in expectations this week. Leading almost all developed countries interest rate curves higher, the US has moved aggressively away from its record lows. Should this be the start of a slow but cyclical low, further US dollar strength can be expected. Manufacturing and weekly jobless claims numbers were again positive in the US session overnight, with inflation and consumer sentiment data to come today in the US.
 
The UK Economy:
A reasonably light week economic data wise in the UK. Housing numbers remain somewhat under pressure. The unemployment rate is stable at 8.4% as expected. A statement by the BOE was more downbeat than expected in the UK overnight session, chipping away at what had been more positive sentiment this week. Next week is far busier in the UK with inflation, the release of the most recent BOE monetary policy meeting minutes, the Budget release, and retail sales numbers.
 
The New Zealand Economy:
It has been a quiet week for economic news in New Zealand. Fonterra downgraded earnings expectations, and whilst not unexpected, has been regarded as conservative by analysts, as superb grass conditions have prevailed throughout New Zealand for the most part. Housing data continue to show increased activity in terms of sales numbers, with Auckland the only region really seeing upward price pressure, with the increased sales. The latest BNZ Manufacturing PMI showed a surprisingly large bounce in activity to its third highest recording in seven years. This is a volatile number, but none the less surprising and is something to be followed in the months to come. Next week will provide more insight, with current account numbers on Wednesday, and 4th quarter GDP numbers on Thursday.
 
The Canadian Economy:
It has been a quiet week so far for news in the Canadian economy, with only capacity utilization numbers were slightly lower than expected, which flags slightly lower use of capable resources. Next week provides a little excitement with retail sales numbers and inflation numbers on Friday. Improving US economic numbers should be supportive of the Canadian economy looking forward.
 
The Japanese Economy:
It has been a year since the devastating earthquake and tsunami in Japan. With aftershocks still happening, the Japanese economy struggles to recover, and the rebuild of devastated areas continues to move slowly. The BOJ have left monetary policy unchanged at their meeting this week, after surprising the market with a quantitative easing program last month. The effect of weakening the YEN through these operations continues this week. Notably the important pairing of USDYEN continues weaken, to the great relief of the export, and wider sectors of the Japanese economy. Slowing growth in Asian trading partners is not helping the Japanese cause, and further central bank stimulation cannot be ruled out. The release today of the most recent BOJ monetary policy meeting minutes will be closely followed.
 
The European Economy:

Following the completion of the debt swap, the extension of bailout funds to Greece has been made a secure funding line through until 2015. On the back of this, further inroads have been made on other peripheral euro-zone member debt. While most developed nations have seen interest rates rising this week, the likes of Portugal, Italy and Spain have seen theirs falling to varying degrees. This has helped support the EUR. German economic sentiment data was released much stronger than expected, which is a positive for Europe’s largest economy. Inflationary pressure remains at expectations, although this will have to be watched in the coming months. Industrial production came out well under expectation. Next week the focus will be on services and manufacturing numbers.
 

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