Daily Market Digest: BoE, SNB keeps rates steady. US retail sales disappoint

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Market Summary

  • New Zealand GDP rises 0.90% in Q2, less than forecast
  • New Zealand Q1 GDP revised higher to 0.90%
  • Australia unemployment rate falls to 5.60%
  • Swiss National Bank leaves LIBOR rate unchanged at -0.75%
  • UK retail sales fall 0.20% on the month in August; July revised higher
  • Eurozone headline CPI confirmed at 0.20%; Core CPI at 0.80%
  • Bank of England leaves policy unchanged. Interest rate at 0.25%
  • US retail sales weaker than expected, down 0.30% in August
  • US producer price index flat
  • Weekly jobless claims rose 260k

Today’s Economic events

  • New Zealand GDP q/q 0.90% vs. 1.10%
  • Australia MI inflation expectations 3.30% vs. 3.50% previously
  • Australia employment change -3.9k vs. 15.2k
  • Australia unemployment rate 5.60% vs. 5.70%
  • Australia new motor vehicle sales m/m 0.10% vs. -1.40% previously
  • SNB Libor rate, -0.75% vs. -0.75%
  • UK retail sales m/m -0.20% vs. -0.40%
  • Eurozone final CPI y/y 0.20% vs. 0.20%; core CPI y/y 0.80% vs. 0.80%
  • Eurozone trade balance 20.0bn vs. 22.1bn
  • BoE leaves interest rate unchanged at 0.25%
  • US core retail sales m/m -0.10% vs. 0.30%; retail sales m/m -0.30% vs. -0.10%
  • US PPI m/m 0.0% vs. 0.10%; core PPI m/m 0.10% vs. 0.10%
  • US unemployment claims 260k vs. 262k
  • US current account -120bn vs. -120bn
  • US empire state manufacturing index -2.0 vs. -0.9

Coming up

  • (USD) Industrial production
  • (USD) Business inventories

New Zealand Q2 GDP rises 0.90%

New Zealand’s second quarter gross domestic product increased 0.90%, data from Statistics New Zealand showed on late Wednesday. The first quarter GDP was revised higher to 0.90%. On a year over year basis, the annual GDP growth rose 2.80% in the period ending June 2016.

New Zealand Quarterly GDP: 0.90%, Q2 2016 (Prev.: 0.90%)
New Zealand Quarterly GDP: 0.90%, Q2 2016 (Prev.: 0.90%)

GDP increased, boosted by strong international demand leading to exports rising 4.0% with exports of goods posting the biggest quarterly jump in 20 years. Exports of dairy, meat, and fruit products also increased during the quarter. The services sector grew at a pace of 0.70%, driven by rental, hiring, and real estate services. Construction rose 0.50% with all of the sub-industries showing gains and reflecting higher construction-related investment.

New Zealand’s GDP per capita increased 0.50%, following a 0.30% increase in the previous quarter.

The GDP growth in the second quarter was however below forecasts of 1.10% growth, but the previous quarter’s GDP growth was revised higher.

Gary Dunnet, the national accounts senior manager said, “Growth this quarter is being driven by strong domestic and export demand. Household spending was up 1.9 percent, with Kiwis spending more on going away, eating out, and furnishing their houses. Eleven of the 16 industries were up this quarter, with construction once again providing a boost to production.”

The New Zealand dollar was little changed on the news. Paul Dales, Australia, and New Zealand economist at Capital Economics said, “Looking ahead, the momentum in construction activity will continue for a while yet, but the 15% strengthening in the dollar over the past year will soon become a headwind. So, while we are revising up our GDP growth forecast for the 2016 calendar year from 2.7% to 3.0%, we don’t believe that the economy will continue to grow by more than 3.5% for long.”

Australia unemployment rate falls to 5.60%

The monthly labor market data released by the Australian Bureau of Statistics showed on Thursday that employment in the country is increased by 3.9k during August, while unemployment fell by 10,500.

Australia Unemployment Rate (Aug’2016): 5.60% (Prev.: 5.70%)
Australia Unemployment Rate (Aug’2016): 5.60% (Prev.: 5.70%)

The unemployment rate fell to 5.60% on a seasonally adjusted basis, with the participation rate slipping to 64.70%. Full-time employment continued to increase, rising 11.5k during the month while part-time employment fell 14.9k.

The report was broadly mixed, but the unemployment rate hit the lowest level since July 2013. Deutsche Bank said that it expects to see slightly higher employment figures in the future, noting that the data does little to change the RBA’s view that employment growth was only modest. Philip O’Donaghoe, an economist from DB, said, “coupling this with the modest decline in the unemployment rate, we see little in these data that is likely to change the picture in front of the RBA.”

UK retail sales fall 0.20%, less than expected in August

Consumer spending in the UK fell at the rate of 0.20% on a month over month basis in August, data from the Office for National Statistics showed today. The data was, however, better than forecasts of a 0.50% decline, indicating that consumers did not hold back from spending post-Brexit. On a year over year basis, retail sales were 6.20% higher compared to a year ago. July’s retail sales were also revised higher, from initially reported 5.90% to 6.30%.

UK Retail sales 3m/3m, Aug’16: 5.50% (Prev.: 5.30%)
UK Retail sales 3m/3m, Aug’16: 5.50% (Prev.: 5.30%)

Excluding gasoline, retail sales were down 0.30%, but less than the forecasts of 0.70%, while on a year over year basis, core retail sales rose 5.90%. The data for July was also revised to show July’s core retail sales at 2.10% from 1.50% while on a year over year basis, core retail sales for July was revised to 5.80%.

The headline retail sales for July, upon revision, showed the fastest annual growth since 2001. ONS said that the smaller pace of retail sales in August was due to declines in sales of clothing and household goods which rose strongly in July on warmer weather. Food sales also increased in August.

Mel Richard, head of retail sales at ONS said, “The underlying pattern in retail sales remains one of solid growth. Overall the figures do not suggest any major fall in post-referendum consumer confidence.”

The Bank of England’s monetary policy meeting today was a non-event as widely expected. The central bank held rates steady at 0.25% while keeping asset purchases unchanged at 435 billion GBP. The central bank cut rates and expanded QE in August and opted to assess more economic data to ascertain if further easing was necessary.

US: Retail sales weaker than forecast, PPI stays flat

Economic data dump today saw a slew of economic releases. US retail sales fell more than expected at a rate of 0.30% missing forecasts of a 0.10% increase. July’s retail sales were revised slightly higher to 0.10%, making August retail sales the first monthly decline since March. Retail sales excluding autos fell 0.10% on the month in August, missing forecasts of 0.20% and follows July’s revised 0.40%.

US retail sales m/m, Aug'16' -0.30% (Prev.: 0.10%)
US retail sales m/m, Aug’16’ -0.30% (Prev.: 0.10%)

Producer price index for August was also disappointing showing no signs of inflation at the factory gate. Headline PPI was unchanged in August, following a 0.40% decline in July. Economists expected to see a 0.30% increase. Core PPI rose 0.10%, matching estimates and slower than the 0.30% increase in July.

The weekly jobless claims alone was the bright spot as 260k new claims seeking unemployment benefits were recorded in the week ending September 10th, lower than the forecasts of 262k.

On the manufacturing front, the data was mixed with the NY Fed’s Empire state manufacturing index falling to -2, while the Philly Fed manufacturing index rose to 12.8, beating forecasts of 1.1. The US dollar initially sold off on the news but managed to recover a few minutes later. Further economic data is await with industrial production and business inventories coming up shortly.

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