China GDP grows 6.70% in Q1 2016

Daily Analysis - 15/04/2016

China records slowest pace of GDP growth since 2009

China's GDP in the first three months of this year grew at a pace of 6.70% posting the slowest growth in seven years. But there are encouraging signs that growth might have hit a bottom. Fixed asset investment increased 10.70% year over year in the period while industrial production jumped 6.80% from 5.40% previously. Retail sales also jumped 10.50%, showing that other economic indicators combined with March's export numbers signal a pickup in economic growth in the second quarter.

Australia unemployment rate falls to 5.70%

Unemployment rate in Australia fell to its lowest levels in March, since September 2013, touching 5.70%, according to data released by the Australian Bureau of Statistics. Analysts expected the unemployment rate to rise to 5.80%. There was a net gain of 26,100 jobs but most of the gains came from part-time positions while full time jobs fell by 9000 with mining and manufacturing seeing a contraction but as expected with the ongoing shifts in the Australian economy rebalancing itself. Better than expected unemployment rate is positive for the RBA and takes away any pressure of rate cuts and highlighting the fact that the Australian labor market was reasonably healthy.

BoE holds rates steady. Highlights Brexit risks

The Bank of England in its monetary policy meeting yesterday decided to leave the benchmark interest rate unchanged at 0.50% by a unanimous vote. Some analysts were expecting to see a divisive vote instead. In the BoE's minutes, the central bank revealed its concerns on the upcoming UK referendum on the EU membership. The bank said that this could lead a softer pace of growth in the first half of the year while also delaying investment and other major decisions that could weigh on the economy. On the recent rise in inflation, the BoE brushed aside the optimism noting that inflation could remain weak once the Easter effect wanes.

US consumer inflation stays tame in March

Consumer prices in the US increased at a slower than expected pace in March showing that underlying inflation had slowed. Core CPI excluding food and energy increased 0.10% in March on a month over month basis, slowing from 0.30% increase in February while on a yearly basis, core CPI increased 2.20%, slower than the previous month. The headline CPI was also weaker, rising 0.10% in March, while slowing to 0.90% on a yearly basis, following 1.0% increase seen previously. The soft inflation data is likely to see the Federal Reserve maintain its cautious outlook on inflation with the interest rate unlikely to go nowhere for the time being.

Canada manufacturing sales expected to fall 1.40%

Following a strong 2.30% increase in January and rising to a 10-month high since March of 2015, Canadian manufacturing sales is forecasted to have fallen 1.10% in February this year. However, there could be an element of upside surprise with the Canadian economy showing a strong performance in the first quarter of this year largely due to improved sentiment in the US fuelling demand for exports alongside a cheaper Canadian dollar making it possible. The risk however comes from February’s overall performance which was the weakest month in the first quarter of this year. Earlier this week, the Bank of Canada left interest rates unchanged at 0.50% while it acknowledged that the economy might have gotten off on a strong footing in the first quarter of 2016 as the central bank upgraded its GDP forecasts for Q1 2016 to 2.80%.