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US Factory Orders Rebound

New Factory Orders Increase At Fastest Pace in Seven Months

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After a deep decline in the prior month’s reading, factory orders expanded in January, underlining the resilience of the American economy despite the implementation of higher interest rates back in December and a stronger dollar which is continuing to hamper a recovery in the manufacturing sector. 

Euro Area Services Show Improvement

According to Markit’s results for the Services Purchasing Manager’s Index, the services sector in the Euro Area reportedly expanded by 53.3 in February, outperforming the previous month’s results and expectations of 53.0. Gains were attributed to major core economies within the Eurozone with Germany climbing to 55.3 from the prior month’s value of 55.1 and Italy increasing to 53.8 from previous 53.6. Spain released a value of 54.1 which was higher than expectations of 54.0 but declined from January’s value of 54.6. However, the one weak spot continued to be the French economy which experienced a contraction after printing below the 50 mark level at 49.2, missing expectations of 49.8. The stronger data may in part reflect growing confidence that the European Central Bank is set to act in the upcoming monetary policy decision due on March 10th.

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Factory Orders Show Signs of Hope

Although still too early to call for a recovery in the US manufacturing sector, the latest factory orders data highlights the strength of domestic demand at a time when a strong dollar and weakness in the oil patch are hurting demand for manufactured goods.  Nevertheless, in spite of higher interest rates which were largely forecast to harm the sector further, the most recent factory orders data released by the Department of Commerce showed new orders rising by 1.60%.  Although below expectations of 2.00% expansion, it notably outperformed the prior month’s contraction of -2.90% in December.  In another positive sign, inventory levels continue to decline, showing that manufacturers are making progress in a budding sign of growing confidence amongst the nation’s producers with business investment sluggish but still on the rise.  The more positive data came amid strong services data, which despite missing expectations, remained firmly in positive territory.

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Australia Retail Rise Misses Forecast

Retail sales figures in Australia, considered a leading indicator for consumer spending and key driver of economic growth at a challenging time for the economy climbed during the month of January. The Australian Bureau of Statistics reported an increase of 0.30% for the post-Christmas month, climbing back from a flat value of 0.00% during the previous month, but missing expectations of a 0.40% increase. Housing prices kept sales afloat as accommodative policies implemented by the Reserve Bank of Australia keep household credit at low levels. Household goods was the strongest factor behind the rise, ascending by 1.00% although the positivity was offset by department store sales declining by -1.30%. A strong labor market over the past year has raised consumer confidence but the slowdown in the Chinese economy, Australia’s largest trading partner, has economists worried that near-term positivity may reverse, reflecting weakness in global trade.

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Turkish Inflation Decelerates

The Turkish Statistical Institute reported declines in both monthly and annualized inflation rates for the month of February. The consumer price index was reported at 8.78% through the 12 months ended in February, beating expectations of 9.35% and falling below the prior elevated value of 9.58%. The value is still far from the Turkish Central Bank’s target of 5.00% despite no effort to adjust monetary policy and raise interest rates in order to counteract the rise in inflation. Food prices were the main source of inflation, with the Government opting to intervene in February by capping prices in red meat and bread. On a monthly basis consumer prices fell by -0.02% after climbing by 1.82% in January, while coming in below estimates of 0.30%. The Turkish Lira pared most of the losses against the US dollar, with USDTRY reaching as low as 2.9068 before bouncing.

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