Economic Activity Bounces Back

Weekly Report - 30/10/2016

GDP Data and Manufacturing Lead the Way Higher for Global Fundamentals


Although predominantly preliminary data, figures released last week show that major global economies are beginning to recover from the deflationary wave of the last year.  Improvements in manufacturing and trade have seen GDP figures from advanced nations bounce back despite a number of different economic headwinds.

Last Week

The prior week was marked by a rising tide in economic fundamentals, leading off with trade in Japan.  As the Yen approaches its lowest levels in weeks, the export contraction in Japan is showing signs of ebbing, shrinking to -6.90% during September from -9.60% a month earlier.  Nevertheless, inflation remains sluggish, with figures across the country remaining firmly in deflationary territory.  Prices for a basket of consumer goods and services fell by -0.50% year over year, hurt by weak household spending.  Turning towards Europe, German manufacturing experienced a significant gain, with the preliminary manufacturing PMI indicating activity was expanding by the fastest pace since 2014.  Even amid widespread concern about the “Brexit” impact, UK GDP growth managed to beat expectations by a significant margin.  The economy grew by a 2.30% annualized pace versus forecasts of 2.10% while quarterly GDP at 0.50% rose above Central Bank estimates of 0.30%. UK figures were mirrored by better than anticipated US growth numbers in the advance reading of third quarter GDP.  According to the data, the US economy recorded the fastest pace in two years, rising by a 2.90% annualized pace during the third quarter thanks to a recovery in inventories and exports.


The Week Ahead

While normally the focus would be predominantly on the US nonfarm payrolls during the first Friday of each new month, the job creation figures will play second fiddle to the upcoming FOMC decision on Wednesday evening.  Although no change in the policy is expected, the stance may prove increasingly hawkish, potentially giving the US dollar a boost if expectations of December action rises.  Apart from the FOMC, the Bank of England and Bank of Japan are also going to be releasing their own monetary policy decisions.  Interest rates and quantitative easing are expected to remain constant across the board, but any hints of upcoming changes could shift the thinking about additional accommodation from each respective economy.  Outside of monetary policy, the Euro Area will be releasing preliminary data on consumer prices during the month of October.  Expectations are for headline annualized CPI to rise by 0.50% year over year during October from the 0.40% gain reported in September.  To cap off the week, US Nonfarm Payrolls will be reported on Friday. Friday’s payroll report could add to the increasingly hawkish stance of Federal Reserve officials.  A number that meets or exceeds expectations could see speculation of December action rise markedly.


This website uses cookies to ensure best possible user experience. Read more