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This week we look at some of the monetary policy decisions during the past week (Australia, Indonesia, Japan, Europe, UK, Philippines). Then we review some interesting data points from the US; non-manufacturing PMI, consumer credit, and the nonfarm payrolls report. Then we finish up with a look at the strong employment numbers in Australia.

1. Monetary Policy Review
Among the central banks announcing monetary policy decisions last week, the Reserve Bank of Australia held its rate at 4.50%, the Central bank of Indonesia held at 6.50%, the Bank of Japan decreased from 0.10% to between 0 and 0.10%, Bangko Sentral Ng Pilipinas held at 4.00%, the European Central Bank held at 1.00%, and the Bank of England held at 0.50%. So all quiet really except for japan who also announced a 5 trillion yen quantitative easing program where it would buy bonds, REITs, and even shares in an attempt to ease further and stimulate the economy. The close call was Australia, which is likely to raise at their next meeting as the Australian economy goes from strength to strength (more on this later).


2. US Non-manufacturing PMI
The US non-manufacturing index rebounded in September on the back of a surge in new export orders. The index rose to 53.2 from 51.5 in August, and up against consensus estimates for 52.0. The other standouts in the report were inventories (falling from 53.5 to 47), supplier deliveries (improving to 55.0 from 51.0), employment (improving to 50.2 from 48.2). Overall the non-manufacturing PMI report showed relatively broad strength (especially as compared to the manufacturing PMI report released last week). Thus the result is relatively positive in the scheme of things.

3. US Consumer Credit
US Consumer Credit continued to contract in August as the deleveraging cycle continues to run its course. In total consumer credit contracted by $3.3 billion in August, vs -$3.6 billion in July, and slightly below an expected contraction of -$4.0 billion. Breaking it down to revolving vs non-revolving, non-revolving is experiencing continued positive numbers due largely to car loans. But overall it reflects the trend of consumer deleveraging, and fits with the data we're seeing in terms of savings rates and retail sales. So basically it's the same old story of the long hard recovery.

4. US Nonfarm Payrolls
So it should be no surprise that we're still seeing subdued results in the non-farm payrolls data. in September payrolls fell by -95k vs consensus for -8k and previous -54k, but stripping out the government cuts and census worker cycle; private payrolls expanded by 64k, which was slightly down against August 67k and consensus 85k. Average earnings were flat against August, and the average work week was also flat. So really just another subdued result as the subdued economic recovery continues to unfold. But of course the positive numbers in the private payrolls can't be ignored, it says that there is at least a pulse - albeit a weak one.

5. Australian Employment
Looking at Australia, the jobs story is a much different one with jobs expanding again, the Australian economy added 49.5k jobs on a seasonally adjusted basis, with all of the strength again coming from full-time jobs, with part time jobs actually contracting as part-timers converted to full-timers and new employees entered the market. The unemployment rate remained at 5.1%. So again the lucky country rides strong as it continues to expand its resource sector and reaps the residual benefits of the stimulus spending last year. With continued strength in the employment data its almost a given (unless anything external happens) that the RBA will need to start lifting rates again in November.

Summary

So we saw continued inaction by the central banks around the world this week as the various monetary policy decisions were announced. Much of the inaction is simply due to a relative comfort of the risks of greater inflation vs the risk of slowing or halting the economic recovery. But in some cases perhaps the more probable or helpful move would even be continued expansion e.g. in the UK, and as Japan acted in its apparently desperate moves. One thing is sure - it will pay to closely watch the central bankers around the world as the recovery unfolds.

Over to the US, we saw signs of strength in the non-manufacturing sectors, just as last week we saw rather ominous signs from the manufacturing sector - which is consistent with a confuse and muddling recovery. We also saw no surprises in the direction of the results in the consumer credit data as deleveraging plays through and in employment as the recovery remains subdued. But in Australia the employment situation is coming along strong - just as the economy is there. So in terms of what I've previously said - nothing much has changed and things are evolving much as expected.

Sources
1. Trading Economics
2. Institute for Supply Management
3. US Federal Reserve
4. Bureau of Labour Statistics
5. Australian Bureau of Statistics


Disclosure: No positions

Source: Top 5 Graphs of the Week: Money, Jobs Dominate