This week, the only news from the EU was the Markit surveys. The manufacturing number was up modestly; it rose .2 to 53. New orders, production, and employment all rose. But supply times increased, indicating increased pressure. And overseas orders dropped, which shows that the trade war issues are probably starting to bite. The service index increased sharply, advancing from 53.8 - 55.2. Germany, France, and Italy all saw increases; of the top four economies, only Spain was weaker. New business, employment, backlogs, and output all increased. The combined reading of the manufacturing and service sectors led to an increase in the composite index which rose .8 to 54.9. But while the M/M numbers were modestly higher, the Y/Y comparisons were lower. And businesses are raising concern about trade and political stability. Finally, Peter Praet of the ECB gave an interview where he discussed recent monetary policy issues. You can read it here.
The Reserve Bank of Austalia maintained their current 1.5% rate. Their release contained the following assessment of the Australian economy:
The recent data on the Australian economy continue to be consistent with the Bank's central forecast for GDP growth to average a bit above 3 per cent in 2018 and 2019. GDP grew strongly in the March quarter, with the economy expanding by 3.1 per cent over the year. Business conditions are positive and non-mining business investment is continuing to increase. Higher levels of public infrastructure investment are also supporting the economy. One continuing source of uncertainty is the outlook for household consumption. Household income has been growing slowly and debt levels are high.
Other news this week pointed towards continued expansion. While building approvals were down, their overall trend is sideways, indicating a balance between supply and demand. Retail sales increased .3% for the third consecutive month and the balance of trade was $827 million, seasonally adjusted. But the RBA warned that the terms of trade were set to decline in the near future, which would lower this number.
The only statistical news from the UK came from the monthly Markit surveys. The service sector index rose 1.1 to 55.1. New orders, capacity, backlogs, and employment indicators all increased. Once again, there was a discussion about Brexit related uncertainty. The manufacturing number was up slightly; it increased .1 to 54.4. New orders, output, and employment all increased. Both reports contained discussion about rising cost pressure. The Bank of England also released the latest meeting minutes of the Financial Policy Committee, which is available at this link.
Canadian news was upbeat. The Markit manufacturing index rose .9 to 57.1. Although the report noted an increase in production, it also had indications of rising lead times, stretched supply lines, and rising cost pressures. After two months of middling numbers, the Canadian economy added 32,000 jobs. But the unemployment rate ticked higher due to the jobs market pulling people in from the sidelines. Finally, Canada's trade deficit widened to $2.8 billion.
Finally, we have data from Japan. The Markit Service PMI rose modestly moving from 51-51.4. The same characterization applies to the manufacturing number, which increased from 52.8-53. Finally, BOJ Governor Takako Masai gave a speech that contained the following description of the Japanese economy:
The Bank's assessment is that Japan's economy is expanding moderately, with a virtuous cycle from income to spending operating. Industrial production has been on an increasing trend, reflecting the increases in demand both at home and abroad, and labor market conditions have continued to tighten steadily. As a result, the output gap -- which shows the utilization of labor and capital -- has widened steadily within positive territory.
This is standard language for the BOJ. As a central bank, they are interested in growing income, which they assume will lead to increased economic activity.
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