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By HaleStewart February 11, 2018 7:21 am
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International Economic Week in Review: The RBA and Bank of England Maintain Rates

           The global economy continues to show signs of stronger growth.  The RBA kept rates at 1.5%.  A look at the underlying data showed an economy that is in pretty solid shape.  The Bank of England kept rates at .5% and, despite the potential negative impact of Brexit, the economy continues to grow modestly.  News from the EU continues to show a region that is (finally) emerging from its weak growth.

            The Reserve Bank of Australia maintained rates at 1.5%.  Their policy release described the Australian economy in positive terms.  GDP continues to grow between 2%-3% on a Y/Y basis:

The participation and employment percentage ratios are increasing (top chart) while the unemployment rate is declining (bottom chart):

 

The terms of trade are positive, due to the Australian dollar’s lower level relative to the yen and yuan:

The Australian industry group recently released their latest assessment of the manufacturing, service and construction sectors.  The manufacturing PMI rose 2.5 points to 58.7, with all 7 components growing. The service sector’s PMI increased 2.9 points to 54.9.  Like the manufacturing sector, all the sub-components were positive.  Even construction increased, this time by 1.5.  In other news, retail sales were off .5.  But this was largely caused by a 2.6% decline in household goods purchases.  Additionally, this also follows a 1.3% increase the previous month, which implies last month was a cooling off period.

            The Bank of England maintained their .5% interest rate policy.  They also released their latest inflation report, which contained the following table of UK GDP and its components:

 

Household spending slowed in the 1H17, and increased modestly in the 3Q.  This also showed up in the continued modest increase in retail sales:

While is supported by a very low unemployment rate:

Business investment dropped in the 3Q17 as businesses grew more cautious due to the fluid Brexit situation.  However, exports continued to grow, aided by a very low sterling:

       EU news continued to mostly impress.  The manufacturing PMI dropped 1 point but was still a very high 59.6.  Business confidence was at a record; new orders and output both advanced, the latter falling slightly from a record high.  All three sub-groups of activity – consumer, investment and intermediate – grew.  The Service number increased from 56.6 to 58.  Output rose to a 12-year high while new business increases were strong.  Finally, the composite reading advanced .7 to 58.8.  Retail sales, however, disappointed, falling 1.5%.  The decline was due to large falls in textile (-3.3%) and electrical goods (-1.5%) purchases.  The decline did come after a strong November advance when sales increased 2%, so last month could simply have been a natural cooling off period.    

In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 

 

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