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By HaleStewart August 20, 2017 2:35 pm
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International Economic Week in Review: A Solid Week of News

            This week, there was no macro theme tying all the data together, save a general positive tone in the EU and Japan, but more weakness in the UK.

            The RBA released their latest meeting minutes this week, which contained the following analysis of the Australian economy:

The available data on activity suggested that GDP growth had increased in the June quarter, following weaker-than-expected growth in the March quarter. Output growth was expected to reach around 3 per cent in year-ended terms during 2018 and 2019, which was a little higher than estimates of potential growth. The recent data had indicated that consumption growth had increased in the June quarter. The value of retail sales had risen strongly in April and May, and the increases had been broadly based both nationally and across spending categories. Beyond the June quarter, rising employment and stronger household income growth were expected to support consumption growth, which was forecast to be a little above its average of recent years.

Australia is often overlooked by economists, probably due to its geography.  But thanks to its symbiotic relationship with China, it has enjoyed near constant growth for over a decade.  While certain imbalances have occurred, they are currently correcting.  Overall, this economy is in solid shape. 

            News from the EU was positive.  The second reading of second quarter GDP was a 0.6% Q/Q increase which translates to a 2.2% Y/Y pace.  The year-over-year rate of growth has consistently increased for the last four quarters.  While industrial production decreased 0.6% M/M, it increased 2.6% Y/Y.  This coincident indicator that has been increasing for the last two years:

Inflation was unchanged at 1.3%.  Inflation in the four largest economies (Germany, France, Spain, and Italy) was below 2%.  While inflation recently increased to slightly below 2%, it has since decreased in a pattern reminiscent of the U.S. inflation rate:

Finally, exports rose 3.9% from the previous month.  More presently exports increased 9.6% in the first half of 2017 relative to 2016.

            News from the UK was mixed.  Inflation was high; it was unchanged from the previous month at 2.6%.  Import prices -which increased after the Brexit vote -are largely responsible.  Retail sales are weaker: they increased 0.3% month to month and 1.3% Y/Y.  This creates a potential problem for the bank of England as it balances its inflation fighting credibility with it’s made to provide ample stimulus to prevent a post – Brexit slowdown.  In other news, the unemployment rate decreased over the most recent three month period to 4.4%.  This was the one bright spot for the bank.

            Japanese News was very strong.  GDP increased 4% Y/Y – one of its best readings in quite some time.  Private demand, residential investment, and nonresidential investment all increased strongly.  It also appears that consumption is finally rising at a level commensurate with Japan’s low unemployment rate.  It increased 1.8% Y/Y.  Durable goods spending increased a very healthy 9.5%, which made up of 481.5 percent decline in Semite durable goods purchases.  In other news, industrial production was up 2.2% month to month and a very healthy 5.5% Y/Ycontinuing this statistics recent growth:

This week’s news was a shot in the arm to Prime Minister Abe, who has experienced some recent setbacks.

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