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By HaleStewart November 19, 2017 7:55 am
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International Economic Week in Review: The Synchronous Expansion Continues

            Global economic news from the OECD big seven continues showing a world economy with link synchronous growth.  The EU is entering its second year of above-trend growth.  There’s no reason to believe this trend will not continue for the next 3 to 6 months.  Japan is also enjoying strong growth, largely as a result of a cheap yen stimulating exports.  Australia has emerged from a recent spate of moderate economic weakness caused by a shift from natural resource lead growth two broader sources of expansion.  While news from the UK continues pointing ports modest growth, it’s possible were beginning to see the initial signs of weakness caused by the country’s ill-informed decision to leave the EU.

Economic news from the European Union was mostly positive.  GDP rose 2.5% Y/Y, which marks another acceleration in the region’s growth rate: GDP rose 1.9% in the 4Q16, 2% in 1Q17, and 2.3% in the second quarter.  The four largest economies all grew at strong rates: Germany +2.8%, Spain +3%, Italy +1.8%, and France +2.2%.  The region’s industrial production decreased 0.6% M/M but rose 3.3% Y/Y.  Of the four largest economies in the region, only France’s IP expanded (it increased 0.6%).  This weakness was in marked contrast to the recent strength in the Markit PMI. Trade continues to be positive for the region: exports rose 5.6% Y/Y.  Imports also rose; they advance 5.1% Y/Y.  However, like other regions, the EU has an inflation problem.  Total inflation dropped 0.1%, falling to 1.4% Y/Y.  Core was up 0.9%, one of his weakest readings in the last six months.

            Japanese News was positive.  GDP increased 1.4% Y/Y.  Exports – which rose 1.5% -were the primary driver.  Both private consumption and residential investment fell.  Industrial production was off 1% M/M but rose 2.6% Y/Y.  This continues a trend of positive industrial developments largely caused by the weak yen.

            The only news from Australia was a 0.1% drop in the unemployment rate, which fell to 5.4%.  Approximately 2/3 of the gain came from fulltime employment.  While the participation rate dropped 0.1%, the employment to population ratio rose 0.1%.  Hours worked rose 0.2%.

            Despite ongoing problems with negotiating its Brexit exit, news from the UK continues in a mostly positive vein.  Unemployment is at historically low levels: the unemployment rate is 4.3% and the employment to population ratio is 75%.  Retail sales rose 0.3% for the previous month and were up 0.9% on a rolling three-month basis.  Inflation, however, is potentially problematic.  It rose 2.8% Y/Y, which continues a trend of slightly elevated price readings:

 

The bank of England argues that the post – Brexit drop in the sterling was the primary cause of these elevated price readings.  I believe this analysis is mostly correct.

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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