The relative strength of the US economy against its peers and other emerging market economies is showing on the strength of the USD that is up by a wide margin against most of the major countries. Read our weekly currency market analysis for currency values.
US economy saw 240,000 jobs added in September 2014 against upwardly revised 180,000 jobs added in August and against July numbers of 212,000 job additions. Unemployment rate was down to 5.9 % against 6.1% seen in August. The US economy has added close to 2 million jobs in this calendar year and unemployment rate has come off from 6.6% to 5.9% over the last nine months. The Fed is first ending its bond purchase program that is currently at USD 15 billion a month in October 2014 and will then consider rate hikes from record low levels of 0% to 0.25%.
US core PCE (Personal Consumption Expenditure) that is the Fed’s preferred gauge of inflation, rose annualized 1.5% in August from 1.47% seen in July and from levels of 1.48% seen in June. CPI (Consumer Price Index) rose 1.7% in August from 2% seen in July and 2.1% seen in June while core CPI that is CPI stripped of food and energy rose 1.7% in August from 1.9% seen in July and 1.92% seen in June. Fed’s inflation threshold is 2%.
US retail sales rose 0.6% in August from growth of 0.3% seen in July. Consumer confidence rose to seven year highs in August. US consumer spending rose 4.1% year on year in August, the highest growth seen in many months. US economy is expected to grow at 2.2% levels in 2014 and 3.1% levels in 2015 as per IMF forecast.
Eurozone inflation as measured by the CPI was at 0.3% in September 2014 from August levels of 0.4% and 0.5% levels seen in July. ECB target for inflation is 2%. Eurozone unemployment rate was steady at 11.5% in August against similar levels seen in July and June and down from 11.6% in May and levels of 11.7% seen in April and 11.8% seen in March and from record highs of 12% seen last year.
Eurozone industrial output fell 1.8% in August against a rise of 1% seen in July and from a fall of 0.3% seen in June. Manufacturing index fell in September indicating weakness in the economy.
ECB cut policy rates to record lows of 0.05% from 0.15% in its September 2014 policy and also cut the discount rate to negative 0.2% from 0.1% to discourage banks from keeping money with the ECB and encourage them to lend to the economy. ECB has announced purchase of covered bonds and asset backed securities to tackle deflation fears.
IMF forecasts the Euro Area to grow at levels of 0.8% and 1.3% in 2014 and 2015 respectively.
Japan manufacturing fell in September 2014 with the index at 51.7 against a reading of 52.2 seen in August. CPI Inflation stripped of sales tax increase was 1.1% in August from 1.3% levels seen in July.
Japan’s exports fell 1.3% in August against rise of 3.9% seen in July. Imports fell 1.5% in August from a rise of 2.3% seen in July. Japan recorded a trade deficit for the 26th straight month though the deficit was down 2.4% in August from July levels.
IMF forecasts Japan to grow at 0.9% in 2014 and 0.8% in 2015.
China Manufacturing stayed flat in September 2014 after falling in August with the official and HSBC reports showing the index at levels of 51.1 and 50.2 levels respectively down from July levels of 51.7. Home sales for the January to August 2014 period fell 10.9% as prospects of property bubble bust kept buyers away from the real estate market.
China’s trade surplus fell from record highs to levels of USD 31 billion in September. It had hit record high of USD 49.8 billion in August. Exports rose 15.3% in September against growth of 9.4% seen in August and imports rose 7% against a fall of 2.4% seen in August. CPI Inflation for August was at 2% down from July levels of 2.3% that was similar to June levels and against four months highs of 2.5% seen in May.
IMF expects China to grow at 7.4% in 2014 and 7.1% in 2015.