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Global growth concerns in the spotlight
Monday, 13 October 2014

Key highlights

IMF growth forecast downgrades reignite markets’ global growth concerns.
FOMC minutes show Fed’s concerns about the spillover effects on the US economy.
Business confidence eases further in the NZIER QSBO, but businesses still have expansion on the horizon.
 

Report prepared by:

Christina Leung, ASB Economist
Phone: +64 9 301 5661
Email: christina.leung@asb.co.nz

Market focused turned squarely back on growth last week, as the IMF downgraded its global growth outlook. The release of the FOMC minutes also revealed concerns amongst its members about the spillover effects of a global slowdown on the US economy, particularly given the strengthening in the USD.

The “risk-off” market sentiment was further compounded by the subsequent release of the dovish FOMC minutes, with members noting that US growth “might be slower than they expected if foreign economic growth came in weaker than anticipated”. Members were also concerned the maintenance of the “considerable time” reference to keeping interest rates low “could be misunderstood as a commitment rather than as data dependent”.

The Australian Bureau of Statistics also threw up some surprises when it released its latest labour market report last week. Employment declined in September, and the previous month’s record jobs growth was revised down. More details are below.

Here in NZ, the NZIER Quarterly Survey of Business Opinion showed further easing in business confidence over Q3. Nonetheless, businesses remained fairly confident about their own trading activity outlook, with hiring and investment intentions pointing to further growth in employment and business investment.

Over the week ahead the GlobalDairyTrade event will be keenly watched for the latest developments in dairy prices.  Offshore this week there are updates from the US on retail sales, industrial production and housing sales, and the Fed’s Beige Book is due.  Across the Atlantic, UK labour data, and Eurozone industrial production, international trade, inflation, and construction data are due. 
 

Read the full PDF Report

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