In this section, we look at the economic news affecting global markets this week.
- The RBA released its monthly minutes, no real surprises. It kept the cash rate at 1.5% and has since August 2016. The board is concerned about household consumption but encouraged by retail sales, which rebounded in December. It expects household income growth to rise. The RBA was also cautious about the outlook for wages growth and hours worked. What can be seen is that there is no urgency to tighten rates. The view among most economists is that the RBA will sit on hold for some time yet and are pricing in a rate hike in early 2019.
- Construction work done fell 19.4% in the 4Q. There was a large decline in total construction work done. Engineering work done tumbled by 35.4% due to the import of the Prelude & Ichthys FLNG platforms which fell out of the equation. Building work done rose by 0.2% in the 4Q giving a 1.1% annual rise. Residential work done eased by 1.9 per cent while non‑residential work done lifted by 4.0 per cent in the quarter.
- US Consumer sentiment rose in February to 99.9 last month. It was the second highest reading since 2004. Analysts had forecast the reading to slip to 95.4.
- The minutes from the Federal Reserve’s Jan monetary policy meeting show that that inflation target should be met in 2018. Some officials saw an appreciable risk of inflation lag to target. VIX slightly lower. Gold and stocks higher. The recent strengthening of the US economy increased the likely hood that rates will tick higher this year. Inflation will rise in 2018 and stabilise in the medium term. A couple of officials are concerned about the outlook. Some officials saw an appreciable risk of inflation lag to target. A number of officials raised economic growth forecast based on better data. The tax overhaul might have larger effects as previously thought and there it is important to monitor slope of the yield curve. Finally officials cautioned about market imbalances.
- British households are concerned about their finances with most expecting borrowing costs to rise again within six months after the Bank of England propped up rates last November. Markit said its Household Finance Index, a monthly gauge of financial well-being, fell to a seven-month low of 42.2 from 42.9 in January.T
- he Bank of England could end up raising rates faster than expected if required. Britain is growing slower than developed economies but is benefiting from a global upturn. Unemployment is at a 40-year low which is why the higher rates argument is back on the table.