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Investors eye data for signs slowing growth is becoming a global trend

Monday 11th March 2019

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Investors will have eyes peeled for any indicators of global growth this week after a surfeit of news this month suggesting economies around the world are slowing.

United States non-farm payrolls showing that the economy added just 20,000 new jobs in February, when economists were expecting 185,000 after a bumper January when 311,000 jobs were added, was the latest piece of disappointing news.

It followed the European Central Bank shaving its growth forecast for the euro region this year from 1.7 percent to 1.1 percent and other weak US data. Australia's December quarter GDP numbers showed quarterly growth of just 0.2 percent and annual growth of 2.3 percent, missing forecasts of 0.3 percent and 2.6 percent respectively.

Weaker than expected data out of China has added to the general malaise.

“There's been a string of soft data points,” says Mark Lister, head of wealth research at Craigs Investment Partners, pointing to weak retail sales data in the US, other weaker-than-expected US data and US small business optimism falling to a two-year low, all unveiled in the past few weeks.

“That means all the data points we see this week will be much more important as we watch to see whether this is a trend,” Lister says.

Arguments for why we should discount recent data include the US partial government shutdown through December and January, the longest in US history, which is still having an impact.

For example, the retail sales figures for January will be released overnight New Zealand time on Monday after a delay of several weeks because of the shutdown.

“Two-thirds of the US economy is consumer spending,” so this data will be particularly closely watched, especially since the December data showed retail sales falling 1.2 percent, the biggest monthly decline since September 2009.

“The December retail sales data was quite ugly and the market got a little bit spooked by it,” Lister says.

“The weakness was broad, with 11 of the 13 retail categories declining. However, this poor showing is somewhat at odds with other data points,” he says.

“Generally, consumer discretionary companies, such as Walmart and Amazon, announced reasonable results during the recent reporting season and the December quarter GDP report also reflected a solid rise in US spending.”

Another factor to keep in mind is that for the past four or five years, the March quarter in the US has been particularly soft and that economy has gone on to pick up in the later months.

“It's by no means something to panic about, but it's still disappointing,” Lister says.

New Zealand has its own partial indicators of activity to watch this week, kicking off with electronic card transactions for February today and ANZ Bank's Truckometer - an indicator that uses car and truck movements to point to economic activity - due Tuesday. The Real Estate Institute's housing prices and sales figures for February are likely to be released on Thursday and the January migration numbers are due on Friday.

As well, retailer Briscoe Group, which owns the Briscoe's and Rebel Sports chains, will report its annual results on Wednesday.

On the back of its downward revision to growth, the ECB has reverted to printing money via giving banks cheap money in the hope they will pass the low interest rates onto customers and help stimulate growth.

It's just the latest in a long line of global central banks, including the US Federal Reserve, the Bank of Canada and the Reserve Bank of Australia, to have become more gloomy on the economic outlook.

“It's really hard for our Reserve Bank and Australia's Reserve Bank to be anything but dovish when you've got the big boys, the Fed and the ECB,” talking about slowing economic growth,” Lister says.

While New Zealand stocks enjoyed a good week last week, with the S&P/NZX 50 Index gaining almost 1 percent, the reasons for that are that “people are looking for safety, people are looking for predictable earnings – it's people being cautious and defensive.”

The message from central banks that interest rates are going to be lower for longer has boosted New Zealand utility stocks.

For example, Auckland International Airport shares gained 2.3 percent last week.


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