Fisher Investments Reviews the Week in the Economy: 11/11/2016

In the US, 31 S&P 500 companies reported Q3 earnings, bringing the total number of companies reporting to 481. October bank lending accelerated to 6.1%. With the yield curve steepening in recent weeks, banks are well-positioned to continue supporting investment. 

In the eurozone, retail sales fell 0.2% m/m in September, beating expectations. While this is the eurozone’s second consecutive monthly decline, sporadic deceleration is normal. Eurozone retail sales also had a weak stretch in September and October 2015, before rebounding.

In the UK, industrial production fell 0.4% m/m, with North Sea oil rig maintenance bearing much of the blame. Manufacturing output rose 0.6% m/m, beating expectations. September’s strong manufacturing growth follows August’s modest 0.2% m/m rise, leaving July as the lone negative—strongly suggesting Q3’s weakness was largely due to initial post-Brexit referendum panic. Once people saw life carrying on as normal, businesses and output recovered.  September UK trade was mixed, but strong imports underscore healthy domestic demand. Export values fell 0.4% m/m, while import values rose 2.5% m/m and export volumes (goods only) fell -0.8% m/m, while import volumes (goods only) rose 4.7% m/m. The increase in imports shows the weaker sterling hasn’t dented demand for foreign goods. While fuel imports explain part of the rise, import volumes ex. oil still rose 4.2% m/m. Conventional wisdom says weak currencies make imports more expensive, hitting consumption. But so far, it appears the UK’s economy is strong enough to weather the pound’s drop, as the country imported a far higher quantity of goods even as currency hedges started expiring. 

In Japan, September core machinery orders fell 3.3% m/m. This is the second straight negative month, extending the choppy long-term trend—and providing more evidence Japanese capital expenditure has yet to meaningfully turnaround. Orders from overseas were positive, demonstrating domestic demand as the weak link.

Hong Kong Q3 2016 GDP rose 1.9% y/y, exceeding expectations and Q2’s report. Private consumption rose 1.2% y/y, and trade’s rebound continued. Goods exports and imports have grown two straight quarters, after a couple of contractionary periods. This is another sign of a nascent recovery in the global goods trade.

Source : FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.