Fisher Investments Reviews Last Week in the Economy: 12/15/2016

In the US, the remaining 19 S&P 500 companies reported Q3 earnings. ISM’s November Non-Manufacturing PMI rose to 57.2, beating expectations—more evidence the vast US services sector is chugging along quite nicely. November forward-looking new orders slowed to 57.0, while the mining industry reported growing activity in November. October trade data were mixed, as imports rose 1.3% m/m but exports fell 1.8% m/m. Exports of capital and consumer goods also fell, and total goods exports suffered their first drop since May. However, this doesn’t necessarily mean the trade rebound is over—ISM’s Manufacturing PMI showed export orders expanding in October and November.

In the UK, November Services PMI beat expectations, rising to 55.2. October industrial production missed expectations, falling -1.3% m/m. Manufacturing output fell 0.9% m/m and mining output fell -8.6% m/m. While most headlines interpreted manufacturing’s slide as evidence Brexit is making the UK economy more unbalanced, it’s consistent with the long-term trend. UK manufacturing has been choppy for years without derailing broader economic expansion, as services make up about 80% of total UK output. UK October trade data were mixed. Exports hit a record high, rising 4.6% m/m but imports fell -3.6% m/m.

In the eurozone, Q4 started off on a positive note, where October retail sales rose 1.1% m/m, beating expectations—the fastest m/m growth since November 2013. October German factory orders smashed expectations, soaring 4.9% m/m—the highest increase since July 2014. Orders for investment goods drove the increase, rising 7.2% m/m. Export orders rose 3.9% m/m, while domestic orders rose 6.3%. The ECB extended QE by nine months but reduced monthly purchases from €80 billion to €60 billion per month. The ECB also lowered the minimum duration of bonds purchased from two years to one year and removed the ban on buying bonds yielding less than -0.4%.

In Australia, Q3 GDP missed expectations, falling -0.5% q/q, the first contraction since Q1 2011. Australia has famously avoided recession since 1991, but they’ve had one-off dips in 2000, 2008 and 2011. While mining investment fell -10.6%, most of the blame goes to weather conditions, which weighed on consumption and construction.

In Japan, Q3 GDP was revised down from 2.2% annualized to 1.3%, missing expectations for a slight upward revision. Private capex fell 0.4%, exports were revised down to 1.6%, and while imports were revised slightly higher, they were still negative (-0.4%). Inventories and business investment were revised down as well.

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.

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