Last week we presented with a veritable deluge of data out of the US. During the shutdown, the processing and publication of economic data was deemed to be a non-essential service, thus incredibly influential figures such as the Non-Farm Payroll number were kept under wraps. Luckily we got no major surprises when the figures were released, and the market continued to hit new highs for much of the week before finally consolidating.
Other than the US there were a few points worth noting. UK GDP rose 1,5%, a further indication that Europe seems to have turned a corner. Even Spain ended its record recession by posting a tiny uptick in growth. Given the scenarios that were in play just a couple years ago, such a Greek exit and a collapse of the Euro; this is quite positive for the global economy. We don’t need Europe to grow, though it would be positive, we would settle for the region not collapsing and dragging the rest of the world down with it.
In China, we did see a strange spike up in money market rates. Due to the strong influence that the government has in that economy, this move likely means that the government has decided to restrict money supply. A couple weeks ago, Chinese inflation figures came in higher than expected. In addition house prices continue to rise despite the Government’s attempt to stop it.
This week the US will release industrial production and capacity utilisation figures that the start of the week. We expect these figures to remain reasonably strong. At the end of the week, US vehicle sales figures are expected. The US car market has recovered strongly and should these figures back that trend we could see Platinum Group Metals rise, especially if AMCU goes through with its threat to go on strike at Amplats and Impala over the next few days. US inflation figures are scheduled for a mid-week release. Over the last few years, US inflation has not risen significantly, despite ever increasing QE. As long as demand remains weak, we can expect inflation to remain subdued.
Finally both the official and unofficial Chinese PMI figures are due out on Friday. Both are expected to show that manufacturing in the world’s second largest economy continues to grow, though the official number is expected to be significantly better than the unofficial HSBC figure. I am a little concerned about China at the moment. A few months ago we saw signs that their economy was slowing. This was something the new leadership didn’t want, especially at the start of their reign. Thus we saw some rather strong statements from the Chinese Government, setting out their targets for GDP growth for the year. As one would expect, they hit their goal and then some. However, we have begun to see signs that this push for growth may have had negative effects on other economic indicators including inflation.