Wednesday, 7 August 2013

Australia cuts interest rate to record low, European economy shows improvement

The Reserve Bank of Australia cut its official interest rate by 25 basis points to a record low of 2.5 percent on Tuesday. RBA Governor Glenn Stevens cited recent muted inflation and retail sales data for the cut.

Low inflation is also a reason for economists expecting more monetary stimulus from the Bank of Japan.

Data from Japan on Tuesday added weight to the case for more stimulus. The Cabinet Office reported that its index of coincident economic indicators fell 0.8 point in June, the first decline in seven months. The index of leading economic indicators fell an even larger 3.7 points.

However, economic data from Europe on Tuesday were more positive.

In the UK, industrial production rose 1.1 percent in June. Manufacturing output jumped 1.9 percent.

Other data from the UK on Tuesday showed that house prices rose in July at their fastest annual pace in nearly three years, retail sales were 3.9 percent higher than a year earlier and car sales grew 12.7 percent from a year earlier.

In Germany, factory orders rose 3.8 percent in June, the biggest increase since October.

Italy's economy shrank 0.2 percent in the second quarter, better than the 0.6 percent contraction in the first quarter. Italian industrial output rose 0.3 percent in June after having risen 0.1 percent in May.

Meanwhile, in the US, the trade deficit narrowed in June to the smallest in almost four years after exports rose 2.2 percent and imports fell 2.5 percent.

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