After what has been a solid month for equities and bond investors, month end flows have probably play their part in the price action overnight, US equities have lost momentum, UST have led a rise in core global bond yields and the USD is stronger. US and European inflation releases favoured the notion the Fed and ECB are done with their respective tightening cycles.
Global & Australian Forecasts – September 2013
Recent data show a promising lift in business sentiment in big advanced economies but financial volatility hitting emerging market growth prospects (India, ASEAN, and Brazil). Little change in headline global growth forecast with advanced economy upturn set to drive faster world economy
Recent data show a promising lift in business sentiment in big advanced economies but financial volatility hitting emerging market growth prospects (India, ASEAN, and Brazil). Little change in headline global growth forecast with advanced economy upturn set to drive faster world economy next year. Forecast 2014 upturn in key Australian export markets barely half that predicted for the world. Australian economy still growing below trend in Q2. Political factors boost business confidence but activity still poor. Outlook broadly unchanged with unemployment to exceed 6¾% in late 2014. Inflation outlook favourable allowing one more rate cut before year-end.
- Recent business surveys show a solid and synchronised lift in business confidence across the advanced economies whose annualised 3mma industrial growth now exceeds that of the emerging economies. This shift in the composition of global economic expansion back to the advanced economies has long been forecast and reflects the impact of their stimulative economic policy and the passing of recession in Western Europe. Big emerging market economies have been hit by financial market volatility as money moves back to the US in anticipation of better returns with impending Fed policy changes. Growth expectations revised down for India, emerging Asia and Brazil as their monetary policy will have to be tighter than would have been the case if there had been a more gradual market adjustment to the Fed’s planned moves.
- Q2 national accounts confirm that the Australian economy grew below trend in H1. Latest NAB survey provides further evidence that conditions remained poor in August, although confidence lifted sharply. The sentiment outcome is likely to reflect political factors, including an expectation of political change and more certainty about the future policy framework (survey conducted prior to election). Labour market forward indicators, including NAB employment conditions, deteriorated further suggesting more weakness in domestic demand to follow.
- GDP forecasts broadly unchanged this month: GDP growth to soften to 2.3% in 2013 before gradually rising to 2.5% in 2014 and 2.9% in 2015. Unemployment to exceed 6% by end 2013 and reach 6¾% by end 2014. Consistent with the soft activity outlook, core CPI expected to edge down to 2.3% by end 2013, lifting modestly to 2.6% by end 2014; rising unemployment expected to keep the brakes on inflation in 2015. We think there is a need for another 25 bp rate cut (probably Nov) to help industries squeezed by the mining investment slowdown.
For further analysis download the full report.
- Global & Australian Forecasts – September 2013 (PDF 455 KB)
- Monthly Business Survey – August 2013 (PDF 283 KB)