NAB’s Non-rural Commodity Price Index is expected to ease in Q1 2024
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NAB’s Non-rural Commodity Price Index is expected to ease in Q1 2024
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Weaker global growth in 2024 to drive modest commodity demand
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There was a wide divergence in growth among major advanced economies in Q3 – with strength in the US in contrast to relative weakness in other countries. For Australia, recent data have confirmed that the economy is growing at a well-below trend pace, inflation pressure is continuing to moderate and the labour market has remained healthy.
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Global inflation slowed in September, including a softening in advanced economy inflation to its lowest level since September 2021. For Australia, we have revised up our forecasts for growth and inflation (in the near-term) while lowering our expected peak in the unemployment rate.
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Global inflation again picked up in August. A key contributor to recent inflation trends has been energy prices, with oil prices increasing since June. For Australia, our forecasts are unchanged. Recent data all point to continued resilience but the ongoing pass through of higher rates and high inflation still suggest consumption growth will soften in H2 2023.
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US equity and FX markets have for once pushed the bond market vigilantes out of the spotlight, albeit the weakness in stocks and strength in the USD doubtless owes something to the lagged impact of the earlier run up in Treasury yields to post 2007 highs
Bond markets are a little feisty ahead of the FOMC meeting tomorrow. NAB’s Taylor Nugent says a hold is still expected tomorrow but there are more signs that inflation isn’t beaten yet.
NAB sees a +0.5% q/q (1.9% y/y) GDP print for Q2 2023 which will confirm the slowing in domestic demand we have seen across other indicators. Both ABS retail sales data and our own transactions data points to a flat outcome for consumption following 0.2% growth in Q1.
Hopes have been raised of a soft landing for the global economy, although a number of headwinds remain. For Australia, our forecasts for GDP growth have strengthened marginally but we continue to expect growth to be well below trend in 2023 and 2024 as the impact of rate rises flows through.
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Our forecasts for the global economy are largely unchanged this month we expect growth of around 2.8% in 2023 before slowing to 2.7% in 2024. For Australia, we continue to expect quarterly GDP growth to be flat over the next three quarters, with growth of just 0.5% over 2023 and 0.9% in 2024 as the impact of rate rises flows through.
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After relatively robust growth in Q1, global activity looks set to slow in the near term. For Australia, we are seeing increasing signs that activity is slowing sharply after a very strong period of growth in 2022.
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Global economic data point to a bounce in growth in Q1, with China providing around 40% of this total. For Australia, we continue to expect growth to be well below trend at 0.7% and 1.2% in 2023 and 2024 respectively – though we have reverted to our previous expected rate call of a peak of around 4.1% and see a material risk that rates reach 4.35%.
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We continue to anticipate a sharp slowdown in global growth in 2023, while for Australia, there are signs that consumption is plateauing ahead of a likely slowdown later in the year.
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Our global forecasts are little changed this month. Also, our outlook for the Australian economy is broadly unchanged.
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A range of global indicators point to a more positive start to 2023 than we had previously anticipated, leading to an upward revision to our forecasts. For Australia the economy has remained resilient but we see growth slowing sharply later in 2023 and into 2024.
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Global business surveys continue to point to a weakening global economy, likely reflecting monetary policy tightening, the energy supply shock as well as COVID-19 related disruptions in China. For Australia, the recent national accounts data showed that the economy remained resilient in Q3 and labour force data continue to reflect a healthy but tight labour market.
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We see a sharp slowdown in global economic growth next year. To date, the Australian economy has remained very resilient although there are some very early signs of a slowing.
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Rapidly tightening monetary policy, an energy price shock in Europe and deteriorating domestic conditions in China are set to slow global economic growth to 2.3% in 2023. For Australia, we see growth slowing to well below 2% in each of the next two years, however we do not expect a major downturn.
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We see global economic growth slowing in 2023. For Australia, we continue to see below trend growth over 2023 and 2024 as the impact of the lockdown rebound ends, global growth slows and higher rates and prices begin to weigh domestically.
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We now forecast the global economy to expand by 3.0% in 2022 before slowing to 2.5% in 2023. For Australia, we have pulled back our near-term growth forecasts, with high frequency data showing a slowing in consumption growth. Following growth of 2.2% during 2022, we continue to see below-trend growth of 1.6% through 2023 and 1.8% through 2024.
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Globally, major central banks continue to tighten monetary policy in response to the highest inflation in decades, thereby straining household finances and leading to falls in asset prices. For Australia, we have not changed our view on the underlying trajectory for the economy but see greater risk for household consumption on the back of higher rates and inflation.
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Global inflation remains high and showing no signs of easing, placing pressure on household finances. For Australia, we have lowered our GDP forecast for this year and next, upped our near-term inflation outlook and incorporated a new, front loaded rate track for the RBA.
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We now expect the global economy to grow by around 3.4% in 2022 and 2023. For Australia, we continue to be optimistic on the economy expecting above-trend growth this year and ongoing strength in the labour market.
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The global economic outlook remains clouded by numerous factors, however, we expect that the global economy will grow by 3.7% in 2022 and then slow to a trend- like 3.5% in 2023. For Australia, GDP is expected to grow by a strong 3.4% this year – supported by healthy growth in consumption and ongoing gains in business investment.
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Globally, the conflict between Russia and Ukraine has caused a significant spike in energy prices – reflecting the importance of Russia in the production and export of oil, natural gas and coal, in combination with limited additional supply elsewhere. Locally, the war in Europe poses risks on both the activity and nominal sides of the economy, uncertainty is now highly elevated – but the central-case for Australia’s economy largely remains strong.
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Globally the Omicron variant of COVID-19 has spread rapidly; the sheer number of cases is disrupting economic activity as infected workers are forced to isolate. In Australia, we have revised up the expected rebound in Q4 GDP, but pulled down Q1 2022 as the spread of omicron weighs on the economy through both consumer caution as well as disruption to business.
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For Australia the Q3 national accounts showed a smaller hit to activity than we had expected but we continue to see a very strong snap back in activity in Q4. Globally, advanced economy growth was robust in Q3, and a similar outcome is expected in Q4 albeit with a shift in the source of growth away from Europe towards the US and Japan.
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We have trimmed our global economic forecasts this month to 5.7% for 2021, however should this occur, it would still be the strongest rate of growth since 1973. For Australia, our internal data and NAB Monthly Business Survey indicate the economy is again rebounding strongly as NSW and Vic reopen following the extended lockdowns through mid-2021.
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We have revised our global economic forecasts lower – to 5.9% for 2021. For Australia, a very sharp fall in activity in Q3 is locked in however we continue to expect a solid rebound in Q4 , and strong growth continuing into early 2022.
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COVID 19 remains the main risk to the global economic outlook, while in Australia the key risks to our forecasts remain the timing and pace of the easing in restrictions, and further out, the underlying pace of growth as the impact of policy measures fades.
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Due to lockdowns, we expect to see a large hit to activity in Australia in Q3. Our global growth forecast for 2021 is marginally weaker this month, 6.2% compared with 6.3% previously.
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Friday was all about US payrolls and the report did not disappoint. Along with solid employment gains, there were improvements in the other metrics of the US labour market edging us one step closer to a Fed tapering announcement. Market reaction to the data saw the UST curve bear steepened with the 10y UST Note testing 1.30% while the USD ended the day broadly stronger.
COVID-19 remains the most significant risk for our global outlook. While in Australia, the current virus outbreak in NSW and associated lockdowns/border closures highlights the uncertainty around economic forecasting at present.
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High frequency indicators continue to point to a recovery in the global economy in early 2021. In Australia, the economic recovery continues at a brisk pace with forward indicators pointing toward ongoing strength in activity and the labour market, even as some fiscal support is wound back.
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Autumn rain lifts EYCI outlook in the short-term.
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Rising restrictions to combat a resurgence in the spread of COVID-19 towards the end of 2020 slowed the global recovery but did not derail it. In Australia, the economy continues to recover at a rapid pace.
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COVID-19 continues to present some uncertainty around the outlook, particularly with the rollout of vaccines to emerging markets lagging that of advanced economies.
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The resurgence of COVID-19 in many parts of the world towards the end of 2020, has had a negative impact on the global recovery. Whereas in Australia, economic activity continues to rebound strongly.
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A range of key commodity prices rose in January.
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Globally GDP rebounded strongly across all the major advanced economies in Q3, however the spread of COVID-19 remains a key risk to the outlook. In Australia our outlook now resembles the best-case scenario we outlined at the start of the pandemic, although large uncertainties remain, even with a vaccine seemingly close to being rolled out.
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Markets have been buoyed by positive COVID-19 vaccine news, which could correspond with stronger economic activity and demand for commodities next year.
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2020-21 on track to deliver above average winter crop.
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COVID-19 remains a major factor influencing the global economy. While in Australia the RBA has lowered rates to a record low of 0.1% and announced a QE program.
Podcast
October was another mixed month in commodity markets.
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Trends in global commodity prices remain mixed.
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Globally, after massive falls in GDP in Q2 across the advanced economies, the latest indicators are pointing to a substantial, but incomplete, Q3 rebound. In Australia, GDP fell by 7% in Q2 – the largest fall in the history of the quarterly national accounts.
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At a high level, commodity prices broadly strengthened in August (with coal and gold the notable exceptions).
Growth is set to bounce back in Q3, but the recovery lost momentum through July/August.
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Demand fundamentals limiting outlook for wool.
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The global economy continues to recover from the impact of COVID-19. However, there is still a long way back with progress. In Australia, we have downgraded our forecasts due to the containment measures in Victoria.
Podcast
Commodity markets have continued to display differing trends.
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Massive fall in Q2 GDP.
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The global economy is forecast to contract by 3.5% in 2020, before increasing by 6.0% in 2021, and 3.9% in 2022.
Podcast
A number of commodity markets saw stronger prices in June –particularly base metals, gold and oil.
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May rebound, but virus spread a risk.
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2020-21 winter crop prospects strong.
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Extremely large falls in Q2 GDP for many advanced and emerging economies are likely, while in Australia we expect a large fall of around 8.5% in Q2, following the 0.3% decline in Q1.
Trends across commodity markets were mixed in May.
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April crash, tentative recovery in May.
We have revised down our forecasts for global GDP and now expect -3.8% in 2020, while we expect Australian GDP to fall by 8.5%.
Commodity prices generally fell in April – with particularly steep falls in oil and LNG markets, along with declines in iron ore and coal.
Q1 GDP falls as US goes into recession
The global economy is in a deep recession due to the rapid and widespread escalation in Covid-19 containment measures since mid-March. While the domestic economy is now expected to see a contraction of an unprecedented speed and magnitude.
Overall, the global economic outlook has deteriorated since last month, with the downturn expected to far exceed the Global Financial Crisis.
Insights from the Kennedy paper.
The US economy is undergoing a severe contraction.
We've significantly lowered our global growth forecasts, and in Australia growth slowed confirming a below-trend pace of growth prior to any virus impact.
Commodity markets generally remain volatile, reflecting the uncertainty presented by the Coronavirus (Covid-19) outbreak.
Risks remain amid rapid rise in cattle prices.
Fed to further cut rates at its March and April meetings.
US economy travelling well but Coronavirus clouds the outlook.
We have revised down our forecasts for global growth in 2020 to 3.0%. While in Australia we now expect a small negative for Q1 2020 growth.
Commodity prices have generally retreated in early February in response to the Coronavirus outbreak in China.
Growth likely slowed in Q4.
Dairy dynamics: prices, drought and costs impacting dairy landscape.
US-China deal reduces downside risks.
Unchanged forecasts for Australia with expected growth of 1.75% while across the globe we expect US growth to ease somewhat further and Japan’s economy is set to contract in Q4.
Economic conditions in 2020 are expected to remain unfavourable for commodity markets.
The waiting game - what's next for US-China “Phase One” trade deal?
Hopes of a US-China ‘Phase One’ trade agreement have lifted financial markets. While in Australia we've lowered our near-term forecast for growth.
NAB’s Non-Rural Commodity Price Index is forecast to fall by 7.9% quarter on quarter in Q4 2019.
US growth has slowed, but remains solid.
With growth having slowed in Q2 2019, there appears limited prospect of a turnaround in Q3 – given the relative weakness in business surveys, market expectations and the deteriorating global trade environment.
NAB’s Non-Rural Commodity Price Index is forecast to fall significantly in Q4 2019.
Economy tracking OK but trade & other headwinds will take their toll.
Global economic growth slowed further in Q2 2019. Major advanced economy (AE) GDP growth declined to its slowest pace since mid-2016.
In US dollar terms, NAB’s Non-Rural Commodity Price Index is forecast to increase by 1.8% quarter on quarter in Q3 2019.
China’s official response to President Trump’s latest round of import tariffs sent markets into a spin on Friday.
More Fed cuts likely as trade headwinds strengthen.
The latest escalation in the US-China trade war has reverberated through financial markets. The policy response will be important - we now expect two further 25bp cuts in the fed funds rate this year. China is also likely to use policy measures to offset any tariff impact, including allowing further depreciation of its currency.
The latest escalation in the US-China trade war – with the US imposing a 10% tariff on most remaining China imports – has reverberated through financial markets.
US dollar NAB’s Non-Rural Commodity Price Index is forecasted to increase by 2.1% yoy in Q3 2019, however underlying trends remain highly mixed. Higher export prices for LNG and iron ore (despite more recent spot price falls) are the key contributors, while both thermal and metallurgical coal are weaker, as are most base metals.
US economic growth slowed in Q2 2019 – will this trend continue? One implication is that the Fed will cut rates.
Indicators in major advanced economies point to a renewed easing in growth for the rest of 2019, driven largely by the US economy. Similarly in Australia, we expect growth to continue at a below trend pace over the next few years.
Global growth remains under pressure even with US-China trade dispute pause.
NAB’s Non-Rural Commodity Price Index has been on the up in recent quarters, in large part due to iron ore prices.
Horticulture exports grow to rival Australian lamb and dairy.
The Fed is close to cutting rates.
NAB’s Non-Rural Commodity Price Index is expected to increase by 0.9% quarter on quarter in Q2 2019, a little stronger than anticipated in May.
The Bigger Picture – A Global and Australian Economic Perspective – May 2019.
Trade policy turbulence continues to unsettle the global economy.
Trade risks realised.
US-China trade dispute a headwind to growth.
The Bigger Picture – A Global and Australian Economic Perspective – May 2019.
Trade worries overshadow tentative signs of activity stabilising.
Reflecting the sustained strength in iron ore prices, NAB’s Non-Rural Commodity Price Index is forecast to increase by 0.4% qoq.
In USD terms, NAB's Non-Rural Commodity Price Index is forecast to fall by 1.9% qoq in Q2 2019.
The bigger picture – A global and Australian economic perspective.
Growth slowdown continues; risks still to the downside
In USD terms, NAB’s Non-Rural Commodity Price Index is forecast to increase by 3.1% qoq in Q1 2019.
Year of the Pig brings an uncertain outlook
Global slowdown continues into early 2019
Confidence and conditions continue to ease
In USD terms, NAB’s Non-Rural Commodity Price Index is forecast to increase by 2.7% this quarter – driven almost entirely by the upturn in iron ore prices.
China’s economy continues to soften, but our outlook is unchanged.
Global Dairy Trade auction results have seen some upside since December after a fairly weak run over much of 2018.
Augmented Yield Curves in the US and Australia – what do they tell us about the growth outlook for Australia and the US?
Economic growth is likely to equal its post-GFC high in 2018.
The Bigger Picture – A Global and Australian Economic Perspective – December 2018
Initial indicators for Q4 suggest the economy continues to perform strongly towards the end of 2018.
Harvest is now underway for 2018-19 winter crop, a season which will likely go down as one of the most mixed in years.
Hands in pockets: Chinese consumers are confident but that doesn’t show up in retail sales data
The bigger picture, a global and Australian economic perspective.
US economy continued to grow strongly in Q3.
In US dollar terms, the NAB non-rural commodity price index rose marginally in Q3 2018 – increasing by 0.4% qoq. The strong upturn in the first quarter of this year contributed to a much more significant increase in year-on-year terms – up by 8.2%.
The bigger picture – a global and Australian economic perspective.
Solid headline growth masks divergent trends.
China’s consumers aren’t ready to drive the economy’s growth.
The bigger picture - a global and Australian economic perspective.
China’s trade relationship with the European Union.
Global growth appears to have remained above average through the first half of 2018, but with our leading indicator pointing to a moderation in coming quarters, we think that this will represent the peak for this cycle.
The US-China trade dispute dominated AUD/USD movements in July.
The US economy grew strongly in Q2 2018, driven by a rebound in consumption and further solid business investment growth.
The global economy remains in reasonable shape right now despite some pressures on Emerging Market economies.
Risk to world growth from trade tensions escalating.
NAB’s USD non-rural commodity price index declined by over 3% q/q in Q2 2018. This only partially reversed the large gain made in the previous quarter and, as a result, it is still 7.5% higher than a year ago. The fall in Q2 mainly reflected a decline in iron ore and metallurgical coal prices, although LNG export prices – linked to the price of oil – rose.
Economy off to a strong start early in 2018
My ‘whys’ haven’t changed over 25 years at NAB. I’m still driven by the impact economics has on our lives and the importance of delivering independent analysis that helps people and institutions make better decisions.
Australians rate restaurants, movies and travel as the most positive experiences their money can buy, according to new research from NAB.
2018 has been exceptionally dry across much of Australia, with knock-on downside to restocker interest and young cattle prices.
Can China maintain its stable growth profile as trade tensions increase?
Still see growth momentum improving.
Stability in financial markets over 2017 and early 2018 came to abrupt end in recent weeks, with a surge in market volatility and big falls in equity markets and prices for many commodities.
In understanding the drivers of the rise in AUD/USD from 0.75 in early December to above 0.81 in January, higher commodity prices have justified much of the move.
China’s official data may underestimate the strength of growth in 2017.
Steve Killelea, the man behind the Global Peace Index, explains its potential value in helping make investment decisions.
2017 was marked by a return to stability following the volatility of recent times and the rise of innovative new products, especially in the green and social sectors.
Uneven flows – how distortions in China’s data paint a very different picture of global trade.
2017 has proved to be another year of solid US economic growth and more of the same is expected in 2018, helped along by fiscal stimulus.
A good year for the world economy as growth rises above trend.
The Indian economy accelerated in the September quarter, recording a 6.3% yoy expansion.
Australia’s GDP continues to grow in spite of subdued wages growth and consumer spending. Gaining a greater understanding of how these contradictory trends break down across regional and metropolitan areas, as well as consumer spending categories, is behind NAB’s expansion of its Consumer Spending and Cashless Retail analyses.
The connection of Eastern Australia to global LNG markets has seen domestic prices face a wild year.
The Australian beef cattle industry has enjoyed a great run over the past couple of years, with the Eastern Young Cattle Indicator (EYCI) hitting a record over 720c/kg in September last year.
The read on business conditions was extremely strong in the October NAB Monthly Business Survey, with manufacturing posting a strong result despite the recent closure of auto manufacturing plants. The conditions index jumped to a record high, and while confidence is not quite as buoyant, it is holding above long-run average levels.
Advanced economies to drive lift to above trend global growth.
Watching the labour market and wages.
Indicators point to marginally softer conditions post China’s leadership change
There were very few consistent themes across the commodity complex this quarter.
Changing of the guard - what does China’s new leadership mean for its economy?
Another strong quarter of growth.
The Indian economy has slowed considerably since the first half of 2016.
China’s stable growth continued in Q3, but supported by another credit binge.
For Australia, outcomes in the September NAB Monthly Business Survey were generally upbeat. Business conditions remain rock steady at levels close to their multi-year highs, but business confidence rose only modestly after a big fall last month.
Global growth rising toward trend pace as advanced economies lift.
Repurposing an old tool – a new life for the Required Reserve Ratio.
The effects of the recent major Hurricanes affecting the US are clearly evident in some of the economic data.
China’s old economy surprises on the downside, may point to weaker Q3 growth.
Tightening the purse strings – China’s foreign investment is slowing in a more closely regulated environment.
All eyes on China’s steel sector.
In Australia, the August NAB Monthly Business Survey showed some mixed results, but is still encouraging overall.
Global growth lifts in mid-2017, heading back towards trend rate as pace of advanced economy output expansion picks up.
Increasing household wealth (due to rising equity and house prices), as well as a high level of consumer confidence, remain tailwinds for consumer spending.
The Indian economy decelerated in the June quarter, growing by 5.7% yoy, the lowest since March 2014.
Waiting to see if goals on tax and trade can make up for failure on health reform
After a sluggish start to the year, GDP growth rebounded in the June quarter and the labour market continues to tighten.
Chinese data generally weaker in July, returning to trend after strong June
Unwinding road ahead – weaker Chinese producer prices providing headwinds for advanced economy inflation
Global growth heading back toward trend after soft first quarter.
Old King Coal – coal still a big part of China’s energy mix but its role is on the wane
Steady as she goes – economic growth and other key indicators stable in Q2.
Following a slow start to the year, GDP growth looks to have accelerated in the June quarter.
Gold began 2017 strongly, up 8% in the first half - despite falling 2% in June. This weakness has continued into early July, with the strong US payrolls data exerting further weakness on gold. However, gold received some support following Fed Chair Janet Yellen’s semi-annual testimony, which the markets interpreted as somewhat dovish.
Global upturn remains in place despite the risks.
Inflation has slowed recently even allowing for ‘one-offs’.
Indian economic growth decelerated in the March 2017 quarter, with real GDP expanding by 6.1% in yoy terms.
Global upturn remains in place although momentum stalled in early 2017
Trends stable across the board, no sign of a major economic slowdown.
Production growth to decline or slow in 2017 and 2018.
After a slow start to the year, early indications for June quarter GDP are pointing to an acceleration in growth.
Belt and Road Initiative – can the reality of the program meet China’s grand ambitions?
A slow start to the year…again.
Key indicators a little softer in April, pointing to easing economic growth in Q2.
Economy regained its footing over 2016 GDP. It grew in each quarter in 2016… the first year this has occurred in since 2005.
No FTA yet, but deepening trade prospects.
China’s income inequality improving but still some long term challenges.
An improving US-China relationship provides a better environment for China’s economy.
In March, the NAB Monthly Business Survey results pointed to an overall healthy economy that is gaining momentum, at least in the near-term.
Geo-political risks fail to dent global reflation...for now.
Geopolitics took a backseat today with Trump’s Wall Street Journal interview dominating market moves.
The global macro picture has been muddied by a rise in geopolitical tensions, economic data releases overnight have been largely ignored and safe haven assets have outperformed.
Prime Minister Turnbull visits India after important economic reforms.
Investment indicators looking better
Head of Asia Business Development, NAB Business & Private Bank, Laura Mattiazzi recently hosted a roundtable discussion at the Global Food Forum addressing the challenges and opportunities facing cropping industries - and how Australian businesses can compete globally.
Rise of the machines: could automation help sustain China’s long term growth momentum.
More Chinese tourists are starting to prefer free independent travel over group tours, according to data from Tourism Australia.
Jobs growth, business surveys and consumer sentiment all point to an economy in good shape.
In February, the NAB Monthly Business Survey moderated from the surprising strength seen in January, but remained consistent with a relatively robust view of business activity and investment behaviour in the near-term.
Global reflation continues, political risks to navigate
An encouraging start to 2017 – although strength still comes from the old economy, with retail trends disappointing.
Foreign multinationals suggest quite good expectations for capital investment in the next 12 months
Business survey suggests solid near-term activity, despite easing from multi-year high.
Prices have seen a gradual recovery from the mid-2014 to early 2016 price slide.
Financial markets rallied strongly shortly after it was clear Donald Trump would be the next President. This was evident across stock, currency and bond markets, and there was also a decline in credit spreads.
Change to fed rate call - March hike now expected.
Likely outcome is that the Euro-zone survives.
The International Monetary Fund expects India to retain and strengthen its recently acquired tag of being the fastest growing economy in the world.
Strong European data failed to excite markets – the exception being equities – as the upcoming French Presidential elections take centre stage. Betting markets now ascribe Eurosceptic Le Pen a 34.2% chance of winning, while a poll by Elable for L’Express magazine overnight puts her within striking distance in a run-off with Fillion with 44% of the vote – inspiration for today’s title “Livin’ on a Prayer” by Bon Jovi.
For the 2016-17 season, we developed a new wheat production forecast model, based on regional rainfall and state yields going back to federation, with an allowance for technological change.
With the US out celebrating president’s day, Europe was always going to be the focus in the overnight session. My dad used to listen to Santana, so the first song that came to mind was “Europa”, a mellow song with no lyrics, but notable for Santana’s guitar solo.
One feature of Australia’s recent employment growth has been the subdued pace of full-time job creation at a time when part-time employment has grown strongly
Just over a week ago, President Trump promised a ‘phenomenal’ tax announcement in 2-3 weeks, so as the clock ticks down to some form of announcement, market inertia is set to reign.
Business surveys and measures tracking the volume of activity suggest that the global economic upturn lifted a notch toward the end of last year and that trend seems to have continued into early 2017.
Don’t be alarmed. It’s not that markets have spat the dummy, but rather US equity markets are down, having opened high, with bond yields also lower. In the currency space the USD has been softer, Euro, Sterling and the CHF stronger. The Aussie has been steady-to-lower, though hugging 0.77, supported by the soggy big buck.
Brighter signs suggest moderate global reflation continues
My colleague Rodrigo Catril warned yesterday of the possibility of a US Fed March rate hike – what he termed the Ides of March. That argument gained further currency overnight with the US CPI and core‑Retail Sales printing double the market consensus.
Reaction to Fed Chair Yellen’s semi-annual testimony before the senate triggered a sell-off in US Treasury yields and a broad USD rally as she left the door open for a rate hike as soon as the next FOMC meeting in March.
The RBI, somewhat surprisingly, maintained the policy repo rate at 6.25%. Uncertainty about the effects of demonetisation and sticky core inflation were factors.
The strength witnessed in last month’s NAB Monthly Business Survey continued into January, with both business conditions and confidence jumping to much higher levels.
The message in American band Daughtry’s 2011 song later covered (with aplomb) by the Arctic Monkeys is, according to the writer, “Your significant other is in the right and just like she said it would happen, you come crawling back”
Last week the USD regained its mojo largely thanks to President Trump's hint of a phenomenal tax policy announcement and on Friday the USD waivered, particularly against JPY when at a joint press conference with Japan’s PM Abe, President Trump responded to a question about currency devaluation saying that "we will all eventually...be at a level playing field." and then added "That's the only way you can fairly compete in trade”.
The US economy continues along the same moderate growth path it has experienced in its recovery from the Global Financial Crisis.
From a political perspective, President Trump’s decision to withdraw from the TPP reflected US sentiment against globalisation, particularly in the mid-west rust belt.
The Trump-trade was reignited overnight on the back of the President flagging an impending “phenomenal” tax announcement.
It’s been a rather listless overnight session as the US earnings season is drawing to a close with one of the best quarters of growth for quite some quarters. But that, and the tantalising prospect that corporate tax reductions and deregulation from the Trump Administration, and hopes of better growth, seems to be priced in.
In what has been a quiet night of data releases and tweets from President Trump, the USD has been the quiet achiever amid simmering political and fiscal uncertainties in Europe, softer oil prices, flat US equities and lower US Treasury yields.
It’s been something of a risk off session to open the week. There’s been a focus on the upcoming French Presidential elections, ECB President Draghi has been batting back criticism from across the Atlantic on currency manipulation (regretting nothing), US markets fretting about the extent of timing of Trump reflation, not to mention ongoing tweets.
Fed pressure index signalling upside risks for US inflation and interest rates?
A bit of early 19th century opera to kick off the week (don’t fret, I’m sure we’ll be back in rock & roll mode for the rest of the week).
The supposedly “lively” conversation that President Trump and PM Turnbull had yesterday over the Australia-US refugee deal has gotten quite a deal of not just Australian press but international press coverage overnight.
The major event overnight was the US FOMC meeting where rates were left on hold as expected. There were very few changes to the post meeting statement with the Fed playing a straight bat. Markets were somewhat disappointed with Treasury yields and the US dollar reversing earlier gains that had occurred following stronger than expected US economic data.
More unwinding of the Trump lower taxes/higher infrastructure spending US$ reflation trade has again been the order of the day. The Bloomberg spot USD dollar index is down by ¾% as markets again sell the big buck, reacting to the latest statements from the new Administration, selling kicking off earlier in the session with some safe-haven buying of JPY and CHF in response to the immigration policies.
Australia’s service sector already accounts for 70% of our GDP and shows no sign of slowing its growth. That means it’s never been more important to understand the where, what and how of Australia’s most important economic driver. NAB crunches the numbers for you.
Business confidence has held up quite well and is remarkably steady given the context of major uncertainties both at home and abroad. That said, the level of confidence has not picked up to reflect the overall strength in business conditions seen over the past year or more.
New Order’s Blue Monday is the best-selling 12 inch single of all time in Britain (mmm I wonder how many 12 inch singles are out there!) and is also the longest charting single at 7:25.
While we are receiving many questions about the impact of President Trump’s policies on the outlook for the US and global economies and markets, the most frequent question we are being asked about Australia is “why is NAB forecasting two interest rate cuts in 2017” (in May and August)?
We expect growth to face some headwinds in coming quarters but to strengthen later in the year and into the next, assuming the President delivers a fiscal stimulus to the economy
A glance at Friday’s New York opening and closing levels for major FX rates tells us that the latest flurry of US data, including a slightly softer than expected Q4 GDP print and downside miss on headline durable goods orders, came and went without much fanfare. US yields dropped on the 1.9% headline GDP print while currencies and stocks did very little.
Sydney music producer Flume claimed the top spot in Triple Js 2016 Hottest 100 yesterday, but many will consider the moral victor to have been Melbournian busker Tash Sultana for her brilliant ‘Jungle’.
Today’s 1994 classic Hot Potato by The Wiggles is likely to be seared into the memory banks of parents and children alike – likewise for your scribe. A staple the humble spud may be, but possibly an expensive one in the 4th quarter according to our economists.
Economic reports have been scant overnight. Trump, trade, executive orders and a White House press briefing have provided wire feedstock for news and trade into Asia trade today.
Apartment construction which has risen strongly over the past few years was reported by the Statistician to have declined in the September quarter.
China records a comparatively strong finish to 2016, but Trump trade uncertainty adds downside risk to our moderate easing forecast for 2017.
Re-building the US industrial base, aiming to “massively increase jobs, wages, incomes and opportunities for the people of our country” is the principal economic objective of the Trump Presidency.
In a defiant and brief speech, President Trump made it clear that from now on “It's going to be only America first” and in what has now become a great economic debate he reiterated his view that “Protection will lead to great prosperity and strength”. Against this view, history and economic theory tells us that protectionism usually involves an increase in tariffs and a decline in trade.
The key views of NAB and BNZ's economists and strategists
Markets continue to digest Yellen’s speech yesterday which was seen as mildly more hawkish and positive US economic data overnight played into that view. The ECB also met last night with Draghi coming off as slightly dovish, playing down the recent uptick in inflation and remaining committed to the asset purchase program.
It’s been a reversal back to USD strength overnight – including a late session kick along from the Fed Chair, more on that below - the Bloomberg spot dollar index up 0.35% before she stepped up to the plate, and another ½% since.
Never underestimate the ability of markets to discount the same news twice. Or in the case of the US dollar, the ability to ignore a relevant piece of news one day only to react with alarm to it a day or two later.
While prices are likely to stay subdued for some time, increased volume will see the value of exports increase significantly.
In 1979 President Carter endorsed a bill to have a holiday in honour of Martin Luther King (MLK), but a Conservative Congress at the time refused to pass the bill. Eventually President Reagan signed the holiday into law in 1983 and it was first observed three years later.
Donald Trump’s inauguration as the 44th President of the United States (45th if you count Grover Cleveland as both the 22nd and 24th President) will capture the world’s attention on Friday.
Australia is ranked the most favourable country to conduct business by Chinese business leaders and business engagement between Australia and China is expected to increase over the next 12 months, a new report has found.
Walking on a Dream was the inaugural 2008 hit song by Aussie electropop outfit Empire of the Sun. That seems an apt description of how markets have been since the election of Trump with a dream run for equities and the US dollar all premised on the idea of a Trump fiscal stimulus boosting growth and inflation. Now with inauguration just a week away (20 Jan), markets are asking “is it real”?
According to the most recent surveys, business conditions and household sentiment are solid, and on an upwards trend.
The overnight session has been a tale of two halves, a dull affair ahead of Trump press conference and a volatile session post.
US small business owners tend to be Republican, and those who are member of the National Federation of Independent Businesses (NFIB) overwhelmingly so. Thus optimism among NFIB members surged to its highest level since 2004 in December and with the monthly increase, from 98.4 to 105.8, the largest since 1980.
Steve Lambert, EGM Capital Financing, explains, innovation and volatility again dominated 2016. Markets were challenged by social, political and economic events which brought about new opportunities for our customers. We delivered insights and solutions to help them face into the increasing environment of disruption and regulation.
Global equities were mostly lower overnight, dragged lower by the oil price. That added to an already uncertain tone following indications that the UK may be hurtling towards a harder Brexit than first thought.
When thinking about a title for today’s note and the impact the US labour market report had on Friday’s session, Aristotle’s quote ” the whole is greater than the sum of its parts” seemed quite fitting, but way too long for a title.
Overall consumer anxiety eases a little more in Q4, but our spending behaviours are still yet to respond.
It seems unlikely that Italy’s largest Bank, Monte dei Paschi di Siena, will meet today’s timetable to raise five billion Euros and provide a lifeline beyond March.
Tapas Strickland shows his knowledge of the Classics, describing yesterday’s RBA minutes as Delphic, in places.
Australia’s population growth remains strong by historical and international standards at around 1.4% y/y. That is 338,000 persons in the past year – nearly equivalent to the population of Canberra being added to Australia each year.
Janet Yellen gave a talk this morning reinforcing the commentary around the strength of the US economy, pointing to steady growth in jobs and rising living standards. A less rosy picture for Australia, of course, but, not bad enough for ratings agencies to act.
China’s capture of a US Navy Drone showed that the US dollar is not infallible.
China is similarly an important market for US producers, being the country’s third largest export market in 2015
Global economic growth remains moderate with a sub-trend pace of GDP expansion set to continue.
The US dollar continued to rise after the FOMC rate decision yesterday and Janet Yellen’s more Hawkish tone.
The US Fed delivered their anticipated 25 basis point rate hike this morning, but they surprised markets by announcing an expectation of three further rises in 2017, one more than previously anticipated.
Monthly business survey readings provide the most up to date measure of the pulse of global economic growth, they have been improving in the months leading up to November.
China’s trade surplus narrowed in November, as a strong month-on-month rebound in imports narrowed the gap.
It’s been a rather uneventful night as the offshore markets did some more final positioning ahead of tomorrow morning’s FOMC meeting.
In Chile, Tuesday 13th instead of Friday 13th is considered to be an unlucky day.
How fast (or slow) is Australian employment growth?
After a strong third quarter, the US economy remains on a solid footing based on the most recent partial indicators.
Shock and awe is how one London based analyst described the Saudi’s decision to cut oil production even further at the weekend.
Mario Draghi had the markets wondering whether the European Central Bank would extend its bond buying program or start tapering its commitment. In the end, it seems, they’ve done both.
Sterling was the worst performing G10 currency overnight, in part because of worst than expected industrial production figures.
Back in March 2011 Lady Gaga’s hit “Born this way” was leading the music chart in Australia and Pink was number one on the Billboard chart.
The market’s knee jerk reaction to “no” outcome from the Italian referendum saw the Euro fall back by over a big figure for an hour or so, but that was it.
NAB economists continue to monitor recent disappointing momentum in indicators of the NSW economy, employment and – until Friday – also in retail sales.
An early song from English progressive rock band Barclay James Harvest. No, it’s not on my playlist either.
The income measure of GDP is likely to be mixed, but stronger than the expenditure measure
Talk of oil cuts has been enough to see prices rise again overnight, up 15% this week. So what’s it doing to bond yields and the US dollar?
Oil prices shot up when OPEC announced that a deal had been reached in Vienna, giving special dispensation to Iran, but overall cuts across the group.
The key event this week will come from Vienna where ministers from OPEC are scheduled to meet and hopefully finalise the first cut in oil production in eight years.
Since the middle of 2015, the seven-day Shanghai Interbank Offered Rate (Shibor) has been unusually stable – when compared with the extreme volatility in this market over the preceding five years.
Oil remains a keen focus with prices back up around $1 a barrel.
Rising oil prices from early this year and again from the middle of the year have been associated with rising medium-to-longer term US inflationary expectations (and indeed expectations globally).
Oil prices, of course, have a massive bearing on the rate of inflation throughout the world. That's why the outcome of OPEC talks this week are crucial.
In his 2007 best seller “The Black Swan” Nassim Taleb uses the life of a thanksgiving turkey as an analogy for explaining a black swan occurrence i.e. a tail event that is so remote that is completely unforeseen.
The song by Angus and Julia Stone (my absolute favourite Sydney band) made number 1 on Triple J’s Hottest 100 songs of 2010 and was responsible for propelling them on to the international stage. Big jet planes were also responsible for the 4.8% jump in US October durable goods orders reported last night and which […]
The USD continued to march a little higher, the Bloomberg spot dollar index up another 0.14%, gains mostly against the Euro, the Yen, and Sterling, the latter from some self-inflicted news.
The S&P 500 hit a new high overnight, largely because of a spike in oil prices as Vladimir Putin steps in and says he expects OPEC to reach a deal next week, and agreeing to limit production in Russia.
Our feature article in this Weekly delves into the recent slowdown in employment, which if it continued into 2017 could be the catalyst for further RBA easing.
A key question this week, for the AUD at least, is whether local exporters will continue to stand aside expectant of still better levels to initiate longer dated hedges and/or whether local real money will now look to lift hedge ratios.
For those who thought there was a chance Yellen may depart the Fed early, those notions were cast aside with Yellen indicating she was very much Stayin’ Alive and was intending on serving out her full four year term.
It’s been an overnight session of digestion and reflection for the market, one week on now from the Presidential election.
It’s been a night in which the US bond market has staged a mediocre rally – not quite a party – for most of the session, tilted to the belly of the curve and the long end. It looks to have been some profit taking after the surge in yields since the US election.
Leonard Cohen passed away last week and on my way in I was listening to a mix of folk tunes with the hope of finding one of his songs as a title for today’s note.
China’s economic stability continued into October, however President Trump poses downside risks to the outlook
While it is reasonable to expect economic change, the degree is understandably uncertain given that in recent days some of the President Elect’s policy positions have been softened and meanwhile policy initiatives will need to be approved by Congress.
While the 24-hour news cycle may talk down Australia’s transition from a commodity to service economy, the figures tell a different, and very positive, story.
Following the severe earthquake this morning in South Island NZ, the Wellington CBD is out of action including the BNZ Harbour Quays building. BNZ Markets will be operating from Auckland / Christchurch and DR sites.
The new President and administration will take office at a time when the economy is in reasonably solid condition at the macro level.
Monthly business survey readings provide the most up to date measure of the pulse of global economic growth – and they have been improving in the months leading up to October.
Prospects of greater US fiscal spending (infrastructure and tax cuts) under a Trump Presidency continue to buoy equity markets, while US bond markets are sold on the prospects that such policies are inflationary.
16 Years ago the Simpsons episode “Bart to the future” aired for the first time with a plot partly consisting of Lisa becoming president of the United States. Lisa tries to get the country out of financial trouble due to the high levels of debt left by the previous president, Donald Trump.
US election highlights social and economic tensions
And it’s on two fronts this morning. The first is of course the election outcome as America votes to elect its 45th President. The second story relates to news breaking out of China yesterday that the authorities are stepping in to take the heat out of coal and steel-related prices.
Today feels a bit like a trip into the unknown with the US election entering its final stage as Americans head to the polls tonight.
Another big story for the Australian economy this year has been the strength in bulk export commodity prices.
Modest dollar strength and higher Treasury yields was the initial response to the US payrolls data but proved fleeting.
The global aluminium market continues to be driven by Chinese producers, which plan to add significant new capacity at lower costs.
The focus for markets overnight was well and truly back on the UK with Sterling the stand-out performer overnight, trading this morning with a solid 1.24 handle, a full three big figures above where it opened the week.
This Fed meeting came with no press conference and updated forecasts for this meeting; that next comes at the December 15 meeting.
Economic stress provides the backdrop to an acrimonious campaign.
US Equities are off, the VIX is up, the US dollar is lower, US Treasury yields are lower and the Mexican Peso/Japanese Yen cross (-2.5%) is still proving to the be the FX market’s weapon of choice when it comes to reflecting sentiment regarding the prospect of Donald Trump.
There was no scary ending to the month of October with markets in general playing it cool ahead of a busy week of data releases, central bank meetings and what is turning out to be a fairly dramatic US presidential election.
US GDP growth accelerated in the September quarter to its fastest pace in two years.
This week we report on the views of Japanese clients of Australia following a recent trip to the country.
Research has identified that the Australia-China economic relationship is broader than previously assumed, with considerable new growth opportunities for Australian businesses in agribusiness, manufacturing, real estate, tourism, education and finance and professional services.
Turbulence, a little known track by American pop punk band Bowling for Soup appears to be an appropriate title for today’s note. The song was written by Jaret Reddick after he asked a pilot whether he found turbulence frightening.
Seven years on from their 1974 classic ‘Whiter Shade of Pale’, Procol Harem’s light-hearted ode to the health benefits of fruit is set for a test today. Healthy on the body fruit may be, but possibly not on the hip pocket in Q3 according to our economists.
While European markets started the week in a lethargic mood, trading sideways for most of the day, US stocks opened higher following a series of merger announcements with the market also getting a boost from better than expected earnings reports.
With the RBA a keen inflation targetter, albeit within a flexible medium-term framework, each quarterly CPI reading provides an important update on current inflation trends and is a key input into the Bank’s forecasts.
While GDP growth has been modest, jobs growth remains solid and inflation is edging up.
China faces some interesting healthcare challenges over the next few decades – and Australian companies are well placed to be part of the solution.
Auction clearance rates in Australia this weekend hit 80% - not just in Sydney and Melbourne but nationally and for the first time since early 2015.
The ECB meeting came and went with absolutely no change in policy, as expected.
China’s economy continued to track sideways – but weaker real estate could cool conditions in Q4
The revelation by Bank of Canada Governor Stephen Poloz following an as-expected unchanged monetary policy decision that the Bank ‘had actively discussed the possibility’ of further monetary policy easing at Wednesday’s meeting.
Ahead of today’s welter of Chinese GDP and activity data, the AUD is trading this morning almost bang on where it was yesterday afternoon.
Bruce Springsteen cautious man tells the story of a man that has doubts about his marriage and in a similar way markets have started the week in a tentative mood reflecting some concerns on the outlook.
In contrast Janet Yellen’s speech in Boston did - primarily in the form of higher Treasury yields at the longer end of the curve and with that late-day support for U.S. dollar. NY Fed President Bill Dudley said he expects a rate rise this year on current forecasts.
The bigger picture – A Global and Australian economic perspective.
Time will tell whether the softer tone over the past 24hr is just a small correction or a sign that a bigger change is coming.
While the FOMC Minutes captured the market’s attention, for your scribe the most instructive comments came from the Fed’s Dudley who serves as the FOMC vice-chair in his fireside chat overnight.
Global economic growth remains soft with a sub-trend pace of expansion set to continue and few signs of an upturn.
The RBI cut the policy rate by 25bp to 6.25% at the October meeting.
Coming into work this morning I couldn’t help but think of Diana Ross’ Chain Reaction. It certainly was where US markets were concerned, with markets playing catch-up following the Columbus Day holiday to developments since the weekend.
Well it wasn't exactly midnight, but close enough. In a night that was expected to be relatively quiet given the US was celebrating Columbus Day, oil prices provided some fireworks after President Putin announced his support to a production freeze or even cut in oil output.
The past week has been dominated by bond yields moving higher as have oil prices.
Friday night’s US payrolls report underwhelmed for the second month running, showing a 151k employment gain.
Last night the ECB released its accounts of its September policy meeting and as expected there was no mention of tapering, the Bank reiterated its willingness and ability to ease further, if needed, while concerns over the lack of an uplift in core inflation was also evident.
Last night’s US non-manufacturing ISM report was certainly something to behold, with not only the headline read of 57.1 more than reversing the August drip.
Core global yields and the Euro have been disturbed by a Bloomberg report claiming ECB officials were considering QE tapering while early in the session the Pound was under renewed pressure trading to a new post Brexit low.
Selling of Sterling re-emerged in the Asia session yesterday and into London as the prospect of a “hard” exit from the EU loomed large.
Having just returned from a client tour this past week in the Riverina in southern NSW, there was also one topic that is currently front and centre for local farmers, and that was “rain”.
Who says fairy tales don’t come true with the Western Bulldogs and Cronulla both taking the silverware in the AFL and NRL grand finals over the weekend. Great results for both teams.
If Janet Yellen has been in the recording studio at the time, David Byrne might well have been directing his lyrics in her direction.
The main focus by markets ahead of Tuesday was no doubt the US Presidential Debate, billed as the showdown of the century.
Four hours before an estimate 100 million Americans tune in to watch the two wannabe leaders of the free world go head to head, and a Bloomberg poll published around 7pm Australian Eastern Time last night shows Clinton and Trump tied on 46%.
Not a huge amount to say about Friday’s offshore markets (unlike Saturday night’s AFL preliminary final), characterised by a give-back of some of the post-FOMC stock market euphoria, fractionally lower US bonds yields and a slightly stronger dollar.
24 hours on, under my [central bank] umbrella is how the markets have interpreted Wednesday’s US FOMC meeting.
It’s now a sea of green in the US equity markets in reaction to the Fed leaving rates on hold this morning, leaving the Fed funds rate at 0.25-0.50%, as nearly universally expected.
A rather measured night again in the lead up to the FOMC tomorrow morning and the BoJ meeting today where the Bank has been honing its thinking on policy to lift inflation.
Markets have been tapping their fingers overnight in the lead up to the Fed meeting. Currencies have traded in very contained ranges, the USD only somewhat softer again with the US Treasury curve up 1-2 basis points for the session.
For this week’s weekly we take a closer look at Australian household balance sheets.
August U.S. CPI data turned out to be the driver of much of Friday night’s market price action. The 0.3% rise in the core CPI series pushed annual growth up to 2.3% from 2.2% - matching its post-recession cycle high and versus the 2.2% expected.
The bigger picture – A Global and Australian economic perspective
The rust belt region has continued to underperform in recent times – as service focussed provinces have driven a greater share of China’s growth. In 2015, the three rust belt provinces were among the four weakest growing regions.
During the US dollar’s recent revival associated with deteriorating global risk sentiment and steepening yield curves, the commodity currencies – in particular the AUD and NZD – have been the hardest hit.
Mental preparations for another onslaught of selling bonds and equities offshore were put on the backburner with markets becalmed overnight.
Global growth still not lifting off.
Yesterday Brainard's comments appeased fears of an imminent hike in September, but concerns of a rising belief within the Fed that the benefit of keeping monetary policy accommodative is waning appears have left markets uneasy
No surprises in the latest data, weaker real estate sector leads to a softening in the growth profile
The most market-sensitive events this week are an RBA speech Tuesday morning, the NAB Business Survey (also Tuesday) and the latest Labour Force statistics on Thursday.
Well there’s one conspiracy theory that has come to nought. That Fed Governor Brainard – a monetary policy dove to now – had become more policy hawkish and indicate that next week’s September 20-32 FOMC would be “live”.
If anyone harboured thoughts that global markets weren’t completely in the thrall of the ‘could they, would they?’ debate about the Fed’s 2016 intentions, they were disabused of the notion from the US get-go on Friday.
Three main developments overnight, a spike in oil prices, a somewhat more content ECB President, and a renewed AUD warning from RBA Governor Stevens in an AFR interview, the AUD in the wake of the interview pulling back from over 0.77 to 0.7642 this morning.
It has been a relatively quiet night for markets with the moves in GBP probably the major highlight. BoE Governor Carney faced the Treasury Select Committee in parliament and was quick to give himself a nice pat on the back for the bounce in business and consumer surveys in August.
The recent ramp up in Fed rhetoric aimed at putting the market on the scent of an imminent Fed funds rate hike took another blow last night following a sharp drop in the August ISM non-manufacturing index.
In offshore markets depleted by the absence of the United States off for Labor Day, latest UK economic data and gyrations in the oil price captured most of the overnight headlines.
This week, we thought we would focus on three themes: (i) Friday night’s US labour market data; (ii) this week’s upcoming Australian Q2 GDP data; and (iii) some thoughts on apartment settlements.
Despite inflation remaining stubbornly below the Fed’s 2% goal, lower unemployment can still be expected to generate price pressures.
The August US employment report turned out to be something of a Goldilocks affair.
Q2 GDP growth expected to ease to 0.3% in the quarter (down from 1.1%)
Jump (for my love) was a classic 1980s hit by the Pointer Sisters and one suspects would be particularly high in the Spotify lists of several Fed officials after last night’s weaker than expected Manufacturing ISM.
One of the first things that I learned when I arrived in Australia a few years ago is that spring in southern hemisphere countries doesn’t start on the same day.
The trading partnership between Australia and New Zealand is a strong one. With the earliest trade agreement between the two countries dating back to 1922,
As we went home yesterday evening, there was pretty keen anticipation of a forthcoming Bloomberg TV interview with Fed vice-chair Stanley Fischer.
Apparently this 1989 hit by the Rolling Stones was written by Mick Jagger as a response to Keith Richards solo effort “You don’t move me”.
Janet Yellen’s Friday morning appearance at Jackson Hole proved not to be the damp squib that many were expecting.
In a night of still very contained major FX crosses, Fed commentary has started to kick in from Jackson Hole.
Only on line one and I already feel like I’m making this up, such is the state of market torpor in front of the Fed’s Jackson Hole symposium and as Sothern England basks in 30 degree summer sunshine – and uncharacteristically not for the first time this year.
The rise in the USD and short dated UST yields on the back of Fed vice-chair Fisher's comments over the weekend have been partly unwound in the overnight session.
China’s slowdown has hit export dependent East Asia
Friday looks to have shown FX traders to be the smartest guys in the room. Traditionally referred to as the ‘last market to clear’ (and so giving FX analysts such as this scribe a career) the dollar had put on a strong showing during the APAC session.
Short sterling positions were dealt another blow overnight by a blockbuster rise in UK retail sales in July where the weather and the low currency has seen a very good month for the High Street.
The overnight session was all about the July Fed Minutes.
It was an overnight session marked by two Fed speakers banging the drum (not as strongly as Keith Moon used to) warning that even the September 22 FOMC is not off the radar for a Fed rate increase.
The RBI held the policy (Repo) rate at 6.5%, as expected. NAB Economics is forecasting a 25bp cut in rates to 6.25% in the December quarter, on expectation of softer food prices.
Europe had a quiet day with many continental countries observing Assumption day. The Stoxx 600 index ended the day flat and the FTSE100 climbed 0.36% aided by another move lower in Sterling.
Spare capacity in the labour market seems to have been an important part of the RBA’s recent decision to lower the cash rate further. The linkage is low wages growth – which reflects this spare capacity – and which, as a key determinant of prices, impacts on the RBA’s outlook for inflation.
GDP growth was soft in the June quarter although the underlying pace of economic activity appears stronger.
The previous Friday’s strong US payrolls report has become a somewhat hazy memory after a much softer than expected retail sales report on Friday that challenged prevailing confidence that the US consumer has entered Q3 in rude health.
A rebound in real estate investment, new construction activity and industrial demand for related products – such as steel and cement – helped to underpin economic growth in the first half of 2016.
Almost 24 hours after yesterday’s decision by the RBNZ to lower the OCR by 25bps and the NZD USD is almost exactly where it was before the rate announcement.
Through our research on wellbeing Australians have told us that they believe it is important for them to feel “connected” with their local community. But how connected do they really feel and what would they change within their communities to improve their sense of personal wellbeing?
Big cuts in corporate and individual taxation are key to Mr Trump’s election platform, aiming to boost the business sector and deliver increased spending power across the income spectrum.
Global financial markets have digested the latest shock – the UK’s “Brexit” vote – quite well. In Australia, business sentiment has shown great resilience to external shocks in the July NAB Monthly Business Survey
The overnight session was neither strongly risk-on nor risk-off; the AUD has been testing higher levels overnight with the big dollar sold lower during the US session.
Brexit has had less impact on the global economy than many feared.
Breathe was Prodigy’s bestselling album in the UK despite the fact that radio play was restricted to the evening shows and although it would be hard to make any link with the song lyrics and market events.
There wasn’t much not to like about Friday’s July US payrolls report, the 255k rise in headline payrolls enhanced by 18k worth of upward revision to May and June and meaning that well over half a million more Americans are in work compared to just two months ago.
It was pretty much all about the Bank of England overnight ahead of payrolls tonight. As my colleague from London Nick Parsons reminded us, there was the real potential for the BoE to over-promise and under-deliver, net GBP shorts according to IMM data at the greatest level of this series.
Dido’s chorus to Eminem’s brilliant ‘Stan’ sums up last night’s US data and which was just about the only talking point in offshore markets last night.
National Australia Bank’s latest Online Retail Sales Index (NORSI) shows online spending grew by 13.5% in the 12 months to June 2016. While still strong, growth has flattened from the year-on-year growth seen back in 2011 when the index was first established.
It was a toss-up this morning between the Rolling Stones classic and “You Can’t Hold a Good Man Down” by James and Bobby Purify (et al), both in reference (or deference) to the performance of the Aussie dollar in the aftermath of yesterday’s RBA rate cut.
In the June quarter 2016, US GDP grew by an annualised 1.2% qoq. This was a little stronger than the 0.8% qoq growth recorded in the March quarter, but still a relatively soft rate of growth and below expectations.
Released overnight, the US ISM Manufacturing release for July was barely a miss, coming in at 52.6 against consensus of 53.0.
Weaker than expected US economic growth for the June quarter after an underwhelming outcome from the Bank of Japan on Friday set the tone for markets on Friday and at the open today.
Gimme Gimme Gimme was ABBA’s most successful hit in Japan, reaching No.17 on the billboard charts in 1979. It might be time to dust that record off today ahead of the Bank of Japan meeting decision at around 12.45pm AEST.
The revelation that the underlying CPI was not another repeat of the first quarter when growth was an anaemic 0.2% but pushed up this quarter to 0.5% had the market rethinking and repricing whether the RBA was indeed more likely than not to cut rates again next week.
Limbo Rock is the less famous (and in your scribe’s opinion underrated) hit song by Chubby Checker. No surprises for its inclusion today, with Aussie CPI out at 11.30am and key to the RBA August Board meeting next week.
Mr Trump’s economic platform is radical in many respects, calling for big tax cuts, alongside continued support for health and welfare spending.
After seven years without a hit, Elvis Presley reclaimed his title of “The King” following the release of Suspicious Minds.
US equities indices edged a little bit higher on Friday despite mixed corporate earnings while European equities ended the day practically unchanged despite the fact that European Flash PMIs for July were better than expected.
The ECB’s policy meeting has come and gone without any policy action, though none was expected. At 1.1025, the EUR sits where it was late yesterday in the wake of some intra-session ECB meeting volatility.
The NAB Quarterly Business Survey provides valuable insight into Australian business, and offers a more in-depth probe into the conditions facing Australian business than the monthly survey, and also provides extra information about how firms perceive the outlook for their respective industries.
As we are about to press the send button, the RBNZ has just released it economic update and although a dovish tone was expected, the NZD has dropped 25/30pips to around 0.6988.
Yesterday’s RBA Minutes with its dovish take and concerns about the activity side of the economy saw the local rates market move to price in a higher above-50% probability of an August RBA move (from 59% to 63%).
In a quiet session US and UK equity indices edged a little bit higher buoyed by technology and financial shares while European indices drifted lower weighted down by energy shares following a sharp drop in oil prices.
Primarily driven by very strong consumption growth, activity looks to have picked up in the June quarter, after a sluggish start to the year.
News of the (now failed) attempted military coup attempt in Turkey started filtering though about half an hour before the US stock market close, too late to have much impact on cash indices which closed fairly flat but early enough to see the S&P500 futures lose 0.4% after the NYSE close
Despite decades of change, China’s State-Owned Enterprises (SOEs) are a specific segment of the economy that still requires substantial reform.
It’s been a busy night in the UK, with PM Theresa May appointing her full new Ministry and of course the Bank of England meeting.
In 1968 John Lennon wrote this Beatles song after three weeks of meditation with Indian Gurus, equity markets have been on a tear for four days and now in a similar way they are also showing signs of fatigue.
The Brexit decision has provided yet another shock to global financial markets.
Risk assets had another positive night boosted by the prospects of a new round of stimulus in some major economies and the removal of at least one source of UK political uncertainty.
In our latest global forecast update we revised down our United Kingdom (UK) year-average GDP growth forecasts in the wake of the UK vote to leave the European Union (EU) – so called Brexit.
Brexit, the latest in a series of shocks to global financial markets, leads up to shave our global growth forecasts by 10 to 20 bps in 2016 and 2017.
Anna Leadsom has stood down as a candidate for leadership of the UK Conservative Party, paving the way for Home Secretary Theresa May to be the next Prime Minister, expected to be formally installed Wednesday after PM Cameron’s resignation.
he US non-farm payrolls headline rise of 287k comfortably exceeded expectations (180k) but wasn’t backed up by the subsidiary details in the report with the unemployment rate higher, small net downward revision to the prior two months payrolls and hourly earnings up just 0.1%.
Genesis’ 1973 album laments the loss of English folk culture and increasing American influence. 43 years on, England can now have back as much of the former as it cares for, but has to hope it can look forward to even more of the latter.
Core global yields have made new record lows amid an increase in risk aversion following news that a number of UK asset managers led by Standard Life were suspending redemptions on their property funds.
The USD weakened overnight, in a night of focus on Europe with the US out for its Independence Day holiday.
The outcome from this weekend’s Australian election remains too close to call. This uncertainty and lack of a clear majority has had a mild negative influence on the AUD/USD at the open.
As a BBC commentator described it this morning, providing it doesn’t violate the laws of thermodynamics, anything can happen inside the British Conservative Party.
Lots of soul searching not doubt from EU leaders on day two of their summit with UK PM Cameron back home.
The personal ties remain strong between Australia and the UK. Around 1.2 million people living in Australia in 2015 were born in the UK, one in 20 of the population.
With the Brexit vote we expect markets to push lower over coming weeks until investors feel appropriately compensated for these heightened risks. We see post Global Financial Crisis share market sell-offs as a useful guide for what is likely over coming weeks.
Whether it’s a near to end-quarter rebalancing or just some short-term perceived value after the knee-jerk post-Brexit sell off, risk appetite had something of a positive session overnight with equities and top-tier bond yields higher.
Equity markets on both sides of the Atlantic ended the day sharply lower, the British Pound fell another 3.6% and demand for safe haven assets boosted gold and dragged core global yields lower.
Lows for the day on Friday in all things GBP and AUD and highs for the USD and US Treasury prices came early to mid-afternoon Australian time almost as soon as it became clear the UK had voted for Brexit.
Despite stormy weather in London and the south east, turnout has been reported to be high and although markets appear to have ‘Remain ‘ as the most likely outcome, recent history suggests that voting outcomes don’t always end as expected.
Alan Oster discusses the influence of the sharing economy and explores how fast it is growing and its impact on the business community.
Pink Floyd’s 1979 song featured on The Wall tells the story of a couple who have treated each other very badly yet are devastated at the prospect of their relationship ending. This seems somewhat appropriate with us now just 9 hours away from polling getting underway in the UK EU referendum.
The risk-on mood that developed as Asia markets opened yesterday on the back of the weekend poll from the Sunday Mirror pointing to a swing back to the remain vote gathered more force overnight, especially in European markets.
China’s longer term growth prospects are dependent on a range of economic reforms – critical to supporting the broad based productivity growth necessary to offset the negative demographic effects from the country’s declining working aged population.
Brexit and local farm conditions too Thursday’s UK EU Referendum will occupy market attention this week. A poll being conducted by ComRes for the UK Sunday Mirror at the time news of the assassination of British MP Jo Cox hit the wires revealed a switch in voting favouring the remain vote. The percentage of those […]
Markets being what they are, last Thursday’s tragic news of the slaying of UK MP Jo Cox, campaigning on behalf of the ‘remain’ side in front of Thursday’s EU referendum, elicited a strong positive response in all things Sterling, as well as supporting risk sentiment more broadly.
Yesterday’s fall in the Nikkei and strengthening of the Yen on the back of BoJ inaction and heightened concerns around the outcome of the UK EU referendum set the tone to the early part of the overnight session.
The US Fed kept its policy rate unchanged (between 0.25% and 0.50%) as expected, however the tone of the statement and forecast revealed a more dovish stance.
Equity markets have recovered much of the losses from earlier in the year but remain below last year’s peaks.
As US markets close and Asia opens this morning, further damage to sentiment has been relatively limited.
While global financial markets slumped and then recovered in the early months of the year, global growth has continued to remain disappointing and sub-trend.
China’s construction rebound underpins industrial activity but also presents uncertainty going forward.
Friday night, Sterling was hit hard soon after London had shut shop for the week, on the publication of an (internet) poll by ORB of over 2000 respondents for the UK Independent newspaper, showing a 55/45 split in favour of ‘Leave’.
Rebel One being BTMFJ who were reported to be on the verge of rescinding their JGB Primary Dealership and Rebel Two being Commerzbank, reported to be considering storing cash in vaults rather than pay the ECB for the privilege of depositing excess cash with them.
March quarter GDP growth was only 0.8% qoq annualised. However, at this stage it looks like GDP growth has strengthened in the June quarter.
We are now seeing signs in other parts of the world of rebellion by private sector banks aimed at circumventing the deleterious effects of negative central bank policy rates and government bond yields.
The Indian economy expanded by 7.9% in the final (March 2016) quarter of the 2015-16 financial year; India is now the fastest-growing major economy.
The perception of a lower for longer Fed has slowly but surely brought back an improvement in risk sentiment.
US equities ended day up between 0.5% and 0.65% with energy stocks leading the way on the back of gains in oil prices.
Looking at the spectrum of forecasts ahead of the release, the 38k print for May was 52k lower than the lowest forecast surveyed by Bloomberg while consensus was at 160k.
Markets mostly treaded water, and most US economic data was bang in line.
The final May Eurozone Manufacturing PMIs were left unrevised at 51.5, while the US Manufacturing ISM headline popped a little higher to 51.3 from 50.8 (50.3 was forecast).
Markets ended the month of May in a cautious mood amid mixed US data and a Guardian poll that suggested Britain to be more in favour of leaving the EU.
As far as the foreign exchange markets were concerned, the USD was a touch softer overnight after having made some gains in the Asia session yesterday.
The past week has seen interest rate markets continue to receive warnings from various Fed speakers – including Fed Chair Yellen – that US interest rates are likely to rise in the next few months.
In her much awaited Harvard University appearance, Fed Chair Yellen endorsed recent Fed rhetoric, noting that it would be “appropriate” for the Fed to raise the Funds rate if economic growth picked up as expected and the labour market continued to improve.
A preview of the Q1 GDP data which will be released on Wednesday 1 June at 11:30 AEDT.
NAB Wellbeing Index: Around 1 in 6 “highly” anxious Australians are not coping - young women struggling most
A quiet night overnight with US Treasury yields moving 3.5bps lower to 1.8%, alongside weaker than expected core durable goods and capex orders.
The release of Australia’s National Accounts next week is likely to reveal a solid rate of economic growth in Q1 2015.
It’s been another night of measured markets with both European and US equities closing higher, US Treasury yields a little higher net on the day and the USD marking time. There has been a little more evident appetite for Sterling, while the Canadian dollar was also a little stronger, helped by higher oil prices and the Bank of Canada leaving rates on hold, as expected.
US and European equity indices had a solid night with gains in financial and technology shares leading the move higher. The USD was stronger against most other currencies although GBP was the outperformer. Meanwhile US Treasury yields ended the day higher along the curve.
Today’s weekly focuses on what the low inflation environment means for monetary policy, and what discretion the RBA has in “looking through” low inflationary periods.
Markets have been generally drifting with FX, equity markets and bond yields trading in contained ranges. The short end of the US Treasury curve edged a little higher.
European and US equities ended the week in positive territory and the mild positive tone to the overnight session helped the S&P 500 move back to black for 2016.
A perfect opportunity for a Bee Gees classic with more Jive Talkin’ amongst US Fed officials with Lacker and Dudley hitting the wires overnight following Wednesday’s more hawkish Fed Minutes.
It was the release this morning of the FOMC April Minutes that’s gotten the attention of the wires and a noticeable chunk of market reaction to boot in rates, currencies, equities and gold.
US equities fell overnight and the US Treasury curve flattened to its lowest level since 2007 after solid data and hawkish Fed talk increased market’s expectations of US rate hikes.
Be grateful for small mercies. It’s a good job this 1971 T.Rex classic popped into my head as I was alighting at Wynyard station this morning, or else you might have been subjected to the ultra-cringe-worthy 1968 Dolly Parton ditty, “I’ll oil well love you” (I kid you not).
Construction activity continued ramp up in April, but we are concerned about the sustainability of growth.
The rising US dollar in Friday’s APAC session gathered fresh momentum from incoming US data.
In a shock revelation, the Dallas Fed has published a note on its website saying that the impact of the Chinese economy on the U.S. has notably increased over the past two decades.
The U.S. economy had a weak start to 2016, but we forecast it to rebound, with moderate growth expected through to 2018
The rise in oil prices overnight were not enough to prevent retail driven decline in US equity markets. The US dollar was weaker across the board and a solid 10y US Treasury auction amid a cautious mood helped core global yields move lower.
The US Energy Information Agency revised up its forecasts for oil prices for this year and next, lifting its forecast for WTI for this year by nearly $6/bbl to $40.32 from $34.37.
A credit-fuelled rebound in China’s construction activity has breathed new life into the country’s beleaguered steel industry.
The USD has continued its ascendency with the DXY index up for a fifth day in a row.
The USD has slowly, but surely continued its rebound while equities on either side of the Atlantic fell for a second consecutive day.
No, the title is not a summation of Australian Treasurer Scott Morrison’s first Budget handed down last night. Rather it looks to be the most apt description of market price action – in FX at least – apropos the smart overnight session reversal in the fortunes of the Japanese Yen and the Euro.
While yesterday’s fall in the Nikkei, partly reflected a catch up move given Friday’s holiday in Japan, this negative sentiment spread throughout Asia with all markets excluding Thailand posting small decline for the day.
The 2004 Saturday Night Live fictional character, recently brought back to life in song on Cortney Barnett's brilliant debut album, would have been in her element on Friday.
NAB surveyed Australian business integration with East Asia in September 2014 and China in December 2015. Recent headline trade data indicate a reversal in the decades-long process of growing integration with our region as exports have declined.
Quarterly U.S. Gross Domestic Product (GDP) growth slowed to a weak 0.1% qoq, or 0.5% annualised in the March quarter. As the same quarter last year was also weak, there was little change in the over-the-year growth rate which has been around 2% for the last three quarters.
For US equities, it was a case of one bad apple in the bunch with investor Carl Ichan stating he sold his stake in Apple.
So it is that following yesterday’s CPI report, NAB altered its 3 May RBA call to now expect a 25bs reduction in the Cash Rate (to 1.75%).
The AUD has flown back down with the 77 handle this morning, pulled back somewhat by a dip in oil prices for once, WTI down $0.59 to $43.60 and Brent off $0.91 to $44.89, the Aussie’s commodity cousins, the CAD, NOK, RUB and the NZD all lower this morning.
The March quarter NAB Business Survey shows both a resilient non-mining recovery and an outlook that has continued to improve. Both business conditions and confidence remained at levels similar to that seen in the previous quarter.
The latest NAB business survey and labour market data accord well with the RBA’s policy stance – low inflation provides ample scope to ease monetary policy further should that be necessary to support the economy, though activity and labour market data do not suggest that such a move is necessary
2016 is shaping up to be a crucial year for copper producers and copper markets. Its biggest consumer, China, is going through a period of slower economic growth, with structural transitions under way and a depreciating currency.
China becoming a major player in global mergers and acquisitions.
In this video Alan Oster talks about Australia’s “Sharing Economy”.
There was an improved tone in global markets this month.
The April 5th Monetary policy meeting was a landmark in terms of the policy measures announced. The 25bp cut in the policy rate was accompanied by a raft of measures to boost liquidity and ensure more effective monetary transmission by banks.
The forces shaping the economic outlook are broadly unchanged.
Consumer anxiety has now fallen for its third quarter in a row as recovery in the non-mining economy supports the labour market.
An improvement in risk appetite has helped global equity markets recovered some grown overnight with the Nikkei a notable exception. FOMC minutes revealed an April hike was discussed, but a cautious approach appears to be well entrenched. A pick up in oil prices contributed to the positive move, but the strength in the yen continues to weigh on Japan’s equity market.
In last month’s Update we noted that after a soft end to 2015, the partial indicators were pointing to a turnaround. Some new data (for February) and some hefty revisions to historical data later, March quarter 2016 GDP growth is now tracking at only 0.7% qoq (annualised) according to the Atlanta Fed’s ‘Nowcast’.
Overall the picture is of an economy struggling to generate any momentum.
In our March update, Nick Ryder, NAB Private Wealth Investment Strategist, talks mixed messages with slumps in developed markets, India and China while the US posted slight improvements and Australia performed reasonably well. Meanwhile, Europe’s inflation entered negative territory.
Casting a wider net over China’s total debt Last month, we highlighted China’s debt as one of the key concerns around its economy in 2016. Debt levels have risen sharply since the Global Financial Crisis, particularly outside the traditional banking system – where the scale of borrowings is frequently under-estimated. This month, we’re digging a […]
Latest ECB move highlights negative interest debate.
Consumer confidence holding up, business sentiment stabilised in February
Global: We are not expecting any acceleration in global growth in 2016. Australia: The recovery across the non-mining economy remains on track.
We are not expecting any acceleration in global growth in 2016.
Price developments over the past week supportive of NAB view that markets had become overly pessimistic on the growth outlook – commodities, equities and the $A all rally strongly; bond yields rise sharply.
We weren’t alone on Friday thinking that the risks heading into the US employment report were for a disappointing headline non-farm payrolls print
The major themes driving the expenditure measure of GDP are unlikely to surprise.
It was a session of two halves with a risk off during European session spilling into the first part of the New York sessio/
The Fed has consistently signalled rate hikes will be gradual.
The 1986 film flop starring Madonna and Sean Penn cost $17mn to make and grossed just $2.3mn at the US box office.
This excerpt from the NAB ACRI Australia-China Business Index examines barriers to engagement between Australian and Chinese businesses.
In the wake of yesterday’s weaker employment report, the AUD/USD jagged down from around 7182 to 7140 and that’s proven to be a base overnight in a 30 point range.
Nick Ryder, highlights that January was a difficult month for financial market with renewed investor jitters over slow growth in China and falling commodity prices.
In this December 2015 quarter edition of the NAB Online Retail Sales Index, we have responded to market changes by including separate data on takeaway food and smaller online retailers.
It was something of a risk-on night with commodity and emerging market currencies back in favour for once.
The global equity rally that began on Friday has started to show signs of fatigue
Labour market improving - jobs growth remains strong
European and US equity indices ended the week on a positive note, boosted by a rebound in bank stocks and a jump in oil prices.
Janet Yellen did her return testimony overnight, this time to the Senate.
NAB Business Markets Podcast – February 2016 Video transcript (Word, 26kb)
If we had to try and summarise the best part of three hours of testimony before Congress by Fed chair Janet Yellen in one sentence, it would be something like “Janet fails to go full dove”.
When the IEA released its monthly report last month, it caused quite a flurry warning “the oil market could drown in over-supply”.
This excerpt from the report synopsis examines how Australian and Chinese businesses believe the Australia China Free Trade Agreement will impact bilateral engagement.
Yeap, the heading says it all. We had a brutal price action overnight with risk assets hammered while safe haven assets were bid.
Chinese share markets have plunged since the start of the year, but still have some way to go.
Since early November, oil prices have resumed a clear downward trend, punctuated by episodes of sharp declines during early to mid- December and the first half of January.
In the aftermath of the RBA Board meeting, the AUD was whipped around, initially rallying on “no change”
Friday’s BoJ powered equity rally stalled overnight with disappointing data releases and fading hopes of output cuts in oil weighted down on sentiment.
U.S. GDP growth slowed in the December quarter to 0.2% qoq (0.7% annualised).
Friday’s sharp improvement in global risk sentiment sparked by the Bank of Japan’s largely unexpected decision to join the ECB, Danish and Swiss National Banks
Mixed oil messages were the main source of market volatility overnight.
The FOMC post meeting statement played a very straight bat, not locking themselves in to one course or the other as far as the March 17 meeting decision is concerned.
2016 got off to a bad start in global equity and commodity markets and in light of recent financial market turmoil in Australia, the NAB Monthly Business Survey provides a timely indication of how market movements have so far affected business sentiment.
The first-ever report comparing attitudes of Chinese and Australian business leaders towards bilateral engagement was conducted by NAB and the Australia-China Relations Institute (ACRI) at the University of Technology Sydney. This excerpt examines how bilateral engagement is expected in increase.
We have lowered our 2016 global forecasts to 3.0% (from a revised down 2.9% in 2015)
Oil having been the main driver of most of the market price action of the past two weeks, it was Friday’s near 10% rebound that was the catalyst for much of Friday’s retracements.
The first-ever report comparing attitudes of Chinese and Australian business leaders towards bilateral engagement was conducted by NAB and the Australia-China Relations Institute (ACRI) at the University of Technology Sydney.
With US markets closed in observance of Martin Luther King Day, the relatively quiet overnight session is probably not reflective of the current collective mood.
Australian producers have been shielded from much tumult by a lower Australian dollar and a large and relatively stable domestic market.
We expect another year of moderate growth in 2016, with further labour market improvement and inflation starting to move back towards the Fed’s target.
In this video Alan Oster talks about the state of innovation in Australia.
Today's title is not only fitting to what has transpired in markets over the past 24 hrs, but it also serves as a tribute to the passing of a music legend.
Ever get the feeling that you’ve been here before?
NAB Business Markets Podcast with Mark Todd and Peter Hartley.
Nine and a half years on from the last Fed rate hike and seven years on from when interest rates were first set at the effective zero lower bound (0-0.25%) the Fed has seen fit to sound the death knell for ZIRP, lifting the target rate for the fed funds rate to a range of 0.25-0.5%.
The Indian market offers great potential for Australian exporters. Already the world’s third largest economy and growing by over 7% annually, India looks set to overtake China as the world’s most populous country in the next 7 years.
Unlike the rest of us who are now waiting to see what Janet Yellen delivers this time tomorrow, RBA Governor Governor Glenn Stevens has gone early, the AFR publishing its now traditional end-of-year interview with him overnight.
Friday night session saw a surge in risk aversion with sharp losses in equity indices, the USD underperformed against other majors while safe haven demand pushed core global yields lower.
A Fed hike would be no surprise to financial markets. This should mean the impact of rate hike itself is limited, given the forward looking nature of financial markets.
A lot of the attention overnight remained centred on the commodity space with oil prices down another 1%, Brent crude at $39.70, down 0.97%.
In Australia, Q3 GDP figures were consistent with our view that the recovery across the non-mining recovery is broadening, and recent business survey results suggest this momentum continued into Q4.
India’s economy accelerated in the September quarter 2015, with Real GDP growing by 7.4% yoy, up from 7% in the June quarter. NAB Economics is forecasting a 7.5% expansion in 2015, followed by 7.6% in 2016.
In Australia, Q3 GDP figures were consistent with our view that the recovery across the non-mining recovery is broadening, and recent business survey results suggest this momentum continued into Q4.
“Were the FOMC to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals,” Fed Chair Yellen told the Economic Club of Washington overnight.
NAB Business Markets Podcast – RBA & US Fed Christmas Messages with Mark Todd
The AUD is back trading with a 73 handle for the first time since 19 October, helped along by a disappoint US ISM manufacturing print.
Well not quite, in terms of manic that is. China received the official nod from the IMF for inclusion in the SDR as entirely expected
Economic partials for Q3 have been mixed, but point to stronger real GDP growth of 0.8% in the quarter (up from 0.2% in Q2), as a series of one-offs that weighed on Q2 growth recede.
A huge week for data and events.
US markets were open on Friday, though more in body than spirit. The major indices were little changed.
In the 1975 Steely Dan classic, the song Black Friday refers to a 24 September 1869 ploy by a group of wealthy US investors to corner the gold market and drive the price higher, but who were subsequently foiled when the government got wind and released $4 million worth of gold onto the market.
It’s 100 years ago today that Albert Einstein formally presented the results of his eight year study into gravity – the general theory of relativity. Good on you Albert.
Markets were rattled in the early part of the overnight session following news that Turkey had shot down a Russian fighter jet near the Syrian border, after allegedly repeated warnings of Turkish airspace violation.
Labour market conditions remain tight with the unemployment rate at 3.4%; wage growth though remains restrained.
The USD got off to a cracking start this week, gaining against all the majors, and taking EUR/USD below 1.06 for the first time since April.
An important week for Australia, with a speech by the RBA Governor Tuesday, the release of key investment figures that feed into next week’s GDP, as well as the latest survey of investment intentions for 2015-16.
Friday’s session was hallmarked by comments from ECB President Draghi, which kept markets on the scent for a range of easing measures at next week’s hotly-anticipated meeting.
It’s been a night of consolidation for currencies with the US dollar giving up some ground, the Bloomberg spot US dollar index losing 0.67% overnight.
Hat tip to one our London traders for plagiarising today’s title.
It is a bit odd coming in to see hard commodity prices under the pump (including a $2 drop in iron ore prices, new cycle lows for copper and oil off another buck) but the AUD at the top of the G10 FX leader board.
In a relatively quiet session, the impact from the Paris attacks on global markets has been fairly muted. The USD is stronger against all G10 currencies with the euro and NZD sitting at the bottom of the leader board.
We review last week’s stunning Australian labour market data. While we don’t believe the large moves in either the employment or unemployment rate, we believe the signals - that employment is strengthening (driven by NSW and importantly an improving trend for QLD)
There is still solid underlying momentum in the economy despite the slowdown in U.S. GDP growth in the September quarter.
Welcome to Friday the thirteenth. Cautious is advised for anyone suffering from triskaidekaphobia.
Under NAB’s forecasts, China’s economic growth is expected to slow from 6.7% in 2016 to the Five-Year Plan target of 6.5% in 2017.
Lots of interest overnight whether ECB President Mario Draghi would throw more fuel onto the ECB stimulus expectation fire, schedule to speak at a BoE sponsored open forum on Financial Market Reform event in London.
Global growth remains sub-trend and there is little sign of an imminent acceleration in the pace of expansion while in Australia, we remain cautiously optimistic that the gradual recovery in the non-mining sector is gaining traction.
Not a big night as far as market movements are concerned, one extension of a theme being the continued ascendancy of the big dollar that has gained a little more momentum, the Bloomberg spot dollar index up 0.12%.
In Australia, we remain cautiously optimistic that the gradual recovery in the non-mining sector is gaining traction. Recent outcomes from the business survey support this contention with business conditions holding up at a high level in October, and the unemployment rate holding steady.
A night of consolidation for markets with inconsequential data not pushing markets one way or the other.
Unlike Wednesday and Thursday morning (post FOMC, RBNZ), Friday was not a big night for markets and following the BoJ’s earlier ‘no change’. End of month rebalancing flows appeared to dominate price action, meaning a slightly softer US dollar (DXY -0.35%, BBDXY -0.42%).
U.S. GDP growth slowed in the September quarter to a rate of 0.4% qoq (1.5% annualised).
China’s latest national accounts data showed a slowing trend for China’s economy in the September quarter falling below the annual growth target for the first time this year. As a result, we are revising our forecasts for China’s growth.
China moving the international standard – already planned but delayed – could show that the transition in China’s economic growth model has progressed further than previously understood.
We are still forecasting little to no pick up in the pace of global growth and our domestic forecasts are unchanged this month, with real GDP expected to expand by 2.4% in 2015/16 and 3.1% in 2016/17.
Global growth remains sluggish and below trend however in Australia, the ongoing high level of business conditions and trend improvement in key leading indicators.
Measured employment growth has been softer in last two months. But the data are noisy and other indicators do not show any labour market softening.
The RBI announced a number of important regulatory measures, including greater overseas participation in Government bonds, and steps to boost the depth of the foreign currency market.
Anyone looking for redeeming features in Friday’s soft US payrolls report was reduced to noting that the weakness in average earnings (flat on the month and unchanged at 2.2% y/y) may have been down to the fact that the Sep 15 mid-month pay day was excluded from the calculation
The Fed is still likely to start lifting rates this year, but we now expect this to be in December rather than September. The US economy is expected to continue growing at an above trend rate. We now expect growth in both 2015 & 2016 to be 2.5%.
Concerns about the extent of slowing in China, the anticipated rise in the US Fed Funds rate, and sharp declines in commodity prices have generated unease about the impact on emerging markets. Among the major Asian Emerging economies, South Korea and Taiwan, appear stronger than the rest.
The pace of growth in the big advanced economies has picked up, mainly reflecting a US recovery from weak first quarter growth. In contrast, Japan and the Euro-zone are not growing strongly and Canada is in recession.
There is increasing evidence that growth momentum is broadening across the the non-mining Australian economy – not limited to the dwelling sector – in response to the lower AUD and interest rates, with improvement particularly evident in services sectors.
The Euro is weaker this morning and the USD a touch stronger thanks to ECB President Draghi banging the drum about QE, the ECB staff downgrading their Euro-zone growth and inflation forecasts and a pretty comforting slug of US data.
A more measured night. Shanghai finished down smalls yesterday (-0.2%) ahead of a four day long weekend to mark China’s victory in WWII and while European bourses had something of a see-saw night closed higher.
Things aren’t really getting better. The circular theme of markets continues, with equities weakening, weighing on broader risk, weighing on currencies, weighing on equities. And so it goes. While the Fed waits to decide to raise rates, this is not helping the global markets.
Economic growth strengthened in the June quarter and is set to remain above its long-term trend rate. The Fed is likely to raise rates this year. We expect this to start in September although it could easily be delayed. Subsequent rate hikes will occur at a slow pace by past standards.
Our forecasts for global growth to stay around the 3¼% yoy and locally, our GDP forecasts are marginally stronger than last month – 2.4% in 2014/15, 2.8% in 2015/16 and 3.2% in 2016/17.
The Reserve Bank of India (RBI) maintained the Repo rate 7.25%, as expected and the Government and the RBI are broadly in agreement regarding the future composition of the Monetary policy committee. The outlook for the remainder of the monsoon - and it impact on food prices, as well as the impact of the Fed’s anticipated rate rise are two critical determinants of future interest rate movements.
Global growth is running below trend limiting the pace of expansion in commodity demand. Output has been growing faster recently in some of the big advanced economies (notably the US and UK) and the Greek crisis has had little impact on activity across the rest of the Euro-zone.
U.S. GDP growth accelerated in the June quarter to a rate of 0.6% qoq (2.3% annualised). Following revisions, the economy is now estimated to have grown in the first quarter.
The economy expanded by 2.2% in 2Q vs 2.5% in 1Q. High frequency indicators point to modest outcomes, particularly in the near term.
After recording gravity-defying price gains in April and May that are largely denominated by correlation with the USD, oil price movements have turned bearish in June and July-to- date.
How Greece and other Euro periphery economies got into trouble and how Greece failed to get out of it.
US GDP slowed in the March quarter - extreme winter weather, plunging oil prices, strong $US appreciation and port disruptions all likely factors of influence.
We have not changed our forecast for global growth this year (3.2%), but a softer outlook for Japan & India prompted a slight downward revision for 2016 and 2017. NAB forecast on the Global economy is for more of the same this year with global growth staying around 3¼% in 2015, but a softer outlook for Japan & India prompted a slight downward revision for 2016 and 2017. And in Australia, we see the RBA keeping interest rates on hold, with the next move to up – but not till late 2016.
Financial market volatility and the downside risks to global growth have been driven by the Chinese share market correction and the issues in Greece. Locally, lower interest rates and the AUD, strong housing prices and a post Budget kick in confidence appears to have driven better business outcomes.
In this special edition podcast, Peter Jolly, NAB Global Head of Research, and Peter Hartley, NAB Business Markets - Foreign Exchange, discuss the latest developments in the Greece referendum fallout.
This week we look at: the Greek vote; recent developments in Chinese equity markets; the RBA’s July Board meeting; and upcoming important Australian labour market releases for June, with ANZ and SEEK job ads released this week and the monthly ABS labour market data on Thursday.
Ahead of Sunday’s referendum, that is now in process of delivering a decisive ‘No’ vote (to the terms and conditions under which Greece’s creditors would have extended the now-expired second bailout).
Snowden Group achieved a breakthrough for the Australian service sector by cooperating with one of China’s central technical design institutes for the mining sector. The Australia-China Trade Report highlights the trends in the services sector from 2009 – 2014.
If you had come in this morning, looked at the news released on the US economy overnight and how the US bond and equity markets had traded, you would not be surprised at all with the prices on the screen this morning, irrespective of what has and has not been going on as far as Greece is concerned.
11 days of 11th hour negotiations: It sure feels like it. It’s still Greek news setting the pace for the market.
All is well, solved, sorted; just not signed. Markets are pretty content with the idea that Greece and its creditors will do a deal before the June 30 deadline. And the Fed will hike in September, and China can avoid an equity market accident.
Except he never came. We wait, there is a vast amount of commentary and expectation, and even a fair degree of optimism. And nothing might happen for a few days at least. But in this case, there will be an endpoint.
Here we are again, still writing about Greece. Will a deal be put together that is acceptable to Greece and its creditors? Greece is asking for debt relief, Europe asking for further economic reforms to pensions and taxation. The 11th hour for Greece is approaching, yet again.
Not much happened Friday amid an absence of US data and with no significant developments - at least not in public view - ahead of Monday’s all-important EU Summit.
A fairly big slug of US economic data last night – admittedly not all of its top drawer – collectively added up to progress, on the real economy at least, towards the commencement of Fed tightening in coming months.
China’s partial economic indicators broadly stable in May, but weak enough for the People’s Bank of China (PBoC). In June, PBoC cut their economic growth forecast for 2015 from 7.1% to 7.0%. For now, our economic forecasts remain unchanged.
NAB forecast on the Global economy is for more of the same this year with global growth staying around 3¼% in 2015, followed by a modest upturn in 2016 (largely driven by the US). And in Australia, we see the RBA keeping interest rates on hold, with the next move to up – but not till late 2016.
The Indian economy expanded by 7.5% over the year to March 2015. Services, followed by Industry, were the best perfromers however agriculture contracted raising concerns about urban-rural divide. Industrial production activity is expected to gain momemtum in the second half of the year and NAB Economics is forecasting a 7.8% expansion in 2015, followed by 8% in 2016.
There was no evidence of an acceleration in the pace of global growth in early 2015. Weak GDP results in the US, UK and Canada outweighed a pick-up in Japan and the Euro-zone and similarly mixed trends among the big emerging economies saw China slowing, India picking up and Brazil still very weak.
Sixteen years ago, Melbourne’s Caulfield Grammar School looked to China to give its Year 9 students an immersion experience. The Australia-China Trade Report highlights the trends in the services sector from 2009 - 2014.
Australian service exports to China have been increasing for more than ten years. The Australia-China Trade Report highlights the trends in the services sector from 2009 – 2014.
After Wednesday night’s excitement, there was a collective deep breath overnight, with some of the preceding moves reversed. There was little newsflow but what there was allowed for some relaxation of the prior day’s anxiety.
Currencies are really where it's at this morning, with the US dollar smartly lower across the board and with losses led by the Aussie and Kiwi dollars.
Increasing productivity is one of China’s most critical challenges over the next few decades and education is a key factor in raising the average level of productivity.
U.S. GDP growth slowed to a crawl in the March quarter. Details were weak, with the major support for growth coming from inventories. We expect the slowdown will be temporary and above trend growth to resume.
The China-Australia Free Trade Agreement (ChAFTA), reached in November 2014, is opening up a massive potential market for Australian healthcare providers. Tom Taylor, NAB Head of International Economics, and Nehemiah Richardson, NAB Health General Manager, discuss the opportunities and ways of making the most of them.
The overnight session was one of US$ weakness and $A strength, trades that gathered momentum early in the London session, a session marked by a big miss on US consumer confidence.
One of Shanghai’s largest private real estate developers, Shanghai Zhongfu, faced the challenge to integrate off-take from its planned Australian operation into the long supply chain of China’s domestic market.
The 2014 Australia-China Trade Report reveals China is Australia’s top dairy export market highlighting the considerable growth potential for Australian agribusiness in processed food as Chinese incomes rise.
Australian engineering company, Mawson Global offer value chain services to Australian SME clients who otherwise would not be able to access global sourcing. Their approach facilitates the transition from localised to globalised production for clients.
China’s economy expanded by 7.0% in Q1 2015, down from 7.3% in Q4 2014. This was the weakest rate of growth since March 2009 – when China was at its lowest point during the GFC. Our forecasts are unchanged – with China’s economy to grow by 7.1% in 2015 and 6.9% in 2016.
Global growth remains stuck at a sub-trend pace. After 3.3% in 2014 we now expect only 3.4% in 2015. We have fine tuned but not fundamentally changed our forecasts– 2014/15 2.3% and 3.0% in 2015/16. The non mining sector is still struggling to offset the impact on domestic demand.
It’s not widely known that China’s a strong buyer of Australian manufactured goods. In fact, manufacturing is now the second largest Australian exporting sector to China behind resources. The Australia-China Trade Report highlights the trends in the manufacturing sector from 2009 - 2014.
Global growth remains stuck at a sub-trend pace. After 3.3% in 2014 we now expect only 3.4% in 2015. While the Euro-zone and Japan are experiencing upturns, recent US data has disappointed. We have delayed the Fed starting till September (or later) and reduced US GDP in 2015 to 2.7%.
The RBI held the benchmark Repo rate at 7.5% in its April Meeting which was largely anticipated, given the previously ‘front-loaded’ rate cuts in January and March. The RBI highlighted recent unseasonal rains had generated uncertainty and banks had not passed on the previous rate cuts.
Economy has got off to a slow start in 2015. While we expect it to be a temporary slowdown, we have revised our 2015 forecast to 2.7% (previously 3.1%). If achieved, this would still represent an above trend rate of growth, and is consistent with further labour market improvement.
China’s rapid industrialisation over the past few decades has provided considerable economic benefit for Australia – as a strong increase in trade and investment has increased the integration between the two countries, even before the recently negotiated free trade agreement.
In early February 2015, the People’s Bank of China (PBoC) cut the Reserve Requirement Ratio by 50 basis points. This was the first broad based cut to the RRR since May 2012 and it could release around RMB 612 billion in liquidity. The PBoC was quick to downplay the significance of this change.
Partial data have been soft recently, perhaps partly reflecting severe weather conditions. With December quarter 2014 GDP also revised down, we have lowered our forecast for 2015 GDP growth to a still solid 3.1% (was 3.3%). Unemployment continues to fall.
The annual meeting of China’s parliament commenced in early March. From an economic perspective, the key announcement was the lowered growth target – to ‘about 7%’ from ‘about 7.5%’ in 2014. Our forecasts remain unchanged – at 7.1% in 2015 and 6.9% in 2016
Global growth remains around 3%. Weaker prices for oil and other commodities will benefit spending power in most big advanced economies as well as in China. The domestic economy, in early 2015, has not gained momentum with another rate cut expected in the coming months.
Finance Minister Arun Jaitley released his first full-year Budget on the 28th of February, 2015. The pace of fiscal consolidation was pushed back, with the 3% Deficit target now likely. Instead, there was a strong push for infrastructure spending.
Global growth remains around 3% and, although the business surveys show a lift in sentiment in key advanced economies, there is still no clear evidence that the expected upturn in global growth to 3½% by the end of the year has commenced. Locally, we have not changed near term forecasts
Due to the Chinese New Year holiday period, there are limited partial economic indicators for January each year. That said, the data available points to a soft start – PMI measures are weak, imports slowed, inflation continues to soften and credit growth contracted.
The US Private Placement market offers a rich source of long-term funds for a wide range of Australian corporates. Our latest survey reveals the key factors that influence US investor buying decisions and their expectations for 2015.
Following two strong quarters, US GDP growth decelerated in the December quarter to a still solid 2.6% qoq (annualised). The large fall in oil prices and the rise in the dollar are producing both winners and losers. Annual labour force growth in January matched civilian population growth.
In 2014, China’s crude oil imports came to US$228 billion – accounting for almost 19% of the country’s total imports by value and around 2.5% of total GDP. Sustained lower oil prices will therefore reduce China’s financial outflows, providing a significant boost to the economy.
U.S. GDP growth decelerated in the December quarter to a still solid 0.65% qoq (2.6% on an annualised basis). This suggests that the economy is growing at an above long-term trend rate. As a result, unutilised capacity in the economy continues to decline.
Moderate sub-trend global growth continues with a diversity of economic conditions (expansion in US, UK, India and China, weakness in Euro-zone, Japan, Latin America). Falling oil prices should boost global activity, although the impact varies between oil exporting and importing countries.
Moderate sub-trend global growth continues with a diversity of economic conditions. Falling oil prices should boost global activity, although the impact varies between oil exporting and importing countries. Unemployment to continue to deteriorate but peak lower (6.6%) and later (Q4 2015).
The Bank of Canada is the latest Central Bank to deliver a shock; cutting its main policy rate to 0.75% from 1.0% in a move which none of the 22 analysts surveyed had anticipated.
China’s economy continues on its gradual transition, away from a manufacturing hub towards a modern, consumption based economy. One signal of this trend is the increasing share of China’s services sector (tertiary industries), averaging 48% of GDP in 2014 (up from 47% in 2013).
The US economy is currently enjoying a strong patch of growth. Small business confidence is at a recovery high, consumer confidence continues to increase, and household incomes - already benefiting from strong employment growth - are being further boosted by the fall in oil prices.
In October 2014, the International Monetary Fund (IMF) announced that China had overtaken the United States to become the world’s largest economy. This was the first time since 1872 that the US was not considered the world’s largest economy, when it overtook the United Kingdom.
Japan is in the midst of major demographic changes, which have had significant implications for its economy and will continue to do so. Japan’s population is already declining, and with its society also ageing the drag on the workforce is potentially even greater.
There is a growing expectation that China’s Central Economic Work Conference will lower China’s economic growth target for 2015 – down from this year’s ‘about 7.5%’ to 7.0% – however this change may not be officially announced until the National People’s Congress meets next March.
GDP growth is expected to strengthen in 2015 to 3.0%, from 2.3% in 2014. This reflects rising business and consumer confidence, improving household balance sheets, a strengthening labour market, solid investment conditions, declines in oil prices and a fading headwind from fiscal policy.
Global growth remained around 3% yoy in Q3, sightly below trend but it is expected to pick-up to 3½% in 2015 and 2016. Major differences in the strength of economic activity persist between regions with the US, India and China accounting for almost 2 ppts of forecast global growth.
In late November, the People’s Bank of China (PBoC) surprised markets with cuts to benchmark interest rates. These changes were the first in over two years – the PBoC had held rates stable since early July 2012.
Recent monthly economic indicators and business surveys show continued moderate global economic growth along with big variations between economies. Low interest rates, falling oil prices and smaller budget cutbacks in big advanced economies underpin faster growth of 3½% in 2015 and 2016.
The Indian economy expanded by 5.3% over the year to the September quarter. It's the second successive quarter of above-5% growth, and reflects a gradual upturn in the Indian economy. Financial services and Community services were the best performing sectors.
Moderate sub-trend growth continues across the emerging market economies of East Asia (S Korea, Thailand, Taiwan, Malaysia, Indonesia, Singapore, HK and Philippines). Growth in the region to increase gradually through the next couple of years.
Twelve months ago, China’s Government announced its reform agenda, following on from the Third Plenum. So far, progress on these reforms has been limited, primarily in social policies such as loosening the Hukou system – which we have argued could go further – and the One Child Policy.
The U.S. economy is growing at an above trend pace, with strong jobs growth. We expect the Fed to start raising rates in mid-2015. While there are signs wages growth is starting to strengthen, low inflation remains the main risk that may delay rate hikes.
The cooler economic conditions experienced in the third quarter could continue into Q4 and further into 2015, reflecting the continued reluctance of Chinese policy makers to implement broad based stimulus. China’s industrial production growth also slowed slightly in October.
Global growth remains moderate and sub-trend with big variations between key economies. China and North America represent around one-third of global GDP but they currently account for around half of global growth.
Recent monthly economic indicators and business surveys show continued moderate global economic growth along with big variations between the major economies. Low interest rates, falling oil prices and smaller budget cutbacks in big advanced economies should underpin.
The US payrolls report on Friday night was solid, despite the headline increase of 214K in October coming in below the 235K expected. September payrolls were revised up by 8k to 256k and August up by 23k to 203k.
GDP grew by 3.5% qoq (annualised rate) in the September quarter, a strong above trend result. While we expect that growth may slow in the December quarter, it should still be consistent with around 3% annualised growth in the second half of 2014.
China’s latest economic data was a mixed bag – with many measures comparatively negative (against the trends of recent years) but stronger than somewhat pessimistic market expectations. While year-on-year GDP growth was at a five year low, the growth rate remaining above 7% will likely…
Global growth was around 3% in the first half of 2014, below trend and with marked variations in performance between major economies. North America continues to perform strongly with solid growth in both the US and Canada.
China’s changing healthcare needs require major changes to the system to avoid economic pain. The population is ageing and life expectancy is rising. With these two trends, demand for healthcare services is set to increase – particularly given the growing incidence of non-communicable diseases.
Disappointing global growth continued into mid-2014 with GDP expanding by a sub-trend 3% yoy and concern over weakness in Japan and the Euro-zone offsetting solid growth in the US and UK. Chinese forecasts unchanged.
The RBI held the policy Repo rate at 8% in its latest meeting – as broadly anticipated. The focus on meeting the 6% headline CPI outcome in January 2016 was reiterated.
Indicators point to above trend growth in the September quarter of just over 3% qoq. Jobs growth was strong in September and the unemployment rate fell below 6% for the first time in over six years. Inflationary pressures have eased in recent months.
“The index shows that Australia’s engagement with Asia is dominated by product imports and not surprisingly, our engagement is clearly strongest with China across all sizes of business. But, it is higher for SMEs than the ASX 300” said Alan Oster.
Conditions in China’s real estate sector have slowed considerably across 2014. The sector has been a key contributor to economic growth in recent years and a slowing trend will impose greater pressure on other parts of the economy to provide growth momentum, particularly if the Government aims to maintain its current growth target.
Weaker than expected industrial production data is likely to generate headlines this month. However these results are not as negative as they may seem – reflecting in part the impact of stimulus in Q3 2013.
Weakness in Japan, stagnation in the Euro-zone and a hard landing in Latin America have resulted in a slowdown in the pace of global growth through the first half of 2014. World GDP growth reached 3.4% yoy in late 2013, it slowed to 3.1% yoy in March qtr 2014 and 2.9% yoy in June qtr.
Indicators remain generally positive, consistent with our forecast of solid, above trend, growth of 3.0% qoq (annualised) in the September quarter. While August’s employment gain (142,000) was below expectations, the recovery in the labour market remains on track.
Disappointing global growth continued into mid-2014 with stagnation in the Euro-zone sparking deflationary concern and ECB action while Japanese demand is still struggling to recover from April’s tax rise.
The European Central Bank has cut its key policy lending rate to only 5 bps, it's progressing its planned schemes for asset purchases and targeted lending to banks and has hinted that it could increase its balance sheet by around €1 Trillion, taking it back to its early 2012 size.
The Indian economy expanded by 5.7% in the June quarter, the fastest pace in over 2 years. By sector, Services (Financial & Community services) and Industry were better performing, while Agriculture eased due to weaker monsoon conditions.
RBA on hold Tuesday, Stevens speaking and a soft GDP report Wednesday, along with mixed July data: strong retail sales but soft building approvals. Pre-Q2 GDP partials also due Mon/Tues; NAB Online retail index due Wednesday
What to Watch: Week commencing 25 August 2014
The RBA’s half-yearly testimony had a somewhat more positive tone without going overboard on growth specifics nor on when a more discernible upturn might arrive. (The Bank’s formal forecasts were of course outlined in their quarterly statement earlier).
Key economic insights from this week and the week ahead
Weak retail trade and net exports point to soft GDP growth in Q2. Headwinds remain, but business conditions jumped to four year high, while, business confidence, orders and capacity utilisation all looking better. We have trimmed our global forecasts.
Global growth remains moderate but monthly trade and industrial growth continues to slow. Economic conditions mixed between regions with solid upturns in the UK and US, weakness in Japan and signs of slowing in the Euro-zone. Emerging market economies still driving most global growth
The RBI held the policy Repo rate at 8% in its latest meeting – as broadly anticipated. The Statutory Liquidity Rate was cut by 50bp to 22% to enable banks to free up capital for lending, and to boost their liquidity coverage.
GDP bounced back strongly in the June quarter, growing at an annualised 4.0% rate. Early indicators for the September quarter are positive. Tapering of asset purchases under QE is continuing and we expect the end of the program to be announced after the Fed’s October meeting.
The rise in the consumption tax rate has had the expected impact on the economy. Spending was pulled into the pre-tax months and has fallen sharply since the rate rose from 5% to 8% on April 1st. Although Japanese firms have told the central bank that the consequences of the tax rise
What to Watch, week commencing 11 August 2014
Unemployment rate rises to 6.4% in July from 6.0% in June after changes to unemployment definition
GDP bounced back strongly in the June quarter, growing by a 4.0% annualised rate. The improvement was broad based and revisions to recent quarters were also positive. Early indicators for the September quarter are positive. We expect solid growth over the rest of the year.
India’s new Finance Minister, Arun Jaitley, delivered his maiden Budget on the 10th of July. It was a good document, albeit not a ‘game changer’, and needs to be followed up with further action and implementation. There were positives for consumers, infrastructure spending, real estate.
The growth in China’s economy over the past thirty years has been extremely impressive, overtaking Japan in 2009 to become the world’s second largest economy. However when measured on a per capita basis, China’s economy still remains comparatively small – within the ‘middle income’ band.
In late June, China’s politburo agreed to fiscal and taxation reforms that were outlined at last year’s Third Plenum, setting a deadline for implementation at the end of 2016. These reforms should provide greater transparency and predictability of local government revenues.
The Canadian economy recorded a moderate 0.3% increase during the March quarter, 2014, impacted by weather related disruptions. Group Economics is forecasting a 2.3% expansion in 2014, followed by a somewhat quicker 2.5% in 2015
The large fall in March quarter GDP is not matched by other indicators. Data for June quarter suggest growth will resume. Inflation has strengthened in recent months.
Key events in Australia, New Zealand and China. What to Watch, week commencing 14 July
US GDP is now estimated to have declined by a recession like 2.9% qoq (annualized rate) in the March quarter. However, we still think the March quarter weakness is a one-off. Other indicators do not point to an economic downturn.
After rising through 2013, the main business surveys have gone sideways in 2014 and the pace of global growth has slipped slightly. We have lowered our global GDP forecasts for 2014 from 3.4% to 3.2%.
Moderate global growth continues after early 2014’s slowing, resulting in slightly lower growth forecasts in 2014 but nearer trend in out years. Mixed picture among advanced economies as US & Euro-zone growth disappoints expectations but UK expansion stays solid...
There are some more meaty reports due on the economy this week, commencing with the ANZ Job Ads report for June (L: -5.6%), a last partial look into labour demand ahead of Thursday’s labour force report.
NAB’s Director of Fixed Income, Mark Todd, discusses the 2014-15 outlook for the US Federal reserve and interest rates with AFR columnist, Chris Joye and Montgomery Investment Management stategist, Andrew Macken.
Key events in Australia, New Zealand and China. What to Watch, week commencing 30 June
As China’s economy has grown over the past decade, so too has China’s overseas investment. This has become a highly controversial issue in a number of countries, in part due to the difficulties faced by firms and individuals when attempting to invest in China
Moderate sub-trend growth continues across the emerging market economies of East Asia (S Korea, Thailand, Taiwan, Malaysia, Indonesia, Singapore, HK and Philippines). Lack-lustre growth in world trade has dampened activity in this export-oriented region.
Partial economic indicators suggest that China’s economy has stabilised in recent months. These trends remain in line with our expectations, meaning that our forecasts for economic growth remain unchanged at 7.3% in 2014 and 7% in 2015.
The economy is now estimated to have gone backwards in the March quarter. However, indicators point to a bounce back in the June quarter. Recovery expected to continue over the rest of 2014 and into 2015. We expect growth of around 2¼% this year and 3% in 2015.
India’s economy expanded by 4.6% during the year to March quarter 2014; it increased 4.7% over the 2013-14 financial year. By industry, agriculture and financial services were the strongest performing; manufacturing and mining remained in recession.
Key events in Australia, New Zealand and China/India. What to Watch, week commencing 16 June
The generally upward trend in advanced economy purchasing manager surveys began to fade through late 2013 and 2014 and that has been followed by a levelling out in the rate of growth in world trade and industrial output.
Global growth levelled off through late 2013 and early 2014, partly due to bad weather hitting North America. Advanced economy upturn looks set to continue as interest rates stay low and as the peak in fiscal consolidation has passed
China’s steel industry is the largest in the world and a key consumer of Australian commodity exports. The industry has been suffering in recent times due to excess capacity, weak profitability and its role in the air pollution crisis, prompting Government plans to rationalise the sector...
The BJP-led National Democratic Alliance won a landslide election victory in the recently concluded elections, with the BJP winning enough seats to govern in its own right. The result was welcomed strongly by financial markets, reflecting gains in both equities as well as the Indian Rupee.
GDP growth paused in the March quarter, but indicators point to a bounce back in the June quarter. The labour market continues to improve highlighted by a large fall in the unemployment rate in April. Other labour market indicators are also improving but more slowly...
Partial economic indicators continue to highlight softening trends in China, evident since the latter part of 2013. These trends remain in line with our expectations, and as such, our forecasts for Chinese economic growth are unchanged at 7.3% in 2014 (before slowing to 7% in 2015).
US GDP growth slowed sharply in the March quarter. This, at least in part, reflected the harsh winter and also a correction to the strong growth seen in the second half of 2013 as inventory accumulation slowed and net export gains were reversed.
There have been concerns around China’s residential property market for a number of years, with bearish observers repeatedly describing the market as a bubble. In March 2014, these fears were elevated by the collapse of the Zhejiang Xingrun Real Estate Company.
There were few surprises in the latest Chinese data release, with the weakening trends evident since the latter part of last year continuing into the first quarter of 2014, with slower economic growth, comparatively soft industrial production and investment data continuing
GDP growth is expected to decelerate in the March quarter, partly reflecting the temporary impact of a severe winter. The recovery should get back on a firmer footing over the rest of 2014. We are still expecting GDP growth of 2.6% in 2014 and 2.9% in 2015.that
At its first bi-monthly Monetary policy statement for 2014-15, the RBI maintained the policy Repo rate at 8%, as expected. India’s headline inflation indicators have improved with easing vegetable prices, although the Core CPI remained sticky at 8%, reflecting high prices for services.
The upward trend in the advanced economy business surveys faltered toward the end of 2013 and this has continued into early 2014. Some of this reflected the disruptive impact of bad weather on supply chains but the March business survey results suggest a levelling out in the pace of growth
Global economy growing around trend but signs in early 2014 that accelerating growth phase has ended. Mixed conditions across regions with advanced economies providing more of global output expansion as Chinese growth rate trends down.
Early this month saw China’s first onshore corporate default, when a Shanghai based solar company defaulted on its bond repayments of RMB 89.8 million (around US$14.7 million). This has been followed this week with a collapse of an unlisted private property development company.
In early March, China recorded its first domestic corporate bond default when the Shanghai Chaori Solar Energy Science & Technology Company failed to make a RMB 89.8 million interest payment, having narrowly avoided a similar outcome in January 2013.
At the start of this month’s National People’s Congress, Premier Li Keqiang confirmed China’s growth target at ‘about 7.5%’ in 2014, but noted that reform was the Government’s top priority.
GDP growth is expected to decelerate modestly in the March quarter, partly reflecting the temporary impact of a severe winter. Following GDP growth of 1.9% in 2013 we are forecasting GDP will grow by 2.6% in 2014 (previously 2.8%) and 2.9% in 2015.
The upward trend in the advanced economy business surveys faltered toward the end of 2013 and this has continued into early 2014. Nevertheless, this softer note probably reflects bad weather disrupting supply chains.
Global upturn continues and forecasts little changed. Advanced economies seeing recovery after their prolonged weakness post 2008/9 recession. Mixed trends across Emerging markets with gradual slowing in China and uncertainty over speed of Indian rebound.
India’s economic growth decelerated to 4.7% in the December quarter 2013, in year ended terms, from 4.8% in the September quarter. The standout was the Services sector (particularly Financial services and Community services), which grew by 6.7%, followed by Agriculture at 3.6%.
Moderate economic growth continues across the emerging market economies of East Asia (ASEAN, HK, South Korea and Taiwan) with the pace of regional growth quickening from just under 4% yoy in September quarter to 4.3% yoy in December.
Concerns have been raised by the rapid growth in local government liabilities in recent years, with questions around the stability and security of China’s sub-sovereign debt, and the risk that a potential default could trigger a broader financial crisis.
Economy still on track despite fall in manufacturing ISM and another weak jobs report. Following GDP growth of 1.9% in 2013 we are forecasting GDP will grow by 2.8% in 2014 and 2.9% in 2015. Inflation remains well below Fed’s 2% objective.
US GDP rose by a reasonably strong 3.2% (annualized rate) in Q4, completing a strong second half to the year. Consumption growth was stronger as were net exports but residential investment went into reverse and public demand was very weak due to the October government shutdown.
At its Quarterly Monetary policy review on the 28th of January 2014, the Reserve Bank of India (RBI) raised the Repo rate by 25bp to 8%, and simultaneously raised both the MSF (Marginal Standing Facility Rate) and Reverse Repo Rate by 25bp to 9% and 7% respectively.
Business surveys and partial data on trade and industrial output show moderate global economic growth continuing through to the end of 2013. There are mixed trends across Emerging markets, with gradual slowing in China and uncertainty over speed of Indian rebound.
Global upturn continues and forecasts little changed. Advanced economies seeing recovery after their prolonged weakness post 2008/9 recession. Mixed trends across Emerging markets with gradual slowing in China and uncertainty over speed of Indian rebound.
One of the key challenges in 2014 for China’s Central Government will be how it addresses the ongoing issue of air pollution across the country. Rising levels of smog and hazardous PM 2.5 particles have increased public health concerns.
China’s latest National Accounts data shows that the economy grew by 1.8% quarter on quarter in December, and 7.7% year on year - representing a marginal slowdown from the September quarter (when yoy growth was 7.8%).
Recent partial indicators of economic activity have been positive. With inventories also tracking more strongly than expected, December quarter GDP growth is now estimated to be 0.7% qoq (3.0% annualised). We are forecasting GDP growth of 1.9% in 2013
Our expectations that China will achieve its growth target this year remain unchanged. Domestic demand has strengthened recently, with consumer confidence improving, while exports increased strongly during November - contributing to the widest trade surplus for four years.
September industrial output and broader measures of quarterly GDP are finally showing economic growth starting to lift in line with both the business surveys and our forecast for a global upturn in 2014 (growth at 3½% unchanged).
Global upturn continues and forecasts little changed. Advanced economies see faster recovery after prolonged weakness post 2008/09 recession. Chinese and Indian economies faring better with no slowing in former and activity picking-up in the latter.
Indian growth accelerated to 4.8%, in year ended terms, in the September Quarter, up from 4.4% in the June quarter. An improvement in the agricultural sector (up to 4.6% from 2.7%), due to a favourable monsoon season, helped drive the improved outcome.
US GDP rose by 2.8% (annualized rate) in the September quarter, continuing the improvement experienced over the course of the past year. However, details a bit weaker as the stronger growth reflected a pick-up in inventories.
US GDP rose by 2.8% (annualized rate) in the September quarter, continuing the improvement experienced over the course of the past year. However, the stronger growth largely reflected a pickup in inventories. Business investment and consumption were weak, but housing is still growing
China has one of the most important labour markets in the world. This is true for a number of reasons. The most apparent is that it has the largest labour market in the world, and rapid income growth is generating a middle class in China that is expected to define the global economy
Global growth rose from 2.4% to 2.8% between March and June quarters and we are expecting 2.9% for 2013 overall, increasing to 3.5% next year. The national accounts and business surveys show a quickening pace of growth in the big advanced economies with the UK and Japan the standout.
China remains on track to achieve its growth target for the year with domestic demand holding up in October, while exports picked up from the disappointing outcome in September. Industrial production was slightly better than expectations for the month.
Global upturn continues and forecasts little changed. Advanced economies seeing faster recovery after their prolonged weakness post 2008/09 recession. Mixed trends across emerging markets with solid Chinese growth but disappointing outcomes in India.
At its Quarterly Monetary policy review on the 29th of October, the Reserve Bank of India (RBI) raised the Repo rate by 25bp to 7.75%. It simultaneously cut the MSF (Marginal Standing Facility Rate) by 25bp to 8%; this follows a prior 50bp cut on the 7th October.
Behind the volatility in the monthly data, the trend pace of growth in the emerging market economies of East Asia (which stretch from S Korea to Indonesia) remains weak. Industrial output and export volumes are barely above year-earlier levels, reflecting sluggish growth in world trade.
As the Chinese economy enters a transitional phase in its development, many are now questioning what this will mean for its future economic performance. The IMF recently examined a number of scenarios for how China’s recent investment driven growth model could unfold over coming years.
According to National Accounts data released today, the Chinese economy grew 2.2% in the September quarter to be 7.8% larger than the same period last year. The improvement in growth from last quarter was slightly above our expectation.
September quarter GDP growth expected to be 2.0% qoq (annualised rate). Business surveys more positive on strength of the economy. Partial U.S. Government shutdown will not have a major direct impact on the economy.
Global upturn continues and forecasts little changed - but growth momentum has slowed a touch through mid-2013. Composition of global growth still shifting toward advanced economies with mixed trends in emerging markets.
At its Quarterly Monetary policy review on 20 July, the Reserve Bank of India (RBI) cut the MSF rate by 75bps, whilst raising the Repo and Reverse Repo rates by 25 basis points. The Cash Reserve Ratio was held at 4%, but the minimum daily balance was reduced from 99% to 95%.
Recent business surveys show a solid and synchronised lift in business confidence across the advanced economies whose annualised 3-month industrial growth now exceeds that of the emerging economies.
US GDP for the June quarter revised up from 1.7% (annualized rate) to 2.5%. While some partial indicators were soft at the start of the September quarter, business surveys point to a stronger underlying momentum in the economy. We have revised up our forecast for GDP growth in 2013 to 1.6%
The most recent batch of partial economic indicators provide further evidence that China's economy may be stabilising, supported by improved foreign demand and a shift in policy stance. There may have also been a delayed impact from rapid credit growth earlier in the year.
There has been a large divergence in views over the future path of China’s monetary policy/stimulus over the medium term. While the majority view expects target interest rates and reserve requirements to remain unchanged until early 2015, there are still analysts calling for cuts to rates.
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
The Indian economy (Production, at factor cost) grew by only 4.4% over the year to the June quarter, 2013. This is the slowest pace of growth since March 2009. By Production, services (primarily financial and agriculture) were the mainstay; in contrast, mining and manufacturing contracted
US GDP rose by 1.7% (annualized rate) in the June quarter, an improvement on the March quarter, but still only a modest rate of growth. The stronger growth largely reflected a pick-up in business investment and a much smaller detraction from growth from public demand.
Partial economic indicators, although still subdued, provided some signs that the economy may be stabilising. Trade data were somewhat above expectations, including much stronger import growth pointing to improved domestic demand.
Central bank statements reinforcing their guidance that interest rates should stay low for a long time yet across the big advanced economies, have supported financial markets. Recent business surveys and industrial data point to an upturn in growth in these advanced economies
Global growth unchanged as modest country forecast revisions cancel each other out. We see moderate acceleration in global growth to around trend in 2014. Recent data show promising signs in big advanced economies while conditions still softening in emerging market economies.
Partial economic indicators, although still subdued, provided some signs that the economy may now be stabilising. Trade data came in somewhat above expectations, including much stronger import growth pointing to a pick up in domestic demand.
At its Quarterly Monetary policy review on the 30th of July, the Reserve Bank of India (RBI) maintained the benchmark repo rate at 7.25%, and the reverse repo rate at 6.25%.
Exports from Australia to the emerging economies of Asia (ASEAN, S Korea, Taiwan, HK) remain below their 2011 peak, largely because of lower commodity prices. Dairy is 40% of New Zealand exports to these economies and higher dairy prices have driven a rebound in its earnings from the region
US GDP rose by 1.7% (annualized rate) in the June quarter, an improvement on the March quarter, but still only a modest rate of growth. The stronger growth largely reflected a pick-up in business investment and a much smaller detraction from growth from public demand.
According to recently released National Accounts data, the Chinese economy grew 1.7% in the June quarter to be 7.5% larger than the same period last year. This result is in line with our forecast for the quarter.
According to National Accounts data released today, the Chinese economy grew 1.7% in the June quarter to be 7.5% larger than the same period last year. This result is in line with our forecast for the quarter, a solid outcome relative to the recent spate of soft partial indicators.
Overall, the US economy appears to be continuing to grow at a modest pace. While GDP growth is likely to slow in the June quarter, this is partly due to an expected inventory correction. We are forecasting GDP growth will strengthen in the second half of the year.
Equity and currency market volatility reflects uncertainties over the pace at which the Fed might alter US monetary policy, Chinese authorities might clamp down on shadow banking and the potential impact of the Bank of Japan’s move to greater monetary easing.
Global growth forecasts unchanged. A few signs that activity is picking up in some advanced economies but India and Brazil still soft and growing concerns over pace of Chinese growth. Markets focussed on central bank policy driving greater volatility in equities and currencies.
In the final quarter of 2012-13, the Indian economy grew by 4.8%. This was broadly similar to the upwardly revised third quarter estimate of 4.7%. Somewhat softer growth in the last 2 quarters of the current fiscal year has pushed overall growth in 2012/2013 to 5%, the lowest in a decade.
In its mid quarter Monetary policy review, the Reserve Bank of India held its benchmark Repo rate at 7.25% and the Reverse Repo rate at 6.25%. The RBI expressed concern at the sudden, steep depreciation in the Rupee amid a high current account deficit.
Early indicators suggest GDP growth will slow a little in the June quarter from its March quarter level. However, as the impact of tax increases and the automatic budget cuts fades, growth is expected to strengthen later in the year. We see GDP growth of 2.1% in 2013 and 2.9% in 2014.
The consensus view is that the pace of global growth should accelerate through the course of 2013 as recessions end in Western Europe, Abenomics lifts Japanese growth, the US continues its moderate expansion and solid growth continues in the big emerging economies.
Economic activity in China appears to have slowed further during the month of May, although the moderation in growth continues to occur at a gradual pace - keeping concerns of a hard-landing at bay. Nevertheless, hopes of a meaningful acceleration in growth this year have faded.
Global growth forecasts little changed. Still waiting to see firm evidence that the expected acceleration in activity through 2013 is beginning. Australian economy now at a watershed as mining investment slows and domestic economy struggles.
Partial economic indicators lack any strong indication that conditions are improving in China. While indicators for April came in broadly consistent with expectations, the market has revised expectations lower in response to a run of disappointing outcomes since the start of the year
US GDP rose by 2.5% (annualized rate) in the March quarter. Underlying trend is modest growth. We are forecasting GDP growth of 2.1% in 2013 and 2.9% in 2014. While GDP growth will likely moderate in the current quarter it should strengthen in the second half of the year.
Chinese partial economic indicators were largely in line with expectations in April. However, we are yet to see signs that real activity is significantly picking up. We continue to expect growth of 8% in 2013, although risks remain skewed to the downside.
US GDP rose by 2.5% (annualized rate) in the March quarter. Underlying trend is modest growth. Growth in the quarter was largely driven by private consumption and a positive contribution from inventories. Fixed investment was weaker than the previous quarter but continues to grow
National accounts for the March quarter came in well below expectations, suggesting a more subdued economic recovery than previously thought. Real GDP growth eased to 7.7% yoy, from 7.9% last quarter. Consumption made the largest contribution to growth but it is too early to say an...
Exports from both Australia and New Zealand to the Asian Tiger economies (ASEAN, S Korea, HK and Taiwan) remain below their previous peaks, largely reflecting lower prices for key export commodities.
According to Chinese National Accounts released today, the Chinese economy grew 1.6% in the March quarter, which is a 7.7% increase on the same period last year. This result is softer than expected and casts some doubt over expectations for a robust recovery in the Chinese economy...
Partial data for the March quarter are pointing to a noticeable pick-up in GDP growth following only weak growth in the December quarter. We are expecting GDP growth of 2.4% (revised from 2.2%) in 2013 and 2.9% in 2014. While we expect growth to slow modestly in the June quarter, it ....
Our global forecasts remain little changed at 3.3% in 2013 and 3.9% in 2014. Renewed Euro-zone instability has taken a toll on global equity markets, which had strengthened quite markedly since late 2012, especially when compared to global economic activity and commodity markets.
Global growth forecasts unchanged. Activity still sluggish but set to accelerate in second half of 2013. Financial markets digesting latest Euro-zone crisis (Cyprus) and new Japanese monetary policy.
In this months economic update we revisit our outlook for the Chinese economy and what we can expect to see from the People’s Bank of China over the forecast horizon.
It has been an eventful month with the annual National People’s Congress (NPC) getting underway early last week, while a number of policies to curb property prices were also announced in the lead up to the gathering – triggering a sharp correction in equity markets.
Economic (GDP) growth appears to have resumed in March quarter after December quarter lull. We are expecting GDP growth of 2.2% in 2013 and 2.9% in 2014. Growth to be supported by some fading headwinds, growing business investment and continued recovery in the housing market.
Financial markets have lifted as confidence in the global growth outlook has firmed but late 2012 data for world exports and industrial output remained soft, showing modest expansion in activity at best.
Global economy still sluggish in late 2012 but equities strengthen on stronger risk appetite and expectations of sustained global recovery. Partial data suggest better start to 2013; we still see marginally better growth in major advanced economies this year, accelerating in 2014.
As is usually the case for this time of year, the seasonal impacts from the Lunar New Year holiday are reaping havoc with China’s economic data. In addition to the obvious seasonal impacts, statistical authorities also refrain from releasing some of the more closely watched statistics …
US GDP fell in the December quarter but the underlying trend is modest growth. Extremely loose monetary policy likely to continue for an extended period. Expect QE3 monthly asset purchases will finish at end of 2013. Fed funds rate likely on hold until late 2015/early 2016
After having stalled through much of last year, the process of trade integration between Australasia and East Asia regained momentum at the end of 2012 – especially exports to China. Exports from both Australia and New Zealand to the “Tiger” economies remain below their earlier levels.
US GDP fell by 0.1% (annualized rate) in the December quarter following quite solid growth in the previous quarter. Underlying trend is modest growth. The quarterly decline reflects a big drop in federal defence spending and slower inventory growth as well as a decline in net exports.
Financial markets have lifted as confidence in the global growth outlook firmed but late 2012 data for world exports and industrial output remained soft, showing modest expansion in activity at best. Central bank action in the Euro-zone, US and Japan has boosted market hopes
National accounts for the December quarter came in slightly stronger than expected, suggesting the economy has achieved a soft landing, at least for now. Real GDP growth rose to 7.9% yoy, ending seven consecutive quarters of slowing growth. Growth for the year came in at 7.8%
Global economy sluggish in late 2012 but signs of an upturn, that gathers pace through next two years. Financial markets strengthen reflecting “risk on” as confidence in global outlook strengthens in wake of central bank action. Emerging market economies will still drive global growth.
Today’s economic data releases for China came in broadly in line with expectations, providing evidence that the economic slowdown may have bottomed in the September quarter. The national accounts show that the economy expanded by 7.9% over the year to the December quarter...
The ‘fiscal cliff’ has been substantially scaled back. The fate of scheduled automatic budget cuts (delayed for only two months) is still subject to negotiation and an increase in the debt limit is also still to be agreed. The U.S. economy continues to track along at a moderate pace...
Although interest rates are historically low in the advanced economies and central banks have stepped up liquidity injections, their pace of economic growth remains very weak. The big emerging economies are driving global growth, and it looks as if their economies are stabilising.
Global growth still sluggish and expected to stay that way in 2013. US growth is moderate, Japan and Euro-zone weak, emerging economies now driving global expansion. Australian economy slowed in Q3 and may soften again in Q4.
China’s economy showed further signs of steadying in October with most of the partial indicators recording an improvement. Year-ended growth in production, retail sales, fixed investment and exports all accelerated in the month. In contrast, bank credit came in below expectations.
The fiscal cliff refers to the large fiscal contraction that will occur early in January 2013 due to increases in taxes and reductions in spending under existing law. Given the state of the economy and the limited ability of monetary policy to respond
Global growth still sluggish with major divergences between different regions. Below trend growth expected to continue into 2013 as world economy averts major risks in US and Euro-zone. Australian economy stumbles into Q4, with growth clearly below trend.
The US economy is only growing at a modest rate. GDP grew by 0.5% qoq (or 2.0% annualized) in the September quarter, and we expect similar growth for the present quarter. Hurricane Sandy is a downside risk for December quarter growth; but upside risk for subsequent quarters.
US GDP grew by 0.5% qoq in the September quarter, stronger than in the previous quarter but still only modest. The strengthening in growth was due to consumption, housing investment and government spending picking up. Of concern, however, was a decline in business investment.
GDP growth was only 0.3% qoq in the June quarter and partial indictors suggest that is was only slightly higher in the September quarter. This is consistent with the finding of the Federal Reserve’s ‘Beige book’ released this week.
The latest business surveys suggest that conditions in the big advanced economies have stabilised after the softening in growth that took place since late 2011. Monthly trade and industrial indicators still point to a broad-based slowing across the emerging economie
A monthly snapshot of NAB’s global and domestic economic outlook. The Bigger Picture – A Global & Australian Economic Perspective Global: The global economy is experiencing a broad-based slowdown with both the advanced and emerging economies reporting a softening in growth. Conditions vary between regions with recession in Western Europe, slowdowns in China, India and […]
The Fed has announced further, aggressive, stimulus – extended forward guidance and a new round of QE. The Fed is also signalling that monetary policy stimulus will be maintained for longer than would normally be the case when the recovery strengthens. The latest indicators continue to suggest that the U.S. is experiencing only modest growth. […]
The IMF has revised down its forecasts of world growth, particularly for advanced economies. Its Australian forecasts have also been downgraded, to 1.8% in 2011 (from 3.0% in April – catch up after weaker than expected GDP in H1) and 3.3% in 2012 (from 3.5%). For 2011 NABs forecast is 1.9%, not materially different from […]
NAB’s Global Economic Research provides up to date commentary on global economic developments in the USA, Asia, New Zealand. China’s partial economic indicators for the month suggest that conditions haven’t quite stabilised as expected, but neither have they deteriorated significantly. Our previous expectation that economic growth would remain unchanged from Q2 now looks unlikely. Recent […]
Drought has led to big downward revisions to US crop production. Impact on farm sector incomes will be mitigated by several factors, particularly the large expected increases in crop prices. However, these price rises will squeeze livestock and dairy producers. Farm sector will be a headwind to US GDP growth in 2012 similar to that […]
Partial economic indicators are starting to stabilise somewhat, but the overall trend in the data was disappointing for the month of July given our expectations for a slight improvement in economic growth over H2 2012. Industrial production softened further along with nominal retail sales, while export growth and bank loans were both well below expectations. […]
US GDP grew by only a modest 0.4% (or 1.5% annualized) in the June quarter, a slightly lower rate of growth than in the previous quarter. The composition of GDP was not positive, with the inventory cycle likely to be a moderate headwind in the near term. We expect growth to be similar in the […]
US GDP grew by only a modest 0.4% (or 1.5% annualized) in the June quarter, a slightly lower rate of growth than in the previous quarter.
The Chinese economy continues to slow, albeit at a relatively controlled pace. Real GDP growth eased to 7.6 per cent, broadly in line with expectations, but the slowest pace in more than three years. Nevertheless, partial economic indicators are providing tentative signs of stabilising, with new loans increasing, while fixed asset investment and real retail […]
The recent softness in economic indicators continued over the last month, and now point to GDP growth in the June quarter being slightly weaker than the March quarter’s modest pace. While we still expect GDP growth to strengthen in the second half of the year we have trimmed our growth expectations for 2012 (from 2.2% […]
Under current law there will be a large fiscal contraction in the United States in 2013. If it went ahead it could significantly impact the economy. However, experience suggests that many of the spending cuts and tax increases will be deferred. We expect the fiscal headwind in 2013 to be similar to that of 2012. […]
The PBoC cut benchmark lending and deposit rates by 25bp this month in response to a clear moderation in inflation and soft demand conditions. Domestic demand may receive support from recent stimulus measures, but global uncertainty (particularly in Europe) will continue to pose headwinds. The partial economic indicators for May continued to be relatively soft, […]
The recent weakness in jobs growth continued into May. It is probably, in part, a correction to the surprisingly strong growth in early 2012. Indicators suggest that June quarter GDP growth will maintain the previous quarter’s modest pace. While we still expect GDP growth to strengthen in the second half of the year we have […]
Partial indicators for April were disappointing across the board relative to optimistic market expectations, but we remain happy with our longheld views for China’s growth outlook. Slowing activity has been driven by both an easing in domestic demand, and weak external demand – global economic uncertainty, particularly in Europe, is likely to provide an ongoing […]
US GDP grew by 0.5% (or 2.2% annualized) in the March quarter, confirming that the US economy is growing at a modest-to-moderate pace. We expect GDP in the current quarter to grow at a similar rate to the March quarter and then strengthen in the second half of the year. We have left our forecasts […]
US GDP grew by 0.5% (or 2.2% annualized) in the March quarter, confirming that the US economy is growing at a modest-to-moderate pace. There was mixed news on the composition of GDP with inventories making a further contribution to growth and business investment declining. However, consumption and housing investment were strong and there was a […]
The Chinese economy decelerated further at the start of 2012, with real GDP growth at its slowest pace in around three years (rising 8.1 per cent over the year to the March quarter – NAB forecast was for 8.2 per cent). By component, consumption made the largest contribution to growth over the year, while investment […]
Growth slowed considerably in the Asian Tiger economies late last year and remains relatively sluggish in 2012. However, some partial indicators suggest that conditions have improved modestly more recently, bolstered by improvements in the US economy, and an apparent v-shape recovery in Thailand from last years floods. However, demand for exports from advanced economies is […]
It is too early to say that the disappointing March jobs outcome signals a shift to a much slower pace of jobs growth but some downwards correction was expected.
If the Fed undertakes another round of Quantitative Easing it may be ‘sterilized’. That is, the Fed would ensure there is no increase in bank reserves, either through using reverse repurchase agreements or auctioning term deposits to banks. Reverse repos or term deposits are a form of shortterm borrowing. Under unsterilized QE, the asset purchases […]
India accounts for around 5% of exports from Australia and 2% from New Zealand, mainly comprising a narrow range of commodities. After growing strongly since 2000, shipment values from Australia fell in 2011. India is one of the biggest Asian locations for Australian bank lending with around $US6½ Billion outstanding in the latter half of […]
New World Bank projections show 2012 global growth slowing to only 2½%, well below NAB’s 3¼% forecast. The difference is largely illusory and reflects how forecasts are compiled. On a comparable basis NAB forecasts are slightly lower than the World Bank’s. For further analysis download the full report. Difference over global outlook more apparent than […]
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