Lonsec Market Commentary – September 2019

Lonsec Market Commentary – September 2019

The Australian economy has not suffered a recession (defined as two consecutive quarters of negative economic growth) for almost 28 years, yet for many conditions will appear stagnant.

With ‘full employment’ thought to be closer to 4.5%, it is difficult to see wages growth picking up much from current levels, particularly if the cyclical weakness in employment, as suggested by job ads data and business surveys, comes like to fruition. From a monetary policy perspective, the likelihood of a 0.50% official cash rate by early 2020 is quite high. The June quarter data shows that core inflation is running at 1.4% and the RBA does not see it reaching 2.0% until 2021.

Lonsec Market Commentary – September 2019

 

(Lonsec September 2019; Issue date 10/10/2019)

Lonsec Market Commentary – August 2019

Lonsec Market Commentary – August 2019

Australia’s GDP growth for the June quarter recorded only 1.4% year-on-year, the worst result since the GFC.
While in line with expectations, the result highlights the challenging environment on the spending side of the economy, with state final demand (a broad measure of spending) recording zero quarterly growth in NSW.

The renewed bout of risk aversion through August and September reflected the escalation in the US-China trade and technology war, along with evidence of further slowing in the global economy. An inversion of the yield curve rattled markets, giving rise to the debate about the timing of the next recession and whether the US Fed was doing enough to fight the slowdown.

Lonsec Market Commentary – August 2019

(Lonsec August 2019, Issue date: 17-09-2019)

Lonsec Market Commentary – July 2019

Lonsec Market Commentary – July 2019

The minutes from the RBA’s July meeting noted that low wages growth and spare capacity in the labour market meant there was room for the bank to cut rates. The underemployment rate in May was 8.6%, barely below the level seen in 2014 when the unemployment rate was more than 1.0% higher at 6.5%. The participation rate is now at a record 66.0%, up from 64.5% in 2014.

Markets enjoyed a short-lived reprieve from the US-China trade conflict in July, but economic data points to a further slowing in the global economy. The US Federal Reserve’s recent rate cut appears justified given the re-emergence of trade tensions, with the US administration threatening 10% tariffs on the remaining $300 billion of Chinese goods.

Lonsec Market Commentary – July 2019

(Lonsec July 2019, Issue date 13-08-2019)