Australian Economy – A poor jobs reading (unemployment rate up to 6.3%) saw talk of a possible recession beginning to grow1. However, reasonable readings of consumer and business sentiment, along with growth in spending, have put such fears at bay for the time being.
Global Economy – The US unemployment rate remained steady at 5.3% despite a healthy boost of 215,000 jobs for the month of July2. Industrial production, housing starts and retail sales also show signs of a growing economy. In Europe, the Greeks got their bailout money and lost their PM. But, the big news of the month was the move by China to start allowing the renmimbi to float a little more freely, starting with an initial depreciation of almost 2%.
Investment Markets – August 2015 was probably the worst month for global equity markets since the GFC. A broad sell off saw losses of over 5% for most developed markets a more than 10% in Hong Kong and China. Despite losing over 30% over the past 3 months, the Chinese share market is still up over 40% for the past year, highlighting that much of the recent losses has more to do with a correction from over-exuberant prices than a large shift in fundamentals3.
Outlook – The heightened volatility of the past month might be expected to continue as uncertainty grows over the path of Fed rate hikes. Added to this are fears over China and the risk of a forced economic rebalancing. But if governments and policy makers are good at one thing, it is kicking the proverbial can further down the road, a skill which Chinese authorities are likely to employ over the coming years as they look to avert a credit crisis.
S&P/ASX 200 – 12 months to 31 August 2015
Source: Core Equity Services
Footnotes: 1. Data from Australian Bureau of Statistics; 2. Dept of Labour, USA; 3. Bloomberg data.