Australian Economy – There were some mixed signals throughout the month of February, though on the whole, economic data continued to look sluggish. Activity in services expanded, while there was a rise in job advertisements. Worryingly though, other activity in the economy (retail, construction, manufacturing) is contracting and Australia's trade surplus is shrinking1.
Global Economy – The spread of Covid-19 was the major headline for the month of February, with numerous restrictions to movement and trade starting to filter through the global economy. In the US, economic data is still relatively strong, buoyed by a large fiscal deficit and steady employment situation. In Europe, with the Brexit deadline now a thing of the past, economic conditions are not looking great. Germany has narrowly averted a likely recession (for now) while business confidence remains low.
Investment Markets – A rough February for markets after hitting all-time highs mid-month. Fears over a Covid-19 pandemic saw many of the world's top exchanges fall by over 10% in just a matter of days - which is a level that is generally deemed to be a technical 'correction'2.
Outlook – The only story at the moment is the economic fallout from Covid-19. Cancelled events and travel is likely to cause significant pain to airlines and hotels, whilst restrictions on Chinese factory work might also cause temporary shortages of key consumer and capital goods. The measures meant to curb the spread of the virus are not likely to have a long-term impact on the broader economy. However, this does not mean that specific companies and industries will not suffer long-term damage, which might translate into heavy short-term pain for societies and economies (beyond toilet paper shortages).
S&P/ASX 200 – 12 months to 29 February 2020
Source: Core Equity Services
Footnotes: 1. TradingEconomics; 2. Bloomberg data .