Australian Economy – Inflation continues to hover at the lower end of the spectrum, coming in at 1.5% for 20161. Some of this was due to a slightly weaker $A, higher oil price and large jump in tobacco prices. Despite a healthy jump in employed persons, a tick up in the participation rate saw the unemployment rate push slightly upwards to 5.8%.
Global Economy – Another strong employment report out of the US with total nonfarm payroll employment rising by 156,000 in December, and the unemployment rate little changed at 4.7%2. Data out of the EU was also relatively promising. GDP in the Euro area was up by 0.6% in the December quarter, while unemployment ticked down a little to 9.6%3. Risks of deflation in Europe are also subsiding with annual inflation moving along at a healthy 1.8%, albeit driven somewhat by rising energy prices.
Investment Markets – Australian equities (-0.8%), European equities (-1.8%) and Japanese equities (-0.4%) all pulled back a little after a good end to 2016, whereas the US had a reasonable gain (+1.8%)4. On the other side of the equation, Hong Kong and China, who both had a bad run into the end of the year bounced back well in January, up 6.2% and 2.4% respectively.
Outlook – Markets, perhaps optimistically, do not seem to perturbed about the risks a Trump presidency may be to the global economy. Domestic business friendly measures may be the aim of the new US executive arm of Government, but his middle-class supporter base are likely to realise soon enough that the benefits of such policies are not likely to trickle down very far or may be overshadowed by the associated costs.
S&P/ASX 200 – 12 months to 31 January 2017
Source: Core Equity Services
Footnotes: 1. Australian Bureau of Statistics; 2. US Dept of Labor; 3. Eursotat; 4. Bloomberg data.