Australian Economy – The continuing depreciation of the $A is starting to be more of a worry than a benefit, with concerns over inflationary risks rising. A relatively large increase in the participation rate saw unemployment rise1, though good retail turnover data suggests that the economy is sustaining a moderate level of growth.
Global Economy – It has been almost 5 years since of positive jobs growth in the U.S. with over 1.25 million jobs being added since the start of the year2. Reasonably strong manufacturing data and wage growth indicators also show a strong picture of the U.S. economy, despite consumers remaining cautious. Across the Atlantic, unemployment has remained steady at just over 11%, whilst industrial production has stalled completely3.
Investment Markets – Some resolution over Greek debt negotiations have helped markets feel a bit more at ease. Most markets bounced back from a poor June, with the exception of China. Despite obvious attempts to keep stock prices elevated, Chinese authorities failed to stop a 14.7%3 drop in the month of July.
Outlook – The Australian share market, in $US terms, has retreated over 20% in the past 12 months. This is the worst year-on-year figure since the end of the GFC, and has been driven by the sliding $A. Despite concerns over frothy property prices, Australian assets seem to be looking reasonably cheap, a point which could help provide support against further market volatility and corrections.
S&P/ASX 200 – 12 months to 31 July 2015
Source: Core Equity Services
Footnotes: 1. Data from Australian Bureau of Statistics; 2. Dept of Labour, USA; 3. Bloomberg data.