Australian Economy – GDP growth for the last quarter of 2020 of 3.1% showed the resilience of the Australian economy in rebounding from the Covid economic slump1. This was accompanied by an equally impressive drop in the unemployment rate from 6.4% to 5.8%, with the total number of employed persons almost back to pre-pandemic levels.
Global Economy – In the US, with many states looking to abolish remaining Covid restrictions, the total number of employed persons still remains about 8 million short of early 2020 levels. This is larger than the gap seen in the EU, which is not surprising seeing as the US employment base was a record high levels at the outset of the pandemic. Going forward, one major issue for the EU, compared to the US, is the slowness of the Covid vaccine rollout across EU member states1.
Investment Markets – Stock markets continue to tread higher, with European equities having a great start to 2021, up over 10% in just the first 3 months. Emerging market stocks, in particular Chinese share markets, have started to trend back to the pack, having had a stellar 2020. Bond markets around the world continue to weaken, with yield curves steepening in possible anticipation of a reversal of central bank stimulus2.
Outlook – The economic recovery seen throughout the world has been largely extraordinary. Australia's level of GDP is probably only 1% or 2% below where it would have been if the world had not seen Covid-19. The rest of the western world is not far behind (except for perhaps the UK, which is having to also deal with its exit from free trade with its biggest partner), while China is ahead of where it might have been. This, of course, has largely been propped up by the ramp up in government spending, which accounted for 5-10% of GDP for most of the world. As economies and government policies move back to normal, this will likely see some countries reface recessionary pressures.
S&P/ASX 200 – 12 months to 31 March 2021
Source: Core Equity Services
Footnotes: 1. TradingEconomics; 2. Bloomberg data .