Australian Economy – More good news on the jobs front, with headline unemployment dropping to 5.7%1. A major driver (and perhaps benefactor) of the strength seen in employment over the recent past has been construction, which saw a big jump in activity in May. Low inflation gave the RBA space to cut rates to a record low level of 1.75%. However, with the release of the budget and the Mother's Day election announcement, most of the next month will be focussed on policies and promises.
Global Economy – Jobs growth in the US seems to be slipping with total nonfarm payroll employment growth back below the 200,000 level3. As in much of the world, jobs growth in services has been keeping employment steady in the US, with mining employment contracting heavily. In Europe, deflation is still a concern along with an unemployment rate hanging above 10%.
Investment Markets – Most markets continued to rise from their 2016 lows in May as oil and commodity price growth steadied. Over the past 3 months, Australian and Chinese equities have performed strongly, both up about 10%, while Europe has lagged with just 4% growth over the same timeframe4.
Outlook – The June meeting of the Fed, along with the Brexit vote, is likely to cause some price palpitations for equity markets around the world. Risks of a global recession in 2017 seem to be growing, and one or two pieces of negative data or geopolitical news could well see consumers and investors heading for the door.
S&P/ASX 200 – 12 months to 31 May 2016
Source: Core Equity Services
Footnotes: 1. Australian Bureau of Statistics; 2. Westpac-Melbourne Institute; 3. Dept of Labour, USA; 4. Bloomberg data.