Australian Economy – On the data front, November was a good month for the Australian economy. The unemployment rate dropped back below 6% and retail sales were up1. The trade deficit was also cut by about 15%, while manufacturing and construction showed signs of growth. Despite the large slowdown in the resource sector, the Australian economy continues to show a mild level of resilience.
Global Economy – The US economy has continued to push along, with the unemployment rate falling to 5%2 and GDP growth for the September quarter coming in at a reasonable 2.1% level. The picture in Europe, the next biggest economy, seems bleaker from an economic point of view. Europe's GDP growth was positive and at 1.6% for the year. However, unemployment still remains in double-digits and geo-political forces continue to make it difficult for any central authority to provide adequate stimulus. The resignation of the Portuguese Government, who had adopted the EZ stance on austerity, along with increased talk of a UK exit from the EU, show how fractured and fragile the European experiment continues to be. A nearby refugee crisis is also threatening to alienate EU members further.
Investment Markets – Following an impressive bounce back in September, markets were rather flat in October. Japanese markets fared best out of the developed world, up about 3.5%. Europe, which was shocked by the Paris terror attacks also performed well, with equities up 2.5%. US markets were flat, while Australian equities slid over 1%3.
Outlook – How the market might react to the imminent decision on rates by the Fed is the big unknown over the coming few months. Waiting for near-Christmas may have been a wise idea by the Fed, as the slowdown in market activity may dampen any potential moves to the downside.
S&P/ASX 200 – 12 months to 30 November 2015
Source: Core Equity Services
Footnotes: 1. Data from Australian Bureau of Statistics; 2. Dept of Labour, USA; 3. Bloomberg data.