- Economic data released over the past month has continued to paint a relatively good picture of global growth with most of the major economies experiencing accelerating economic growth in the June quarter.
- Geopolitical tensions remained heightened in August and this helped drive down bond yields.
- Political gridlock in the United States increased nervousness about a potential government shutdown.
- Strong earnings reports from companies in the United States and Europe were largely ignored and global equity markets were essentially flat over the month.
- Australian GDP growth rebounded in the June quarter after the weather affected softer March quarter.
- Australia’s earnings reporting season was a touch disappointing with a higher than average number of companies missing earnings projections and many companies lowering their guidance for the year ahead.
Reasonably good economic news and earnings reports in the US and Europe were largely ignored by investors, who were more focused on the escalating geopolitical tensions involving North Korea, as well as the impending US debt ceiling and government shutdown negotiations.
In Australia, the June quarter GDP figures painted a picture of an economy in reasonable shape after the weather affected softness in the prior quarter. The 0.8% quarterly expansion in the economy was boosted by strong growth in household consumption, business and government investment and LNG exports.
Most of the economic data in the United States over the past month has been relatively good. GDP growth in the June quarter was revised up from 2.6% to 3.0% annualised growth helped by stronger household consumption and investment growth.
In the Eurozone, the strong momentum seen earlier this year has continued with economic growth revised up from 2.1% to 2.2% in the June quarter, and business and consumer surveys have remained at strong levels suggesting that the economy is in reasonable shape. Inflation has also ticked up a little, although as in other countries it remains below the European Central Bank’s target rate.
Chinese data over the past month has been a little mixed with some indicators such as the business surveys pointing to better conditions whereas other indicators such as industrial production, retail sales growth and fixed asset investment slowed over the past month.
In Japan, the consumer price index rose an expected 0.4% year-on-year in July, however, the Bank of Japan’s preferred measure of core annual inflation remained very low at just 0.1%. Meanwhile the July employment report in Japan remained strong, with the unemployment rate staying at a very low rate of 2.8%.