- The US economy is set to repeat the robust GDP growth achieved in the June quarter, although the figures may be boosted by short-term effects.
- The signing of a trade deal between the US, Mexico and Canada has managed to settle some nerves, but trade remains a key issue for investors.
- For the first half of 2018, Australia’s GDP expanded at an annualised pace of 4.0%, challenging the US economy for the strongest rate of growth in the developed world.
- Australia’s labour market added 44,000 jobs in August, allaying fears of a slowdown in employment growth.
- China is combatting lower growth with fiscal and monetary stimulus, but easing has contributed to lower market interest rates and a falling yuan.
The Australian economy continues to outpace expectations. For the first half of 2018, Australia’s GDP expanded at an annualised pace of 4.0%, challenging the US economy for the strongest rate of growth in the developed world. Recent growth outcomes are broadly in line with the RBA’s and Treasury’s optimistic projections, while the household sector has maintained solid consumer spending in the face of very subdued wage growth.
Despite the strong performance of the US economy and its share market, the rest of the world is struggling to keep pace. US dollar strength has been a negative for emerging markets, while global economic growth appears to have slowed moderately. Although the signing of a trade deal between the US, Mexico and Canada has managed to settle some nerves, trade remains a key issue for investors.
The US economy is powering along, and the September quarter is likely to see a repeat of June’s solid growth rate. The Atlanta Fed’s GDPNow estimate for the September quarter was sitting at an annualised 4.1% at the start of October, with consumer spending forecast to grow at 3.7%. However, there are concerns that tax cuts and the imposition of tariffs have led to some short-term effects, as manufacturers and purchasers ramp up inventory ahead of further possible tariff increases.
Recent economic data across the EU has been relatively soft with Italian, French and Spanish CPIs all missing estimates, and Spain’s June quarter GDP revised lower. Growth across the eurozone was 0.4% in the June quarter and 2.1% over the year. GDP growth in Germany was 0.5% in the June quarter, up from 0.4%, buoyed by strong increases in consumer and government spending, while France, Italy and Spain saw subdued growth in private consumption.
The news out of China has been mixed over the past month. The crackdown on credit growth in the shadow banking sector has been a significant factor behind the weakness in investment spending, although modest fiscal stimulus and easier liquidity conditions in the traditional banking market has supported growth.
Japan’s manufacturing PMI continued to expand in September, with output sustained by robust demand, although the expansion is slower compared to the first half of 2018.