The Pulse
- US economic growth moderated in the September quarter but is underpinned by strong consumer spending growth.
- The IMF recently downgraded its forecast for global economic growth, partly reflecting the US-China trade war.
- In Australia, business conditions remain relatively robust while labour market conditions continue to show signs of underlying strength.
- Chinese GDP grew by 6.5% year-on-year in the September quarter, below the expected 6.6% and down from the June quarter’s growth of 6.7%.
- Incoming European data was weaker than expected but consistent with broad-based growth and growing inflation expectations.
Australia
Despite the risk of a material slowdown in the Chinese economy, evidence of a decline in house prices, and global trade concerns, business conditions remain relatively robust while labour market conditions continue to show signs of underlying strength. At its November meeting the RBA lifted its forecast for economic growth in 2018 and 2019 slightly to 3.5%, with growth then set to slow in 2020 due to reduced exports of raw materials.
Global economies
Global economic growth remains relatively robust, especially in the US, but an adjustment in inflation expectations along with concerns about peaking corporate earnings growth resulted in a dramatic selloff in equities in October, similar to that seen in February this year. The IMF recently downgraded its forecast for global economic growth, partly reflecting the US-China trade war, with global GDP growth for 2018 and 2019 revised down from 3.9% to 3.7%.
US
US September quarter GDP grew by an annualised 3.5% according to October’s advance estimate, beating expectations for growth of 3.4% and boosted by consumer spending growth of 4.0%—the fastest rate since the December quarter of 2014. While growth moderated from the annualised 4.2% rate recorded in the June quarter, the continuing strength of consumer spending is promising.
Europe
Euro area GDP grew 0.2% in the September quarter according to October’s initial estimate, missing the expected 0.4% growth. Markets did not appear too fazed by the result, with temporary factors such as disruptions in car production from new car emissions testing procedures impacting growth, and lower oil prices through October seen as positive for consumers going forward
China
Chinese GDP grew by 6.5% year-on-year in the September quarter, below the expected 6.6% and down from the June quarter’s growth of 6.7%. The official manufacturing PMI dropped from 50.8 to 50.2 while the Caixin PMI was for all intents and purposes flat, rising from 50.0 to 50.1. Authorities have in recent months unveiled measures to reduce financing costs, cut taxes and fast-track infrastructure projects, although such modest stimulus may take time to have an impact.
Asia Region
October business survey data pointed to a rebound in economic activity during the month, with the manufacturing sector PMI rising from 52.5 to 52.9, underpinned by sharper output growth, possibly covering shortfalls in September due to bad weather.