St George Economics economy and finance update

Overview:

  • Housing market index down 420 basis points
  • House prices up 1.2% in January
  • Producer prices up 0.2% in December quarter
  • Early-stage manufacturing prices higher in Decemeber

Share Markets:

The US stockmarket had a strong session boosted by the release of upbeat economic data. The Dow rose 1.1%, to close at a 5-year high, the S&P500 gained 1.0% and the Nasdaq was up 1.2%. 

Bonds:

US government bonds slipped (yields rose) as stockmarket gains dented demand for safe haven government debt. Comments from moderate Fed member Bullard that "the jobless rate in the low 7%s may let the Fed end QE", supported the slide in bonds.

Foreign Exchange:

The Aussie dollar edged lower against the US dollar, with softer than expected Chinese manufacturing data weighing on the local currency.

The Euro gained ground against the Aussie dollar on better than expected Euro zone manufacturing data. The Aussie, however, strengthened versus the Yen, with expectations of quantitative easing in Japan weighing on the Yen. 

Commodities:

Commodity prices gained, led by oil, copper and gold prices, after US economic data strengthened suggesting solid demand for commodities.

Australia:

The AiG Performance of manufacturing declined from 44.3 to 40.2 in January, the lowest reading since June 2009.

All of the sub-indices except for one (average wages) were lower, including new orders, employment and production. The survey continues to point to difficult conditions in the manufacturing industry, despite the improved global backdrop.

RP Data-Rismark house prices rose 1.2% in January, recovering after weakening towards the end of last year.

Annual growth in Australian house prices is now in positive territory for the first time since April 2011. In the year to January, Australian house prices rose 1.8% in the year to January, providing an encouraging sign that housing is responding to a lower interest rate environment.

The recovery might be an early sign that the soft patch in housing towards the end of last year may have indeed been due to one-off factors, when first home buyer grants for established dwellings expired in NSW and QLD.

Producer prices rose 0.2% in the December quarter, taking annual growth to a subdued 1.0%. Both domestic and import prices at the final stage of production were muted rising by just 0.1% in the quarter.

While the strength of the Australian dollar has helped keep down import prices, domestic prices have also weakened in recent quarters. Prices at the earlier stages of production (preliminary and intermediate) rose by a stronger 0.6% in the quarter but on an annualised basis have also eased and stood at 1.4% and 1.7% respectively.

China:

The manufacturing PMI declined slightly from 50.6 to 50.4 in January according to the National Bureau of Statistics. In contrast, the HSBC manufacturing PMI measure improved from 51.5 to 52.3 in January.

While the two indices might be sending conflicting messages, they both continue to point to a healthy pace of growth in Chinese manufacturing.

The non-manufacturing PMI remained robust, edging  up to 56.2 in January, from 56.1 in December. This was its highest level since August, driven by strength in retail and construction. Services industries are becoming more important to China's economy, having accounted for 45 per cent of China's GDP in 2012.

Europe:

Eurozone CPI slowed from 2.2% year-on-year to 2.0% year-on-year in January, according to the flash estimate, its lowest since late 2010.

Unemployment was steady at 11.7% in December, but with November revised down from 11.8%, that jobless rate is still a record high. The factory PMI was revised up from 47.5 to 47.9 in the final Jan report (Germany revised from 48.8 to 49.8 but France unrevised at 42.9).

Japan:

The jobless rate rose from 4.1% to 4.2% in December, as the number of employed declined. The job-to-applicant ratio however, rose to 0.82 in December from 0.80.

United Kingdom:

The UK factory PMI edged down from 51.2 to 50.8 in January, the first back to back readings above 50 since March-April last year.

United States:

US non-farm payrolls rose by 157k in January, which was slightly below consensus expectations, however, revisions to previous months' data was positive, with an additional 127k new jobs added in the previous two months.

The separate household survey showed just a 17k increase in jobs, and with the labour force rising 143k most of that went straight into unemployment, so the jobless rate rose from 7.8% to 7.9%, its highest since August last year.

Hourly earnings and aggregate hours worked have both shown slower growth in the past two months, from 0.4% in November to 0.2% and 0.5% to 0.1% respectively. The industry breakdown showed across the board gains in January outside of temp hiring and the public sector.

The US factory ISM rose from 50.2 to 53.1 in January, its highest since April last year and well above the 50-level, signalling expansion in manufacturing activity. Orders, jobs and production all contributed to the rise.

The Uni of Michigan consumer sentiment index was revised up from 71.3 to 73.8 for January, now a partial rebound after Dec's 9.8 point fall to 72.9, rather than an extension of that fall. The revision was almost entirely due to the outlook component.

US construction spending rose 0.9% in December, with revisions the ninth straight month of gains. This was once again led by a surge in residential spending, up 2.1%, although non-residential spending rose 0.3%.

Please read the disclaimer below (to enlarge, press ctrl-+ on modern browsers)

The information contained in this report (the Information) is provided for, and is only to be used by, persons in Australia. The information may not comply with the laws of another jurisdiction. The Information is general in nature and does not take into account the particular investment objectives or financial situation of any potential reader. It does not constitute, and should not be relied on as, financial or investment advice or recommendations (expressed or implied) and is not an invitation to take up securities or other financial products or services. No decision should be made on the basis of the Information without first seeking expert financial advice. For persons with whom St.George has a contract to supply Information, the supply of the Information is made under that contract and St.George's agreed terms of supply apply. St.George does not represent or guarantee that the Information is accurate or free from errors or omissions and St.George disclaims any duty of care in relation to the Information and liability for any reliance on investment decisions made using the Information. The Information is subject to change. Terms, conditions and any fees apply to St. George products and details are available. St.George or its officers, agents or employees (including persons involved in preparation of the Information) may have financial interests in the markets discussed in the Information. St.George owns copyright in the Information unless otherwise indicated. The Information should not be reproduced, distributed, linked or transmitted without the written consent of St.George.



Headless body murder accused ‘happy’ after man dismembered

Headless body murder accused ‘happy’ after man dismembered

LINDY Williams claimed ‘violent partner’ had gone overseas and she was getting a...

UPDATE: Tragedy as man dies in Tin Can Bay Rd crash

UPDATE: Tragedy as man dies in Tin Can Bay Rd crash

Emergency workers rush to two serious crashes in the Gympie region

40 years of painting brings Ken full circle

40 years of painting brings Ken full circle

Internationally acclaimed Gympie artist Ken Gailer opens exhibition

Local Partners