Weekly Market Recap 20201207 | J.P. Morgan Asset Management

Weekly Market Recap

Households in the driving seat

07/12/2020

Week in review

Australia real GDP 3.3% q/q in 3Q20
Chinese PMI manufacturing rose to 52.1
Australia national house prices rise 0.8% m/m

Week ahead

Australia business confidence
Australia consumer confidence
ECB policy meeting

Thought of the week

Consumers have come to the rescue of the Australian economy, driving the expansion in the third quarter and lifting the country out of recession. Consumption accounts for around 55% of the economy so a healthy household was always going to be crucial for a successful recovery. The household savings rate remains high, creating a buffer to offset the fading support from the government’s JobKeeper and JobSeeker schemes and should smooth consumption over the coming quarters. However, this depends on consumers’ willingness to dip into these savings rather than using them to bring down debt. Net exports was the biggest drag. Simply put, Australia bought more than it sold last quarter, but this is likely to reverse in the coming quarters. The most worrying signal from last week’s national accounts is private investment. Residential and business investment were virtually flat over the quarter, but this masks the continued decline in private business investment which fell a further 3% q/q and is now a clear drag on the economy.

Households in the economic driving seat
Contribution to quarterly real GDP growth

Source: ABS, FactSet, J.P. Morgan Asset Management, all returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.

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