Weekly Market Recap

Time for a trim

25/10/2021

Week in review

Chinese economic growth rate slows to 4.9% y/y in 3Q
RBA policy October meeting minutes still dovish
U.S. industrial production falls 1.3% m/m for September

Week ahead

Australia CPI inflation rate
U.S. 3Q real GDP growth
Australia private sector credit growth

Thought of the week

As Victorians are now able to head out for a trim this week, the degree to which higher inflation impacts their spending habits will matter for the growth outlook. However, the breadth of inflation pressures is more important than the overall rate of inflation. Both the trimmed mean rate of inflation or the rate excluding volatile items are ways of considering the extent of inflation in the economy. The trimmed mean, which is designed to adjust for temporary factors such as supply disruptions, has experienced a more modest rise than other gauges of inflation. Removing the distorting effects of those goods which have seen the largest price rises and falls from one quarter to the next provides a better indication of the underlying burden of inflation and is why it’s the one of the RBA’s preferred indicators. What this doesn’t capture is the real cost of living, how consumers may react and the squeeze on household spending or wage expectations.

Watch the breadth of inflation not overall rise

Change year-over-year

Source: ABS, FactSet, J.P. Morgan Asset Management. Data reflect most recently available as of 22/10/21.
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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