Weekly Market Recap

Week in review

Australian economy expands by 0.5% q/q in 4Q22
Australian retail sales 1.9% m/m
China PMI manufacturing surges to 51.6

Week ahead

RBA official cash rate
China CPI inflation
U.S. non-farm payrolls

Thought of the week

The Australian economy expanded by a smaller-than-expected 0.5%q/q in the final quarter of 2022. The drag was mostly due to inventory levels, but the underlying data was not supportive. Household consumption continues to fade as the impact of higher interest rates start to bite and fits into the broader moderation in domestic demand in the Australian economy. The restraint in consumer activity will continue given the delayed impact of higher rates on the economy and expectation for the RBA to increase the cash rate by another 50bps in the coming meetings. In the past the higher savings rate in Australia offered something of a buffer the rising cost of living. However, the savings rate is now back to pre-COVID averages as the buffer has been eroded. The positive is that if the economy is not as strong as expected then inflation pressures may not be as persistent allowing the RBA to take their foot off the brake sooner. Should they press ahead with hikes beyond April, the risks to the economy become much greater.

Household savings rate
Percent of annualised household disposable income

Source: ABS, BEA, Factset, J.P. Morgan Asset Management.
Data reflect most recently available as of 03/03/23.
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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WEEKLY MARKET RECAP

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