St George Economics economy and finance update

Share Markets:

Sentiment was weighed down by some disappointing earnings results, and the rally in equity markets since the beginning of this year continued to take a breather.

Concerns about the global growth outlook have resurfaced since the IMF downgraded its global growth forecast for 2013 earlier this week.

In the overnight session, the Dow fell 0.9%, the S&P500 dropped 1.4% and the Nasdaq fell 1.8%.


US treasuries rose (yields fell), with 10-year yields falling to their lowest this year.

Worries about global growth and increased concerns on terrorism in the US have boosted demand for relatively safer assets such as bonds.

Foreign Exchange:

The US dollar rose against a basket of currencies while the euro weakened on comments from German central bank President Weidmann that the ECB might lower interest rates if warranted. 

Weaker risk appetite has placed downward pressure on the Australian dollar which fell to just above 1.03.


The broad index of commodity prices (CRB) weakened dragged down by lower oil prices and concerns about the demand outlook.

Gold prices continued to partial recover some lost ground after the sharp drop late last week.

Reports of large amounts of physical buying in Asia were supportive of the precious metal.


The WBC leading index gained 0.6% in February.

The annualised growth rate of 4.2% in February is above the long term trend of 2.8%, suggesting above trend economic growth in three to nine months into the future.

New Zealand:

Consumer prices rose 0.4% in Q1, after falling 0.2% in Q4 2012.

The increase was smaller than consensus expectations, assisted by the strong New Zealand dollar, which drives down prices for imports.

The major contributor to inflation was higher tobacco and cigarette prices, as taxes increased on January 1.

Excluding tobacco, inflation rose 0.2% for the quarter.

For the year to the first quarter, CPI inflation held at 0.9%. This was slower than the RBNZ's 1-3% inflation target.

United Kingdom: 

UK employment fell 2k in the 3 months to February, the first quarterly decline since mid 2011, although economic growth has been patchy over that period.

The unemployment rate rose from 7.7% in the quarter ending November to 7.9% in February.

Average weekly earnings growth slowed to 0.8% in the year to February, equal lowest since the 2009 recession.

Excluding bonuses the 1.0% annual pace in Feb was the lowest on record.

The Bank of England (BoE) minutes to the April MPC meeting once again showed a 6:3 vote in favour of no further asset purchases, with the minority, including Governor King, preferring a further £25bn.

United States: 

The Federal Reserve's Beige book reported economic activity grew at a "moderate" pace, a slight upgrade from from the "modest to moderate" pace described in the previous Beige book.

Improvement was seen in residential construction while the labour market conditions were either unchanged or improved somewhat.

The assessment largely reflected data in recent months.

Although the housing market recovery will continue to support the US economy, fiscal policy remains a downside risk to growth.

Budget cuts and tax increases are expected to provide a large detraction from growth this year.


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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.

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