US, RBA and treasury show doubts about Australian economy


The US Conference Board's leading index of the Australian economy dipped 0.2% in June having shown positive results earlier in the year.

The small downturn mirrors comments made by the RBA and Treasury who have both trimmed their short-term growth forecasts for Australia.

Share Markets:

Financial markets were encouraged by stronger-than-expected PMI data from China and Europe, which provided some more positive signs for global growth.

Jobs data from the US came below expectations, but this only dented sentiment briefly (see below for more detail). European shares rose a solid 1.4%, while in the US the Dow rose 0.4% and the S&P500 rose 0.9%.

The Nasdaq rose 1.1%, despite a 3-hour shutdown due to a technical glitch.


In bond markets, yields on US 2, 3 and 5-year treasury notes rose, although US bonds were flat at the longer-end.

The yield on 10-year bonds appear to have consolidated after hitting a 2-year high earlier on ahead of expectations the Fed will taper purchases soon.  

Foreign Exchange:

The US dollar index initially rose, but retreated later on to be unchanged.

The euro conversely fell, but then recovered its losses.

The Australian dollar yesterday dipped to a low of 0.8932 but then rose to above 90 US cents after the Chinese PMI was released and was supported by the more positive mood last night.


Commodity prices were boosted by the positive European and Chinese data, which signalled stronger global growth. Oil, copper and gold prices all rose.

Gold prices have held up well, despite the prospect of the Federal Reserve tapering its quantitative easing program. 


The HSBC/Markit flash manufacturing PMI rose from 47.7 in July to 50.1 in August, beating market expectations.

A number this close to 50 suggests to us that the Chinese economy will continue to grow at least at an annual pace of 7.0% over the next twelve months.


The euro zone PMI composite rose from 50.5 in July to 51.7 in the advanced reading for August, the first back-to-back above 50 readings since July-August 2011.

Of note, the German factory and services PMIs rose to 52 or higher, whereas the French factory index was stalled at 49.7 and the services PMI there fell from 48.6 to 47.7.

While the headline reading suggests that the broad euro zone may have sustained growth through to Q3, the breakdown continues to indicate that the recovery remains uneven and driven by Germany.

United States:

US initial jobless claims rose from 323k to 336k for the week ending 17 August (vs consensus estimates 330k) , but the four-week average of 331k was the lowest since November 2007.

A year earlier, the claims average to mid August 2012 was 369k.

Despite this clear evidence that firms are firing less, payrolls employment growth in the first seven months of 2013 has averaged 192k, just 10k more than in the same period last year.

US house prices rose 7.2% in the year to June, according to the FHFA series. In the quarter, prices rose 2.1%, including a 0.7% rise in June.

In other US news, the leading index rose 0.6% in July with only two of the ten components (workweek and orders) registering negative in the month.

The Kansas City Fed factory index rose from 6 to 8 in August, reflecting steady production growth, slower shipments, faster orders growth and a rebound in jobs.

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