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Weekly Brief Sheet - 12/12/22

Provides a market roundup, a selection of useful data points we use for our investment analysis, and some interesting articles/charts we have noticed recently.

US stocks closed lower on Friday following the release of higher-than-expected November producer price index data. The data, along with anticipation of upcoming US consumer price index and Federal Open Market Committee meetings, led to a slightly hawkish reaction from the markets. Meanwhile, China has eased pandemic restrictions on transportation workers, allowing them to avoid quarantine and regular PCR testing. The country's Ministry of Finance also announced plans to issue 750 billion yuan in special treasury bonds to support the economy. In the day ahead, market-moving events include Japanese manufacturing conditions, PPI and machine tool orders data, as well as UK house price information.

Australia's Q3 gross domestic product (GDP) came in slightly under the market's expectation at 0.6%, 6.9% for the year. Household spending was the key support in the three months to September, with a further reduction in the savings rate and robust nominal income gains facilitating a 1.1% lift in consumption. However, this represents a clear slowdown in the pace of consumption growth from the first half of the year, indicating that the reopening effect is fading. As spending patterns continue to normalize and the full effect of rapidly rising interest rates and inflation's impact on real incomes is felt, consumption growth will slow further. Some components of household spending are already beginning to wilt under these headwinds. Conditions for business investment remain mixed. After 13 consecutive quarters of surplus, Australia's current account meanwhile slipped into deficit in Q3.

The national accounts for the September quarter showed that the Australian economy expanded by 0.6%, in line with expectations. This slower growth is expected to continue into 2023, with household consumption slowing from around 2% in the first half of the year to near zero in the second half. Business equipment investment is also forecast to contract by around 7% in the second half of 2023. The Reserve Bank of Australia is expected to continue lifting interest rates in the first half of 2023 but may cut rates in 2024 as inflation is forecast to be lower than the RBA's current forecast.


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