Economic growth remains below long-run average despite gains

Share Markets:

US markets were quiet following the Thanksgiving Day holiday. Both the Dow and the S&P500 were little changed from their pre-Thanksgiving Day levels.

European markets were also quiet on Friday. The Euro Stoxx index rose 0.2% but the FTSE100 and the Dax barely moved.

Interest Rates:

Weak inflation outcomes are keeping interest rates low.

In Australia, 10 year government bond yields fell 8 basis points to 3.03% on Friday while in the US they fell 8 basis points to 2.16%.

US 2 year government yields fell 5 basis points to 0.47%.

Foreign Exchange:

The AUD dipped over the weekend as commodity prices and raw materials companies saw prices slide.

The AUD fell against all major currencies at the same time as the US dollar index picked up.


The price of West Texas Intermediate crude oil fell 10.2% on Friday from its close prior to the Thanksgiving Day public holiday.

Supply remains strong and demand modest. One suspects a grab for market share is at play with margin pressure being placed on US based new sources of oil.

The price of copper became swept up in the move away from raw materials with no specific news on a slowdown in global demand.

Gold was 2% weaker on Friday. The weekend saw the defeat of a Swiss referendum that, had it succeeded, would have seen the Swiss central bank forced to buy gold.

The export price of iron ore from Australia to China lifted off its low of US$69 per tonne but only up to US$70 per tonne.


Credit growth in the private sector has been slowly gaining traction. It grew by 0.6% in October.

The annual rate was at 3.0% at its trough in the middle of 2013 and has now risen to 5.7%, the fastest pace in nearly 6 years. Despite the pickup, the pace of growth remains below the long-run average.

Growth in housing credit, particularly for investors, continued to stand out. Investor housing credit grew by 1.0% in October, the fastest monthly pace since June 2007.

Moreover, the annual rate lifted to 9.9%, the strongest in just over 6½ years.

The business credit data was encouraging and suggested that businesses are starting to lift their spirits. Business credit expanded by 0.7% in October, the firmest pace in four months and the annual rate lifted from 3.7% to 4.3%, the fastest rate since June 2012.

The improvement in business credit provides some tentative evidence that businesses are starting to take on more risk and invest in new projects.

A deepening of this trend is needed to ensure that the transition in the economy from mining investment to other forms of investment is successful.

Other personal credit, which includes personal loans and credit cards, remained lacklustre, recording no growth in October and growing by only 1.0% on a year ago.

Voters in Victoria replaced its Liberal / National Party coalition government over the weekend, voting in a Labor government led by premier-elect Daniel Andrews.

The make-up of the Upper House is yet to be fully determined but could be potentially disruptive to the newly elected government's plans.


European inflation for the year to November came in at an anaemic 0.3% following a rise of just 0.4% in the year to October.

High unemployment, weak demand and lower energy prices all played a part in the outcome.

German inflation was only marginally stronger than the broader Eurozone result coming in at 0.6%, or 0.5% if adjusted for the standard Eurozone method of calculation.

German retail sales rose a modest 1.7% in the year to October.


The jobless rate unexpectedly fell to 3.5% in October, from 3.6% in September. The job-to-applicant ratio also improved from 1.09 in September to 1.10 last month.

Consumer prices grew by 2.9% in the year to October, from an annual rate of 3.0% in September.

Core consumer prices, which strip out food and energy, also eased in the year to October to 2.2%, from 2.3% in the year to September.

Industrial production grew by 0.2% in October, following on from a 2.9% jump in September. On a year ago, however, industrial production was still weak, down 1.0%.

Retail trade disappointed, falling by 1.4% in October, after a rise of 2.8% in September. The annual rate, therefore, eased from 2.3% to 1.4%.

New Zealand:

Building permits rose by 8.8% in November, after a decline of 11.9% in September.

Confidence among businesses has been elevated over the past two years according to the recent ANZ business outlook survey.

In November, a net 31.5% of firms were optimistic about the outlook, up from 26.5% in October. While this is down from a peak earlier in the year, confidence remains well above its long-run average.

United Kingdom:

Consumer confidence in the UK remained weak at -2 in November, the same outcome as in October.

Keeping this result in context, the index stood close to negative 30 in 2012 and negative 20 in 2013. Consumer sentiment has picked up in the UK and moved into positive territory in mid-2014 but has since slipped back into marginally negative territory.

United States:

No data of significance released.