Economic News – July 2016

What’s made news recently?

Australian Economy Grows 1.1% in Q1 2016

Figure-1-Australian-real-GDP-growth

The latest national accounts data show that the Australian economy grew by 1.1% in the March quarter. This contributed to the 3.1% growth posted over the year. The figure was above market forecasts for 2.8% annual GDP growth and is the fastest expansion since the third quarter of 2012, according to the Australian Bureau of Statistics (ABS).

However, while GDP growth in volume terms exceeded expectations, the result was tempered by continued weakness in national incomes.

This reflects the amount of conflicting data in the Australian economy at the moment:

  • Production is strong but incomes are weak.
  • Record export growth with falling company profits
  • Strong employment growth with low wages
  • Strong GDP growth with a large budget deficit

RBA Holds Steady-Rate Position

“Taking account of the available information, and having eased monetary policy at its May meeting, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and inflation returning to target over time,” RBA governor Glenn Stevens said.

US Fed Leaves Rates Unchanged.

The US Federal Open Market Committee (FOMC) decided to leave the federal funds target range unchanged at 0.25%–0.5% in its June meeting. The central bank signaled that it still planned to raise rates twice in 2016.  Slower growth would restrain the pace of future monetary tightening.

Low GDP Growth for Euro

According to estimates published by Eurostat (the statistical office of the European Union) the EU-28 has an estimated GDP growth of just 0.5% for the first quarter.

A positive result for the first quarter suggests that the recovery remains firmly on track. Improving domestic demand should continue to fuel steady gains in the coming quarters. This is despite concerns over the global economy.

Political risk however, continues to take center stage in the region, with the fall out from UK’s exit from the EU.

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