It’s hard to believe it’s February already, with the nation back at work and kids back at school after the summer holidays. While Australians flocked to the beach, it was business as usual on the global economic front.
All eyes were on the US in January, where newly installed President Trump hit the ground running. Markets took this as an encouraging sign that he would follow through on promised tax cuts and infrastructure spending, pushing the S&P 500 share index to record highs. An encouraging start to the US company reporting season and higher oil prices also boosted confidence, until confusion surrounding immigration policy prompted a late sell off.
In Australia, local shares lost ground over the month despite continued strength in iron ore prices and tame inflation. The consumer price index (CPI) rose by a lower than expected 0.5 per cent in the December quarter, taking the annual rate of inflation to 1.5 per cent from 1.3 per cent previously. This leaves the door open for a further rate cut by the Reserve Bank if inflation remains in check. The only fly in the ointment is continued strength in the local housing market. The Australian dollar finished the month above 75 US cents, well up on its low of 71.7c in December. Longer term, observers expect the US dollar to firm if the US Federal Reserve lifts interest rates and President Trump rolls out his pro-growth agenda as expected.
Read more in our February 2017 update here: