Economic Snapshot – August – September 2016
Financial markets were quieter in August than in previous months as Northern Hemisphere holidays reduced the volume of trading activity. Key economic data around the world did little to change the overall picture the markets have come to understand and expect. That is, the US economy continues to improve, but without sufficient strength to make a clear case for imminent interest rate increases. The government stimulus program in China is still showing up in some better than expected activity numbers, but this is not expected to last into 2017. In Australia, economic growth is holding up fairly well, led by the housing sector, while business investment and inflation remained muted. The UK economy is starting to show signs of the adverse impact of the Brexit vote, which led the Bank of England to ease monetary policy further in August. The Reserve Bank of Australia has been content to leave the cash rate at 1.5%. The US Federal Reserve has been try to soften the markets up for the possibility of higher-than-expected interest rates, but the mixed economic data have been undercutting their efforts.