Australian economic data remains very soft and has given us precious little to hang our hat on insofar as our confidence in a 2020 economic rebound.
Today’s ANZ Job Advertisements for November fell again and are down -12.6% on last year, and the November Building Permit figures for private houses also fell, this time to their lowest absolute figure in almost 7-years.
Being this deep into the year, it seems likely we will have to wait until the new year for tangible signs of a bottoming, however we still feel confident its likely.
Rising Australian house prices will help perceptions of household wealth – house prices for Australia’s 5 capital cities have now risen 15-week on the trot – and an increasing likelihood that the Federal Government could bring forward personal income tax cuts at the May Budget will likely spur a turning point during 1H 2020.
November Chinese manufacturing continued to improve with the official data coming in at its best level since Q1 and the unofficial Caixin manufacturing index further rising on last month’s level to its highest rate since early 2017.
Conditions in China remain tight, but this data reminds us that impacts on industrial demand from the trade war have been ongoing for over 18 months and not news.
Australian November Job Advertisements continued to fall and are now -12.6% YoY.
Employment is likely to remain a soft spot until deep into 2020.
Australian November Building Permits failed to fire, falling again on the month to be down -23.6%.
The absolute number of private house permits fell to its lowest level since 2013 and the figure for apartments is similarly soft.
Given the typical delay between permitting and construction of 3-6 months, these figures put any prospect of rebounding domestic residential construction before winter next year as slim.
Westpac (WBC) shares remained under pressure last week as analysts tried to gauge the likely level of civil penalties the bank would be forced to pay as compensation for their alleged contraventions of Anti-Money Laundering legislation.
Telstra (TLS) shares were one of the strongest performers last week, with the share rising +8% after a well-received investor day that saw both 2019 operational guidance confirmed and a ray of hope that mobile division profitability was set to improve.
For the second month in a row we have seen a positive surprise in Chinese manufacturing data, with this month’s official PMI surprising with a jump back into positive month-on-month activity and supporting the jump in unofficial figures released a month ago for October activity.
The chart below shows in red the official China Purchasing Manager data for manufacturing businesses with the jump above 50 in November a move to positive monthly performance.
The white chart is the so-called Le Keqiang index, named after the current Chinese Premier who once famously told a US Ambassador that he didn’t trust the official GDP figures and hence followed rail cargo volumes, electricity consumption and bank lending.
The white chart is a clever index of those three indicators.
A very quiet week on the corporate front this week with only Nufarm (NUF) of note holding their AGM this week.
The following week however expect fireworks at Westpac’s (WBC) AGM, and Pendal (PDL) will also hold theirs next Friday.
On the international front, the UK election is scheduled for December 12th and the first Democratic caucus is penciled in for February 3rd 2020.
Regards,
Jono
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