26/06/2009

This month was by far the best month we have had since the talk of doom and gloom started. Good news about recovering economies in both domestic and international markets filled many columns in the paper. Here are just a few of what we saw this month.

Australia avoids technical definition of recession

Australia has recorded positive growth of GDP in the face of global economic crisis in the March quarter emerging as the only advanced nation to avoid recession. 

Analysts say that Australia may have dodged the recession bullet for the time being but in reality we are still in recession because of other indicators such as five quarters of sub-trend growth and rising unemployment.  However, they were wrong in their forecast that the Australian economy will have risen by 0.2 per cent in the first quarter when actual figures showed 0.4 per cent.  We think they could be wrong again.  While the analysts may try to talk us into recession, Australian businesses and workers are continuing to look on the brighter side.  Let’s not forget that our rivals are still suffering from the downturn with US economy shrinking by 2.5 percent in the year to March, the euro zone by 4.6 percent and Japan’s GDP withering by a staggering 9.7 per cent.  

China on its way to recovery

There’s even more good news for Australia with the World Bank announcing that it has raised its forecast for Chinese economic growth in 2009 from 6.5 per cent to 7.2 per cent.  The boost is expected to come from the $A739 billion stimulus-driven investment plan in an effort to reinvigorate the economy.  A World Bank economist said “We see very little growth coming out of the market-based economy in 2009.  We do expect a nice pick-up in exports next year, so that will help.”

Investors bullish as bear market draws to an end

Merrill Lynch’s survey on fund managers shows around 70 percent (yes you read it right 70) of investors are bullish that the economy will improve in the next 12 months.  “Investors are finally opening their wallets and reducing cash balances to mid-cycle levels to buy equities, cyclical stocks and risky assets,” said Michael Hartnett who is a co-head of international investment strategy at Banc of America Securities-Merril Lynch.

US seeing light at the end of the tunnel?
If history is to repeat itself, the credit crunch nightmare may be over in the US sooner than expected with rising consumer confidence and inventory cycle stabilising says Jim McCaughan, global chief executive of Principal Global Investors.  "The US economy is seeing rising unemployment but improving consumer confidence. That is absolutely typical of the end of a recession," McCaughan said.