Global economic data remains positive and supportive of shares. Solid business and consumer surveys as well as strong jobs growth suggest that the global economy has considerable momentum in early 2018.
Central banks were quiet in April by keeping interest rates on hold. However solid US economic activity and emerging inflation pressures suggest further interest rate increases by the Federal Reserve (FED) this year.
Australia’s economic data releases remain modest and mixed. Business confidence surveys are positive. Consumer sentiment is improving while retail spending has rebounded. However jobs growth has recently moderated after a strong performance last year. Price pressures are still subdued with annual inflation at 1.9% for the March quarter. This has allowed the Reserve Bank to keep the cash interest rate on hold at 1.5 % for 18 consecutive meetings, including at its April meeting where it signalled that a near-term rate hike is unlikely. With GDP growth likely to stay below potential and inflation to remain subdued, the first rate rise is unlikely until late 2019. But as RBA Governor Philip Lowe cautioned, “the last increase in the cash rate was more than seven years ago, so an increase will come as a shock to some people”.
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