Market & Economic update - May 2023

File: Economic & Market Update

Duration: 02:39

Date: May 11, 2023

00:01 Economic Review May 2023

00:05 Most notably for last month the Reserve Bank of Australia took a pause in lifting rates,

00:11 only to resume again at the beginning of May.

00:15 The RBA quoted the pause was to “provide additional time to assess the impact of the increase in interest rates to date and the economic outlook.

00:25 Globally inflation seems to be peaking, but with strong services based inflation in many developed economies like the US and Europe, we can still expect higher interest rates for longer.

00:35 Trouble in US banking continues, with the collapse of First Republic Bank the 2nd largest banking failure in American history.

00:40 The bank was acquired by JP Morgan in a deal brokered by the US government.

00:45 The Australian share market gained a strong 1.85% for the month, helping recovery over the last 12 months into a positive 2.13%

00:52 This echoed Global developed markets, which saw a strong 3.88% for the month, contributing to an annual performance of 4.31%

01:00 The growing confidence that inflation has peaked and interest rate rises should moderate from here appears to be the main driver of markets at the moment.

01:08 Though concerns do still linger about the likelihood of a global recession and the delayed impact of the aggressive interest rate rises over the last 6 months in developed markets around the world.

01:25 Inflation declined in the March quarter, though it remains high and broadly based across multiple sectors of the economy.

01:30 Inflation on Goods has moderated as supply constraints ease, but Services inflation remains high with mounting Wage growth pressure.

01:38 Inflation (as measured by CPI) increased by 1.3% in the March quarter and 7% over the year, which is down from 7.8% in the prior quarter.

01:45 This remains at the highest rates since 1990, just prior to when the RBA first started targeting inflation through managing interest rates and other Monetary Policy tools.

01:59 The Australian Dollar ranged up and down for the month in a range of 2.7%, finishing the month marginally lower at 0.6613 USD, a monthly decline of just 0.75 US cents

02:06 Consumer confidence edged higher in the month of April from 78.2 to 79.8 points.

02:10 The index has now spent over 9 weeks below 80 points, the longest stretch at this level since the 1990-91 Recession.

02:17 Unemployment remained at just 3.5% for the March quarter, still near its historic 50 year low,

02:22 while the participation rate increasing to 66.8%.

02:26 These figures continue to stoke fears of additional interest rate hikes as the RBA attempts to fight rising inflation from wage pressures and strong consumer demand.