Weekly Updates

The Westpac-Melbourne Institute consumer sentiment index slipped a little in January. The Melbourne Institute inflation gauge added weight to expectations that Aussie underlying inflation eased in Q4. A rise in exports drove the Chinese trade surplus wider in December and iron ore import volumes hit a record high in 2024. Chinese GDP growth met the 5% Government growth target for 2024.

Aussie dwelling approvals slipped, annual trimmed mean inflation (the RBA’s favoured measure of underlying inflation), eased, the Aussie trade surplus hit a 10-month high, and Black Friday promotions boosted household spending in November. The Caixin Chinese services PMI hit a seven-month high. In the US, the ISM services PMI showed US services sector growth accelerated in December.

The FOMC delivered a hawkish fed funds rate cut, lifting the interest rate projection path for the coming years and for the longer run. Other G10 central banks that announced their decisions this week mostly kept their interest rates unchanged. Data-wise, the flash PMIs for December confirmed strong expansion in the US and stagnation or contraction in other major advanced economies.

In Australia, the RBA left its cash rate unchanged, as expected, but issued a relatively dovish post-meeting statement. Data-wise, employment growth surprised to the upside in November, while the unemployment rate unexpectedly fell to 3.9%. Abroad, the annual rate of US CPI inflation picked up slightly in November, as expected, while PPI inflation surprised to the upside.

In Australia, real GDP growth disappointed in Q3, with the annual rate the lowest since the early 90s (outside of COVID-19). Abroad, the US ISM PMIs suggested slower contraction in manufacturing and deceleration in services growth. The Chinese PMIs were mixed, but generally pointed to sluggish growth.

At home, the monthly CPI indicator suggested that annual consumer price inflation remained at 2.1% in October, held down by the impacts of household electricity bill relief measures rolled out by Commonwealth and State governments. Offshore, the FOMC minutes suggested a cautious approach to fed funds rate cuts from now on.