29 Sep Economic overview: August 2014
August was characterised by extremes, basic materials sold off aggressively while industrials (notably telecoms and healthcare) performed very well. Banks had a weak month driven by Capitec, Standard Bank and Barclays Group Africa. The Perpetual Preference Share Index lost 1.4% due to the African Bank event, though the rest of the prefs on the index did well. Global developed world markets and emerging markets had a positive month being up 2.2% and 2.3% respectively.
Over the next couple of months we are going to discuss global themes, their interaction with each other and the impact on selected assets.
- The most dominating global theme is the normalisation of monetary policy in the United States. The US has been applying a very aggressive monetary policy since the great recession in 2008 to normalize economic growth. A great emphasis has been placed on the labour market, focusing on the unemployment rate, productivity and wage inflation.
- The second equally important theme is the European recovery. The geo-political tensions in the Ukraine, followed by selective sanctions on Russia, have retarded European growth (especially for Germany).
- The re-engineering of the Chinese economy from a fixed investment driven economy to a more balanced consumption based economy has caused some hiccups and China will continue to have a bumpy road.
- Secondary themes linked to the above are base metal production volumes and the supply and demand thereof; global platinum supply and demand; and emerging market currency, fixed interest and equity markets. We will discuss these in more detail over the next few months.
Real GDP expectations (using IMF forecasts) are set out below:
Please comment below if you have any questions.