Weekly Impressions

The positive surprise on 2Q US real GDP concealed a five year long stall in nominal GDP growth. The US Federal Reserve’s unwillingness to combat disinflation has contributed to the growth stall. Investors remain unnerved by the Fed’s willingness to tighten monetary policy at a time when inflation continues to undershoot its 2% target by a long way, and will only be further confused by Vice Chairman Stanley Fischer’s comments at the Jackson Hole symposium. I expect financial market volatility to remain high until the Fed more clearly enunciates the goals of monetary policy and explains why it remains indifferent to meeting its inflation target. In Australia, the poor 2Q capex survey confirmed that the economy is on the precipice of a 20% slump in business investment in FY2015/16. The long and drawn out transition from mining to non-mining capex continues to weigh on the outlook and a re-balancing of growth will need an assist from further monetary stimulus. I also discuss changes in the senior hierarchy at Woolworths. (VIEW LINK)