The outright contraction in the September quarter real GDP belies underlying strength in the economy. Nominal GDP lifted by 0.5% and expanded by 3% in the year to the September quarter. The nominal economy - which is a more important barometer for stock investors - is gradually pulling out of a five year long income recession, assisted by higher commodity prices this year. The income recession has created a difficult environment for corporate profitability, with consensus 12mth forward EPS estimates for the ASX200 companies remaining around one-third lower than their pre-GFC peak. Consistent with the recent re-bound in global commodity prices and nominal GDP, forecast profitability appears to have bottomed in early 2016. (VIEW LINK)


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