Evergrande, tapering and supply chains

September was a mixed bag on the economic front. After reaching record highs in August, global share markets stumbled in late September. There are concerns about rising inflation and bond yields if the US Federal Reserve begins tapering their bond purchases later this year as expected. Markets also grappled with rising COVID cases in a vaccinated population, the potential collapse of the Chinese property developer Evergrande, global supply chain blocks and rising oil prices (oil was up 10% in the quarter and is at a 3yr high).

In Australia, consumer confidence is growing in response to State and Federal governments revealing their re-opening plans. The ANZ/Roy Morgan consumer confidence rating rose over the last three weeks of September to a 10-week high of 103.7. Prior to that, retail trade fell 1.7% in August and 0.7% over the year. And while the unemployment rate fell from 4.6% to 4.5% in August, participation and hours worked all fell. This reflects the large numbers of Australians who have been stood down due to COVID but not actively seeking work. In contrast there is a strong expectation that working hours will increase as summer approaches, again feeding inflation expectations.

Despite some of the above concerns, policy setting remain very accommodative globally. Central banks will want to be sure that growth is settling ‘above trend’ before any tightening occurs. We think it will be at least a medium term issue.

Guardian Investments Pty Ltd ABN 18 608 506 261 is a Corporate Authorised Representative of Guardian Associates Pty Ltd AFSL 238281. This page reproduces commentary published in September 2021 and is general advice only. It has not been tailored to your objectives, financial situation or needs, and the figures were current at the time of writing. Past performance is not a reliable guide to future returns. Seek personal financial advice before acting on it.