The Australian share market closed the month of August flat at 5,625 points. This was despite a wave of negative geo-political events in Gaza, the Ukraine, Iraq/Syria and the complex Argentinian bond default (that all continue to play-out).
International share markets were mixed for the month of August, with the US Dow Jones Index gaining 3.2%, the London the FTSE gaining 1.3%, the Hong Kong Hang Seng Index falling 0.1% and the Japan Nikkei 225 Index falling 1.3% for the month.
It was never going to be easy for the Australian economy to transition from the mining boom, however the recent pick up in building approvals is very welcome.
The table below shows the June 2014 building approval figures for the Australian economy.
Source: ABS
Building approvals are a good ‘leading indicator’ for future economic growth. This is because the ‘approval’ is the first phase in the process that ultimately leads to construction jobs and a general an increase in retail spending.
I know from recent client conversations that construction industries (particularly in the Eastern states) are performing strongly. This comes on the back of low interest rates and a strong housing market. However, it is remarkable to think that the domestic unemployment rate (which spiked to 6.4% in the month) is now higher than the US.
The importance of other parts of the economy “firing up” is critical if we are to avoid a slowdown as business investment as a share of GDP falls from its historical mining boom driven highs. Therefore, continued growth from housing (and other industries) is required to ensure that economic growth can be sustained (and growth in corporate earnings to support current share price valuations).
Interest rates again remained on hold in August, and support for a rate rise in the foreseeable future is easing. The RBA will meet again tomorrow to assess rates with the consensus view that rates will remain on hold at 2.50% per annum.
The Australian Dollar was steady in the month of August and is currently buying 93.46 US cents.
For more information please contact Ryan Love on 1300 856 338 or e-mail ryan.love@apexpartners.com.au.
This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.