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Published on: Friday, October 06, 2017

by James Dunn

Retail trade tanks

Australian retail trade figures turned sour in August, with total retail trade tanking 0.6% in August – its worst month in almost four-and-a-half years. To make things worse, July’s figure was revised from its original flat result to a 0.2% fall, which followed June’s 0.2% rise, which at the time was seen as a poor result. That’s why August’s 0.6% fall is being called a “shocker.” On consensus economists were expecting sales to rise by about 0.3%. The weakness was spread across the country, with sales in every state falling. Online retailing was about the only bright spot in August, with sales up 1.7%. Slow wage growth and higher electricity and gas bills are the obvious culprit for the downturn at the nation’s tills, with the slump dashing hopes that the economy was poised for an uptick, and also disappointing those who were hoping for an interest rate rise anytime soon.

Trade surplus surges

A jump in iron ore exports has helped push Australia’s trade surplus almost to $1 billion in July, with the trade surplus surging from $808 million in July to $989 million in August. On a rolling 12-month basis, the surplus rose from $14 billion to a record $16.8 billion, says CommSec. The value of Australia’s iron ore exports jumped 10% in August, while coal exports slipped 3% and the value of all exports edged 1% higher. Australia's exports to China hit a record high of US$98.6 billion in the year to August, and accounted for one-third of Australia's total exports. Australia’s exports to India hit fresh 6-year highs, totalling $15.8 billion in the year to August, up 68.1% on the year. The net services measure was also a positive, rising from a $4 million deficit to an $18 million surplus.

French economy stirs

France's national statistics agency has raised its economic growth forecast for 2017, in welcome news for President Emmanuel Macron as he fights to overhaul the Eurozone's second-largest economy. After three years of “modest” growth around 1%, national statistics bureau Insee now sees gross domestic product (GDP) growing by 1.8% this year, up from its previous forecast of 1.6%."From now until the end of the year, activity will continue to advance vigorously and in all sectors," Insee said in an economic report released overnight. The uptick will encourage President Macron, who is gearing up to push through a Budget built on tax cuts for the wealthy and spending cuts in housing and government-sponsored jobs schemes, sparking opposition from the Left and France’s strong unions.

Budget bill passes in Washington

The Trump Administration has developed an unwanted reputation for inability to get its legislation through – especially after the failure to repeal the Affordable Healthcare Act, AKA Obamacare – but it won an important victory overnight with Congress passing a US$4.1 trillion ($5.2 trillion), budget resolution, a step seen as a precursor for an overhaul of the tax code later this year. By passing a budget resolution through both Republican-controlled chambers, Republicans can trigger a legislative process known as reconciliation, during which they could pass a major tax reform bill with a simple majority of 51 votes in the Senate, instead of the usual 60-vote requirement. Republicans currently control the US Senate with 52 seats.

Fresh records for US markets

Another day, another record-setting close on the US markets. Overnight the Dow Jones Industrial Average gained 113.7 points to 22,775.39, while the broader S&P 500 added 14.3 points to 2,552.1 and the Nasdaq Composite Index rose 50.7 points to 6,585.4 – all record closing levels. The small-cap Russell 2000 index let the side down, with its 4.3-point gain falling just short of its record close set earlier this week. In Europe the FTSE 100 surged 40.4 points, to 7,508, while the DAX in Germany slipped 2.5 points to 12,968 and the CAC 40 in Paris gained 16 points to end at 5,379.2. This morning the Australian SPI futures are up 36 points at 5,670.

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