November economic round up
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Fear of fading global economic growth dominated through much of November even though the world’s biggest economy, the United States, continued to show signs of stronger economic expansion. In contrast, the signals from the world’s second biggest economy, China, were mostly softer than expected taking a toll on important commodity prices for Australia such as iron ore. Late in the month the Peoples’ Bank of China cut official interest rates – the one-year deposit rate and one-year lending – by respectively 25 basis points (bps) and 40 bps to 2.75% and 5.60%. The rate cuts were unexpected and the first in two years showing that China’s growth prospects had softened more than the authorities would like. European economic readings remained soft although Q3 economic growth was a touch stronger than expected at 0.2% q-o-q. Australia continued to show signs of sub trend growth with softness persisting in the labour market. Housing activity, notably investor housing activity remained buoyant, but the patchiness of economic growth generally combined with little inflation allowed the RBA to reaffirm that the cash rate’s already lengthy stay at 2.50% could extend for many more months.
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