For a more comprehensive round up of the week, listen to Stephen’s full report here.

Global economic growth seems to be taking a turn for the better in the closing months of 2013 setting the scene for accelerating growth almost everywhere, including Australia, in 2014. Positive growth surprises are occurring in the world’s biggest economy, the United States, and the second biggest economy China. Early Q4 2013 data readings in Australia have also mostly been comparatively firm. Central banks continue to cheer on economic growth keeping official interest rates at very low levels. Also, the US Federal Reserve (Fed) seems to be winning acceptance from financial markets that when it does start to wind back (taper) its $US85 billion a month of asset purchases, that is not the marker of the beginning of tighter monetary conditions, that only starts to occur when official interest rates increase and the Fed has no intention of starting that process for a long time to come.

On balance, recent US economic readings have been impressively stronger than market expectations. The second reading of Q3 US GDP showed 3.6% annualized growth, up from the advance reading of 2.8% and 2.5% in Q2. Putting this growth number in perspective, before the advance reading was released back in late October the market expected that growth weighed by cuts in government spending would have slowed to 2.0% annualized pace. In short, the US economy has been performing far better than the market expected six weeks ago. Given how well the US economy has coped with big cuts in government spending during 2013, it is very likely that the economy will gather pace as government spending cuts moderate over the next few quarters.

Better than expected US growth has also generated better than expected employment growth. Non-farm payrolls advanced at 200,000 pace or better in both October and November. The US unemployment rate has fallen by more than expected to 7.0% in November. Meanwhile household wealth continues to rise very strongly. US house prices rose by 13.3% y-o-y in September according to the Case-Shiller 20-city house price index, the strongest pace in the recovery so far. The US sharemarket is running close to a record high and is up by 30% y-o-y. US households are in a position to spend more strongly and the latest monthly US credit card data indicates a rare lift in revolving credit, up $US4.3 billion in November, indicating freer use of credit cards.

Growth data in China have taken a stronger turn too. November exports lifted much more strongly than the market expected, up by 12.7% y-o-y after increasing by 5.6% y-o-y in October, also a stronger reading than the market expected at the time. November industrial production, retail sales and urban fixed asset investment spending readings are all due later this week and are expected to match the strength recorded in October when industrial production rose by 10.3% y-o-y, retail sales by 13.3% and urban fixed asset investment spending by 20.1%. Anything close to these readings in November, as seems likely, implies a small acceleration in China’s GDP growth rate in Q4 to around 7.9% y-o-y.

In Australia, Q3 GDP growth was a touch softer than expected at 0.6% q-o-q, 2.3% y-o-y, however several signs are emerging that Q4 GDP growth will be materially stronger. Home building approvals lifted particularly strongly in September, by 16.9% on revision and virtually held that outsized gain in October, falling by only 1.8%. The number of home building approvals was above 16,000 in both September and October. Back-to-back 16,000 plus readings are both exceptionally strong and rare, occurring only twice before since 2000 in 2010 and 2003. Home building activity is likely to start making a positive contribution to growth, starting in Q4. Improving retail sales, up by 0.5% in October after a 0.9% increase in September imply household consumption expenditure (contributing 0.2 percentage points to Q3 GDP growth) will start contributing 0.5 percentage points and better to quarterly GDP growth starting in Q4. The change in the resources boom from investment phase to export phase is also in full swing, although in the near term there is still investment work in progress coinciding with improving export volumes. All told, Q4 and 2014 are looking brighter.