AMP Capital's Investment Brief for June 2009

Global Review:

• Economic data tended to support the view that the global economic recession was drawing to a close, with leading indicators pointing to higher levels of activity. The IMF, OECD and many analysts around the world revised up their global growth expectations, while by contrast the World Bank downgraded its economic outlook.
• US data continued to show improving economic momentum, including monthly increases for the ISM manufacturing and non-manufacturing indicators, retail sales showing their fi rst gain in three months, unemployment claims trending lower, and higher indicators on housing starts and durable goods orders. Non-farm payrolls declined at a much slower pace than the market expected, but hours worked were very weak and the unemployment rate rose to a new high of 9.4%. Consumer confidence indicators were confl icting, suggesting that the road to recovery for the consumer remained a bumpy one. The Conference Board's leading indicator index showed its strongest monthly rise in fi ve years in May, while the ECRI weekly growth indicator moved to its best rate since October 2007, strongly indicating that the US recession will end this (Northern Hemisphere) summer.
• Data across Europe weren't as positive as those for the US. Forward-looking survey indicators such as the PMIs and Germany's Ifo continued to show improvement, while hard data such as industrial production remained weak, falling for the twelfth consecutive month in May, down 1.9% month on month (MoM) and 21.1% year on year (YoY) for the Euro area. More promising was the first lift in UK industrial production in April since February 2008.
• Japan's economy-watchers and small business surveys continued to paint a picture of improving economic activity ahead, while industrial production rose by 5.9% MoM in May and has now shot up some 14% from the very depressed level reached in February. Chinese economic indicators for May continued to paint a clear picture of a strong, domestically-driven recovery, underpinned by easier fi scal policy. Industrial production growth improved to 8.9% YoY in May. India's industrial production rose for the fi rst time in three months in April. On the negative side, trade data across many Asian economies remained weak, with widespread falls in exports continuing.
• Central banks were on the sidelines during June, with none of the major ones we monitor changing their policy stances. Governments also seemed to be in a wait-and-see mode regarding further policy initiatives. One highlight was the US passing legislation for a cash-for-clunkers scheme. Such a scheme has already proven to be very positive for auto makers in Europe.

Global Outlook:

• There's increasing evidence that the downward economic spiral has been broken and we continue to look for some economic recovery in the second half of this year. However, growth is likely to remain fairly tepid for some time and the world economy still faces some major economic headwinds.

 Read the full Investment Brief.