macro economic update
By David Marshall, Chief Financial Officer

Firstly to the Asian region, and in China, indicators suggest the economy expanded in October, which follows strong growth in the September quarter. Overall, expectations in growth are of 8¼ per cent in 2009 and 9 per cent in 2010. The manufacturing sector continues to recover, albeit at a less rapid pace. Industrial production increased by around 1 per cent in October and as at December was 16 per cent higher than the beginning of  2009. However, production growth has been slower as inventory rebuilding moderates. On the other hand, manufactures are benefiting from higher external demand. This activity is expected to flow through positively to other parts of Asia. For example, in  Hong Kong, for the 3 months ended October, unemployment fell slightly to 5.2% from 5.3% the month previous. In August it had been 5.4%. However 5.2% is still 1.2% higher than it had been in 2007 before the GFC. Decreases in the unemployment rate were mainly observed in the construction, food services, insurance and wholesale sectors. Youth unemployment continues to be a concern at around 22-23% however. Business conditions in general are expected to improve slowly alongside improvements in international circumstances. In Singapore GDP is also improving - it was up 0.6% in the third quarter of 2009 and forecasts are showing a progressive return to more healthy growth.

In Europe, UK GDP in the third quarter was revised up in line with expectations. Output in the third quarter is now estimated to have fallen by 0.3%, rather than the original estimate of a fall of 0.4%. From its pre-recession peak output has now fallen 5.9%. The expenditure breakdown provided in the latest results of GDP reveals a picture of an economy stabilising after the dramatic contractions we saw in the last quarter of 2008 and first half of 2009.

Overall, the data suggest that the UK is poised to leave recession in the fourth quarter. And the economy could benefit from a reasonable upswing in stock-building in the next couple of quarters. Unemployment has not grown to the extents predicted a few months ago. Unemployment is hovering around 7.8-8% but the growth rate of unemployment has slowed considerably. According to the IMF, it is currently increasing at the slowest rate than in the past 18 months. GDP in the UK is believed to now be strengthening on an ongoing basis. In Ireland, as at November, unemployment was 12.5% compared with 11.6% in the second quarter - it is one of the few nations whose unemployment appears to be continuing to grow.

Source: OECD, IMF, Australian Markets Monthly - "A monthly outlook for Australia, Key Global Economies and Markets" December 2009