Public spending as a share of GDP remains around a record high of 28% of GDP. This is not leaving enough room for private spending without causing capacity issues in the economy and higher than otherwise inflation and interest rates.

The wages share of GDP is continuing to rise whereas the profit share (ex mining, where profits were inflated by high commodity prices rather than low wages) has been flat to down over the last 30 years.

Per capita GDP (another guide to living standards) is on the mend after a long slump but was flat in the September quarter and has a long way to go. Sustained decent productivity growth is the key to seeing this improve.

The November ADP private payrolls estimate fell pointing to an ongoing softening trend for US private payrolls. (JP Morgan chart)

Eurozone shares +0.2% US shares +0.3%, Nasdaq +0.2% as soft ADP emp reinforces Fed rate cut expectations US 10 yr yld -3bp to 4.06% Oil +0.8% to $59.1 Gold +0.1% to $4208.2 Iron ore +0.8% to $108.2 Bitcoin $92.96k ASX futures +0.3% $A 0.6601 with $US index -0.3%

US Nov services ISM +0.2pts to an okay 52.6 with orders still positive but down and employment up but still negative. Prices paid fell but remain elevated. (Bloomberg charts)

Australian household spending rose a stronger than expected 1.3%mom/5.6%yoy reflecting a pick up in discretionary spending on clothing & furnishings reflecting promotional events & on hospitality thanks to cultural events. No need for a rate cut here (at least for now)

Australia’s goods trade surplus widened in October to $4.4bn with stronger exports (+3.4%mom) versus imports (+2%mom).

US initial jobless claims -27k (altho could have been impacted by Thanksgiving holiday volatility) & remaining lo Continuing claims -4k…but remaining elevated Challenger job cuts fell in Nov after the October spike (falling from ~104k to 95k after seas adj) but in a rising trend

Eurozone shares +0.4% US shares +0.1%, Nasdaq +0.2% US 10 yr yld +4bp to 4.1% Oil +1.1% to $59.7 Gold flat at 4208.6 Iron ore -0.2% to $108 Bitcoin $92.4k ASX futures +0.2% $A 0.6612 with $US flat

The share of multiple job holders is down from 2023 highs but still well above pre covid levels suggesting there are more jobs out there (making it easier to work in multiple jobs) &/or many households remain under cost of living stress (with some needing multiple jobs))

The latest Victorian budget update showed a smaller deficit in 2024-25 (and hence lower net debt) but little change to the outlook. More work is required to be confidence its back under control. (Macquarie Macro Strategy charts)

Australian productivity growth in mkt (ex ag & mining) sector (yellow line) remains in a rising trend. Agri productivity is strong but impacted by weather & mining productivity is down but is cyclical. The trend is flat in non-mkt sector productivity (albeit measurement issues)

Over the year to Sept jobs growth has been strongest in accom, construction & health sectors & negative in manufacturing, wholesale & retail. The non-market (largely public) sector has accounted for the bulk of new jobs in Australia over the last 2 years but this may be fading.

Weekly economic and market update - the Santa Rally; Aust econ stronger; cut public spending to ease capacity constraints; RBA to hold and sound more hawkish Weekly market update - 05-12-2025 - AMP amp.com.au/resources/insi…

Eurozone shares +0.1% (+0.7% wk) US shares +0.2% (+0.3% wk)..after earlier +0.6%, Nas +0.3% with core PCE in line with expectations US 10 yr yld +4bp to 4.14% Oil +0.8% to $60.1 Gold -0.3% to $4195.7 Iron ore -0.8% to $107.05 Bitcoin $89.2k ASX futures -0.15% $A 0.6641 w $US flat

US Sept real personal spending slowed to flat (mkt was +0.1%mom) Core PCE deflation rose 0.2%mom/2.8%yoy down from 2.9%yoy in Aug which was in line with expectations A Fed rate cut next week is a 95% probability according to the US money mkt. (EvercoreISI charts)

US Uni Michigan consumer sentiment rose slightly but remains weak 1 year ahead inflation expectations fell back to 4.1% 5-10 yr ahead inflation expectations fell back to 3.2% which is around the top of the range of the last few decades (EvercoreISI and Bloomberg charts)

Prelim Domain auction clearances Syd 59%=final ~59%,Dec avg 56 Mel 64%=final ~61%,Nov avg 60 Clearances are continuing to slide reflecting increasing talk of rate hikes & rising listings on a yr ago suggesting a slowing in the property mkt,but it’s also partly seasonal. #ausecon

Chinese exports rose a stronger than expected 5.4%yoy in November (up from -1%) Imports rose a less than expected 1.9%yoy (up from +1%)