May 18, 2023

Weekly Update
Managing Director

Aussie unemployment at 3.7%, and Canadian inflation at 0.7% m/m

Weekly Update | May 18, 2023

It has been a busy week in the Frame Funds office, with strategy development as the key focus.

Let’s hop straight into five of the biggest developments this week.

    1.    Aussie unemployment at 3.7%

On Thursday we saw the Aussie unemployment rate increase to 3.7% from 3.5%. This increase in the unemployment rate continues with the rhetoric from the RBA that all of the interest rate increases that have happened over the last year are still slowly working their way into the economy.

    2.    US Core Retail Sales m/m dropped to 0.4% m/m

American consumers last month resumed their purchases after last months decline of -0.5%. This shows that the American consumer is still spending and continues to open up the possibility of a soft landing for the American economy after the recent aggressive interest rate increases.

    3.    Canadian inflation surprised with a 0.7% increase m/m

On Tuesday we had Canada released its month-on-month inflation figures which showed that inflation rose and beat expectations of a 0.5% increase. This brings their annual rate to 4.4%, which is one of the lowest globally.

    4.    US Manufacturing continues to plummet

Monday saw the Empire State Manufacturing Index show a month-on-month decline of -31.8 vs expectations of -3.7. Delivery times were shortened somewhat, and inventories contracted. Both employment and hours worked edged lower for a fourth consecutive month.

    5.    Crude oil inventories climbed to 5.0M barrels vs -1.5M expected

This was a surprise increase in inventories as refineries operated at 92% capacity. This increase in capacity was in response to continued excess demand from American consumers. Also the US government continues to run the SPR low, which means at some stage, they will look to refill it using these inventories.

Here is an overview from Finviz covering some of the moves seen in a selection of futures markets that are included within our investment universe.

We saw positive moves in cotton and the energy complex. The energies have recently been poor, so this looks to be a reversion to the mean at this stage. Soybean Oil, Rice, Corn and Soybeans, all had a bloody week, and continue to hit fresh lows.

Here is the one-week performance heatmap of the largest companies on the ASX.

From an Australian share market perspective, a relatively mixed week, with NAB and BHP doing a lot of the heavy lifting.

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