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Hedge Clippings | 26 September 2025 - Helicopter view of the Economy
Across the Pacific, the US economy surprised to the upside in the second quarter. Revised figures show GDP running at an annualised 3.8%, well ahead of the initial 3.3% estimate and the fastest clip in almost two years. The driver was the consumer, with spending up 2.5%, supported by an upswing in investment in intellectual property - particularly software and AI. Not all sectors pulled their weight, but financial services, information technology, and manufacturing made solid contributions. Economists, however, were quick to point out the obvious caveat: while the data looks strong, its durability is less clear. A still-uncertain trade policy environment, persistent tariff disputes, and the shadow of slowing global demand could yet put a lid on momentum, while the previous week's soft employment numbers, and the upward inflation pressures remain. Back home, the inflation story also continues to play out. The monthly Consumer Price Index (CPI) indicator rose 3.0% in the 12 months to August 2025, according to the ABS - up from 2.8% in July, and the highest annual rate since July 2024. Housing (+4.5%), food and non-alcoholic beverages (+3.0%), and alcohol and tobacco (+6.0%) were the largest contributors. The annual trimmed mean inflation rate edged down slightly to 2.6% in August from 2.7% in July, but the CPI excluding volatile items and holiday travel accelerated to 3.4%, compared with 3.2% previously. Housing inflation, in particular, reflected higher electricity costs, with the annual rise skewed by the expiry of one-off rebates. In August last year, households in Queensland, WA and Tasmania were cushioned by State Government rebates of $1000, $400, and $250 respectively. With those programs now finished, out-of-pocket costs have risen, leaving electricity prices up 5.9% year-on-year once rebates are stripped out. On a monthly basis, however, electricity costs fell 6.3% in August, mainly due to NSW and ACT households receiving the first payments of the extended Commonwealth Energy Bill Relief Fund rebates. The shifting landscape of rebates makes the data noisy, and while the ABS' monthly indicator grabs headlines, the RBA remains more focused on the quarterly numbers - with the September quarter CPI not due until the end of October. Which begs the question: what will the RBA Board do when it meets next week? Having just cut rates by 0.25% at their last meeting, was the Board a little too quick to bow to pressure from the media and the market? Our experts - Nick Chaplin (Seed Funds Management) and Renny Ellis (Arculus) - might be tempted to say, "I told you so." For now, it seems inevitable that the Board will sit on its hands until at least their November meeting. With some banks and economists starting to backtrack on their expectations of multiple cuts before Christmas, the latest inflation uptick adds an uncomfortable wrinkle. Maybe only one at the most? News | Insights New Funds on FundMonitors.com Manager Insights | East Coast Capital Management Market Update | Australian Secure Capital Fund Investment Perspectives: Riding the silver tsunami | Quay Global Investors August 2025 Performance News Insync Global Quality Equity Fund DAFM Digital Income Fund (Digital Income Class) Equitable Investors Dragonfly Fund |
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