ASX selling pressure

Key Points

• Real GDP growth slowed to 0.4% in the third quarter, but this masks negative growth for the consumer.
• The S&P Global composite PMI shows business is holding up well.
• However, the ASX 200 is signaling selling pressure.

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Real GDP growth slowed to 0.4% in the fourth quarter, while annual growth remains low at 2.1%. The result includes household electricity rebates, which are added to GDP as government spending but are deducted from the CPI inflation index—a form of double counting.

Real GDP also does not account for population growth driven by immigration since the 2020 pandemic. The Macrobusiness chart below shows how immigration has masked a decline in real GDP per capita.

On the business front, the S&P Global composite PMI reflects a healthy expansion.

The housing market is weaker, but the 3-month moving average of private dwelling approvals is holding above its long-term MA.

ASX 200 Index

The ASX 200 rally has petered out at 8600, while declining Trend Index peaks warn of growing selling pressure. A breach of support at 8400 would be a strong bear signal.

The problems lie with the key Financials sector. A narrow consolidation at the 9000 support level is a bearish sign, and follow-through below 8900 would signal another decline, offering a target of 8000.

Conclusion

The S&P Global composite PMI may reflect a healthy expansion, but consumers are struggling with negative per capita GDP growth.

The key ASX 200 Financials index is testing support at 9000, and a follow-through below 8900 would warn of a bear market.

Acknowledgments

• ABS: Australian National Accounts
• ABS: Building Approvals
• Macrobusiness: Australian economy remains per capita recession bound
• Trading Economics: Australian Composite PMI