The Morningstar Economic Briefing for January 2014 said the December 2013 results of the AIG suite of activity indices for manufacturing, services and construction indicated the growth rate for construction activity has slowed, while manufacturing and service activity has actually contracted.
The briefing stated that while the ASX200 index increased by 15.1 per cent in 2013, this was a modest outcome given the global bull market in equities.
It did note, however, that investors remain wary about the forecast for business activity during 2013, as the mining investment boom begins to drop away.
Members of the Morningstar expert panel said the current period of slow growth was “not disastrous” but that it is unlikely to generate any significant results in equities.
“With the Australian economy slowing, there have been pressures on equities for some time, especially as there is not the same room for fiscal stimulus,” said one of the panellists.
“The new government is finding out just how much waste there was under the previous administration, a lot of fiscal sloppiness.”
One of the panellists said monetary policy was also lacking in “firepower” with interest rates already very low.
Some of the experts also regarded valuations as an issue, with the Australian market either as expensive as US shares or slightly more expensive.
The panel concluded the market would remain underweight in its allocation to Australian shares.
