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June 18 2021

1. Big employment numbers…

The May labour market report was unbelievably strong. It’s become clear the April report was affected by the survey period coinciding with Easter and school holidays. Measured employment rose by 115.2k m/m in May (market expected +30k) and  unemployment declined to 5.1% (market expected 5.5%). This is only just above the most recent low of 5.0% reached in December 2019. Interesting to note the labour force participation rate for Australian females aged 15-24 has surpassed that for males and nearly returned to previous highs. The participation rate gender gap is rapidly closing for 25-34 year olds too.

Source: Macquarie, ABS

2. Tiiiiiimber!…

Lumber prices have now dropped over 40% from their peak in May. Our recent industry calls have highlighted the impacts this is having on input costs. For portfolio holding James Hardie, their current FY22 guidance incorporates around $125m of raw materials inflation, effectively assumed at the peak of input prices. Any easing in pricing should therefore fall to the bottom line.

Lumber futures

Source: Bloomberg

3. The freight train…

It seems there is no stopping freight rates. Shanghai to LA containers were up another 6% this week!

Global freight rates

Source: Bloomberg