U.S. retail sales exceeded expectations in July, rising by 1.0% following a downwardly revised 0.2% decline in June, according to the Commerce Department’s Census Bureau. This marks the strongest performance in 18 months and may ease concerns of a sharp economic slowdown. The gains were led by the volatile auto sector, but increases were widespread, including a 0.3% rise in sales at bars and restaurants.
Also reported this week, U.S. consumer prices posted a moderate 0.2% increase in July, with the annual inflation rate easing to 2.9%, marking the first reading below 3% since early 2021. This softening inflation trend, highlighted in the Labor Department’s report on Wednesday, strengthens the case for a potential interest rate cut by the Federal Reserve next month. Core CPI, excluding food and energy, also rose by 0.2% month on month and 3.2% year on year, in line with expectations.
Similarly, wholesale inflation, measured by the producer price index (PPI), edged up by 0.1% in July, while core PPI, excluding volatile food and energy components, remained flat. These inflation indicators, combined with the subdued consumer price readings, point to a continued downward trajectory in inflation pressures.
Headline inflation in the UK rose to 2.2% in July, up from 2.0% in June, as reported by the Office for National Statistics (ONS). Despite this uptick, the growth in services prices—a critical focus for monetary policy—slowed more than anticipated. Services inflation increased by 5.2% in July, down from 5.7% in June.
The U.K. economy grew by 0.6% in the second quarter, continuing its modest rebound from recession, as reported by the ONS. This follows a 0.7% increase in the first quarter. However, monthly GDP growth was flat in June after a 0.4% expansion in May. The stagnation in June was attributed to heavy rain impacting retail sales and a doctors’ strike, which led to a 1.5% decline in healthcare activity, the ONS reported.
Eurozone industrial output fell for a third-straight month in June. Industrial activity in the currency union ticked down 0.1% in June, compared with a 0.9% decline in May, the European Union’s data agency Eurostat said Wednesday. On a year-over-year basis, industrial production fell by 3.9%
The second estimate for Eurozone GDP growth in the second quarter of 2024 showed a 0.3% increase, maintaining the same rate as in the previous quarter. This growth was primarily driven by positive contributions from France, Italy, and Spain. In contrast, Germany experienced an unexpected contraction due to a slowdown in investment in equipment and construction, exacerbated by ongoing weaknesses in the industrial sector amidst rising interest rates.
China’s industrial production increased by 5.1% year on year in July, the slowest growth rate in four months, reflecting a weak start to the third quarter amid a significant slowdown in the property sector. This growth fell short of expectations and was down from 5.3% in June, partly due to reduced auto sales, according to data from the National Bureau of Statistics (NBS). In contrast, China’s retail sales grew by 2.7% year on year in July, exceeding expectations and improving from the 2.0% growth recorded in June. When excluding automotive sales, retail sales rose by 3.6% year on year in July, up from 3.0% in June.
U.S. stocks recorded significant gains over the week, buoyed by encouraging developments in both inflation and economic growth, which bolstered optimism for a potential “soft landing” for the economy. The technology-heavy Nasdaq Composite led the advance with a weekly increase of 5.29%. The S&P 500 and Dow Jones Industrial Average also saw notable gains of 3.93% and 2.94%, respectively.
In Europe, the pan-European STOXX 50 Index rose by 3.53% as expectations grew for potential interest rate cuts as early as September. The UK’s FTSE 100 Index also saw a solid weekly gain of 1.75%.
In Asia, Chinese equities saw gains despite weaker-than-expected economic data, with the Shanghai Composite Index up 0.6% and the Hang Seng Index in Hong Kong rising by 1.83%. Japan’s stock markets had a strong rebound in the holiday-shortened week, with the Nikkei 225 Index surging by 8.7%.
Market Moves of the Week:
Retail trade sales in South Africa rose by 4.1% year on year in June and by 1.5% in the second quarter (Q2), suggesting the economy likely avoided a recession after a 0.1% contraction in Q1. According to Statistics South Africa (Stats SA), this positive trend was primarily driven by a 7.3% year-on-year increase in general dealers’ sales and a 6.1% rise in textiles, clothing, and footwear sales, the two most heavily weighted categories
South Africa’s unemployment rate increased to 33.5% in Q2 2024, a 0.6 percentage point rise from Q1, according to Stats SA’s Quarterly Labour Force Survey. The expanded unemployment rate, which accounts for both the officially unemployed and those no longer actively seeking work, also rose by 0.7 percentage points to 42.6%. Employment figures dipped by 92,000, bringing the total number of employed individuals to 16.7 million, while the number of unemployed increased by 158,000 to 8.4 million. This data indicates that unemployment in South Africa is at its highest level since 2022.
The JSE All-Share Index mirrored global trends with notable weekly gains, rising by 2.58% over the week. All sectors contributed positively, with Financials leading the charge with a 4.41% increase. The Resources sector lagged, posting a modest gain of 0.67%. The rand appreciated by 1.95% against the dollar, closing the week at R17.95/USD.
Chart of the Week:
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