Take two: Slower US inflation lifts rate cut hopes; Japan GDP beats expectations
- 19 August 2024 (3 min read)
What do you need to know?
US annual inflation edged down to a three-year low of 2.9% in July from 3% in June, lower than the 3% analysts had expected. Meanwhile core inflation, which excludes food and energy prices, rose 3.2% compared to 3.3% in June. The data raised hopes that the Federal Reserve (Fed) will cut interest rates at its September meeting and also helped buoy US stocks. Meanwhile, UK inflation increased for the first time since last December to 2.2% in July from 2% the previous month as domestic energy bills fell by less than a year ago, though the rise was less than expected.
Around the world
Japan's economy grew 3.1% (annualised) in the second quarter (Q2), surpassing the 2.3% consensus forecast and recovering from Q1’s 2.3% contraction. The expansion reflected an increase in private consumption and strengthened expectations the Bank of Japan could raise interest rates again after lifting rates to “around 0.25%” in July. Separately, Japan’s Prime Minister Fumio Kishida said he would step down as his party’s leader in September. Elsewhere, Eurozone GDP increased by 0.3% in Q2 compared to the previous quarter, according to an official second estimate - the same pace as in Q1. UK GDP grew 0.6% in Q2 after a 0.7% expansion in Q1.
Figure in focus: 0.9%
Real household income growth per capita accelerated in Q1, rising 0.9% across the Organisation for Economic Co-operation and Development (OECD) member countries. That compares to 0.3% growth in the previous quarter, the OECD said. The data measures household disposable income per person, adjusted for inflation, and is a key indicator of a country’s economic prosperity. Poland saw the largest increase of 10.2%, driven partly by higher wages and social benefits, while Greece contracted the most, by -1.9%. Among the G7 group of largest economies, Italy saw the strongest increase of 3.4%.
Words of wisdom
Digital Product Passports: A new sustainability measure being introduced across the European Union (EU) to increase transparency around products’ environmental impact. Digital product passports (DPPs) will provide information about the origin, composition and production of goods as well as repair or disposal methods, to encourage consumers to shop sustainably and make more informed purchasing decisions. Industrial and electric vehicle batteries will be the first products to require DPPs in the EU from 2027, with other goods, including clothing and textiles, expected to follow by 2030. Last week a large UK retailer announced it would roll out DPPs across its clothing range.
What’s coming up?
On Tuesday, the Eurozone and Canada report their latest inflation figures. Minutes from the Fed’s last monetary policy meeting are published on Wednesday. Flash Purchasing Managers’ Indices for August are issued for Japan, the Eurozone, UK and US on Thursday and Japan publishes its inflation data for July on Friday. The Fed’s Economic Policy Symposium, a forum for central bankers and policymakers from around the world, takes place in Jackson Hole from Thursday to Saturday.
Disclaimer
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales, No: 01431068. Registered Office: 22 Bishopsgate, London, EC2N 4BQ.
In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
© 2024 AXA Investment Managers. All rights reserved
Risk Warning
The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.