Global Economic Update 24 to 29 June 2024
United States
- Economic Growth and Inflation: The Federal Reserve’s preferred inflation measure, the core PCE price index, increased by 0.1% in May, the smallest advance in six months, suggesting moderation in inflation. Personal spending rebounded, rising by 0.3% in May, driven by goods consumption. Treasury yields fell as markets priced in potential interest rate cuts, indicating a softening economic outlook.
- Jobs: Despite some cooling signs in the labour market, wage growth remains solid, with wages and salaries up by 0.7%. Real disposable income rose by 0.5%, highlighting consumer resilience.
- Debt Securities: Treasury yields fell as investors anticipated rate cuts following moderate inflation data, suggesting a potential monetary policy easing later in the year.
United Kingdom
- Politics and Economic Policy: Polls indicate volatility in voter preferences ahead of the July 4 election, with the Labour Party expected to target economic growth of at least 2.5%. Barclays reduced mortgage rates, anticipating increased competition among banks ahead of a possible summer interest rate cut.
Eurozone
- Economic Sentiment: EU leaders endorsed Ursula von der Leyen for a second term as European Commission president. ECB officials signalled a cautious approach to monetary policy, with investor expectations for further rate cuts being considered fair.
- Debt Securities: French bond premiums rose amid concerns about government deficits, reflecting heightened fiscal scrutiny.
Japan
- Currency and Economic Policy: The yen weakened significantly, prompting government concern and potential intervention to stabilize the currency. Retail sales rose by 1.7% month-over-month in May, driven by fuel and machinery, indicating steady consumer demand despite inflation pressures.
Australia
- Inflation: Inflation rose to 4% year-over-year in May, with core inflation at 4.4%, prompting speculation of potential interest rate hikes by the Reserve Bank of Australia.
- Monetary Policy: RBA officials indicated caution against reacting to a single inflation report, suggesting that a comprehensive assessment of economic data is needed before policy changes.
China
- Economic Policy and Trade: China’s Premier defended the country’s industrial strategy amid rising Western criticism, stressing the openness of China’s market. Chinese firms explored relocating manufacturing to Malaysia to avoid US tariffs.
Artificial Intelligence
- Corporate Developments: Nvidia experienced a significant market value fluctuation, shedding over $500 billion after reaching record highs. AI technologies continued to attract substantial investment, with global tech companies targeting new markets like India and defence tech start-ups securing significant funding.
Environmental, Social, and Governance (ESG)
- Energy Consumption: Bill Gates urged a balanced view on the energy consumption of AI systems, emphasizing the long-term benefits of the technology despite its current high energy demands.