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[News] US Q2 GDP Growth Revised up to 3% as Initial Jobless Claims Slightly Declined
Summary:
- Q2 real GDP revised up to 3.0%
- Initial jobless claims last week fell by 2,000 to 231,000
- Continuing claims last week rose by 13,000 to 1,868,000
The U.S. initial jobless claims slightly declined last week, as reported by the Bureau of Labor Statistics on August 29. The Initial claims was 231,000, down by 2,000 from the revised figure of the previous week, outperforming market expectations of 232,000. The four-week moving average was 231,500, down by 4,750 from the previous week’s revised figure. Meanwhile, continuing claims increased by 13,000 to 1,868,000.
At the same time, the Bureau of Economic Analysis also released the second estimate for Q2 Real GDP, revising the annual growth rate up to 3.0%, an increase of 0.2% from the preliminary estimate. The core PCE inflation rate was revised down to 2.8%, a decrease of 0.1% from the preliminary estimate. Overall, the U.S. economy continues to demonstrate resilience, with inflation remaining on a downward trend.
During last week’s Jackson Hole Global Central Bank Symposium, the Federal Chairman Jerome Powell reiterated that the risks of rising inflation are continuing to diminish and that there is sufficient reason to believe inflation will return to 2%.
Meanwhile, the downside risks to the labor market are gradually increasing. Although the unemployment rate remains at a historically low level, it has risen back to 2023 levels. This increase is primarily due to higher labor supply and job vacancies rather than widespread layoffs. However, the Fed do not welcome any further cooling of the labor market.
Finally, Powell clearly stated that the time for policy adjustments has arrived. Although he did not reveal specific plans for rate cuts, insights can be gained from the September release of the Summary of Economic Projections (SEP), where adjustments to the dot plot will indicate the pace and magnitude of future rate cuts by the Fed. Currently, the market expects the Fed to cut rates by 3 to 4 quarter-points throughout 2024 (1 quarter-point in September, 1 to 2 quarter-points in November, and 1 quarter-point in December).
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[News] A Quick Summary: Key Economic Indicators to Watch in the Week ahead
Over the past two weeks, the unexpected rate hike by Japan, coupled with weak U.S. manufacturing PMI and rising unemployment rates, sparked fears of an economic recession in the markets. Meanwhile the strengthening of the yen prompted a significant number of carry trade investors to sell assets to cover margin calls, leading to a sharp decline in global stock markets within a short period.
However, as the U.S. services PMI and jobless claims came in better than expected, along with dovish remarks from the Bank of Japan, global stock markets quickly rebounded. Given the market’s heightened sensitivity to macroeconomic changes, this week’s key economic data need to be closely watched. Below is a preview of the upcoming economic data this week, as well as potential market outlook regarding these key indicators.
August 14:
- July U.S. CPI: In June, the U.S. CPI increased by 3.0% year-over-year, with the core CPI (excluding food and energy) rising by 3.3%. According to a survey by the Federal Reserve Bank of Philadelphia for the third quarter of 2024, it is expected that as the labor market slows and service inflation decreases, the CPI and core CPI will decline to 2.5% and 2.6%, respectively, by the end of 2024.
- July U.K. CPI: In June, the U.K. CPI rose by 2% year-over-year, with the CPIH (including owner-occupiers’ housing costs) at 2.8%. Excluding food, energy, and tobacco, the core CPI and CPIH were 3.5% and 4.2%, respectively. According to the August MPC meeting minutes, the Bank of England expects the CPI to rise to around 2.75% by the end of 2024 due to a reduction in the impact of energy prices, before falling back to the target of around 2%.
August 15:
- China’s July Economic Data: In June, China’s retail sales of consumer goods increased by 2% year-over-year, industrial output rose by 5.3%, and fixed asset investment grew by 3.9%. The market expects that with the summer season and a low base effect, retail sales could rebound to 2.6%. Meanwhile, industrial output is anticipated to increase to 5.4% due to sustained high growth in industrial exports, while fixed asset investment is expected to remain steady at 3.9%.
- July U.S. Retail Sales: In June, U.S. retail sales increased by 3.0% year-over-year, with monthly growth flat. Core retail sales rose by 0.4% month-over-month, while double core retail sales (excluding autos and gasoline) increased by 0.8%, and control group retail sales rose by 0.9%. Given the slowdown in consumer spending, the market expects a modest monthly growth of 0.3% in July retail sales.
- Japan’s Q2 Real GDP: In Q1, Japan’s real GDP contracted at an annualized rate of 1.8%, and was revised downward to -2.9% due to declines in consumption and exports. According to a survey by the Japan Center for Economic Research, economists expect Q2 2024 GDP growth to reach an annualized rate of 2.26% driven by a rebound in external demand. The Bank of Japan forecasts full-year 2024 GDP growth of 0.5% to 0.7%.
(Photo Credit: Federal Reserve)
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[News] China’s July Export Growth Slows, Posing Challenges to Annual GDP Target
The General Administration of Customs of the People’s Republic of China released the import and export data for July on August 7. The total export value in July, measured in USD, was $300.5 billion, representing a 7.0% year-on-year growth. However, this figure is lower than June’s 8.6% growth and falls short of the market expectation of 9.7%. Meanwhile, the total import value reached $215.9 billion, marking a 7.2% year-on-year increase, significantly higher than June’s -2.3%.
As the world’s second-largest economy, China’s slowdown in export growth may reflect a deceleration in global economic growth. With labor markets and consumer spending in various countries continuing to show weakness, coupled with strained trade relations due to China’s previous high export volumes, it may be challenging for China’s export growth to maintain its current pace for the remainder of the year.
The increase in imports might slightly alleviate the issue of weak domestic demand. During China’s Politburo meeting held on July 30, it was mentioned that policy efforts would be made to strengthen countercyclical adjustments, promote large-scale updates of equipment and durable goods, and enhance the consumption capacity of low- and middle-income groups.
However, these policies lack detailed implementation strategies. Similar to the Third Plenary Session, phrases such as “New quality productive forces” and “high-quality development,” have been brought up frequently, but specific measures to boost domestic demand were only briefly mentioned.
In summary, with the potential decline in export growth due to the global economic slowdown and the uncertainty surrounding domestic demand stimulus policies, China faces significant challenges in achieving its annual GDP growth target of 5%.
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(Photo Credit: General Administration of Customs of the People’s Republic of China)
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