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.
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