The noise
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The UK’s GDP grew by 0.5% in June per the Office for National Statistics, while the second quarter from April to June saw the economy grow by 0.2%. Both figures beat economists’ estimates and will likely give the Bank of England grounds to hike interest rates further as it had made it clear that economic resilience was one of the key factors that would influence its decision making. The UK is still the only G7 country yet to return to pre-COVID-19 levels of GDP.
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US inflation rose moderately in July to 3.2% year-on-year, up by 0.2% from June as the latest data release could persuade the Federal Reserve to leave interest rates unchanged next month. Weekly jobs claims figures have indicated the US labour market is cooling. This coupled with moderate inflation has bolstered economists’ conviction that the US central bank will be able to achieve a “soft landing” scenario for its economy.
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Germany will increase funds dedicated to climate-protection measures and investment in semiconductor production by about €20 billion to more than €200 billion. The funds are earmarked for measures that include sustainable renovation of buildings, subsidies for the replacement of fossil-fuel heating systems and an expansion of Germany’s hydrogen infrastructure. The investment is part of a wider push from European governments trying to meet the EU’s ambitious climate targets.
The numbers
The nuance
China fell into deflation in July as both consumer and producer prices declined simultaneously for the first time since 2020. While this increases pressure on Beijing to release more direct policy stimulus, it could help global central banks fight inflation in their own countries. With consumer demand in China decelerating, a declining property market and rapidly falling exports, manufacturers are being forced to lower prices to clear excess stock. These lower costs could flow through to developed nations, where central banks like the Federal Reserve and Bank of England are still hiking rates to control inflation.
Elsewhere for China, US president Joe Biden has imposed limits on US investments in China, in a move to restrict China’s ability to develop military and surveillance technologies. The order will regulate US investments in Chinese semiconductors, AI and quantum computing firms. Some US investors are now worried that China will retaliate, as it has done in the past, however how they plan to do so remains to be seen.
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