Economy

Meanwhile another report showing a smaller than expected increase in the number of American’s filing for unemployment benefits last month showed resilience rather than deterioration in labor market conditions and lifted stock futures, Treasury yields and the dollar. Futures traders raised the odds that the Federal Reserve will ease by just 25 basis points in September to about 75% after the Commerce Department said retail sales increased 1.0% last month after a downwardly revised 0.2% drop in June. Economists polled by Reuters had forecast retail sales advancing 0.3% after previously being reported as unchanged.MARKET REACTION:STOCKS: S&P 500 E-minis extended gains and were up 0.94%BONDS: The yield on benchmark U.S. 10-year notes rose to 3.928%, the two-year note yield jumped to 4.089% FOREX: The dollar index turned 0.51% higher COMMENTS: STEVE WYETT, CHIEF INVESTMENT STRATEGIST, BOK FINANCIAL, TULSA, OKLAHOMA”The overall message that I would take from this number is that the angst that the market was feeling a week and a half ago after a weaker than expected employment report and this idea that the Fed was dropping behind and that the economy was sliding into a recession and we built in 50 basis points in easing in September is just backing that off.”    “The economy is not going into a recession imminently. This will take 50 basis points in September off the table. Still think that 25 basis points make sense just because inflation continues to ease and we got a couple of good reports, PPI and CPI adding to that.”    “We have the all-important employment data before the next Fed meeting but this should reduce the feelings that the economy is imminently going into a recession.”    “The early calls during that market volatility for the Fed to do something on an emergency basis now look even further out of line than what we felt they were at the time they were made.”CHRIS LARKIN, MANAGING DIRECTOR, TRADING AND INVESTING, E*TRADE FROM MORGAN STANLEY, NEW YORK    “Today didn’t deliver any major curveballs. More data like this could ease concerns that the economy is tilting toward recession and take pressure off the Fed to cut rates more aggressively than they’d like to.”BRET KENWELL, U.S. INVESTMENT ANALYST AT ETORO, PETOSKEY, MICHIGAN (via email)”The retail sales report beat expectations across the board, with strong headline figures and stronger-than-expected control group sales — the most stringent cut of data within the report. We’re back to an environment where good news is good news and bad news is bad news.” “Given the recent worries over the labor market, today’s lower-than-expected jobless claims data is another positive and marks the second consecutive miss for this report. Combined with a strong retail sales report, investors are breathing a sigh of relief this morning, letting recent worries of economic softness subside. While it would still be appropriate for the Fed to lower rates next month, today’s reports should buy them some time until the September meeting.”  More

Advanced retail sales accelerated 1% on the month, much better than the 0.3% estimate.
In other economic news, weekly jobless claims totaled 227,000, a decrease of 7,000 from the previous week and lower than the estimate for 235,000.
The reports come the same week as data showing that inflation eased slightly in July.

An H&M store is seen in Herald Square on July 01, 2024 in New York City. 
Michael M. Santiago | Getty Images

Consumer spending held up even better than expected in July as inflation pressures showed more signs of easing, the Commerce Department reported Thursday.
Advanced retail sales accelerated 1% on the month, according to numbers that are adjusted for seasonality but not inflation. Economists surveyed by Dow Jones had been looking for a 0.3% increase. June sales were revised to a decline of 0.2% after initially being reported as flat.

Excluding auto-related items, sales increased 0.4%, also better than the 0.1% forecast.
There was also good news on the labor market front: Initial unemployment benefit claims for the week ended Aug. 10 totaled 227,000, a decrease of 7,000 from the previous week and lower than the estimate for 235,000.
Gains in sales were propelled by increases at motor vehicle and parts dealers (3.6%), electronics and appliance stores (1.6%), and food and beverage outlets (0.9%). Miscellaneous retailers saw a plunge of 2.5% while gas stations saw receipts climb just 0.1% and clothing stores were down 0.1%.

Stock market futures rose sharply following the Thursday morning data releases, while Treasury yields spiked as well.
The report comes the same week as data showing that inflation eased slightly in July.

Prices that consumers pay for goods and services increased 0.2% on the month, and the annual inflation rate declined to 2.9%, its lowest since March 2021. At the same time, wholesale prices were up just 0.1% on the month and 2.2% on the year.
While the inflation numbers remain above the Federal Reserve’s 2% target, the data shows continued easing of price pressures that had peaked two years ago. Financial markets expect the Fed to respond with its first rate cut in more than four years when it next meets in September, though a resilient consumer could give policymakers more reason to take a measured approach to cuts.
Echoing the theme of a stable consumer, Walmart earlier Thursday reported strong earnings and sales for the previous quarter and raised its outlook, though it sounded some cautionary notes about the second half of 2024.
In addition to looking for lower rates, investors also increasingly are expecting the Fed to turn its attention from a laser focus on inflation to a broader look at potentially weakening conditions in the labor market and elsewhere.
Unemployment benefit filings numbers from the Labor Department also showed that continuing claims, which run a week behind, declined slightly to 1.864 million. A weaker-than-expected July payrolls report had stirred concern that the labor market could be weakening.
Other economic data released Thursday showed that the manufacturing picture is wobbling.
The New York Fed’s Empire State Manufacturing gauge edged higher but was still in negative territory at -4.7, slightly better than the -6 estimate. At the same time, the Philadelphia Fed manufacturing measure slid to -7, its first negative reading since January and well below the forecast for 7.9.
Both indexes measure the percentage of companies reporting expansion against contraction.

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BANGKOK (Reuters) – The political turmoil unleashed by the dismissal of Thai Prime Minister Srettha Thavisin is likely to deal another blow to the already struggling economy, where millions of people drowning in debt have been waiting for long-delayed cash handouts.Southeast Asia’s second largest economy grew 1.5% in the first quarter of 2024 compared to a year earlier, slowing from the prior quarter’s 1.7% expansion and lagging regional peers.The tourism-dependent country of 66 million people has struggled to recover from the COVID-19 pandemic, and major growth engines, including an automobiles sector that is the largest in the region, are still spluttering.Tim Leelahaphan, senior economist at Standard Chartered (OTC:SCBFF) Bank, said the political upheaval had cast doubts about the passage of the 3.75 trillion baht ($107 billion) national budget for fiscal 2025, as well as the 500 billion baht nationwide cash handout that was a flagship Srettha policy.”Political uncertainty and an unclear political outlook could have adverse implications for fiscal policy,” he said. The caretaker deputy finance minister said on Thursday the budget would not be delayed.Srettha’s ouster by the constitutional court on Wednesday came a fortnight after his government opened registrations for a scheme to give away 10,000 baht to 50 millions Thais, a key election promise of his Pheu Thai party.Over 16 million people had applied to receive the “digital wallet” handout on the day registrations opened, crashing the system but signalling huge demand for the controversial scheme among ordinary Thais hurting from the slowing economy and high levels of personal debt.Household debt stood at 16.4 trillion baht, or 90.8% of GDP, at the end of March, among the highest in Asia. The central bank, which had bickered with Srettha’s administration over the scale of the handout, left its key interest rate unchanged at a more than decade-high of 2.50% for a fourth straight meeting in June.It is expected to hold the rate again when it meets on Aug. 21.Ballooning household debt has also hit the car industry. Thailand is home to the factories of Toyota Motor (NYSE:TM) and Honda (NYSE:HMC) Motor, and overall production in the sector has dropped for 11 straight months into June as local sales slumped.Exports of car and car parts also dropped 0.4% in the first half of 2024 from a year earlier, with main markets Malaysia and Vietnam down nearly 30% on the year, commerce ministry data showed.ENTRENCHED UNCERTAINTYSrettha’s removal underlines the deep fissures between the conservative-royalist establishment, backed by the military, and populist parties like the Pheu Thai. Both camps have been locked in a decades-long tussle, triggering coups and bouts of unrest.In the absence of a lasting resolution to the conflict, Thailand’s long-term prospects remain uncertain, analysts say.”Thailand has still not found a formula to bridge the country’s deep political divide,” said Gareth Leather, Senior Asia Economist at Capital Economics.”Without one, uncertainty looks set to remain entrenched while economic populism is likely to become worse, with negative repercussions for investor confidence.”Thailand’s stock market has been the worst performing bourse in Asia so far this year, down 9.3%.Industrial sentiment also hit its lowest in two years in June, while consumer confidence reached an 11 month low in July.Parliament will convene on Friday to elect a new prime minister, less than 48 hours after Srettha’s dismissal. A Pheu Thai-led 11-party alliance holds 314 house seats, allowing it elect a prime minister on Friday, providing the coalition remains intact.While on the streets Bangkok there is calm, analysts say the ongoing political drama could raise the risk of unrest. For now, some Thais are simply despondent. “Just look at the economy now,” said Wilai, 60, a book shop owner who gave only one name. “I think if politics continue like this, the economy won’t be able to move forward.”($1 = 35.06 baht) More

The U.K. economy grew by 0.6% in the second quarter of the year, the Office for National Statistics said Thursday, in line with the expectations of economists polled by Reuters.
The print follows an expansion of 0.7% in the first quarter.
Economic growth was flat in June, in line with a Reuters poll.

A guided tour in the center of in York, UK, on Friday, June 7, 2024.
Bloomberg | Bloomberg | Getty Images

The U.K. economy grew by 0.6% in the second quarter of the year, the Office for National Statistics said Thursday, continuing the country’s cautious recession rebound.
The reading was in line with the expectations of economists polled by Reuters and follows an expansion of 0.7% in the first quarter.

Economic growth was flat in June, in line with a Reuters poll, as activity in the U.K.’s dominant services sector dipped 0.1%. Construction and production output rose by a respective 0.5% and 0.8% in the month.
The British economy has recorded slight but steady growth almost every month so far this year, as the U.K. exits a shallow recession. GDP was also flat in April, when wet weather quelled retail sales and construction output.
On an annual basis the economy was 0.9% bigger in the second quarter, against a forecast of 0.8%.
“These figures confirm that the UK’s recovery from recession picked up steam in the second quarter, despite strike action and wet weather causing activity to flatline in June,” Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said in a note.
“The UK’s strong second quarter owes more to temporary momentum from the large recent falls in inflation and a boost to consumer spending from events like Euro 2024 than from a meaningful improvement in the UK’s underlying growth trajectory,” Thiru continued.

The pace of growth is unlikely to continue into the second half amid weaker wage growth, high interest rates and supply challenges, Thiru added.
U.K. inflation rose to 2.2% in July, data published Wednesday by the ONS showed, coming in slightly below a consensus forecast of 2.3%. The headline figure had been at the Bank of England’s 2% target rate for the two months prior, helping spur the central bank’s decision to cut interest rates by 25 basis points at the start of August.
The July figures were described by analysts as supportive of consistent monetary easing through the rest of the year, despite stubbornness in services inflation.
Over the April-June period, U.K. wage growth excluding bonuses cooled to a two-year low, but remained relatively hot at 5.4%.
Richard Carter, head of fixed interest research at Quilter Cheviot, said lower interest rates should “help stimulate more economic growth by making borrowing more affordable for households and businesses” in the coming months — but noted that it would take time for the impact to be felt.
The British pound ticked slightly higher following Thursday’s GDP release, and was up by 0.25% against the U.S. dollar and 0.2% against the euro at 12:17 p.m. in London.

Improved outlook

Institutions including the International Monetary Fund, investment bank Goldman Sachs and the Bank of England have all hiked their growth forecasts for the U.K. economy in recent months. The IMF now sees growth of 0.7% this year, up from 0.5% previously.
Factors cited include the decline in inflation and reforms to planning and business rules planned by the new Labour government, which took office in July. Prime Minister Keir Starmer and Finance Minister Rachel Reeves have repeatedly stated that boosting economic growth will be the bedrock of their policymaking, setting a target for the U.K. to achieve the fastest per capita GDP growth among the Group of 7 nations.
“The new Government is under no illusion as to the scale of the challenge we have inherited after more than a decade of low economic growth and a £22 billion black hole in the public finances,” Reeves said in a statement Thursday.
Labour is due to deliver its first budget on Oct. 30, with analysts saying the announcement will give more clarity on the government’s fiscal strategy and plans for changes to taxation and public spending.
Because of this, “it is unlikely that we will see a marked acceleration in GDP in the short term,” said Quilter Cheviot’s Richard Carter.
“For now, the economy is expected to continue on its relatively moderate growth path, bolstered by wage growth that remains ahead of inflation and the recent easing of monetary policy,” he added. More

He did not elaborate on the policy details. Pan told CCTV the number of high-risk small and medium-sized banks in China had almost halved from its peak, and the cost burden of local government debt had also dropped significantly. More

(Reuters) – South Africa’s Reserve Bank is expected to cut interest rates for the first time in more than two years – by 25 basis points to 8.00% – on Sept. 19, according to a Reuters poll of economists who had similar views to a poll taken last month.A repo rate cut would follow a period of tight monetary policy in Africa’s second-largest economy aimed at reducing inflation, which slowed to 5.1% in June.That expected rate reduction would come one day after the U.S. Federal Reserve is widely expected to start its cutting cycle after holding the federal funds rate steady over the past year. The SARB’s Monetary Policy Committee was split at the July meeting for the first time since September 2023, with four members preferring to keep rates on hold and two favouring a 25-basis-point cut.Nineteen of 26 economists surveyed between Aug. 6-14 said the SARB will trim its main repo rate by 25 bps to 8.00% on Sept. 19. A majority also said it will cut again by the same amount in November to 7.75%.Two more 25-basis-point cuts are expected in the first quarter of nest year – with meetings due in January and March – according to median forecasts from the poll, followed by another in May before the Bank pauses at 7.25% for the remainder of the year. Only one further cut to 7.00% is expected in 2026, based on a smaller sample of forecasters.David Omojomolo, Africa economist at Capital Economics, wrote in a note that the economic recovery in South Africa is operating at two speeds, with retail sales and manufacturing on the up but the important mining sector stuck in a weak spot.”Nonetheless, with easing electricity shortages and interest rate cuts on the way, the economy is finally turning a corner. We expect further modest growth over the rest of this year and in 2025,” he added. Power shortages from the state utility have crimped growth in Africa’s most industrialized nation in recent years, making planning and job creation difficult for small businesses.Economic growth in South Africa is expected to be 0.9% this year and 1.6% in 2025, a 0.1 percentage point downward revision for both years compared with the July survey.South Africa’s unemployment rate rose to 33.5% in the second quarter of 2024 from 32.9% in the first quarter.Inflation was expected to slow to an average of 4.9% this year and 4.5% in 2025, from 5.1% in June, similar to the previous poll. Among major central banks, the European Central Bank is expected to cut its deposit rate twice more this year after a reduction in June, in both September and December.The SARB’s southwestern Africa peer in Namibia cut its main interest rate by 25 basis points on Wednesday, while Zambia’s central bank held rates steady due to the inflationary impact on the economy from drought.    (Other stories from the Reuters global economic poll) More

NEW YORK (Reuters) – Trent Anderson may drive for Uber (NYSE:UBER) in Tampa, Florida, but his daydreams take him to places like picturesque Malaga, a city in the south of Spain.”It’s got the beach. It’s got the mountains. It has a big-city feel, but it’s not that big,” said Anderson, 49. The dream was inspired by a recent trip through Portugal and Spain in March which gave travelers a taste of daily life across the Atlantic. It was organized by Expatsi, a firm which helps Americans intrigued by the idea of living abroad.”When we started thinking about moving abroad ourselves, we built all these massive spreadsheets of data about different countries,” said Jen Barnett, an Alabama native who founded Expatsi with her husband Brett Andrews.Figuring other people might be able to use that information, the couple, who recently moved to Merida in Mexico’s Yucatan, launched the business to match expat wannabes with their dream destinations.On their website, a 20-question survey starts with “Why do you want to move abroad?”Relocating overseas is a big leap, but many have already done it: At least 5.4 million Americans lived abroad in 2023, according to the Association of Americans Resident Overseas.The strong U.S. dollar is a very good incentive. Since most Americans are far behind on retirement savings, moving to a place with much lower living costs immediately boosts their standard of living.Costa Rica is the best place to retire, according to International Living magazine’s 2024 Global Retirement Index ranking locales based on various criteria. Portugal, Mexico, Panama and Spain round out the top five.For those who want a trial run, an Expatsi trip to Spain and Portugal is set for September, followed by France and Italy in October, and Mexico on the horizon.Here are some tips for those who are scouting abroad for their retirement years:DO NOT BE A TOURISTStay in homes on Airbnb or VRBO in residential neighborhoods, Barnett suggested. Staying in hotels on guided vacations with quick visits to tourist hotspots give no idea about what it is like to live in a place.”What is it like day-to-day, going to the grocery store or pharmacy, visiting a clinic, taking public transportation?” Anderson said. “It’s not about the museum.”RENTFantasizing about owning a place abroad is easy, but if the experience falls short you could be in a jam because it is much harder to sell a home than to buy one, Barnett said. It can tie up your assets and trigger unforeseen tax consequences.That is why Barnett rents in Merida with her husband. They could easily move elsewhere.DIG INTO RULES AND REGULATIONSFiguring out the legal and financial ramifications of retiring abroad can take some fun out of a vacation, but it helps to make sure what you are getting into.The Internal Revenue Service requires expats to file tax returns on income, gifts and inheritance in the same way as if they are living in the United States. Check out Publication 54, Uncle Sam’s tax guide for Americans living abroad, here.Visas for work, study or retirement can vary widely for each country. ‘Golden Visa (NYSE:V)’ programs make pathways to residence and citizenship easier for investors.As for healthcare, a major concern for seniors, does your target country have universal coverage? Will you secure private coverage abroad or pay out of pocket?To address these tough questions early, Expatsi trips kick off with a half-day seminar featuring several local experts.”Just do it” if you are thinking about visiting a potential retirement location, said Anderson, the Uber driver, who is considering going on Expatsi’s trip to Mexico.”No amount of research can replace being there and experiencing it for yourself.” More

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