🇿🇦 Local Market Indicators & News Highlights
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🌟Retail Sales Show Strong Growth in June
Retail sales growth accelerated in June, rising by 4.1% year-on-year, up from 1.1% in May. The increase was driven by strong performances from general dealers and retailers in textiles, clothing, footwear, and leather goods, which saw growth of 7.3% and 6.1%, respectively.
Over the second quarter, retail sales increased by 1.5% quarter-on-quarter, a positive turnaround from the -0.3% decline in Q1. Clothing and footwear retailers, along with general dealers, led the way with quarterly growth of 3.2% and 1.1%.
While most retail sectors experienced growth, sales in food, beverages, and tobacco stores, as well as household furniture and appliances, remained stagnant. The positive trend in retail sales suggests that rising real incomes and moderating inflation are beginning to support consumer spending. As inflation continues to recede, retail sales are expected to gain further momentum, moving closer to the SARB's 4.5% target midpoint.
🌟Unemployment Rate Rises to 33.5% in Q2
South Africa's unemployment rate increased to 33.5% in Q2 2024, up from 32.9% in Q1. This rise reflects 158,000 more unemployed people, while employment dropped by 92,000. The formal non-agricultural sector was hardest hit, losing 77,000 jobs, overshadowing the 48,000 jobs created in the informal sector.
Discouraged jobseekers also rose by 147,000, indicating growing despair among those seeking work. The domestic trade sector lost 111,000 jobs, and agriculture shed 45,000. However, manufacturing and mining sectors added jobs, thanks to stable energy supply and higher commodity prices. Community and social services saw modest job gains of 36,000 after a sharp decline in Q1.
The job market outlook remains uncertain. While economic conditions are gradually improving with reduced load-shedding and better logistics, employment growth is expected to be slow, with a more significant recovery likely next year as inflation eases and interest rates potentially decrease.
🌟 South African Markets Reach New Highs as Rand Extends Record Rally
South Africa's financial markets are experiencing a significant upswing, with the FTSE/JSE Africa All Share Index climbing by 3% to a record high, driven by anticipation of interest rate cuts and a global surge in risk assets. Banking stocks like Standard Bank and FirstRand reached new peaks, bolstered by higher commodity prices, particularly in precious metals. The positive sentiment is further supported by a business-friendly coalition government and improving economic conditions, including reduced inflation and stable power supply. Since the May 29 election, the stock market has delivered a 7.8% return in dollar terms, ranking among the top 10 global indices. Simultaneously, the rand is enjoying its longest winning streak since 2011, emerging as the best-performing currency against the dollar globally. Despite these gains, experts warn that the rand's rally may face challenges if interest rate cuts materialize, and emphasize the need for structural reforms to sustain long-term economic growth.
🌟 Standard Bank Reports Solid Interim Results for 2024
Standard Bank delivered a strong performance in its 2024 interim results, with headline earnings up 4% to R22 billion. The bank's share price rose over 6% to R232.82, marking a 15% gain over the past three months.
The bank's interim dividend increased by 8% to R7.44 per share, driven by continued franchise growth in banking and robust earnings in insurance and asset management. CEO Sim Tshabalala highlighted double-digit earnings growth in South Africa, supported by improving credit trends.
Credit impairments rose by 8%, but the credit loss ratio improved to 92bps, within the target range. Operating expenses were well managed, rising just 1%, with a cost-to-income ratio of 49.7%.
Notably, the Standard Bank saw a 7% increase in digitally active clients in South Africa, with digital transactions up 25%. Tshabalala emphasized the strong performance in Africa, particularly in Angola and Nigeria, as key growth areas for the bank.
🌍 Global Market Indicators & News Highlights
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🇺🇸 United States: Stocks Rally Amid Soft Landing Hopes
Strong Stock Gains: U.S. stocks posted solid gains, with the Nasdaq Composite leading the way, up 12.24% from its August 5 lows. The rally was driven by optimism about inflation and growth, with notable performances from NVIDIA (+18.93%) and Starbucks (+24.50%).
Retail Sales Surge: Retail sales in July jumped 1.0%, marking the strongest increase in 18 months. The data indicated resilience in consumer spending despite a cooling labor market.
Benign Inflation Data: Inflation data showed a cooling trend, with core producer prices flat in July and the consumer price index (CPI) falling below 3% year-over-year for the first time in over three years.
🇪🇺 Europe: Strong Gains Amid Rate Cut Hopes
Stocks Surge on Rate Cut Speculation: The STOXX Europe 600 Index rose 2.33%, driven by hopes of further interest rate cuts. Major indexes like Germany’s DAX (+3.38%) and Italy’s FTSE MIB (+4.09%) posted strong gains.
Eurozone Growth Steady: The eurozone economy grew by 0.3% in Q2, matching Q1’s pace. However, industrial production slightly contracted in June, while the labor market remained resilient.
Norway Holds Rates Steady: Norges Bank kept its key interest rate at 4.5%, with signals that the rate might remain unchanged for some time unless economic conditions deteriorate.
🇬🇧United Kingdom: Growth and Inflation Provide Rate Cut Room
Economic Growth Remains Strong: The UK economy grew by 0.6% in Q2, following a 0.7% expansion in Q1. Despite zero growth in June, driven by weather impacts and labor strikes, the economy showed resilience.
Inflation Ticks Up: Headline inflation rose to 2.2% in July, but a slowdown in services price growth increased the likelihood of further rate cuts later in the year.
Retail Sales Rebound: UK retail sales volumes rose by 0.5% in July, recovering from a decline in June, signaling a potential easing of the consumer squeeze from high inflation.
🇯🇵 Japan: Market Rebounds on Economic Strength
Stocks Surge: Japan's stock markets rebounded strongly, with the Nikkei 225 up 9.28% and the TOPIX Index gaining 7.9%, driven by positive U.S. economic data and a weaker yen.
Economic Growth Beats Expectations: Japan’s economy grew by 0.8% in Q2, surpassing forecasts, driven by strong private consumption and business investment, with an annualized growth rate of 3.1%.
Political Uncertainty: Reports suggest Prime Minister Fumio Kishida may not seek reelection as LDP leader, potentially leading to a change in leadership but unlikely to impact asset prices significantly in the near term.
🇨🇳 China: Equities Rise Despite Economic Weakness
Stocks Edge Higher: The Shanghai Composite Index gained 0.6%, and the CSI 300 added 0.42%, while the Hang Seng Index in Hong Kong rose 3.27%, despite weaker-than-expected economic data.
Slowing Economic Activity: Industrial production grew by 5.1% in July, missing expectations, while retail sales showed a better-than-expected 2.7% increase. However, fixed asset investment and property investment both underperformed.
Weak Credit Data: New bank loans in July were significantly lower than expected, raising concerns about the ongoing property market slump and fueling speculation of further rate cuts by the central bank.