KUWAIT: US existing home sales fell in June, where the latest figure shows a drop from 4.11 million homes sold in May down to 3.89 million, lower than the expected 3.99 million figure. The June figure comes following a 0.7 percent drop in May, which was considered the lowest reading for the figure since February. Meanwhile, median home prices rose 4.1 percent y/y reaching $426,000. Declines were seen in all four major US regions, where sales weakened in all parts of the US except for the West which remained unchanged.

US business activity surged in July, where the country saw a significant acceleration in business activity, with the S&P Global Flash US Composite PMI rising to 55.0, its highest in 27 months. The Services Business Activity Index increased to 56.0, while the Manufacturing PMI Index slipped to 49.5 down from 51.6 in June, marking a six-month low. Employment growth continued for the second month although at a slower rate, driven by stronger service sector performance. Despite this growth, business confidence dipped due to political uncertainties and inflation concerns. Input prices rose at a slower rate, indicating some easing of inflationary pressures.

US GDP advances q/q

Real gross domestic product in the US increased at an annual rate of 2.8 percent in the second quarter of the year, up from 1.4 percent in the first quarter. The increase reflected a rise in consumer spending, which was seen in both services and goods. In services, the leading contributors to the increase were healthcare, housing, utilities, and recreation services. Where in goods, motor vehicles and parts, recreational goods, and household equipment were the biggest contributors to the increase. Personal income increased $237.6 billion, compared to $396.8 billion. Disposable personal income rose $186.3 billion, marking a 3.6 percent increase compared to 4.8 percent the previous quarter. While personal saving as a percentage of disposable income was 3.5 percent, compared to 3.8 percent in the first quarter.

In June 2024, personal consumption expenditures (PCE) increased by $57.6 billion, or 0.3 percent, reflecting a rise in consumer spending on both goods and services. The PCE price index, which measures inflation, rose by 0.1 percent from the previous month and 2.5 percent year-over-year. Excluding food and energy, the core PCE price index increased by 0.2 percent monthly and 2.6 percent annually. Personal income in the US increased by $50.4 billion, or 0.2 percent, driven by gains in compensation and personal current transfer receipts.

The US dollar index closed the week at 104.32.

In its July 2024 meeting, the Bank of Canada cut its key interest rate by 25 basis points to 4.5 percent, following a similar cut in June. This decision was influenced by excess supply in the economy, which has helped slow inflation, and signs of moderation in the labor market. The central bank believes that lower interest rates will help reduce mortgage and shelter costs, major drivers of inflation. The Governing Council expects CPI inflation to decrease in the latter half of the year due to base effects for gasoline prices and to stabilize at 2 percent in 2025. The USD/CAD currency pair closed the week at 1.3833.

Eurozone consumer confidence

The eurozone consumer confidence indicator increased by 1.0pp in the euro area to -13.0, from -14.0 the previous month. The figure shows further progress towards reaching its long-term average of around -11, and comes following the ECB decision to hold rates unchanged in its latest meeting as inflation proved to be more resistant.

The eurozone’s economic recovery decelerated in July, with the HCOB Flash Eurozone Composite PMI dropping to 50.1, down from 50.9, marking a five-month low. The Services PMI fell to 51.9, down from 52.8, while the Manufacturing Output Index decreased to 45.3, from 46.1, indicating continued weakness in manufacturing. New orders fell for the second consecutive month, leading to a halt in employment growth. Business confidence dipped to a six-month low amid ongoing inflationary pressures. Despite some optimism, the data points to a challenging outlook for the Eurozone’s economy. The EUR/USD currency pair closed the week at 1.0857.

In July 2024, the UK’s private sector experienced significant growth, with the manufacturing and services PMI figures showing notable improvements. The Composite Output Index rose to 52.7, up from 52.3 in June, indicating solid expansion. The Services PMI climbed to 52.4, and the Manufacturing Output Index reached 54.4, marking a 29-month high. Manufacturing PMI also increased to 51.8, up from 50.9 in June. Employment growth accelerated, particularly in services, which saw the fastest increase in staffing in over a year. Despite ongoing inflationary pressures, business confidence improved, driven by expectations of stronger demand and political stability. This positive trend suggests a promising start to the second half of the year for the UK economy. The GBP/USD currency pair closed the week at 1.2872.

In July, core consumer prices in Japan rose by 2.2 percent y/y. matching markets forecasts and slightly accelerating from June’s 2.1 percent increase. This marks the third consecutive month of rising inflation in Japan’s capital. Excluding fresh food and fuel costs, inflation increased by 1.5 percent down from 1.8 percent in June. The figures come a week before the Bank of Japan’s policy meeting, where markets are pricing in a 70 percent chance of a rate hike. The USD/JPY currency pair closed the week at 153.72.

China cuts rates

The People’s Bank of China delivered a 10 basis points cut to key rates, taking the seven-day reverse repo rate to 1.7 percent from 1.8 percent previously, the one-year loan prime rate to 3.35 percent from 3.45 percent, and the five-year loan prime rate was lowered to 3.85 percent from 3.95 percent. The move took markets by surprise, especially since it was forecasted that rates would remain unchanged. The PBOC decision comes amid a period of weaker growth for the world’s second largest economy. Annual CPI came in at the lowest level since March rising just 0.2 percent.

Meanwhile, consumer demand is muted while Chinese imports were weaker than expected. GDP growth also disappointed, increasing by 4.7 percent versus 5.1 percent expected. Policymakers in China previously introduced easing measures to boost consumer demand and the economy overall, delivering rate cuts, lowering down payment requirements for real estate, and decreasing the reserve ratio requirements. It remains to be seen how much further authorities in China are willing to go to support the struggling economy, however it is expected that they will be more comfortable doing so once the Federal Reserve start cutting rates as they attempt to balance between supporting economic growth, and being mindful of interest rate differentials as the Yuan gets weaker. The USD/CNY currency pair closed the week at 7.2502.

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USD/KWD closed last week at 0.30545.