Fisher Investments recaps the biggest market, political and economic news from last week, including US, UK and China July retail sales figures, UK, eurozone and Japan July inflation data, and the eurozone's second Q2 2021 GDP estimate.
In the US, the Conference Board’s July Leading Economic Index (LEI) increased 0.9% from the prior month—higher than consensus estimates. July manufacturing and industrial production expanded 1.4% m/m and 0.9% m/m, respectively—both beating expectations. July retail sales rose 15.8% y/y, but fell 1.1% m/m. Headlines portrayed retail sales’ month-over-month weakness as a portent of worse to come, given rising COVID cases and renewed mask mandates. However, one month’s economic data don’t make a trend, and we think stocks are looking well beyond summertime results. Current COVID flareups likely won’t materially dampen total economic activity over the next year or two. For more, please see our 8/17/2021 commentary, “Your Economic Two’fer Tuesday.”
In the eurozone, July core consumer prices (excluding energy, food, alcohol and tobacco) rose 0.7% y/y, in line with expectations. The second estimate of Q2 2021 GDP was unchanged at 2.0% q/q. In the UK, July core consumer prices (excluding food and energy) rose 1.8% y/y, lower than expected. July retail sales rose 2.4% y/y but fell 2.5% m/m. The June unemployment rate fell to 4.7% from 4.8% the prior month.
In Japan, the first estimate of Q2 2021 GDP was 0.3% q/q, less than expected. July core-core consumer prices (excluding food and energy) fell 0.6% y/y. July imports rose 28.5% y/y while exports rose 37.0% y/y, both lower than expected. Final June industrial production growth was revised upward to 6.5% m/m and 23.0% y/y, both higher than estimates. June retail sales rose 0.1% y/y and 3.1% m/m. In China, July retail sales and industrial production rose 8.5% y/y and 6.4% y/y, respectively, but both fell sharply from their June levels. Some fear these results point to deeper trouble in China’s economy. However, slowing growth rates have been the norm in China for years now—a logical consequence of the country’s shift away from fast, factory-led growth. In our view, recent headlines are more evidence that sentiment toward China has fallen too far, too fast. China jitters look to us like a big brick remaining in this bull market’s wall of worry, not reason to be bearish on China or global stocks today. For more, please see our 8/16/2021 commentary, “Inside China’s July Slowdown.”
The Week Ahead:
The US, UK, eurozone and Japan release August purchasing managers’ indexes (PMIs). The US reports its second estimate of Q2 2021 GDP, July new home sales and durable goods orders. Japan releases June LEI data and July trade figures.
Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses the maximum rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.