Global Economic Trends and Local Insights
Source: Graviton Perspectives
US Inflation Approaches Target as Economy Shows Resilience
The United States is edging closer to its 2% inflation target, with consumer prices showing a modest increase in September 2024. The annual inflation rate dropped to 2.4%, the lowest in three years, marking steady progress since the inflation surge began in 2021. Month-on-month, prices rose by just 0.2%, mirroring August’s performance.
Despite this positive trend, core inflation, which excludes volatile food and energy costs, increased by 3.3% year-on-year, driven by higher costs in sectors like medical care, clothing, and transportation. The Federal Reserve is expected to continue rate cuts, with economists anticipating two more reductions before year-end. The broader economic picture is buoyed by strong job growth and a drop in unemployment to 4.1%, alongside a 3% annual growth rate in Q2.
UK Returns to Growth Amid Policy Challenges
The UK economy rebounded in August 2024, growing by 0.2% month-on-month after stagnation in June and July. This growth was driven by a modest recovery in services, production, and construction sectors. Over the three months to August, growth stood at 0.2%, reflecting the government’s efforts to stabilize the economy after a shallow recession earlier in the year. UK Finance Minister Rachel Reeves emphasized the government’s priority to restore robust economic growth.
China’s Economy Struggles to Meet Growth Goals
China reported 4.6% GDP growth in Q3 2024, slightly surpassing expectations but falling short of the 4.7% achieved in Q2. Quarterly growth stood at 0.9%, with retail sales and industrial production exceeding forecasts. However, challenges persist, including low consumer sentiment and a struggling property sector. The Chinese government announced additional stimulus measures in October to address these issues, including easing bank reserve requirements.
Eurozone Cuts Rates as Growth Remains Subdued
The eurozone economy grew by 0.4% in Q3 2024, according to Eurostat, with Spain and Ireland leading the charge. However, persistent economic weakness led the European Central Bank (ECB) to implement its third rate cut of the year in October, bringing inflation to 1.7%.
Local Highlights: South Africa’s Inflation Declines
In South Africa, inflation dropped to 3.8% in September 2024, the lowest in three years. This decline, attributed to lower fuel prices and a good food harvest, raises the possibility of further rate cuts by the South African Reserve Bank (SARB). Analysts anticipate a 25-basis-point rate cut in November, potentially boosting consumer purchasing power and economic growth.
The government’s budget review projected a widening deficit of 5% of GDP for 2024/25, citing revenue shortfalls. Despite this, improved power supply is expected to drive a slight acceleration in growth to 1.7% by 2025.
Market Overview: October’s Mixed Performance
Globally, developed and emerging market equities experienced declines in October 2024, influenced by weaker performances across most sectors. Locally, South African equities followed suit, with the FTSE/JSE Capped All Share Index down 0.92%. Resources ended positively at 2.98%, but Industrials and Property saw notable declines.
The bond market also struggled, with the FTSE/JSE All Bond Index dropping 2.2%. The rand weakened against the US dollar but showed strength against the euro and pound.
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