Global equity markets were subdued in August against a backdrop of mixed economic indicator readings over the period. Risk appetite appears to have been negatively affected at the margin by on-going posturing by North Korea.
In the US the labour market remained buoyant with payrolls increasing by 189000 in July and the unemployment rate edged lower to a reading of just 4.3%. Retail sales and consumer sentiment also showed some improvement. On a less positive note the pace of manufacturing expansion sector slowed a little as did growth in consumer credit. Inflation increased at a pace of 1.7% y/y which was a little lower than anticipated.
In the Eurozone GDP growth increased to 0.6% q/q in the second quarter up from 0.5% in the first quarter. Industrial production growth slowed to a pace of 2.6% y/y although the Eurozone PMI rose to a two-month high reading of 57.4 (56.6 previously). Inflation was stable at a rate of 1.3%
In China industrial production growth eased to 6.4% year on year from 7.6% previously and retail sales growth decelerated to 10.4% y/y from 11% previously. The trade surplus narrowed as exports were up 7.2% y/y while imports grew by 11.3%. On a more upbeat note the general manufacturing PMI increased to 51.1 from a previous reading of 50.4.
In Japan while the manufacturing PMI expanded at a slower pace in July, preliminary estimates for August showed this accelerating again. Consumer price growth was stable at a rate of 0.4% year on year.
Locally, indicators have been mixed and the economic outlook remains subdued. On the negative front manufacturing remained weak with output declining 2.3% on a year on year basis. Mining production also declined by 0.8% y/y with lower production of gold, iron ore, platinum group metals, and other metallic minerals. On a more positive note vehicle sales increased, retail sales were stronger than anticipated and the trade surplus widened to just under R11 billion (marking a 5th consecutive in surplus). Second quarter GDP growth was ahead of expectations and reflected a seasonally adjusted annualized rate of 2.5%.
Foreign equity market inflows remained negative over the month. The All Share Index gained 2.4% in ZAR terms for the month. A weaker rand saw the USD return come in 1.3% up. Gains were most pronounced in the resources sector.