The Day at a Glance | August 15 2024

 El Top

• US industrial production surprised to the downside in July.
• In the United States, retail sales rose more than expected in July.
• Industrial production in China slowed for the third consecutive month in July, showing that the economic recovery is losing steam (5.1% y/y vs 5.3% previously).
• In the week ending August 10th, initial jobless claims were 227,000, marking a decrease of 7,000 from the previous week’s 234,000
• Japan’s economy expanded by an annualized 3.1% in the second quarter, rebounding from a slump at the start of the year thanks to a strong rise in consumption and backing the case for another near-term interest rate hike.
• Oil prices extended gains on Thursday after U.S. economic data that could allay fears of an imminent recession in the world’s biggest economy, though concerns over slower global demand curbed the rally.

US industrial production surprised to the upside in June. Industrial activity decreased -0.6% m/m in July, falling expectations of a -0.2% m/m figure after a 0.3% m/m growth in June. Manufacturing and Utilities decreased by 0.4% m/m and -3.7% m/m, respectively; while mining output was flat in July. The capacity utilization rate in the industrial sector stood at 77.8% in June, 1.9 percentage points below its long-term average level (1972-2023), suggesting few inflationary pressures from the cost side. On an annual basis, US industrial production decreased by -0.2% at the beginning of the third quarter of 2024. By components, manufacturing slightly increased by 0.1% y/y, while mining and electricity generation decreased by -1.5% y/y and -1.0% y/y, respectively. In general, the July figures showed the first drop in the industrial production in four months, which suggests a loss in the dynamism of the economy, however, it is important to note that Hurricane Beryl is estimated to have reduced the July manufacturing production by 0.3%.

In the United States, retail sales rose more than expected in July. In July, retail sales soared with a 1.0% m/m growth, beating market forecasts of a 0.4% m/m gain, following a downwardly revised -0.2% drop in June. Excluding the more volatile items, such as autos and gasoline, retail sales rose by +0.4% m/m in July, after increasing by 0.8% m/m in June. On an annual basis, retail sales increased by 2.7%, while sales excluding autos and gasoline rose by 3.4%. The aforementioned figures include annual growth rates of +6.7% in online sales, +3.4 in health, +3.4% in restaurants and +2.5% in clothing, while furniture and sporting goods fell in -2.4% and -6.8%, respectively. In general, U.S. retail sales rose more than expected in July, which could help to allay financial market fears of a sharp economic slowdown that were fanned by a jump in the unemployment rate.

Markets and Companies

The U.S. stock market opened with gains, driven by July retail sales data that exceeded expectations, easing concerns about a potential slowdown in the U.S. economy. Additionally, inflation expectations have been reinforced this week following the release of consumer and producer inflation figures, suggesting that inflation is gradually moving toward the Federal Reserve’s target. Reduced fears of an economic recession and the potential for interest rate cuts this year have pushed stock indexes higher throughout the week. In Europe, stock markets are also trading with gains, while in Asia, positive movements are also observed as investors digest Japan’s GDP growth data, which was higher than expected.

In the debt market, the yield on the 10-year Treasury bond has risen to 3.95%, responding to the U.S. retail sales figures.

In commodities, oil prices are trending higher as markets closely monitor developments in the Middle East and assess the possibility of lower demand from China.

In Mexico, the IPC opened with gains, trading at 53,774.3 points.

Regarding the exchange rate, the peso is currently trading at 18.7 per dollar, slightly down from yesterday’s close of 18.78.

Notes

• Ulta Beauty shares surged nearly 13% after Berkshire Hathaway disclosed a stake in the company valued at approximately $266 million.
• Wal-Mart reported better-than-expected results and raised its annual guidance, driven by strong consumer spending in the U.S.
• Cisco released a quarterly report that exceeded expectations and announced a cost-cutting restructuring plan, which includes a 7% reduction in its workforce.