The Day at a Glance | September 17 2024

The Top

• US industrial production recovered in August.

• In the US, retail sales pleasantly surprised with slight growth in August.

• Tomorrow, the Federal Open Market Committee will announce its monetary policy decision. We estimate a 25 basis point cut in the federal funds rate range, despite the market pricing in a potential 50 basis point cut.

• The Leading Indicator of Private Consumption (IOCP) estimates that household consumption increased by 2.3% in July and 1.6% in August 2024.

• China is raising the retirement age for the first time since the 1950´s and increasing the number of years workers must contribute to receive their pensions to address an aging population.

• According to Reuters, the Biden administration is investigating an increase in enriched uranium imports from China since the end of 2023 amidstconcerns that these shipments are helping Moscow evade a US ban on importing fuel for power plants from Russia.

• Oil prices rose on Tuesday as investors focused on the US Federal Reserve’s monetary policy meeting, which ends on Wednesday, while concerns about weaker demand in China limited gains.

Economic Environment

US industrial production recovered in August. In August, industrial activity increased by 0.8% m/m, exceeding expectations of 0.2% m/m after falling by -0.9% in July. Manufacturing increased by 0.9% m/m (prev. -0.7%) and was mainly driven by a 10% m/m (prev. -9.0%) rise in vehicle and auto parts production. Similarly, mining rose by 0.8% m/m (prev. -0.4%), while utilities remained flat (prev. -3.0%). The industry’s capacity utilization stood at 78.0% in August, 1.7 percentage points below its long-term average (1972–2023), suggesting little inflationary pressure from costs. On an annual basis, US industrial production remained virtually unchanged with 0.04% growth in August, up from -0.74% in July. By component, manufacturing increased slightly by 0.2% y/y, mining by 0.1%, while utilities fell by -0.9%. Overall, August’s figures logged a recovery following Hurricane Beryl, but there may be another disruption in September due to Hurricane Francine, potentially delaying a recovery in industrial production until the last quarter of 2024. 

US retail sales pleasantly surprised with slight growth in August. In August, retail sales increased by 0.1% m/m, beating expectations of a -0.2% m/m decline after a revised 1.1% rise in July. Excluding more volatile categories such as autos and gasoline, retail sales rose by +0.2% m/m in August, following a 0.4% m/m increase in July. Annually, retail sales increased by 2.1%, while sales excluding autos and gasoline rose by 3.3%. These previously mentioned figures include annual growth of +10.7% in miscellaneous stores, +7.8% in online sales, health +3.5%, restaurants +2.7%, clothing +1.0%, while building materials, furniture, and sporting goods sales decreased by -0.1%, -0.7%, and -3.6%, respectively. Overall, retail sales in the US unexpectedly rose in August, which suggests that the economy remains resilient halfway through the third quarter. 

Markets and Companies

The US stock market began the week with slight positive changes following August´s retail sales, which increased by 0.1% month-over-month, surpassing expectations of a 0.2% decline, indicating strong consumer health. Investors remain focused on the Federal Reserve’s monetary policy decision, which will be announced tomorrow, with an expected 25-basis point rate cut. This move could boost corporate earnings growth amidst high borrowing costs and inflation. It would be the first rate cut since the start of the Fed’s aggressive rate-hiking cycle in March 2022. In Europe, banking and automotive sectors are leading gains, pushing indexes into positive territory, while in Asia, markets loggedmixed performance, with the Nikkei 225 down due to the strengthening yen, which reached its highest level since July 2023. Additionally, the Bank of Japan is expected to announce its monetary policy decision this week.

Regarding commodities, oil prices are logging positive figures with a partial production recovery in the Gulf of Mexico after Hurricane Francine. Despite this, oil has dropped more than 13% this quarter due to slowing demand in China, while OPEC+ maintains its plans to increase production in December.

US Treasury bond yields remained steady after the release of retail sales data. The 10-year yield stands at 3.64%, while the 2-year yield is at 3.60%.

In Mexico, the stock market is up, and the country´s main index stands at 52,126.4 points.

As for the exchange rate, it stands at 19.36. 

Corporate News

• Microsoft approved a share buyback program of USD $60 billion, in addition to raising its quarterly dividend to USD $0.30.

• Technology company Intel announced the creation of a separate entity for its foundry business, allowing it to have its own board and raise external funds.

• Due to its growing share in the US e-commerce market, Redburn Atlantic upgraded Shopify’s rating.