In a shortened trading week, global indices were mixed amid a week filled with economic data releases. US retail sales rebounded in March, China’s economic growth surprised to the upside, US industrial production weakened and the UK kept low unemployment rates amid Brexit uncertainty.
In March US retail sales grew by 1.60%, surprising economists who estimated growth of 1.00%, this marks the largest increase since September 2017. Auto sales and gas prices recorded gains of 3.10% and 3.50%, respectively. Excluding the two sectors, retail sales still grew by 0.90%, suggesting the US economy grew more than expected in the first quarter of 2019.
The Chinese economy grew by 6.40% in the first quarter, greater than most economist’s expectations. Growth was spurred on by industrial production and consumer spending, which grew by 8.50% and 8.70%, respectively. The positive growth numbers come on the back of government initiatives such as tax cuts and increased infrastructure spending, in a bid to boost economic growth. Recently, the calmer trade tensions have helped in increasing business confidence. The target growth rate for 2019 is between 6.00% and 6.50%.
US industrial production declined by 0.10% for the month of March, this was below market expectations of a 0.20% increase. Mining output was the biggest detractor to the print, declining by 0.80% for the month. The weaker economic data suggests that the global economic slowdown is putting pressure on the manufacturing sector in the US.
The UK unemployment rate fell to a 44-year low for the three-month period ending January. Unemployment came in at 3.90%, down from 4.00% the month before. The economy added 222,000 jobs to the workforce and average weekly earnings grew by 3.40%. These figures show the labour markets resilience throughout all the Brexit uncertainties. There is talk that these figures are simply in order to meet current demand and there is still uncertainty with respect to longer-term business investment.
Market Moves of the Week
Local markets ended the shortened week higher overall. The All-Share index ended the week 1.40% higher, boosted by gains in Financials (+3.29%) and Industrials (2.26%). The rand closed the week at 14.07 to the greenback, depreciating by 0.71% for the week.
This week the Reserve Bank in their Monetary Policy Review publication stated that continued Eskom interruptions in 2019 could cause economic growth to halt by 1.10%. The Reserve Bank further estimates a sum of 125,000 jobs could be lost to the first wave, with an additional 77,000 jobs lost in the second wave. These figures come a month out from the national elections to take place in early May. In the February budget the growth forecast for 2019 was 1.50%, this figure has now been pushed down to 1.30%.
Chart of the Week
US retail sales grew by 1.60%, surprising to the upside as growth was expected to be 1.00%, the largest increase since September 2017.
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