Herman van Papendorp, Head of Investment Research & Asset Allocation and Sanisha Packirisamy, Economist at Momentum Investments
Economies at a Glance by Momentum Investments’ macro research team consists of an easy-to-read chartbook of what is happening in the world’s largest economies and a snapshot of the index returns for the month.
Download the INFOGRAPHIC or read the text summary below.
Following a series of ten consecutive interest rate increases that began in March 2022, the Federal Open Market Committee (FOMC) of the United States (US) decided to pause in June 2023. However, the postmeeting statement revealed that many Fed officials still considered additional hikes necessary to gradually reduce inflation to the desired level of 2%.
European Commission President Ursula von der Leyen emphasised the risks to national security and economic resilience arising from Russia’s incursion into Ukraine and has repeatedly called for the European Union (EU) to ‘derisk’ from China. While there is no consensus among member states on how to approach relations with China, scrutiny of this partnership is growing.
The Bank of England surprised markets with a larger than- anticipated 13th consecutive interest rate hike of 50 basis points, bringing rates to 5%, their highest level since 2008. The decision was supported by a seven-to-two vote from the BoE’s Monetary Policy Committee, considering recent data indicating a more persistent inflationary trend.
Prime Minister Fumio Kishida’s mid-year economic policy roadmap addresses the costs associated with Japan’s ageing population, where the average age is 48 years old. To tackle this issue, new childcare measures have been prioritised. However, given Japan’s high public debt, which is more than double the nation’s output, innovative financing approaches will be required.
Several factors that contributed to first-quarter growth are now encountering obstacles. China’s increased export share to the ASEAN (Association of Southeast Asian Nations) region and the Middle East has reduced exposure to slower-growing regions like the US and Europe. However, the global economic environment has cooled down, which could dampen exports.
Amid escalating tensions between China and India, due to border clashes in the Himalayan region and concerns about China’s regional influence and close ties with Pakistan, Delhi and Washington have gravitated towards each other, despite India facing public criticism regarding democracy and human rights issues. To enhance security and technological collaboration in the Indo-Pacific region, India has forged alliances with the US, Japan and Australia, forming the so-called ‘Quad Alliance’. During Indian Prime Minister Narendra Modi’s recent visit to the US, new commitments were announced, including an agreement to manufacture fighter jet engines in India, assistance in expanding clean energy production and a commitment to foster international cooperation in space exploration. As the strategic partnership between India and the US strengthens, future agreements on technology, supply chains and clean energy will help these economies reduce their reliance on supply chains originating from China and mitigate associated risks.
Eskom noted that the improvement to an energy availability factor of 56% has come about from warmer-than-usual winter weather, increased diesel deliveries, an improvement in the generation capacity available and lower electricity demand (partly due to alternative forms of energy supply being installed in the private sector). However, higher levels of loadshedding remain a significant risk in the near term given that large generating units remain offline and there have been significant delays in connecting projects from the fifth Bid Window of the renewable energy independent power producer (IPP) procurement programme. Nevertheless, we are expecting a significant improvement in energy supply from next year.