MACRO DEVELOPMENTS
U.S. Economic Resilience Amidst Mixed Signals: Q2 GDP Expansion Despite Political Turbulence
Real-time estimates of 2Q GDP continued to point to a further quarter of economic expansion,
despite the fact that U.S. data was typically poorer in April. May’s manufacturing survey data
revealed mixed results: the S&P Global series continued to show expansion, while the ISM series
dropped to 48.7 points. There were cautious indications of labor market slack in April: job growth
and vacancies slowed, and the unemployment rate increased to 3.9%, which is still low by
historical standards. Positively, the April announcement showed that U.S. inflation for the first
time this year met rather than above forecasts. YoY, headline and core inflation decreased to
3.4% and 3.6%, respectively. Powell said that the rate cut was postponed but not canceled when
the FED kept interest rates constant in May. In the political sphere, Trump became the first former
president to be found guilty after being found guilty of all charges in his “hush money” case.
Europe: Mixed Growth Signals, Inflation Pressures, and Central Bank Actions Amid Political Shifts
Growth indices in Europe maintained. The composite PMI index for the eurozone showed a pick-
up in growth in May, although the UK version stayed in expansion territory. UK GDP numbers
confirmed the country’s brief technical recession earlier in the year. Inflation figures, however,
exceeded expectations: headline inflation increased in Switzerland (1.4%) and the eurozone (to
2.6%). After Ofgem’s energy price ceiling was reduced once more, headline inflation in the UK
dropped substantially to 2.3%; yet wage growth and services inflation remained high. In contrast,
a more negative storyline evolved in Europe: the ECB was getting ready for a rate cut in June, and
the Swedish Riksbank became the second developed market central bank to start its cycle
of rate cuts. Money markets tended toward a cut in the fall, despite the BoE more divided
and impartial position. In the UK despite the Conservative Party’s dismal performance in
the local elections, Sunak unexpectedly declared national elections for July.
Asia: Geopolitical Tensions Escalate Amid China’s Economic Resilience
and Real Estate Woes
While economic data in China was strong, with consensus GDP predictions for 2024
hovering around 5%, issues in the real estate industry persisted in spite of fresh
government assistance initiatives. The geopolitical environment remained unstable in the
interim. Conflicts in the Middle East showed few signs of resolution, Putin warned NATO
about the use of weapons supplied to Ukraine, and China conducted military exercises
around Taiwan. Biden also announced new tariffs on China in critical areas such as
semiconductors and electric vehicles.
Market Impact
The world’s financial markets saw a strong rally in May, regaining the losses from the
previous month and momentarily hitting record highs. Despite a minor increase in market
participation, gains were still led by large-cap U.S. stocks. Government bonds saw a rise in
fixed income during the first part of May, but by the end of the month, some of those gains
had been reversed. In certain regions of Europe, including Germany (2.7%) and the UK
(4.4%), ten-year government bond rates hit fresh annual highs due to negative inflation
figures. With the striking exception of Brent crude, which dropped by 7%, commodities
continued to gain overall.
Our Expectations
In Q3 2024, market sentiment suggests a continuation of the bearish trend for the USD,
driven by factors such as cooling inflation and the Federal Reserve’s potential for monetary
policy easing, including interest rate cuts. Despite concerns surrounding inflation, interest
rates, and political gridlock, investors are hopeful that the Federal Reserve’s strategy,
including potential rate cuts, will stimulate financial markets.
——————————————————————————————————–
This Economic Outlook report was prepared by the N PrimePartners Capital
Investment team.
DISCLAIMER
The information contained herein is provided without any undertaking, representation or
warranty or other assurance, expressed or implied, with respect to their completeness,
correctness, accuracy, or fairness, or with respect to their accuracy or correctness as of any
time subsequent to the date hereof. This document may be supplemented, updated,
revised, and amended from time to time. Neither this document nor any of the
accompanying materials shall in any way constitute an offer to sell or the solicitation of an
offer to buy any shares or interest in any jurisdiction to any person to whom it is unlawful
to make the offer or solicitation in such jurisdictions or be regarded as an advertisement
that is published in connection with an offer or invitation in respect of shares or interest in
Singapore or in any other jurisdiction except where permitted by law.
Nothing in this document or any of the accompanying materials or the fact of its distribution
shall form the basis of, or be relied on in connection with, or act as any inducement to enter
into any contract or commitment thereof, or as a promise or representation as to the
investments, policies, and/or future performance of any of the products .The contents of
this document are not to be constructed as a recommendation or advice in relation to a
potential investment in any of the products or in relation to any other legal, taxation or
investment matters.
This document is intended solely for the person to whom it has been delivered and shall be
held on a strictly private and confidential basis and should not be circulated, distributed,
published or reproduced (in whole or in part) or disclosed by recipients to any other person
without the prior written consent from N PrimePartners Capital Pte Ltd. The distribution of
this document and the offering and sale of shares or interest in certain jurisdictions may be
restricted by law and therefore persons into whose possession this document comes should
inform themselves about and observe any such restrictions. Any failure to comply with these
restrictions could result in a violation of the laws of such jurisdiction.