Investment Institute
Weekly Market Update

Take Two: US consumer confidence falls, G7 plans ‘Belt and Road’ rival

  • 04 July 2022 (5 min read)

What do you need to know?

The effect of sustained high inflation and the perceived threat of recession were reflected in weaker US consumer confidence readings for June. The Conference Board index fell more than expected to a 16-month low of 98.7, from May’s 103.2, while a separate measure that tests confidence for six months out fell more sharply. Federal Reserve Chair Jerome Powell acknowledged the risk that action to rein in prices could spark an economic contraction, but argued the risk was greater of leaving inflation untamed. His comments, at a European Central Bank (ECB) conference in Portugal, were echoed by ECB President Christine Lagarde who warned the low inflation of the pre-pandemic era would not quickly return.

Around the world

China manufacturing activity swung into growth territory in June, rising to 51.7 from 48.1 in May, according to the Caixin Purchasing Managers’ Index (PMI). That was the fastest pace of expansion in 13 months and above analysts’ expectations. Official government data had already indicated a rebound in both manufacturing and services activity for the month, with the National Bureau of Statistics reporting a particularly sharp rise in services and construction PMI, to 54.7 from 47.8 in May. Manufacturing PMIs from Japan and South Korea both showed expansion slowing in June but remained above 50, indicating growth.

Figure in focus: $600bn

Leaders of the Group of Seven (G7) nations have pledged to raise $600bn to finance infrastructure in middle- and low-income countries, in what is being seen as an answer to China’s Belt and Road project. The money for the Partnership for Global Infrastructure and Investment will come from public and private funds over five years, and seek to tackle climate change, improve global health, build digital infrastructure and drive equality. US President Joe Biden said the scheme would allow developing countries to “see the concrete benefits of partnering with democracies”.

Words of wisdom

Skimpflation: A term suggesting that companies are cutting back, or skimping, on what they provide to their customers, while continuing to charge the same amount or more. While shrinkflation generally refers to products shrinking in physical size, while the cost remains the same, skimpflation relates to the quality of the product or the service. Examples include consumers waiting longer for items they have ordered to be delivered, airlines cancelling flights and hotels reducing the frequency of housekeeping services, as companies struggle with rising costs and labour shortages.

What’s coming up

On Tuesday, June services and composite PMI data are reported for Japan, China, the Eurozone and the UK, followed by the US services and composite PMI on Wednesday. The minutes of the latest Federal Open Market Committee meeting are also published on Wednesday. On Friday, Japan publishes its Economy Watchers Survey, which is designed to give a regional picture of economic trends within the country. US unemployment data is also released on Friday.

Related Articles

Weekly Market Update

Take Two: Fed hikes as US enters technical recession, IMF cuts growth estimate

  • by AXA IM Investment Institute
  • 29 July 2022 (5 min read)
Weekly Market Update

Take Two: ECB finally raises rates; US launches $2.3bn infrastructure plan

  • by AXA IM Investment Institute
  • 22 July 2022 (5 min read)
Weekly Market Update

Take Two: US inflation reaches new high; China GDP growth slows

  • by AXA IM Investment Institute
  • 15 July 2022 (5 min read)

    Disclaimer

    This website is published by AXA Investment Managers Asia (Singapore) Ltd. (Registration No. 199001714W) for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities. It has been prepared without taking into account the specific personal circumstances, investment objectives, financial situation or particular needs of any particular person and may be subject to change without notice. Please consult your financial or other professional advisers before making any investment decision.

    Due to its simplification, this publication is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this publication is provided based on our state of knowledge at the time of creation of this publication. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

    All investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested.

    Some of the Services and/or products may not be available for offer to retail investors.

    This publication has not been reviewed by the Monetary Authority of Singapore.