Global Economic Overview
United States
Retail Sales Surge: US retail sales rose by +1% in July, marking the largest increase in over two years. This robust consumer spending, driven by strong demand for cars, appliances, and furniture, contrasts with a slight -0.2% drop in industrial production. Regional factory surveys present mixed signals, with New York’s outlook improving while Philadelphia’s declines.
Canada
Home Sales Decline: Despite central bank rate cuts, Canadian home sales fell in July. A potential rail strike could further impact future sales, suggesting caution in the real estate market.
Japan
Strong GDP Growth: Japan’s Q2 GDP expanded by +3.1%, significantly exceeding expectations and recovering from a -2.3% contraction in Q1. This strong growth signals a positive economic turnaround.
India
Mixed Vehicle Sales: Passenger vehicle sales in India fell by nearly -2% in July compared to the previous year. However, two-wheeler sales grew by +12.5%, reflecting strong demand in that segment.
China
Economic Challenges: China continues to face economic difficulties, with retail sales up only +2.7% and industrial production rising less than expected at +5.1%. Declines in electricity production and new house prices further highlight ongoing challenges.
Australia
Employment and Inflation: Australia saw an increase of +58,000 jobs in July, with a higher participation rate and a slight rise in the jobless rate to 4.2%. Consumer inflation expectations have risen to 4.5%, indicating potential cost pressures.
Global Financial Markets
Market Movements: US Treasury yields have risen to 3.93%, and global equity markets have shown gains. Oil prices have firmed slightly, while gold prices have increased to US$2454/oz.
Commodity Prices
Iron Ore and Freight Rates: Iron ore prices have fallen below US$100/tonne, reflecting a downward trend since late 2023. Global container freight rates remain significantly higher than a year ago, while bulk cargo rates are slightly elevated.
Investment Trends
Real Estate Concerns: UBS plans to sell a US$2 billion real estate fund, reflecting broader concerns about commercial property markets, particularly office buildings.
Accounting and Financial Advice for Businesses
Given these global trends, here are some key considerations for businesses:Monitor Cash Flow and Inventory LevelsThe strong rise in US retail sales suggests a robust consumer spending environment. Adjust your inventory levels to align with this increased demand, particularly in high-performing sectors like automobiles and appliances. Ensure your inventory-to-sales ratio remains healthy to avoid overstocking or stockouts.
Evaluate Capital ExpendituresWith a decline in industrial production, exercise caution with large capital expenditures. Reassess your investment plans to ensure they align with current economic conditions and consider delaying or scaling down non-essential projects.
Consider Currency FluctuationsThe stability of the Kiwi dollar against major currencies means it’s essential to review your currency risk management strategies. If your business is exposed to foreign exchange risks, consider hedging to mitigate potential impacts.
Assess Inflation ImpactsRising inflation expectations in Australia and increasing costs for goods and services necessitate a review of your pricing strategies. Balance cost increases with customer affordability to maintain profitability.
Review Debt and FinancingWith rising US Treasury yields, evaluate the impact of changing interest rates on your financing costs. Consider refinancing options if current rates are more favourable compared to your existing debt terms.
Monitor Commodity PricesFalling iron ore prices and fluctuating oil prices can impact your cost structure. Review your supply chain and cost strategies to address potential impacts from these price changes.
Consider Investment StrategiesWith increased concerns about commercial real estate, assess the risks associated with property investments. Ensure any real estate investments align with current market conditions and your long-term strategic goals.
Stay Informed on Economic SurveysRegional economic surveys provide valuable insights. Use this information to guide decisions on expansion, hiring, and regional investments.
Review Financial Statements RegularlyRegularly update and review your financial statements to assess the impact of economic conditions on profitability and costs. Ensure your financial records reflect any significant changes in business performance.
