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Astute Market Overview - 4th September 2023

Hello, and welcome to the Astute Market Overview of the last week, which was a shortened trading week for many key markets. Here in the UK, the August Bank Holiday Monday closed the London stock exchange, and a market holiday on Friday closed the Hong Kong stock exchange.

At the top of the week, the British Retail Consortium released its latest measure of shop price inflation. It was reported that the figure fell to 6.9% in August, down from 7.6% in July. There was a particularly big drop in food price inflation, which fell from 13.4% to 11.5%. This data from the British Retail Consortium shows a clear cooling of inflation in these areas, but as we know, inflation cooling doesn’t equal prices decreasing, no, prices are still rising strongly, but just by slightly less than they were before.

This should feed through to the broader inflation measure (the consumer prices index) on 20th September, which is still facing upwards pressure from food and non-alcoholic beverages.

Turning to China, we have the release of two key measures of manufacturing output last week. Purchasing Managers Index (PMI) surveys manufacturers to get a view of current and future economic conditions. A PMI of 50 is neutral, and represents no real change month on month. A PMI of over 50 reflects expansion, and a PMI of below 50 indicates contraction.

The official manufacturers purchasing managers index (which focuses on state owned firms) came in at 49.7 up from 49.3. Whilst in contractionary territory, this is a move in the right direction.

The Caixin Manufacturing PMI (which focuses more on export-oriented firms) came in at 51.0, up from 49.2. This wasn’t only a climb out for a recent slump, but also into expansionary territory. Both measures are positive signs for the economy, following the headlines faced in 2023 so far.

And to finish the week, we had the release US jobs data which painted a picture of a pick up in employment, an increase of participants in the workforce (more potential employees should help to ease wage pressures), and a slowing in wage growth.

Last week we mentioned that the Federal reserve would be data driven when making their interest rate decisions, given that inflation in the region has already come a long way down from its 2022 highs. This data may be enough to leave interest rates at their current level when they next meet on 19th and 20th September.

See you next time.

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