Last week US CPI eased to 3.5% year-on-year in June from a three year high of 4.2% recorded in May. Locally, May mining output fell 5.2% month-on-month and 5.4% year-on-year, leaving Q2 production tracking below Q1.
International Market Developments
Global economic indicators reflected mixed momentum last week, underscoring the fragile balance between inflation control and growth sustainability across major economies. The latest data reaffirmed the economy’s resilience. The core PCE Index, the Federal Reserve’s preferred inflation gauge, rose 0.4% in June, consistent with expectations. The year‑on‑year rate climbed to 4.1%, marking a three‑year high. Energy prices surged 4% month‑on‑month, while food inflation remained contained. Core personal consumption expenditure, excluding food and energy, increased 0.3%, lifting the annual rate to 3.4%. On a three‑ and six‑month annualized basis, core PCE inflation stood at 3.5% and 4.1%, respectively, signalling persistent underlying price pressures.
US economic growth was revised upward, with Q1 2026 GDP expanding 2.1%, compared to 1.6% in the prior estimate and 0.5% in Q4 2025. Net trade’s drag on growth was smaller than previously thought (‑0.37 pp vs ‑1.25 pp), as imports slowed (11.8% vs 21.1%) and exports rose (10.9% vs 13.1%). Private investment increased 7.9%, led by a 15.8% surge in equipment spending and a 13.8% rise in intellectual property outlays. Structural investment fell 4.7%, and residential investment contracted 7.8%, reflecting ongoing housing market softness. Consumer spending grew 0.5%, below the earlier 1.4% estimate, amid weaker services demand. Government expenditure rebounded 4.4%, recovering from the prior quarter’s shutdown‑related contraction.
European data remained subdued, with industrial output declining and energy‑related costs weighing on competitiveness. In Asia, China’s growth moderated to 4.2% in Q2 from 5.0% in Q1, as domestic consumption slowed despite robust export performance. South Korea’s equity markets continued to experience deleveraging pressures, particularly in tech‑linked pooled vehicles, adding volatility to regional sentiment.
Looking ahead: Escalating US‑Iran tensions and upcoming PMI data will test global resilience, with services strength offsetting manufacturing weakness and shaping central bank policy.
Local Market Developments
Fuel price relief prospects faded in mid-July as Brent’s rebound and higher diesel refining margins drove large daily under-recoveries. CEF data showed petrol set to fall only R0.46/l, or 1.8% month-on-month, while diesel was on track to rise R1.36/l, or 5.4% month-on-month. Gold slipped while Brent climbed above US$85/bbl on escalating Middle East tensions, partially reversing the move in Fed pricing after the softer CPI print. USD/ZAR traded near 16.46 after moving from around 16.40, with higher oil and weaker gold keeping the rand in the 16.40–16.55 range.
SA’s terms of trade weakened as export prices fell, led by declines in gold, down 15% YTD, and PGMs, with platinum down 33%, palladium down 32% and rhodium down 19%, partly offset by coal, up 21%. Overall, the trade-weighted export index was down around 20% in rand terms but remained 3.7% higher year-on-year. On the import side, Brent was up around 32% since January, with higher refining margins adding pressure to the import bill. May mining production fell 5.2% month-on-month, the weakest monthly performance in thirteen months, with broad declines across major commodities. Output was down 5.4% year-on-year, leaving Q2 production tracking around 2% below Q1. SA Government Bonds were little changed to marginally firmer, with benchmark yields moving 0–2bp. Inflation-linked bonds underperformed, with real yields rising 3–12.5bp as inflation protection was pared.
Looking ahead: The SARB’s MPC decision on Thursday is the main event, with June CPI due Wednesday.