Market Forces

The US economy recovered in July after a contraction the previous month. China also posted positive quarterly growth, exceeding the 5% mark. Domestically, the South African Reserve Bank (SARB) cut interest rates at its July Monetary Policy Committee (MPC) meeting, responding to easing inflation pressures.

US non-farm payrolls increased slightly in May, with job gains continuing but at a slower pace than in April. The OECD forecasts a slowdown in global economic growth in 2025 and 2026, primarily due to weaker performance in certain countries. SA's headline Producer Price Index (PPI) declined in May, while Consumer Price Inflation (CPI) remained steady.

In May, the US and China reached an agreement to reduce the reciprocal tariffs previously imposed on Chinese goods. Meanwhile, the UK economy posted solid growth in Q1 2025, outperforming all other G7 nations during the same period. In a significant development, Moody’s became the third major credit rating agency – after S&P Global in 2011 and Fitch in 2023 – to downgrade the US’s credit rating.

Market volatility was exacerbated by on-again/off-again tariff announcements. The trade war sparked fears of a US recession amid slowing growth, weak consumer sentiment, and sticky inflation. Rapid changes in global trade dynamics caused tremendous confusion and unease among investors, weighing on global equity markets.

Consumer inflation in the US increased slightly in February compared to January. In March, US President Donald Trump imposed tariffs on steel and aluminum imports. Chinese officials introduced a special plan to boost the economy and are considering various measures to stabilise the Chinese stock market. On the domestic front, the US issued an executive order to immediately suspend funding for the President’s Emergency Plan for AIDS Relief (PEPFAR) to South Africa.