UK retail sales rose 0.9% mom in June, a solid rebound from May’s -2.8% mom drop, but shy of expectations for a 1.2% mom increase. On a quarterly basis, sales volumes grew 0.2% qoq in Q2, indicating modest underlying momentum.
Fuel sales jumped 2.8% mom—the strongest monthly gain in over a year—while food store volumes also posted a 0.7% mom rise. Online activity remained robust, with non-store sales volumes climbing 1.7% mom and reaching their highest level since February 2022.
Tokyo’s core CPI (ex-fresh food) eased slightly from 3.1% to 2.9% yoy in July, coming in just below expectations of 3.0% yoy, but still notably above the BoJ’s 2% target.
Headline inflation also slowed from 3.1% yoy to 2.9% yoy. Core-core measure—excluding fresh food and energy—held steady at 3.1%. The stickiness in core-core inflation highlights persistent underlying price pressures.
The figures will feed into the BoJ’s upcoming July 30–31 policy meeting, where the board is widely expected to upgrade its inflation forecast for the current fiscal year. While the data alone may not push the BoJ to act immediately, it strengthens the case for further normalization as inflation remains well above target.
US business activity surged in July, with Composite PMI jumping from 52.9 to 54.6, a 7-month high, driven by strength in services. PMI Services rose from 52.9 to 55.2, also a 7-month high. However, the manufacturing index dropped sharply from 52.9 to 49.5, slipping back into contraction for the first time this year.
S&P Global’s Chris Williamson noted the data signaled a sharp pickup in economic growth, with the survey pointing to a 2.3% annualized expansion in Q3, compared to 1.3% in Q2. But the rebound is uneven. Manufacturing is now dragging again, with the prior boost from tariff-related front-loading fading.
Business confidence weakened across both sectors, falling to one of the lowest levels in over two years. Tariff uncertainty and soft demand appear to be weighing heavily on forward-looking sentiment. Even in services, the outlook has dimmed despite the current strength in output.
Price pressures are also building. The survey highlighted one of the largest increases in selling prices in three years, with firms citing tariffs and rising labor costs as key drivers. This suggests upward pressure on consumer inflation will persist into the months ahead, keeping the Fed on edge despite soft spots in manufacturing.
Canadian retail sales fell -1.1% mom to CAD 69.2B in May, with the decline driven largely by -3.6% mom drop at motor vehicle and parts dealers. While the headline figure disappointed, core retail sales—which exclude autos and gasoline—were flat, suggesting underlying consumption was more stable than the headline suggests.
Looking ahead, Statistics Canada’s advance estimate points to a 1.6% mom rebound in June sales, which could help ease fears of weakening domestic demand.
US initial jobless claims fell -4k to 217k in the week ending July 19, below expectation of 230k. Four-week moving average of initial claims fell -5k to 224.5k.
Continuing claims rose 4k to 1955k in the week ending July 12. Four-week moving average of continuing claims fell -2k to 1954k.
The ECB held its deposit rate steady at 2.00% today, as expected, pausing its easing cycle after a string of cuts since June 2024. In its statement, the central bank reiterated that it will remain “data-dependent” and take a “meeting-by-meeting”. It emphasized that approach, the Governing Council is “not pre-committing to a particular rate path”.
Policymakers noted that incoming data is “broadly in line” with prior assessments, with domestic price pressures continuing to ease and wage growth slowing. However, the ECB flagged “exceptionally uncertain” global conditions, citing persistent trade disputes as a key risk.
The UK economy showed signs of losing momentum in July, with Composite PMI falling from 52.0 to 51.0. A modest rise in Manufacturing PMI to 48.2 from 47.7 failed to offset a sharp slowdown in services activity, which dropped from 52.8 to 51.2. Overall, the data point to a fragile expansion at the start of Q3.
Chris Williamson at S&P Global Market Intelligence warned that output growth is now consistent with just a 0.1% quarterly GDP gain, and that “risks are tilted to the downside.” Persistent job shedding across sectors underscores the underlying weakness, raising concerns about near-term demand conditions.
With growth stalling and the labor market softening, Williamson said that will add pressure to the BoE to deliver another rate cut in August. While recent inflation data surprised to the upside, the BoE could “look through” those pressures and prioritize support for a struggling economy.
Eurozone private sector activity accelerated in July, with Composite PMI rising from 50.6 to 51.0—its highest level in 11 months. Manufacturing PMI improved slightly from 49.5 to 49.8, a 36-month high, edging closer to the 50-mark that separates expansion from contraction. Services PMI climbed to a six-month high of 51.2, from 50.5, pointing to broad-based improvement across sectors.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said the data suggests the Eurozone economy is “gradually regaining momentum.” The manufacturing recession is “coming to an end,” while services growth has picked up. Their GDP Nowcast model indicates the region is on track for “robust economic growth” in Q3, with Germany likely to show slight expansion while France may post a mild contraction, partly due to its domestic political uncertainty.
For the ECB, the data offers some relief. Services inflation—a key focus for policymakers—continued to ease in July. While goods prices stabilized, a stronger Euro and ongoing US tariffs are expected to put downward pressure on price levels in the months ahead.
German consumer confidence took another step back heading into August, with GfK Consumer Climate index falling to -21.5, down from -20.3 and missing expectations of -19.
The decline highlights persistent caution among households, delaying any meaningful rebound in consumer spending. According to Rolf Bürkl at NIM, the rise in saving appetite reflects a broader reluctance to commit to major purchases amid lingering uncertainty and elevated prices.
A durable improvement in sentiment, he emphasized, will require clearer signs of stability to reduce uncertainty and unlock household demand.
RBA Governor Michele Bullock signaled in a speech caution over the inflation outlook, warning that the fall in trimmed mean inflation in Q2 “may not be quite as much as we forecast”. While headline CPI is expected to dip into the lower half of the 2–3% target range, Bullock stressed that temporary cost-of-living relief is playing a role, and underlying pressures may prove more persistent. The RBA still anticipates inflation drifting toward 2.5%, but Bullock emphasized “we are looking for data to support this expectation”.
On the labor market, Bullock dismissed surprise around the recent rise in unemployment to 4.3%, saying the outcome was in line with RBA’s May forecasts. Although the June monthly figure saw a noticeable uptick, vacancy rates remain stable and leading indicators “are not pointing to further significant increases in the unemployment rate in the near term.”
Overall, she reaffirmed that a “measured and gradual” policy approach remains appropriate, especially with global risks—such as the trade war—showing signs of easing. Her remarks suggest the RBA remains on track for further easing, but will move cautiously, with the pace largely dictated by data flow—particularly the upcoming Q2 CPI print.
Speaking today, RBNZ Chief Economist Paul Conway said rising global tariffs and economic uncertainty are likely to “reduce medium-term inflation pressures” in New Zealand, and drag on the country’s economic rebound through mid-2026. While the US faces rising costs from tariff-induced supply chain disruptions, Conway said New Zealand is more likely to experience disinflation due to lower global growth and falling import prices.
He highlighted that strong export prices—particularly for dairy and beef—alongside lower domestic interest rates are supporting the economy for now. But widespread uncertainty is causing both consumers and firms to take a wait-and-see approach, which is curbing spending and delaying investment decisions.
Given this backdrop, Conway confirmed that the RBNZ retains a dovish tilt. If inflation continues to ease as expected, there is “scope to lower the OCR further”.
Japan’s Composite PMI was unchanged at 51.5 in July. Services drove growth, rising from 51.7 to 53.5, while Manufacturing slipped into contraction at 48.8, down from 50.1.
S&P Global noted that manufacturers saw weaker output and new orders, weighed down by tariff uncertainty and cautious customer behavior. Confidence weakened across the board, with optimism falling to the second-lowest level since August 2020. Firms responded by slowing hiring to the weakest pace in 18 months.
On the positive side, cost pressures eased, with input inflation at a four-year low—suggesting headline “inflation may ease further over the summer”.
Australia’s private sector expanded more strongly in July, with the S&P Global Composite PMI rising from 51.6 to 53.6. Services led the way with a sharp rise from 51.8 to 53.8. Manufacturing returned to firmer growth at 51.6, up from 50.6.
S&P Global noted that business activity growth “hastened” at the start of Q3, supported by one of the fastest paces of new manufacturing orders in over two-and-a-half years.
However, the upbeat data came with warning signs. Business confidence slipped to an eight-month low, while manufacturers cut back on purchasing and slowed hiring. More critically, price pressures “intensified” during the month, pointing to renewed upside risks for inflation and “adding to the uncertainty for the interest rate outlook.”
Nikkei jumped over 2% on today, breaking above the 41k level for the first time in a year after the US and Japan confirmed a long-anticipated trade deal. Investor sentiment was buoyed by the breakthrough, which reduces the threat of harsher tariffs that were set to take effect on August 1.
The agreement, publicly confirmed by both US President Donald Trump and Japanese Prime Minister Shigeru Ishiba, includes a 15% blanket tariff on Japanese imports—down from the initially threatened 25%. Japan’s chief negotiator Ryosei Akazawa called the outcome “#Mission Accomplished” in a social media post.
Trump hailed the deal as “perhaps the largest Deal ever made,” claiming Japan will invest USD 550B into the US and that Americans would receive “90% of the Profits.” Under the terms of the agreement, Japan will further open its markets to US goods, including cars, trucks, rice, and agricultural products. On the other hand, Ishiba indicated that the auto tariff rate will drop to 15% from the current 25% imposed globally.
BoJ Deputy Governor Shinichi Uchida said in a speech today that Japan’s economy is likely to “moderate” amid slowing global growth, with underlying inflation remaining “sluggish temporarily”. He added that downside risks dominate the outlook, particularly due to high uncertainty surrounding global trade policy and its spillover effects on both domestic and external demand.
Still, Uchida maintained that if the Bank’s baseline outlook holds, gradual rate hikes will continue. With real interest rates deeply negative, the BoJ is positioned to adjust its accommodative stance, but only as long as the economic and inflation path improves as expected.
He also highlighted the crosscurrents in Japan’s inflation profile—cost-push pressures from food remain elevated, while demand-side forces are weak. How businesses adjust wages and prices in response to these forces will be central to determining the sustainability of price growth.
Australia’s Westpac Leading Index slipped from 0.11% to just 0.03% in May, continuing a six-month slide that points to weakening momentum heading into the second half of 2025. The index, which provides a guide to economic activity three to nine months ahead, has lost altitude from 0.33% in December, with five of eight components dragging—particularly commodity prices, consumer sentiment, and hours worked.
Westpac noted that the shift from modestly above-trend growth to an “around trend” signal marks a clear step-down in economic momentum. The bank now expects the economy to expand by only 1.7% in 2025, a slight pickup from 1.3% in 2024, but still well below historical averages.
With the RBA set to meet on August 11–12, the Leading Index adds to the case for renewed policy easing. Westpac sees the June quarter CPI, due next week, as the key swing factor. A benign reading would likely clear the way for a 25bp cut in August, followed by another in November and two further cuts in H1 2026 as the central bank gradually loosens policy amid persistent growth headwinds.
Fed Vice Chair for Supervision Michelle Bowman reaffirmed the central bank’s commitment to policy independence during an interview with CNBC, stating that “it’s very important… that we maintain our independence with respect to monetary policy.”
Meanwhile, she stressed that this autonomy must be matched by a commitment to openness. “We have an obligation for transparency and accountability as well,” she noted.
Bowman also stressed the importance of listening to a wide range of voices in forming monetary policy. Since joining the Board in 2018, she said the Fed has consistently engaged with diverse viewpoints to better understand how different segments of the economy are affected.
“That should influence our decisions in monetary policymaking,” she said.
BoE Governor Andrew Bailey told the Treasury Committee that the recent rise in long-term borrowing costs reflects global trends rather than UK-specific issues. Responding to questions on the growing cost of government debt, Bailey emphasized that similar, or even steeper, yield increases have occurred in other advanced economies.
He attributed the shift to heightened uncertainty on two key fronts: “one is uncertainty around what is going on in trade policy at the moment. The second thing is uncertainty globally around fiscal policy he said.
Bailey noted that unpredictable tariff strategies and widening fiscal deficits are contributing to volatility in fixed income markets worldwide, driving up yields across the curve. “It is greater uncertainty, clearly,” he said.
Minutes from the RBA’s July 7–8 meeting reveal a Board broadly aligned on the view that there will be “some additional reduction in interest rates over time”. Yet, the board is divided on the “appropriate timing and extent of further easing”. The majority ultimately judged it prudent to keep the cash rate steady at 3.85%.
The decision to hold reflected stronger-than-expected recent data, including “a little stronger than expected” private demand in Q1 and resilient labor market that ” has not eased as anticipated”. Monthly inflation readings had also been “marginally higher” than staff projections. Additionally, Members noted that reduced global risks allowed greater confidence in the RBA’s baseline forecasts, rather than the worst-case scenario.
Still, the minutes make clear that the RBA remains on an easing path. Some members argued there was already enough evidence to justify a cut now, but the Board as a whole leaned toward keeping a cautious, gradual approach, which is inconsistent with a third rate cut within the space of four meetings at that time.
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ECB’s Kazaks sees pause to continue as inflation settles at 2%
Latvian ECB Governing Council member Martins Kazaks said there is now “value in holding rates at the current levels,” signaling that the era of obvious rate hikes or cuts is over. Speaking in an interview, the central banker stressed that a “steady-hand policy is appropriate,” suggesting little urgency for additional easing from the ECB in the near term.
Kazaks further emphasized that unless the Eurozone economy suffers a major blow, there’s limited justification for lowering interest rates. His stance comes after ECB President Christine Lagarde also struck a cautious tone following yesterday’s decision to keep the deposit rate unchanged at 2.00%.
Separately, Lithuanian Governing Council member Gediminas Šimkus noted “inflation is expected to stay at 2% level in the medium term.”