Global Economy

USA: In July, the U.S. annual inflation rate slowed for the fourth consecutive month, reaching 2.9%, the lowest since March 2021, down from 3% in June and below the expected 3%. The deceleration was primarily driven by lower price increases in shelter, transportation and apparel, though housing costs still exerted upward pressure. The CPI rose by 0.2% month-over-month, matching forecasts and Core CPI, which excludes food and energy, also increased by 0.2% for the month, with an annual rise of 3.2%. The Labor Department reported that 90% of the overall inflation increase was due to a 0.4% rise in shelter costs, while food prices edged up 0.2% and energy remained flat. With inflation gradually nearing the Federal Reserve’s 2% target, the possibility of an interest rate cut in September remains, although Fed officials have not committed to a specific timeline.

 

Sub-Saharan African Economies

 

 

UK: The British economy expanded by 0.6% quarter-on-quarter in Q2, following a 0.7% rise in Q1, according to preliminary estimates from the Office for National Statistics. This growth was in line with forecasts and was largely driven by a 0.8% increase in the services sector, with scientific research and development contributing significantly with an 11% surge, the highest since 2020. Although economic growth was flat in June, matching expectations, with a slight 0.1% dip in the services sector, construction and production output increased by 0.5% and 0.8%, respectively.

Nigeria: Nigeria’s headline inflation rate decelerated to 33.4% in July 2024, marking the first decline in nearly two years down by 0.79 percentage points. This slowdown occurred despite the pressures from fuel subsidy removal and a depreciating naira. The moderation was largely driven by a slowdown in food inflation, which makes up a significant portion of the inflation basket, easing to 39.5% from 40.8% in June.   On a monthly basis, consumer prices increased by 2.28% in July, following a 2.31% rise in June. The decline in inflation can be attributed mainly to lower food prices and the base effect.

Ghana: Ghana’s annual inflation eased for the fourth consecutive month in July, dropping to 20.9% from 22.8% in June, marking the lowest rate since March 2022. This decline was driven by lower food and non-food prices, despite ongoing cedi depreciation. Inflation for imported goods also fell sharply to 15.6%, while locally produced items saw a higher rate of 23.3%. On a monthly basis, consumer prices increased by 2.1%, down from the 2.9% rise in June. However, inflation remains well above the central bank’s 6% to 10% target range.

Angola: In July 2024, Angola’s annual inflation rate rose to 31.09%, its 15th consecutive increase and the highest since May 2017, driven by the weak kwanza and last year’s fuel subsidy cuts. Monthly consumer prices climbed 1.68%, the smallest rise since July 2023, after a 2.07% increase in June. The National Bank of Angola’s foreign exchange restrictions have also created challenges for banks in buying dollars.

 

Domestic Economy

Major updates during the week:

  • Nigeria’s inflation rate cooled down in July 2024. According to the National Bureau of Statistics (NBS), the rate eased by 79 basis points to 33.40% year-on-year, compared to 34.19% in June.
  • FG Launches $500m FX-denominated Local Bond, Offer Opens on Monday
  • The Central Bank of Nigeria (CBN) has reintroduced the publication of several reports, .including the purchasing managers’ index (PMI), business expectation survey (BES), inflation expectation report and other key macroeconomic indicators.

 

Nigerian Equity Market: NGXASI retreats amid profit-taking

The Nigerian Stock Exchange (NGX) experienced a downturn this week, with the NGXASI index shedding 1.53% to close at 97,100.31 points. This reversal was primarily driven by profit-taking in large-cap stocks. While sectors like Consumer Goods, Insurance, and Oil & Gas posted gains, Industrial and Banking sectors recorded losses. Key decliners included BUA Cement, Oando, Cadbury, and FBNH. Despite the weekly decline, the market remains up 29.85% year-to-date.

Nigerian Fixed-Income market: The DMO stays cautious

This week, with the introduction of the dollar-denominated local bond instrument, investors’ focus shifted more toward the fixed-income market. We saw buying interest drive the average yield down by 35bps to 19.70%. This positive sentiment was particularly evident at the mid-end as investors responded to the DMO’s reduction in the size of the offer at the August 2024 Bond auction, along with a proactive portfolio allocation strategy following the recent decline in the inflation rate. A similar trend was observed in the treasury bills market, where the average yield dropped by 84bps WoW as investors favored long-tenor treasury bills.

In the Eurobond market, positive sentiment prevailed, with yields decreasing by an average of 16bps to 10.33%. Looking ahead to the next trading week, we anticipate continued buying interest in the fixed-income market as investors seek high-coupon instruments at favorable levels. For treasury bills, we expect a relatively quiet week as market participants assess the current conditions.