Our weekly podcast by Kevin Lings:

US economy adds 300 000 jobs in two months

In this podcast, STANLIB’s Chief Economist, Kevin Lings, discusses the upcoming SA Reserve Bank Monetary Policy Committee meeting, when a 25 bps interest rate hike is expected, as well as latest US inflation data. US CPI in April rose 3.8% y/y – and this does not yet fully reflect the increase in gasoline prices. In the short term, though, US interest rates are expected to be held, with the risk of a hike if the oil price remains above $100/barrel.

The focus areas during the week included:

• The S&P 500 closed at a record high on Thursday, before pulling back meaningfully on Friday to end the week up 0.1%. This is its seventh consecutive weekly gain. Since the low on 30 March the S&P 500 index is up 16.8% and has gained 8.2% year-to-date. AI remains a key engine of growth, with sustained investment supporting earnings momentum across sectors and reinforcing expectations for continued profit expansion. The outcome of the Trump–Xi summit in China suggested the current trade truce would be extended, although there was no major breakthrough or material update, including on Iran. The tone of the discussions was constructive, reducing the risk of further tariff escalation.
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• There was, however, a global rise in bond yields at the end of the week, driven by a combination of inflation concerns, rising expectations of central bank rate hikes, and growing worries about government debt as countries try to cushion the impact of higher energy prices. The US 30-year bond yield rose to its highest level (5.12%) since 2007, Japan’s 30-year yield has reached 4% for the first time since 1999, while political uncertainty in the UK pushed the 30-year gilt yields to a 28-year high. Markets are now pricing in roughly a 65% probability of a US Federal Reserve (Fed) rate hike in December. While central banks cannot directly resolve a global energy shock by hiking interest rates, the prospect of fiscal stimulus appears to be complicating the inflation outlook. In recent months, US equities and bonds have responded to divergent narratives. Equity markets have been supported by a technology-led rally and strong earnings, while bond markets have focused more on inflation risks, higher oil prices, and policy uncertainty. At the end of the week the yield on the benchmark US 10-year government bond had increased to around 4.59%, the highest level in over a year. The recent rise in yields maybe approaching levels that will begin to weigh on equity performance – unless there is a meaningful reduction in the oil price.
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• The STOXX Europe 600 ended the week down 0.9%. Japan’s equity markets generated a mixed performance: the Nikkei 225 Index declined 2.1% while the broader TOPIX Index gained 0.9%. Investor sentiment was tempered by concerns that higher oil prices (sharply higher CPI and PPI inflation data in many countries) could weigh on economic growth through rising import costs and downward pressure on household consumption. SA’s All-Share Index fell by 2.8% and is now down 1.1% year-to-date.
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• Despite a substantial sell-off on Friday, the performance of the rand remains in the middle of the emerging market currency basket on a month-to-date as well as a year-to-date basis. The rand has lost 0.7% of its value against the US dollar since the start of the year.‍
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• In April 2026, US consumer inflation rose by 0.6% m/m, which was in line with market expectations. This pushed the annual rate of inflation up from 3.3% y/y to 3.8%y/y – the highest US inflation rate since May 2023. Core consumer inflation increased by a more subdued 0.4% m/m in March, but this was above market expectations for a monthly increase of 0.3%, resulting in the annual rate of core inflation increasing from 2.6% y/y to 2.8% y/y. The market expected core inflation to rise to an annual rate of 2.7%.  While core inflation has slowed from 3.3% at the start of 2025 it is, obviously, not in sight of the Fed’s inflation target and risks rising further over the next few months, given the potential “second-round” effects of the sharply higher fuel price. At this stage we still expect the Fed will keep rates on hold for the next few months as it evaluates the risk of “second-round” effects due to the higher fuel price.‍
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• A breakdown of US CPI data for April reveals that gasoline prices (unsurprisingly) rose by 5.4% in the month(18.9% y/y) after rising by 21.2% m/m in March, while airline fees increased by a further 2.8% m/m, which pushed the annual rate of inflation for airline fees up to a substantial 20.7% y/y. There was a larger-than-expected increase in shelter inflation of 0.6% m/m, (partly reflecting a semi-annual data refresh) which pushed the annual rate of shelter inflation up from 3% to 3.3%. This is even though the private sector Zillow index continues to moderate. There was also a 0.5% m/m increase in the cost of food, which might reflect higher fertilizer costs. More positively, the tariff-related price effects remained subdued in April, with the possible exception of clothing.
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• After the release of the higher-than-expected US inflation data for April 2026, Chicago Fed President Austan Goolsbee acknowledged that the US has an “inflation problem” and that inflation is “going the wrong way not just in oil-related things and not ‌just in tariff-related things," helping to fuel concerns that the Fed may need to keep monetary policy restrictive for longer.‍
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• US producer inflation accelerated to 6% y/y in April 2026 (1.4% m/m), well above market expectations for an increase of 5% y/y. Elevated oil prices were the main driver, rising by 22% y/y. Core PPI also surprised to the upside, rising to 5.2% y/y, compared with market estimates of 4.3%. From a corporate earnings perspective, higher input costs could create profit-margin pressure unless businesses can pass along the higher costs to consumers. However, much of the impact appears tied to energy-related price increases, which should prove temporary, assuming oil prices retreat as supply disruptions ease.‍
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• US weekly jobless claims for unemployment insurance were recorded at 211 000 in the week, slightly above market estimates for around207 000 and also above the prior week’s revised reading of 199 000. Continuing claims increased by 24 000 from the prior week to 1.782 million. Overall, US labour market data has improved over the past two months and continues to support 2% GDP growth.
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• US retail sales rose 0.5% m/m in April, in line with market expectations but down from March’s revised reading of 1.6%. US consumer spending has been supported by the recent tax rebates that form part of the One Big Beautiful Bill. For example, individual income tax refunds in April were $22 billion higher than in the same month last year and were slightly higher than the negative impact of higher fuel prices. However, there bates will slow in May, leaving consumers more exposed to fuel costs, which is likely to prompt a pull-back in discretionary spending.

• President Donald Trump and President Xi Jinping concluded a two-day summit in Beijing on 15 May, with both sides signalling support for stable relations. US officials said China was prepared to increase purchases of US agricultural and energy products, while both governments discussed mechanisms to manage disputes over semiconductors and rare-earth supply chains, although no major roll-back of export restrictions was announced. Xi said US-China economic ties were “mutually beneficial in nature”, while Trump described bilateral relations as “better than ever before”. At the same time, Xi reiterated that Taiwan remained “the most important issue” in bilateral relations and warned that mishandling the issue could jeopardise broader ties. From a geopolitical perspective, Trump said that Xi would not supply Iran with military equipment and had offered to help the US secure a peace agreement that would re-open the Strait of Hormuz. For markets, the summit appeared to reinforce expectations that Washington and Beijing are focused on preventing renewed escalation in trade and technology tensions, helping to limit downside sentiment in Chinese and regional equities in the week. Trump invited Xi for a state visit to Washington in September 2026.
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• SA’s mining production fell by a substantial 5.1% m/m in March 2026, after increasing by a revised +3% m/m in February. In Q1 2026, output was up a modest 0.6% q/q. On a yearly basis, mining production rose by 2.5% y/y, which is well below the February reading of 9.7% y/y and below market expectations for an increase of 6.1% y/y (Bloomberg). Overall, SA’s mining sector is still underperforming, considering elevated commodity prices. In fact, mining production is 11.6% below the level of production that prevailed in January 2020, prior to the Covid-19 outbreak. ‍
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• In April 2026, China’s CPI rose by 0.3% m/m, which pushed the annual rate of inflation up from 1% y/y to 1.2% y/y. This was above market expectations for inflation of 0.9% y/y. It was driven mainly by higher energy costs rather than a demand-led acceleration in inflation. Despite the latest increase, China’s headline rate of inflation has been below the People’s Bank of China’s (PBoC) implicit target of 2% for more than three years. The ongoing weakness in the property market, subdued consumer confidence levels, and a fragile labour market are likely to keep underlying consumer inflation relatively subdued.

• China’s PPI inflation rate increased to 2.8% y/y in April, its highest reading since July 2022 and well above market expectations for an increase of 1.8% y/y. Despite the surge in factory gate prices, producer prices for consumer goods remained in deflation for the second straight month, (-1% y/y in April), suggesting that companies are finding it hard to fully pass on higher costs to customers as overall domestic demand remains fragile.
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• Japan’s corporate goods price index, which measures input prices for Japanese firms, surged in April to 4.9% y/y, well above market expectations for 3% and a revised 2.9% increase in March. Much of the gain was due to higher prices for petroleum and chemical products.
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• Unemployment in France rose to a higher-than-expected 8.1% in Q1 2026, its highest level since early 2021. The jobless rate among young people aged 15 to 24 remained elevated but nudged lower to 21.1% from 21.5%.
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