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South Africa’s incumbent political party is set to lose its legislative majority in National Assembly elections and, in turn, relinquish a piece of policymaking power. But the composition of the legislative coalition will determine the direction of policy as well as the direction of local financial markets. Also, May sentiment data in China were underwhelming, suggesting China’s economy is still under pressure.

In this week’s data, U.K. wage growth surprised to the upside, but the underlying details were a bit more encouraging; we maintain our outlook for an initial Bank of England rate cut in August. Japan’s GDP contracted more than expected, by 2.0% quarter-over-quarter annualized. Swedish CPI inflation continued its journey back to target, affirming the central bank’s decision to ease monetary policy last week. In China, industrial output firmed while retail sales softened, and in India, CPI inflation slowed by less than expected.

Next up on the 2024 global election calendar is South Africa. Voters in Africa’s most industrialized nation will head to the polls May 29 amid a backdrop of local economic stagnation and a potential desire for policy change. While the range of potential election outcomes is wide, this report focuses on three of the more plausible outcomes and the local financial market reaction in each scenario. In our view, the African National Congress (ANC) is likely to lose its legislative majority, but the magnitude of ANC support could determine if South Africa continues on a path of reform pursuit or slips into full-blown crisis.

We have not made significant changes to our economic forecasts this month. We continue to believe the global economy can grow 3% this year, even as geopolitical tensions have introduced some new uncertainties. Our forecast profiles for major economies have also not changed materially. In our view, the U.S. economy, while on pace to achieve a “soft landing”, is slowing, while economic recoveries in the Eurozone and U.K. are under way.

Was it an unwillingness to share the limelight with the world’s central banks or just a quirk of the domestic economic calendar? Either way, it was an extraordinarily light week for U.S. economic data.

The Bank of England (BoE) held its policy rate at 5.25% at today’s monetary policy announcement, but offered a dovish outlook that suggests rate cuts are now approaching.

Q2 began on a softer note. Employment growth was sturdy in April, but the 175K jobs added was the smallest gain since October. The below-consensus gain was accompanied by an increase in the unemployment rate, which rose to 3.9%. Meanwhile, an unexpected acceleration in the Employment Cost Index was the latest indication that progress on inflation is plateauing. As such, the FOMC is likely to remain in a holding pattern in the months ahead.

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