Economy in Brief

The severe lethargy in U.K. retail and wholesale sales continues into July with the outlook portion of the survey for August still exceptionally weak.

Distributive sales retail volumes Sales in July: In July, the distributive trades volume survey finds sales for a year ago with 34% of the respondents indicating weaker sales compared to those indicating stronger sales. This net reading of -34 is a slight improvement from June’s -46 and signals deterioration compared to May (-27) as well. However, beyond the monthly bumping up and down, the ranking of this net reading is in the lower 8.5 percentile marking it as truly an exceptionally weak reading. The reading for orders compared to a year ago shows better comparisons but still a great deal of weakness and a net reading of -21, compared to -51 in June and -41 in May. It marks a 20th percentile standing, which is better than for sales compared to a year ago but still exceptionally weak. The next reading that, essentially is seasonally adjusted, comparing sales for the same time of year, shows a -10 reading which is better than -37 in June and better than May’s reading of -19 and steps up to a percentile standing at its 42nd percentile. It is still short of its median (which occurs at a ranking of 50%) but is a reading that looks a little closer to the land of the living than the land of the dead.

Expected sales in August: The distributive volumes statistics for sales expected for August, looking a month ahead, shows negative readings across the board for these same 3 metrics with all three of them improving in August from their July expectations; however, sales compared to a year ago have a 7-percentile standing, even weaker than their current July reading, orders have a 23.5 percentile standing, and sales for the time of year fare much worse with a 6.7 percentile reading - much worse than the current performance ranked for July. In short, there's very little in this survey that is encouraging or reassuring. Conditions are weak and even where there is improvement the new reading is still very weak and the expectations readings, while somewhat improved, are still extremely weak.

Distributive sales wholesale volumes Sales in July: The distributive trades survey for wholesaling produces another set of weak readings that are, for the most part, weaker in July than they were in June and, while different, not much better, or worse than they were in May. The percentile standings for wholesaling show sales compared to a year ago at a 7.4 percentile standing, orders compared to a year ago at a 3.2 percentile standing, and sales for the time of year at a 1.8 percentile standing. All of these are simply exceptionally weak.

Expected sales volumes in wholesaling: Turning to the expected sales for August once again, all the readings are net negatives; two out of three of them show some improvement compared to their July values; however, the rankings remained exceptionally weak. Sales compared to a year ago are at a 9.1 percentile standing, orders compared to a year ago are at a 5.3 percentile standing, and sales for the time of year are at a 2.1 percentile standing. The results for expected sales and orders in the wholesaling survey are extremely grim.

This week, we examine a series of major US trade and tariff developments since early July. The US has expanded its network of bilateral trade deals, including deals with Indonesia and the Philippines, both securing tariff rates of 19%. Meanwhile, former President Trump has seemingly raised the general tariff floor from 10% to 15%, potentially affecting countries like Australia, New Zealand, and Singapore (see chart 1). India, once expected to be among the first to reach a deal, has yet to finalize an agreement ahead of the August 1 deadline. Attention remains on China’s suspected use of transshipments through third countries to circumvent tariffs. One possible, though inconclusive, indicator is the decline in China’s direct exports to the US alongside stable overall export levels—suggesting either the use of transshipment routes or a broader redirection of exports to other markets (see chart 2).

Japan also recently struck a significant deal with the US, reducing its reciprocal tariff from 24% to 15%. This announcement boosted Japanese equities and the yen (see chart 3). However, Japan’s auto exports to the US continue to decline, with firms absorbing tariff-related costs to maintain competitiveness (see chart 4). Despite political uncertainty following the ruling LDP’s losses in recent upper house elections, Japanese markets have remained resilient (see chart 5). As the Bank of Japan prepares to announce its next rate decision, real wages have posted their sharpest decline in two years, while household spending—driven by car purchases—has surged (see chart 6).

Latest US tariff developments Several significant US trade developments have occurred since early July. Notably, the number of bilateral trade deals secured by the US has increased. For instance, Indonesia reached an agreement that reduced tariffs from 32% to 19%, while the Philippines avoided a previously threatened 20% rate, settling instead at 19%. Meanwhile, former President Trump has reportedly raised the tariff floor from 10% to 15%. This suggests that countries previously facing the 10% rate—such as Australia, New Zealand, and Singapore (which runs a trade surplus with the US)—will now be subject to higher duties, as illustrated in chart 1. In contrast, India, once expected to be among the first to reach a deal, has yet to produce a substantive agreement as the August 1 deadline approaches.