Finimize - 🇯🇵 Japan jumped

What’s going on here?

Home Depot had a surprisingly good quarter, with sales and profit hammering home that success.

What does this mean?

After nearly three years of soaring demand, Home Depot braced itself for a more challenging 2023, anticipating a return to pre-pandemic norms. But while there were some signs of strain, the situation wasn’t as dire as many predicted. Sure, the financial pinch has made folks hesitant about major renovations, and the big-ticket items that go along with that – but they’re still keen on smaller home projects, segments where Home Depot continues to shine. And professional contractors and builders, too, are keeping the registers ringing as they tackle their project backlogs. So even though the DIY behemoth recorded a 2% dip in sales compared to the same quarter last year, it outperformed both sales and profit forecasts.

Why should I care?

Zooming in: Safe as houses.

Home Depot’s keeping its annual forecast pretty conservative, despite the beat. But when it comes to the long haul, it’s feeling bullish – pointing to the US housing shortage as a potential sales booster for years to come. In fact, the firm thinks it could be a decade before housing supply catches up with demand. And while the real estate market isn’t currently in the best shape, it could be on the up: recent data revealed that permits for housing construction surged to a twelve-month high in June. That uptick signals a wave of new homes in the pipeline – and as everyone knows, new homes make for plenty of trips to Home Depot.

The bigger picture: Living it large.

US consumers are really showing their resilience. Retail sales rose by 0.7% in July, easily beating expectations – and wages, which are finally outpacing inflation, probably helped. Combined with Home Depot’s beefy performance, this could be a sign of what to expect when Target and Walmart’s results are released later this week too.

What’s going on here?

Data out on Tuesday showed that Japan’s economy outstripped expectations last quarter, with exports balancing out weak domestic demand.

What does this mean?

Japan’s economy dazzled last quarter, boasting 6% annualized growth – its strongest showing since late 2020. And that wasn’t just a minor win for the country: it was actually double what analysts had on their charts. Exports did a lot of the heavy lifting there, with auto shipments to the US and Europe taking the lead. And the limping Japanese yen, near its weakest in decades, meant those takings packed an even bigger punch when brought home. Tourism made a comeback too, recapturing over two-thirds of its pre-pandemic buzz. But not everything’s in full bloom: domestic consumption, which forms the heart of Japan’s economy, took a 0.5% hit. That comes as businesses and consumers alike are tightening their belts, now that the ghost of inflation, after years of no-shows, is spooking spenders.

Why should I care?

The bigger picture: Leaning on friends.

While Japan’s recent economic glow-up is commendable, it’s mostly fueled by external demand. And that’s a little bit risky, given that Western economies – which drove a lot of this growth – are facing their own set of challenges at the moment. At any rate, economists think this export-driven momentum might not last – and if they’re right, Japan could find itself in a tricky spot. Given that backdrop, it’s unlikely we’ll see the central bank pulling back on its hefty stimulus measures anytime soon, as some were speculating.

Zooming out: Peas in a pod.

Japan isn’t alone in its domestic demand dilemma. After all, China’s recent data revealed a similar problem, with retail sales growing surprisingly slowly in July. But China’s already making moves: on Tuesday its central bank made the biggest cut to a key interest rate since 2020, in a bid to give the economy the boost it clearly needs.