Applications for U.S. unemployment benefits dropped to their lowest level in nearly six decades last week, underscoring a resilient labor market that may allow the Federal Reserve to maintain its focus on controlling inflation. According to Labor Department data released Thursday, initial claims fell by 22,000 to 187,000 in the week ending July 18. Meanwhile, continuing claims, which represent the number of people receiving benefits, remained largely unchanged.

U.S. business activity showed marked improvement in July, expanding at the fastest pace in eight months. Strong demand in the services sector offset challenges posed by slowing factory output, supply-chain disruptions, and rising costs. The S&P Global flash composite purchasing managers index rose during the month, signaling robust economic momentum. New-home sales also experienced an uptick in June—the first increase in three months—benefiting from heavy builder discounting amidst persistently high mortgage rates and cautious consumer sentiment.

In Europe, the European Central Bank (ECB) opted against an immediate interest rate hike during its meeting on Thursday but left open the possibility of an increase in September. President Christine Lagarde noted that some ECB members had proposed acting sooner, yet emphasized the need to carefully evaluate incoming economic data before making further decisions. German investor sentiment improved in July, reaching a five-month high according to the ZEW institute’s expectations index, reflecting optimism that Chancellor Friedrich Merz’s economic reforms could foster growth. In the United Kingdom, activity in the private sector rebounded in July, supported by factors such as the World Cup, staycations, and hot weather, though escalating tensions in the Middle East present a potential threat to this nascent recovery. The S&P Global purchasing managers index climbed to a three-month high in the UK during this period.

In Asia, South Korea’s economy exceeded expectations with solid growth in the second quarter, driven largely by a surge in artificial intelligence-related semiconductor demand. The Bank of Korea reported GDP growth for the quarter ending in June, while customs data indicated that exports sustained strong growth through early July, reaching a record high for that month. Conversely, Japan’s trade deficit widened unexpectedly in June as a weak yen increased import costs and geopolitical tensions linked to the conflict in Iran pushed oil prices higher. The unadjusted trade deficit grew to 406.9 billion yen (approximately $2.5 billion) compared to a revised 391.8 billion yen gap in May.

Among emerging markets, South Africa’s rand weakened after the central bank chose to keep interest rates steady at 7%, contrary to market expectations for a hike, in an effort to support economic growth. Governor Lesetja Kganyago announced the decision Thursday in Pretoria while revising inflation forecasts downward. Meanwhile, Argentina continues to grapple with mounting bad loans despite economic reforms under President Javier Milei’s austerity program. Milei has achieved notable inflation reduction from triple-digit levels and returned the economy to growth since his 2023 inauguration. The country has received successive sovereign credit upgrades, most recently from Moody’s Ratings, although it remains classified in speculative-grade territory.

Globally, central banks displayed varied approaches to monetary policy: the European Central Bank held off on additional rate increases, Indonesia and South Africa maintained current rates, and Russia and Hungary implemented cuts.