1)New home sales in May jumped to 696k, about 100k more than anticipated and April was revised up by 38k to 629k. The mix really stood out as there were sharp drops in the Northeast and Midwest m/o/m offset by jumps in the South and out West. The number of homes for sale rose but not to the same extent as sales and months’ supply fell to 7.7 from 8.3 but still well above the long term average of around 6 months. The y/o/y median home price gain was 15%.
2)With the average 30 yr mortgage rate hitting 5.98% for the week ended June 17th according to the MBA, purchases did jump by 7.9% w/o/w while still down almost 10% y/o/y.
3)Existing home sales in May totaled 5.41mm, about as expected but down from 5.6mm in April. Months’ supply did tick up to 2.6 but still remains well below its historic average. The median home price rose almost 15%. First time buyers made up just 27% of all purchases vs 28% in the month before and vs 31% one year ago. The NAR said “further declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year. Nonetheless, homes priced appropriately are selling quickly and inventory levels still need to rise substantially – almost doubling – to cool home price appreciation and provide more options for home buyers.”
4)The June UK PMI was unchanged m/o/m even though manufacturing slipped and services were unchanged. Markit said “The economy is starting to look like it is running on empty. Current business growth is being supported by orders placed in prior months as companies report a near stalling of demand. Manufacturers in particular are struggling with falling orders, especially for exports, and the service sector is already seeing signs of the recent growth spurt from pent-up pandemic demand move into reverse amid the rising cost of living. Business confidence has now slumped to a level which has in the past typically signaled an imminent recession.”
5)Italy reported a surprising rise in its June Economic Sentiment Index to 113.6 from 111 in May. A lot of this is the freedom of the post covid world as the services component jumped 5.3 pts which in turn helped retailers confidence. Manufacturing and construction confidence was up too.
6)The Norges Bank in Norway surprised the markets with a 50 bps rate hike to 1.25%. A 25 bps increase was expected. They said they’ll most likely hike by 25 bps in August but didn’t rule out a 50 and said “A faster rate rise now will reduce the risk of inflation remaining high and the need for a sharper tightening of monetary policy further out.”
7)Japan’s composite PMI index rose .9 pts m/o/m to 53.2 but the internals were mixed as services rose while manufacturing fell. Services were helped by further relaxations of Covid restrictions and “the return of international visitors.” On the manufacturing side, China is messing up again the supply chain because of their Covid approach “and exacerbated existing supply and demand pressures.” On the pricing side, “While the rate of input price inflation remained broadly similar to May’s series record, the slight easing in inflation was the first for 5 months and provided tentative evidence that the rise in input prices had peaked. That said, prices charged for Japanese goods and services rose at an unprecedented rate for the second successive month as higher material and staff cost burdens were partially passed through to customers.”
8)In the 1st 20 days of June South Korea said its exports fell 3.4% y/o/y after a 24% rise in May. But, if we smooth out for average daily exports (as there were two less business days this June relative to last yr) it was up 11% y/o/y. The world still needs the chips and auto’s that dominate South Korean industry. Imports were up by 21% y/o/y.
1)The US Markit manufacturing and services June PMI fell to 51.2, down from 53.6 and the lowest since January. Manufacturing saw the biggest decline, falling to 52.4 from 57. Services moderated to 51.6 from 53.4 last month.
2)Initial jobless claims totaled 229k, 3k more than expected and last week was revised up by 2k to 231k. This brings the 4 week average to 224k from 219k as a 211k print drops out. Continuing claims rose by 5k to 1.315mm, slightly off the lowest level in more than 50 yrs.
3)The final June UoM consumer confidence, on the heels of the record low print of 50.2 seen in the preliminary read in the beginning of the month, was 50.0. Both components were down m/o/m but from the initial report Current Conditions weakened further while the Expectations index was a bit higher. One year inflation expectations was 5.3%, unchanged from May, but off the 5.4% seen in the beginning of the month. The 5-10 year inflation expectations line item rose to 3.1% from 3% in May but off the first look of 3.3%. The aggressive rate hike by the Fed in turn helped to slightly moderate inflation expectations. From May, employment expectations dropped 6 pts and income was down by 9. The mean % of those expecting higher real income growth was just 31.5% vs 33.3% in May and 37.8% in April but that was slightly up from the initial read of 30.8%. Spending intentions for auto’s and major household items softened further while holding at a 40 year low. The breadth of the confidence weakness was widespread. The UoM said “Consumers across income, age, education, geographic region, political affiliation, stockholding and homeownership status all posted large declines. About 79% of consumers expected bad times in the year ahead for business conditions, the highest since 2009.” We of course can blame inflation for the current situation as “47% of consumers blamed inflation for eroding their living standards, just one point shy of the all time high last reached during the Great Recession.”
4)Refi’s fell 3.1% w/o/w and are down by 77% y/o/y not surprisingly.
5)BoJ Governor Kuroda got his 2% inflation wish for a 2nd straight month in May as Japan’s CPI headline rose 2.5% and ex food was up by 2.1% after a similar gain in April. If we take out both food and energy though, prices were up .8% y/o/y for a 2nd month and just one tenth from matching a 6 yr high.
6)The Aussie PMI fell to 52.6 from 52.9 with manufacturing up 1 pt and services down by .6 pts. The influence of higher inflation and interest rates flowed through the report.
7)The June Eurozone manufacturing PMI fell to 52 from 54.6 and that was under the estimate of 53.8. That’s the weakest since August 2020. Markit said the tailwind of Covid reopenings has run its course and is now “offset by the cost of living shock and slumping business and consumer confidence. Excluding pandemic lockdown months, June’s slowdown was the most abrupt recorded by the survey since the height of the global financial crisis in November 2008.” Also of note, “business confidence has fallen sharply to a level rarely seen prior to the pandemic since the region’s economic contraction during 2012, hinting at an imminent downturn unless demand revives.” On pricing, “Persistent inflationary pressures add to the woes. The survey’s price gauges, which correctly anticipated the recent surge in inflation, remain elevated at levels not seen in history of the Eurozone prior to the pandemic, with a worrying increase in costs growth in the service sector. However, the recent cooling of demand is already showing signs of calming goods prices, bringing a tentative hint of a peaking of inflation in the near future.”
8)The German June IFO business confidence index fell to 92.3 from 93 and that was less than the 92.8 that was expected. The Expectations component was down 1.1 pts and the Current Assessment declined by .3 pts m/o/m. The IFO said succinctly, “The threat of gas shortages is of great concern to the German economy.”
9)Headline UK CPI rose 9.1% y/o/y as expected in May, up one tenth from April. The core rate was higher by 5.9% y/o/y, one tenth less than expected and off the 6.2% pace seen in the month before. The retail price index, in which inflation linkers are priced off, saw an 11.7% y/o/y jump. There was no relief yet on the input side as UK PPI input was up 22.1% y/o/y vs the forecast of up 19.4% and output charges were up less, by 15.7%, 100 bps above the estimate.
10)Reflecting the strain of falling real wages, UK retail sales ex auto fuel in May fell .7% m/o/m and 5.7% y/o/y. If we include the downward revision to April, it was below expectations.
11)The UK CBI industrial orders index in June fell to 18 from 26 and that was 3 pts under the estimate. CBI said “While manufacturing output is still being supported by a backlog of orders, growth appears to be softening. Stocks of finished goods are now seen as broadly adequate and we may be seeing the first signs that weaker activity is beginning to slow the pace of price increases in the sector.”