Positives
1)Gasoline prices continue to drop to the lowest in two months with the average gallon at $4.58 according to AAA.
2)With the response to inflation being a now aggressive Fed, NY Fed consumer expectations for 3 yr inflation fell to 3.6% from 3.9%.
3)Core June retail sales, stated in nominal terms, rose .8% m/o/m, 5 tenths better than expected but mostly offset by a 3 tenths downward revision to May to a 3 tenths decline. The negative is that this is basically due to higher prices rather than an increase in volumes.
4)After negative prints seen in 3 out of the prior 4 months, the July NY manufacturing index rebounded to +11.1 and that was well better than the estimate of -2.0. Price pressures eased.
5)The Bank of Canada, the Monetary Authority of Singapore, the Bank of Korea, the central bank in Chile, the Reserve Bank of New Zealand and the central bank in the Philippines all further tightened monetary policy.
6)With the reopenings again in June, Chinese retail sales that month did lift by 3.1% y/o/y but assume part of that was stocking up on things in case there is another set of lockdowns. Industrial production rose 3.9% y/o/y about as expected and fixed asset investment was up by 6.1% ytd y/o/y.
7)As Chinese factories further opened up as did the Shanghai ports, they reported that exports rose 17.9% y/o/y in June, above the estimate of up 12.5%.
8)Some sanity shines through in response to this energy problem as Japanese PM Kishida said he wants 9 more nuclear plants to be reopened by winter.
9)The UK economy grew by .5% m/o/m in May which was better than the estimate of up .1%. The Office for National Statistics interestingly said “a large rise in GP (Dr) appointments” was a major driver as well as travel. Spending on other retail saw weakness. Industrial production bounced helped by energy.
Negatives
1)Initial jobless claims rose again to 244k from 235k last week and 9k above the estimate. As the July 4th holiday might have impacted the data, smoothing this out puts the 4 week average to 236k from 233k and that is the highest since December. Continuing claims fell by 41k but after rising by 48k in the week prior.
2)Headline CPI rose 1.3% m/o/m while the core rate was higher by .7% m/o/m and both were 2 tenths higher than expected. On a y/o/y basis headline inflation was up by 9.1% and the core rate by 5.9%. Services inflation ex energy was up by .7% m/o/m and 5.5% y/o/y with rents STILL undercounting reality but making progress on catching up. Core goods prices rose .8% m/o/m and 7.2% y/o/y but this is where the rate of change is slowing as it’s the 4th straight month of moderation. The rate of change peaked at 12.4% in February.
3)Headline PPI in June was higher than expected with a 1.1% m/o/m increase vs the estimate of up .8% and May was revised up by one tenth to a 9 tenths gain. The core rate was as forecasted when we include a May upward revision here too. The headline y/o/y increase was 11.3% and by 8.2% ex food and energy. Goods prices ex food and energy rose by .5% m/o/m and 9.1% y/o/y. Services prices were up .4% m/o/m and 7.7% y/o/y.
4)Thanks to a skyrocketing dollar and also some relief on the commodity side, June import prices rose .2% m/o/m, 5 tenths below the estimate. Ex petro they declined by 4 tenths vs the forecast of up .2%. Versus last year, import prices were up by 10.7% y/o/y and 5.4% ex petro and 4.4% ex food and energy. Import prices from China declined by 2 tenths, helping also to cool the data.
5)The NY Fed said its median one year inflation expectations survey saw an increase to 6.8% in June vs 6.6% in May and that is a new cycle and series high.
6)While the headline NY mfr’g number was an upside surprise, the disappointment was the 6 month outlook falling to -6.2 from +14 and that is the worst print since September 2001 after you know what. Capital spending plans fell notably.
7)The first look at the July UoM consumer confidence index wasn’t much changed from the record low seen in June. The index was 51.1 vs 50 last month, a hair above the forecast of no change. Current conditions rebounded to 57.1 from 53.8 but Expectations fell again, by a modest .2 pts. One year inflation expectations fell by one tenth m/o/m off a 40 yr high to 5.2%. For the 5-10 yr inflation expectations question, it fell to 2.8% from 3.1%. There was clear disappointment in the labor market answers. Employment expectations fell 13 pts and by 32 pts over the past 3 months. At 77, it’s the lowest since September 2011. Net income growth expectations fell another 2 pts to the least since January 2021. With respect to spending intentions, there was a pick up from June for auto’s, homes and major appliances but only after dropping last month. Interestingly, those that said it’s a good time to SELL a home fell 18 pts to the lowest since March 2021. On the impact of inflation to consumer psyche, “The share of consumers blaming inflation for eroding their living standards continued its rise to 49%, matching the all time high reached during the Great Recession. Consumers under the age of 45, lower income consumers, and less educated consumers – groups that tend to have less wealth to buffer against shocks – all reported substantial worsening of personal finances.”
8)The June NFIB small business optimism index fell to 89.5 from 93.1 and that is the weakest since January 2013. Expectations for a Better Economy continued to fall to a fresh all time low dating back to the 1970’s at -61% from -54% in May. Specifically on inflation, it again was the “top problem for small businesses with 34% of owners reporting it was their single most important problem in operating their business, an increase of 6 pts from May and the highest level since quarter four in 1980.”
9)Cass Freight reported its June data and shipments fell 2.3% y/o/y after declining by 2.7% y/o/y in May. They said “Inventory has shifted from a major tailwind for freight demand to more of a neutral factor currently, with potential to become a considerable headwind if goods demand continues to decline.” The inferred freight rate which they calculate “still rose 28% y/o/y in June, decelerated from 31% y/o/y in May.”
10)The average 30 yr mortgage rate was unchanged w/o/w at 5.74%. Purchases fell 3.6% w/o/w and by 18% y/o/y. Refi’s rose by 2.2% but after last week’s nearly 8% drop. They remain down by 80% y/o/y.
11)US industrial production in June fell .2% m/o/m vs the estimate of up .1% and May was revised down by 2 tenths. Manufacturing was the main culprit for the weakness with its .5% drop for the 2nd month.
12)Taking the data out of China with a big grain of salt, they reported that Q2 GDP rose .4% y/o/y, below the estimate of up 1.2% and activity declined by 2.6% q/o/q with distress in residential real estate and the stop-start fight against covid.
13)China’s residential real estate market continued with its stream of bad news as buyers hold back mortgage payments and home prices continue to drop.
14)China’s June imports, where many end up in eventual exports, rose just 1% vs the forecast of up 4%.
15)China reported its June loan data where aggregate financing totaled 5.17 Trillion yuan, above the estimate of 4.2 Trillion. Of this, bank loans made up 2.81 Trillion. Until they fully reopen and get off the stop-start, this is like trying to capture water using a sieve. Also out of China over the weekend was their PPI and CPI figures that were both one tenth higher than expected
16)Japan said its June PPI rose 9.2% y/o/y, above the estimate of up 8.9% and vs an upwardly revised 9.3% in May.
17)The Swedish Riksbank a few weeks ago hiked rates to .75% and today they reported a June CPI of up 8.5% and by 6.1% ex energy.
18)While Mario Draghi’s resignation should not have been a surprise in terms of the typical short tenure of the Prime Minister, fragmentation worries are back.
19)With the inflation and energy squeeze, the July German ZEW investor confidence in their economy fell to -53.8 from -28. The estimate was for a drop to -40.5. That matches the lowest since October 2008 right after Lehman blew up. Current Conditions dropped to -45.8 from -27.6. Not surprisingly, the ZEW said “Expectations for energy intensive and export oriented sectors of the economy have fallen particularly sharply, and private consumption is also assessed as significantly weaker.”
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.