1)Core retail sales were as expected in June when we include the downward revision to May. June sales were 7 tenths more than expected but May was revised down by the same 7 tenths. In dollars, core retail sales were $341.5b in June vs $342.7 in April and vs $344.1b in March when the stimulus checks were mailed.
2)Those filing under pandemic unemployment assistance fell slightly to 96k from 101k. Continuing claims, delayed by a week, continues to shift lower by another 126k to 3.24mm, also the lowest since last March. By month end about half the states will have ended the added benefits. Delayed by two weeks, we saw declines in both continuing PUA and the emergency kind.
3)The NY mfr’g index for July showed a nice pop to 43 from 17.4 and well better than the estimate of 18. Prices paid moderated slightly while those received rose to a record high dating back to 2001. The 6 month business outlook fell to 39.5 from 47.7 but that is just back in line with the 6 month average. Capital spending got back what it lost last month while tech spending fell to a 6 month low.
4)Likely influenced by the timing of the July 4th holiday with respect to seasonal adjustments, purchase apps rebounded by 8.3% w/o/w though is still down 29% y/o/y. Refi’s jumped by 20.4% w/o/w but lower by 28.7% y/o/y. We did see another 6 bps drop in the average mortgage rate to 3.09% from 3.15% last week and 3.20% in the week prior.
5)The NFIB small business optimism index rose to 102.5 in June from 99.6 and that is the best since October but still below the 104.5 seen in February 2020. Those planning Higher Selling Prices jumped another 7 pts to 47%, matching the highest on record dating back to 1981. Optimism about the economy improved by 14 pts while those that Expect Higher Sales rose by 5 pts and those that said it is a Good Time to Expand was up by 2 pts. The NFIB summed up the report by saying, “Small businesses optimism is rising as the economy opens up, yet a record number of employers continue to report that there are few or no qualified applicants for open positions. Owners are also having a hard time keeping their inventory stocks up with strong sales and supply chain problems.” On pricing, “The incidence of price hikes on Main Street is clearly on the rise as owners pass on rising labor and operating costs to their customers…Inflation is everywhere, but particularly strong in a number of critical industries.”
6)The Economic Affairs Committee in the House of Lords is the most vocal criticism of quantitative easing that I’ve ever read coming from such a high level of government. A brighter spot light on what central banks do and the consequences of their actions is well needed. Maybe not coincidentally, two BoE members this week said they may end QE early.
7)The Bank of Korea set the markets up for an August rate hike. “Almost every board member agreed that it was time to place our utmost priority in addressing financial imbalances.”
8)The Bank of Canada, as expected, cut the pace of QE again to C$2b per week. “This adjustment reflects continued progress towards recovery and the Bank’s increased confidence in the strength of the Canadian economic outlook.”
9)The Reserve Bank of New Zealand said ‘no mas’ to QE. “Members agreed that the major downside risks of deflation and high unemployment have receded. The committee agreed that a ‘least regrets’ policy now implied that the significant level of monetary support in place since mid 2020 could be reduced sooner.”
10)China’s economy grew by 7.9% y/o/y in Q2 just under the estimate of 8%. As for the month of June, retail sales, IP and fixed asset investment were all just above expectations.
11)China’s trade data for June was above expectations. Exports rose 32.2% vs the estimate of up 23%. Imports were higher by 36.7% y/o/y, above the forecast of up 29.5%.
12)Non oil exports in June in Singapore rose 6% m/o/m and 16% y/o/y and both were well above expectations. Electronics and pharma product led the way.
13)Australia’s unemployment rate fell to 4.9% from 5.1% in June and that is the lowest since 2011. Job gains in June also exceeded expectations but all because of full time as part time jobs were shed.
14)Japan said that machinery orders in May (so somewhat dated), was well better than expected as capital investment continues to recover regardless of the Covid challenges Japan is still dealing with.
15)In the UK, June jobless claims fell a sharp 115k and May was revised down to a decline of 151k from 93k initially as the UK is on the cusp of fully reopening. Thru May, their unemployment rate stands at 4.8% vs 4.7% in the prior period.
16)The only respite in the UK inflation data was PPI which moderated m/o/m in June after the sharp gains in prior months but they are still up 9.1% y/o/y while output charges are up by about half that, by 4.3%.
1)Both headline CPI and the core rose .9% m/o/m, well more than the estimate of up .5% and .4% respectively. Versus last year where the easy comp thing is rolling off, the headline gain was 5.4% and the core rise was 4.5%. Energy prices jumped 1.5% m/o/m and food prices were higher by .8% m/o/m. Comparing headline CPI for June 2021 vs June 2019, they are up 6%. As for the core rate, it is higher by 5.7%. With respect to services, ex energy prices rose .4% m/o/m and are running at a 5.1% annualized rate over the past 4 months. Core goods prices jumped 2.2% m/o/m after a 1.8% rise in May and 2% increase in April and are now up 8.7% y/o/y. Used car prices led the way with a 10.5% monthly increase alone in June.
2)The Cleveland Fed’s 16% trimmed CPI (cutting out volatile stuff) saw a .5% m/o/m gain in June after two months in a row of .4% increases. Prices are up 2.9% y/o/y.
3)Headline PPI in June rose 1% m/o/m as did the core rate, both double the estimate. Versus last year, PPI is up 7.3% y/o/y and 5.6% ex food and energy. Food prices rose by .8% m/o/m and energy by 2.1%. Goods prices ex food and energy rose 1% m/o/m after a 1.1% increase in May, a 1% rise in April, a .7% increase in March, a .5% rise in February after an .8% gain in January. This is an annualized pace of 10.2% for core goods prices. As for service prices, they jumped .8% m/o/m and is rising at a 7.6% annualized pace year to date. As for inflation in the pipeline, there is no let up. Core processed goods prices is truly exploding higher, rising by 2.3% for a 2nd month which comes after a 2.9% rise in April, 2.6% in March, 2% in February and 1.8% in January, all m/o/m. Core unprocessed gains were higher by .9% m/o/m after a 9.3% skyrocket higher in May.
4)June import prices rose 1% m/o/m headline gain after a 1.4% jump in May (revised from 1.1%) and prices ex petro were higher by .7% m/o/m after a .9% increase. Headline import prices are rising at a 14.8% annualized rate year to date and ex petro, by 9.4%. Aggressively high import prices from Canada are a key factor as they were up 3.1% m/o/m and by 42% y/o/y. Import price from China grew by .4% m/o/m for the 4th straight month. The higher costs of food, petro and industrial supplies led the way.
5)Jay Powell in his Congressional testimony and Q&A this week reflects someone who is running a fingers crossed monetary policy that this inflation spurt will be short lived.
6)The preliminary July UoM consumer confidence index fell to 80.8 from 85.5 and that was well below the estimate of 86.5. Both key components were lower m/o/m with Current Conditions at 84.5 vs 88.6 in the month prior and Expectations down to 78.4 from 83.5. The headline figure is the lowest since February. One year inflation expectations jumped to 4.8% from 4.2% in June, 4.6% in May and 3.4% in April. That is the highest since the summer of 2008 when the average gallon of gasoline was $4.00 and before that you have to go back to 1990 the last time it printed 4.8%. The longer term 5-10 yr inflation outlook rose to 2.9% from 2.8% and that is one tenth from matching the highest since 2011. Employment expectations moderated but those seeing higher income rose to the highest since March 2020. The ‘Mean % of Expecting Family Income Will Beat Inflation over Next 5 Years’ fell to 38.3% from 41.3% in the month prior. That is the least since October 2016. Those that plan to buy a car/truck fell 7 pts to 80, the lowest level since 1981. As for intentions to buy a home, that fell 11 pts to just 63, the least since 1982 and was 127 in March while those that said it’s a good time to sell a house was 1 pt from the highest since the question was 1st asked in 1992. Buying intentions for a major household item fell 11 pts to the lowest since April 2020.
7)Initial jobless claims fell to 360k from 373k but were 10k more than expected. The 4 week average fell to 383k from 397k and that is the lowest since mid March.
8)The Philly mfr’g region saw a decline to 21.9 from 30.7 and below the forecast of 28. That’s the lowest since December. Prices paid is back off a 40 yr high to its 6 month average while those received is still 10 pts above. The 6 month outlook fell 20 pts to a 5 month low but cap ex plans rose slightly.
9)The Cass Freight shipments index for June rose 27% y/o/y vs a 35% increase in May. Cass Freight said “While still among the top ten results in the past decade, the result indicates a little slower volume environment than May, which is consistent with several other broad freight measures, including rail volumes and spot truckloads. Fading Federal stimulus was likely a contributor, but our industry discussions suggest shipment volumes continue to be hindered by supply constraints, which range from driver and trailer shortages in TL and LTL to chassis shortages hampering intermodal capacity.” With respect to transportation costs that are leading to the inflationary pressures for every goods producer, “The freight rates embedded in the two components of the Cass Freight Index surged to a 23.4% y/o/y increase in June from a 10.8% increase in May. The embedded rates jumped 12.3% m/o/m on a seasonally adjusted basis in June, more than reversing a 7.8% m/o/m decrease in May. This result confirms that the accelerating trend remained intact through Q2, but the volatility in May and June was partly due to modal mix.” The bottom line on rates, “Outside of mix shifts impacting the m/o/m data patterns, this data series shows broad and material increases in freight rates across modes.”
10)US industrial production in June rose .4% m/o/m vs the estimate of up .6%, half offset by a one tenth upward revision to May. Manufacturing production unexpectedly fell .1% m/o/m after a .9% gain in May. The forecast was for up .3%. Capacity utilization ticked up by 3 tenths to 75.4%. Auto production in particular was weak, not surprisingly at this point.
11)The UK reported a .5% m/o/m increase in CPI in June after a .6% increase in May and April. The forecast was for up .2%. Versus last year it is up 2.5% from 2.1% in May and vs the estimate of up 2.2%. The core rate was higher by 2.3% y/o/y, 3 tenths more than expected. Higher used car prices were influence in the UK too.
12)PPI in June in Japan jumped .6% m/o/m after a .7% gain in May, .9% increase in April, a 1% spike in March which followed .5% rises in the three prior months. Over these 7 months PPI is running at an annualized rate of up 8.1%.