1)June new home sales totaled 776k, 76k more than expected and up from 682k in May (revised a touch higher from 676k). All four regions saw increases with the biggest percentage happening in the Northeast (many leaving NYC?). Months’ supply fell to 4.7, the lowest since 2016 as builders now need to scramble to catch up. This led to a 5.6% y/o/y price increase to the highest median price since February.
2)After last week’s 6.1% w/o/w decline in purchase applications to buy a home, they rose by 1.8% this week and are higher by 19.4% y/o/y as we know the residential housing market has been a bright spot in the economy. Refi’s with mortgage rates sitting at record lows rose 5.3% w/o/w and 122% y/o/y.
3)The Eurozone July composite index rose to 54.8 from 48.5 with services up about 7 pts m/o/m and manufacturing up around 3.5 pts. The estimate was 51.1. Internally, Germany’s composite index rose to 56.7 from 47.3 with manufacturing back to 50 while the French index was up at 57.6 from 51.7 all driven by services as manufacturing was little changed. While encouraging to see, we know the obvious caveats. Markit said, “The data add to signs that the economy should see a strong rebound after the unprecedented collapse in the 2nd quarter. However, while the survey’s output measures hint at an initial v-shaped recovery, other indicators such as backlogs of work and employment warn of downside risks to the outlook. The concern is that the recovery could falter after this initial revival. Firms continue to reduce headcounts to a worrying degree, with many worried that underlying demand is insufficient to sustain the recent improvement in output.”
4)The UK also saw a nice rebound with its manufacturing and services index in July rising almost 10 pts to 57.1, well better than the forecast of 51.7, again mostly driven by services. As we’ll see globally, growth is shaping up to resume in Q3 “However, while the recession looks to have been brief, the scars are likely to be deep. Even with the July rebound there’s a long way to go before the output lost to the pandemic is regained and, while businesses grew more optimistic about the year ahead, a V-shaped recovery is by no means assured. New orders showed only a relatively small rise in July, indicating that demand remains worryingly low at many firms.”
5)French business confidence in July improved to 85 from 78, about where the estimate of 86 was. The manufacturing component was higher by 4 pts m/o/m, services grew to 89 from 78, employment was up by 10 pts and retail was higher by 4. This index bottomed at 53 in April after peaking this year at 105 in February.
6)German consumer confidence rose sharply to -.3 from -9.4 and better than the estimate of -4.5.
7)Retail sales ex auto fuel in the UK in June rose more than expected.
8)The EU agreed to a 750b euro slush fund but with its roll out taking three years, heavily focused on pet projects, and without legitimate economic liberalizing changes, the real economic impact will likely be limited.
9)Australia’s manufacturing and services composite index rose to 57.9 from 52.7 with most of the gain coming from services. Markit said “The improvement in growth momentum in July is welcome, but concerns around COVID-19 and the potential policy responses to a lift in the number of new cases continue to weigh on activity.”
10)Taiwan’s exports in June rose 6.5% y/o/y, above the estimate of up 1.2% and helped by a 13.6% y/o/y increase to the US, 13% to Hong Kong and Mainland China and 10.8% to Europe as economies reopened.
11)Baseball is back and the NBA is soon to follow.
1)While an improvement, it wasn’t as much as hoped. The Markit July manufacturing and services composite index rose to exactly 50 from 47.9 with modest m/o/m gains in manufacturing and services. Services remained below 50 at 49.6 vs 47.9 in June. The estimate was 51. Manufacturing rose 1.5 pts m/o/m to 51.3, a touch below the forecast of 52.
2)Initial claims totaled 1.42mm, above the estimate of 1.30mm and vs 1.31mm in the week prior. This is the 1st w/o/w uptick since March and likely coincides with reclosings that we’re seeing. Not seasonally adjusted, those filing under the Pandemic Unemployment Assistance program grew by 975k vs 955k in the week before. Continuing claims, delayed by a week, though fell to 16.2mm which is a decline of 1.1mm w/o/w and below the forecast of 17.1mm. These numbers also do not include those receiving claims via the PUA program which as of July 3rd totaled 13.2mm people.
3)The TSA checkpoint travel data each day this week thru Thursday declined w/o/w, //www.tsa.gov/coronavirus/passenger-throughput.
4)Existing home sales in June, reflecting many contract signings in the March thru May time frame, totaled 4.72mm, 30k less than expected but up from 3.91mm in May as things were only just reopening. This figured was 5.27mm in March and 5.76mm in February. As homes for sale didn’t keep up, months’ supply fell to 4.0 from 4.8 but that is where it was in April and above the 3 handle seen in Q1. Median prices rose 3.5% y/o/y and a needed come down after years of 5-6% price increases. First time buyers totaled 35% of sales vs 34% in May and 36% in April. That though is up from 32% in January. The NAR said “Homebuyers considering a move to the suburbs is a growing possibility after a decade of urban downtown revival. Greater work-from-home options and flexibility will likely remain beyond the virus and any forthcoming vaccine.” And, “buyers were eager to purchase homes and properties that they had been eyeing during the shutdown.”
5)The UK GFK consumer confidence index in July was -27 from -30. The estimate was -24.
6)The UK CBI industrial orders index for July was a bit better m/o/m but still weak and below expectations. It came in at -46 vs -58 in June and compares with the estimate of -38 but we likely have seen the worst. CBI said “There are tentative signs of gradual recovery on the horizon, with firms expecting output and orders to begin to pick up in the next three months. But demand still remains deeply depressed.”
7)Consumer confidence in July for the entire Euro area fell to -15 from -14.7. The estimate was for a gain to -12.
8)There was only slight improvement in the Japanese manufacturing and services composite index for July. It rose to 43.9 from 40.8 with no change in services while the manufacturing component was up by 2.5 pts to 42.6. Markit said “While the easing of emergency measures provided some relief, especially to the domestic sector, Japan’s growth continued to be adversely affected by subdued global trade flows and restrictions on travel. All of these factors continued to weigh heavily on demand, with total new orders falling further, dragged down by a substantial decline in new exports…Any hope of a robust recovery need to be tempered as business sentiment about the year ahead outlook remained pessimistic on balance.”
9)Japanese exports fell 26.2% in June y/o/y, a bit more than the estimate of down 24.7%. It was the 3rd month in a row of 20%+ declines but should improve from here, with China helping as June exports to them were little changed. Exports to the US though fell by almost 50% y/o/y. Imports were 14.4% lower y/o/y but not as much as the forecast of a 17.6% decline.
10)South Korean exports in the 1st 20 days of July saw no lift. They fell 12.8% y/o/y after a 7.5% drop in June. Imports were no better, down by 13.7% y/o/y after a 12% decline last month.
11)It’s never a good thing for the global economy for the two largest economies to be going at it.