1)The Fed continues on their path to conquer high inflation.
2)This is only on the positive side because off a record low in June of 50, the final July UoM consumer confidence was up 1.5 pts in July all due to the rise in Current Conditions. Expectations fell further, albeit a touch. One yr inflation expectations were 5.2%, the same as the initial print but down from 5.3% in June as gasoline prices have come off their boil. The 5-10 yr guess was 2.9% vs 2.8% initially but off 3.1% in June. The UoM said “The one yr economic outlook fell to its lowest reading since 2009…inflation continued to dominate consumers’ attention, and labor market expectations continued to soften….With overall inflation and short run inflation expectations remaining elevated, 49% of consumers cited inflation for weighing on their personal finances, which was exceeded only once before in 1951.”
3)The Q2 Employment Cost Index saw a headline q/o/q increase of 1.3%, one tenth more than forecasted. Measuring this y/o/y saw a 5.1% increase vs 4.5% in Q1, 4% in Q4 2021, 3.7% in Q3 2021, 2.9% in Q2 2021, and 2.6% in Q1 2021 so the trend is obvious. That’s the fastest gain since at least 2001. Most importantly, private sector compensation accelerated to 5.5% with wages/salaries going up by 5.7% vs 5% in the two prior quarters, 4.6% in the one before that and vs 3.5% in the one prior to that.
4)The July Richmond manufacturing index was exactly zero vs -9 in June and better than expectations of -14. New orders and backlogs remained below zero while capital spending plans were mixed. Prices paid and received moderated as did the employment components.
5)The KC manufacturing index was 13 vs 12 in June and better than the forecast of 4.
6)Japan’s June unemployment rate held at 2.6% and the jobs to applicant ratio ticked up to the highest level since April 2020 at 1.27. It though was at 1.45 in February 2020.
7)The Eurozone economy grew by .7% q/o/q in Q2, much better than the estimate of up .2%. And the reopening, particularly on the travel side, is what helped as Italy and Spain saw decent growth. Germany’s economy though saw no growth q/o/q but Q1 was revised up by 6 tenths. The French economy grew by .5% q/o/q after contracting by 2 tenths in Q1.
8)South Korea said Q2 GDP was better than expected with a .7% q/o/q gain vs the estimate of up .4%. It grew by 2.9% y/o/y helped out by the end of covid restrictions but mitigated by slower trade.
1)The Fed continues on their path to conquer high inflation and still the fed funds rate is well below PCE and CPI and they are aggressively tightening as the US economy enters an economic downturn. And full on QT hasn’t even started yet.
2)Jobless claims were 256k, 6k more than expected and last week was revised up by 10k to 261k. This brings the 4 week average to 249k from 243k last week and 236k the week before. This is the highest level since late November. Continuing claims fell by 25k after rising by 51k last week.
3)The US economy contracted for a 2nd straight quarter in Q2, by .9%. Much of the drop though in Q2, relative to expectations, on a real basis was the 7 tenths more than expected price deflator at 8.7%. If it came in line, Q2 GDP would have fallen .2% instead of .9%. Cutting through the influence of inventory saw real final sales growth of 1.1% after a 1.2% drop in Q1. Also taking out trade, final sales of private domestic purchases saw zero growth.
4)The headline PCE inflation figure for June was up by 1% m/o/m, one tenth more than expected. For context, there once was a time when it was up 1-2% during an entire year. The core rate was higher by .6% m/o/m, also one tenth more than estimated. Versus last year the headline increase was 6.8% and by 4.8% for the core rate.
5)The US savings rate at 5.1% in June is the lowest since 2009 as spending outpaced income.
6)The average 30 yr mortgage rate was 5.74% for the week ended July 22nd vs 5.82% in the week before but mortgage apps fell again. Purchases were lower by .8% w/o/w and 18.3% y/o/y and this component is at the lowest since April 2020. Refi’s declined by 3.7% w/o/w and are 83% below its level seen one year ago.
7)Pending home sales in June plunged by 8.6% m/o/m, well worse than the estimate of down 1%. The index at 91 is the lowest since April 2020. The NAR said “Nearly a quarter of buyers who purchased a home three years ago would be unable to do so now because they no longer earn the qualifying income to buy a median priced home today.”
8)New home sales in June totaled 590k, 65k below expectations and May was revised down by 54k to 642k. There was a notable drop in sales out West. For perspective on the overall slowdown, the 3 month average is now 612k vs the previous three month average of January thru March of 776k. Months’ supply rose again to now 9.3 months, matching the highest since 2009 vs 8.4 in May and 5.7 back in January.
9)Apartment List.com’s August National Rent Report rose by 1.1% in July m/o/m and by 12.3% y/o/y, a continued moderation as the comps get tough. The rate of change peaked at 18%. There was no change in the vacancy rate of 5% as people who now can’t afford to buy a home have no choice but to rent.
10)In May, S&P CoreLogic said home prices rose 19.8% y/o/y, a painful print for that first time buyer. The S&P CoreLogic home price index is now up 40% over the past two years.
11)The July Conference Board’s Consumer Confidence index fell to 95.7 from 98.4, just below the estimate of 97 and the weakest since January 2021. It was 132.6 in February 2020 and bottomed at 85.7 the next month. Most of the weakness was in the Present Situation that fell 6 pts while Expectations were down .5 pt. Inflation expectations over the next year averaged 7.6% vs 7.9% in June and 7.5% in May. The 5 yr average is 5.6% and the 10 yr average is 5.4%. There was some softness in the labor market questions. With the high cost of things, along with higher interest rates paid to fund big ticket purchases, spending intentions weakened notably. Plans to buy a home fell to match the lowest level since 2013. Intentions to buy an auto fell 1.2 pts to the least since November 2021. And finally plans to buy a major appliance falling by 6 pts to the softest since 2010. The bottom line as stated by the Conference Board is now obvious, “Concerns about inflation – rising gas and food prices, in particular – continued to weigh on consumers.”
12)The July Dallas manufacturing index softened further to -22.6 from -17.7 and that is the weakest since May 2020. New orders, backlogs, and the 6 month outlook were all negative. Price pressures also moderated. The labor market is what hung in there.
13)The Chicago manufacturing PMI for July slipped to 52.1 from 56. The estimate was 55.
14)July Eurozone CPI accelerated further to a gain of 8.9% y/o/y, 2 tenths more than anticipated and vs 8.6% in June. The core rate was higher by 4% y/o/y, up from 3.7% last month and one tenth more than estimated.
15)Germany saw a sharp jump in unemployment in July of 48k people, well worse than the estimate of up 17k. Their unemployment rate ticked up by one tenth to 5.4%.
16)The July German IFO business confidence index fell to 88.6 from 92.2. That was below the estimate of 90.1 and the weakest since June 2020. Both Current Conditions and Expectations components fell m/o/m. IFO said succinctly, “Higher energy prices and the threat of a gas shortage are weighing on the economy. Germany is on the cusp of a recession.”
17)German and French consumer confidence both fell again m/o/m. The German index in particular fell to a fresh record low dating back to 1991. GFK said “In addition to concerns about disrupted supply chains, the war in Ukraine and soaring energy and food prices, there are now worries about sufficient gas supplies for businesses and households next winter. This is currently causing consumer sentiment to hit rock bottom. Especially as a tight supply of natural gas is likely to add to the pressure on energy prices and thus inflation.”
18)The July Eurozone Economic Confidence index fell to 99 from 103.5 and well below the estimate of 102. All of the 5 components, including manufacturing, services, consumer, retail and construction confidence, fell m/o/m and the headline index is now at the lowest level since February 2021.
19)The July UK CBI industrial orders index fell to 8 from 18 and that was 5 pts below expectations and the weakest since April 2021. CBI said “The manufacturing sector has been an economic bright spot in recent months, but output and orders have softened amid ongoing cost pressures, supply challenges and a generalized weakening in economic conditions both in the UK and globally.”
20)Headline CPI in Tokyo rose 2.5% y/o/y in July, ex food it was up 2.3% ex food and by 1.2% ex food and energy. All were one tenth more than expected and the 2% BoJ target rate is ex food. Outside of VAT tax increases, the core rate is running at the quickest pace since 1992.
21)A higher cost of living weighed on Japanese consumer confidence which fell to the lowest since January 2021. Of particular note, ‘Willingness to Buy Durable Goods’ fell to the weakest on record dating back to 1992.
22)Singapore’s June CPI saw a headline gain of 6.7% and a core rate increase of 4.4% y/o/y. The headline print was 5 tenths above the estimate and the core rate was 3 tenths more.
23)Exports in Hong Kong in June disappointed with a 6.4% y/o/y drop, well worse than the forecast of down .7%. Imports, helped by higher energy prices, rose .5% y/o/y vs the estimate of down 2.1%.