Positives
1)The always volatile Chicago manufacturing index for July spiked to 51.9 from 36.6 and that was well better than the estimate of 44. The caveat though from the Chicago MNI, “Nevertheless, companies noted continued uncertainty amid the ongoing Covid-19 crisis.” Stating the obvious.
2)The July Richmond manufacturing survey rose 10 pts to 10 from zero. The estimate was 5 and it’s the best read since January. It bottomed at -54 in April.
3)The Dallas July manufacturing index rose to -3 from -6.1 and that was a touch better than the -4.8 estimate. That’s the least negative since February when it was a hair above zero.
4)Pending home sales in June rose 16.6% m/o/m, a bit above the estimate of up 15% and follows the 44.3% spike in May as things reopened after 20%+ declines in March and April. This rebound takes the index to the highest level since 2006. The chief economist at the NAR said simply “Consumers are taking advantage of record low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.” Also, to what we’re all seeing, “as house hunters seek homes away from bigger cities, properties that were once an afterthought for potential buyers are now growing in popularity.”
5)After three straight months of declines with most of the pain in April, core durable goods spending rose for a 2nd month, this time by 3.3% after a 1.7% m/o/m rebound in May. That was above the estimate of up 2.2%. We’ve gotten back about half of what was lost.
6)China’s state sector weighted manufacturing index for July rose to 51.1 from 50.9. The estimate was 50.8. Business expectations were higher too.
7)South Korea’s June industrial production figure was better than expected, up by 7.2% m/o/m after falling by 7% in May. The estimate was for a 2.3% rebound.
8)Japan’s unemployment rate in June fell to 2.8% from 2.9% vs the estimate of a rise to 3.1% but the job to applicant ratio did fall sharply to 1.11 from 1.20. The forecast 1.15.
9)The July Economic Confidence index in the Euro area rose to 82.3 from 75.8 and that was a touch above the forecast of 81.4. Gains in manufacturing and services led the way along with retail but consumer confidence and construction were little changed.
10)Germany reported a better than expected July jobs number as the number of the unemployed fell by 18k instead of rising by 41k as expected. That follows an increase of 68k in June.
11)The German July IFO business confidence index rose to 90.5 from 86.3 and that was about 1 pt more than expected. Most of the gain was in the Expectations component which was up 5.4 pts m/o/m while the Current Assessment was higher by 3.2 pts. In their succinct style, the IFO said “The German economy is recovering step by step.”
12)The July UK CBI retail sales index improved sharply to +4 vs -37 and that was well better than the estimate of -25. CBI said “The improvement was primarily driven by stronger grocery sales, although conditions appear to have eased more widely following the reopening of non essential retailers on July 4th.” Specifically they said “sales of hardware & DIY products and other normal goods (cards, flowers, stationary) returned to growth in the year to July. Although most other retailers (e.g. clothing, footwear and department stores) continued to report significant declines, in some cases falls were less severe than in recent months.”
Negatives
1)On the day extended benefits expire, Congress still can’t find a compromise.
2)The Fed, while not changing policy, continues to suppress bond yields in the global magic trick of disappearing rates.
3)To this, yield curves across the world continue to melt down, damaging bank profit power, starving investors of all kinds of low risk income and increasing the number of walking dead businesses.
4)Initial jobless claims totaled 1.43mm, about in line with expectations when the previous week’s revision is included to 1.42mm. Continuing claims, delayed by a week, got back above 17mm unfortunately vs the estimate of 16.2mm and up from 16.15mm last week. Via the Pandemic Unemployment Assistance program, not seasonally adjusted in contrast to the seasonally adjusted data above, totaled 830k which is down about 100k from last week.
5)The final July UoM consumer confidence index slipped to 72.5 from the initial read of 73.2. That’s slightly below the estimate of 72.9 and down from 78.1 in June and vs 72.3 in May and 71.8 in April. Thus, consumer confidence is basically right back to the almost full shutdown lows. Current Conditions are at 82.8 vs 74.3 in April (although well below the highs) but Consumer Expectations is now below at 65.9 vs 70.1 in April. That matches the lowest level since October 2013. One year inflation expectations were 3% vs 3.1% in the 1st read but unchanged with June. It was 2.1% in April. As businesses have reopened, the employment component did improve and got back what it lost in June but income expectations remained very muted. Spending intentions were mixed. The UoM said “Consumer sentiment sank further in late July due to the continued resurgence of the coronavirus. In the last four months, the Sentiment Index has remained trendless, averaging 73.7, a decline of 25% from the same period in 2019.”
6)The July Conference Board Consumer Confidence index fell to 92.6 from 98.3 in June and that was below the estimate of 95 but compares with 85.9 in May. The components were very mixed as the Present Situation improved to 94.2 from 86.7 but was more than offset by the sharp drop in Expectations which dropped to 91.5 from 106.1 driven by a drop in business conditions expectations. One year inflation expectations held above 6% for a 3rd straight month but moderated to 6.1% from 6.6%. It was 4.6% one year ago. Those that said jobs are Plentiful rose a touch to 21.3 from 20.5, although remains well below the 46.5 seen in February but above the May low of 16.5. Those that said jobs are Hard to Get fell to 20 from 23.3 and that was 13.9 in February. It topped at 34.5 in April. The offset to this was in the jobs expectations component where those expecting More Jobs fell almost 8 pts m/o/m and those expecting Fewer Jobs was up almost 6 pts. Income expectations were little changed. Spending intentions were mixed but the home buying desire really stood out. Plans to buy a home this year rose to 7.4 vs 6.8 and that matches the highest level since this survey began in the late 1960’s.
7)What is now seemingly a very old number, Q2 GDP contracted by 32.9% q/o/q annualized, not far from the estimate of down 34.5%. Consumption, the biggest part, was as expected, falling by 34.6% and that took 25 percentage points off GDP. Gross private investment took off 9% with spending on software the bright spot as there was no change there. Inventories were a drag of 4 percentage points while trade was actually a very slight boost as imports rose more than exports. Government spending added almost one percentage point, solely on the Federal side as state and local spending fell with their revenues.
8)China’s services PMI focused on state owned companies fell slightly in July to 54.2 from 54.4 vs the forecast of an uptick to 54.5.
9)Hong Kong said June exports fell 1.3% y/o/y instead of rising by 3.8% as expected due to a 21.4% decline in exports to the US that wasn’t offset enough by an 8.8% rise to China. Exports to Europe fell as well. Imports were lower by 7.1% y/o/y, a touch more than the estimate of down 6%.
10)Vietnam’s July exports and imports were below expectations.
11)The headline Eurozone July CPI rate rose .4% y/o/y vs the estimate of up .2% and the core rate jumped by 1.2% y/o/y vs .8% in June and vs the .8% estimate. Food, alcohol and tobacco prices rose 2% y/o/y and non energy industrial goods prices were up by 1.7% y/o/y. Services prices rose .9% y/o/y. Lower energy prices kept a lid on the headline number.
12)Q2 GDP in the Eurozone contracted by 12.1% q/o/q as expected and 15% y/o/y.
13)Cushioned by the employee support programs, the June Euro area unemployment rate still rose to 7.8% from 7.7% in May, but well off the peak of 12.1% in 2013.
14)French consumer confidence in July fell to 94 from 96. The estimate was for a rise to 99. The low in this Covid time was 92 in May.