1)I’m sympathetic to Powell’s belief that growth is moderating and he wants to take back that December hike.
2)Initial jobless claims totaled 209k, 12k less than expected vs 222k last week. However because of the 4th of July holiday we can throw out the number and wait until next week to average it out.
3)The MBA said mortgage applications to buy a home rose 2.3% w/o/w but the y/o/y gain moderated to 5.5% from about 10% last week.
4)Eurozone Industrial production for May jumped .9% m/o/m, better than the estimate of up .2%. How much was related to tariff timing is impossible to say.
5)The UK economy for the 3 months ended May grew more than forecasted, albeit at a moderating pace. Growth was .3% vs the estimate of .1%.
6)German exports in May rose more than expected but imports were light.
7)The business friendly Kyriakos Mitsotakis is the new PM of Greece.
8)Taiwanese exports (heavily reliant on tech/semi’s) rose .5% y/o/y in June vs the estimate of a drop of 4.8%. Imports jumped by 6.6% vs the forecast of a decline of 1.5%. Again, who knows how much was tariff driven in terms of pulling forward activity.
1)By cherry picking one inflation stat, the core PCE, Jay Powell and some colleagues have convinced everyone that there is a low inflation problem relative to their 2% target and they need to get ahead of the curve in addressing it. Please Jay Powell and Co, learn the key lesson from the BoJ and ECB that they missed their arbitrary inflation targets not from lack of trying.
2)Both headline and core CPI rose one tenth more than expected. The core rate in particular rose .3 m/o/m and 2.1% y/o/y, the 16th straight month in a row with a 2 handle. Services inflation ex energy rose .3% for the 3rd month in the past 4. Versus last year, they rose 2.8%. The noteworthy aspect of the data was the .4% m/o/m jump in goods prices ex food and energy.
3)The Cleveland Fed’s CPI print for June was 2.84%, matching the highest level since November 2008.
4)The Atlanta Fed’s Sticky CPI was 3.02% y/o/y vs 2.3% in May while the core rate rose to 2.9% from 2.2%.
5)Producer prices in June exceeded expectations both headline and core with .1% and .3% m/o/m gains respectively. Versus a year ago the headline rate rose 1.7% and the core rate was higher by 2.3%. That core rate print marks the 23rd straight month of 2%+ gains. Services inflation led the way with a .4% m/o/m gain while goods prices ex food and energy was flat.
6)Reflecting the weakness in manufacturing, MSC Industrial Direct and Fastenal start off Q2 earnings on a squishy note.
7)Refi’s fell 6.5% w/o/w, down for the 3rd week in the past 4 but are still up 88% y/o/y.
8)The NFIB small business optimism index for June fell almost 2 pts m/o/m to 103.3 from 105.0 in May and vs 103.5 in April. Plans to Hire fell 2 pts to 19%, a 3 month low but just back to the 6 month average. There was also a 2 pt drop in Positions Not Able To Fill and declines in Compensation Plans, both current and future. After seeing a 3 pt jump last month in Capital Spending plans, they fell 4 pts in June to 26%, matching the lowest since December. Those expecting to Increase Inventory was up 1 pt but to a 6 month high. Ahead of Q2 earnings season, Positive Earnings Trends fell 6 pts to a 3 month low (slower sales, higher labor and material costs were mostly cited). Those expecting Higher Selling Prices jumped by 7 pts to 17%, matching the highest since May 2018. The NFIB got snarky on this last point, “The Federal Reserve will like the June actual and planned price changes, indicating a pick up in inflation. The rest of us, not so much.” Those that Expect a Better Economy was unchanged but holding at the best since November. On the flip side, those that Expect Higher Sales fell 6 pts to a 4 month low and those that said it’s a Good Time to Expand fell by 6 pts giving back all of the May increase. The NFIB said “As expectations for sales gains and the general business environment faded, uncertainty levels increased.” They did also say, “The economy is still advancing at a solid pace, but it is expected to be a slower pace than the first quarter.”
9)The number of job openings in May slowed to 7.32mm from 7.37mm in April and below the estimate of 7.47mm. It’s still a high level of openings but the least in 3 months thru May. Hiring’s also fall as does the number of quitters.
10)Wholesale inventories in May rose .4% m/o/m but because sales rose less, the inventory to sales ratio rose to 1.35, matching the most since May 2016.
11)The Singapore economy contracted by 3.4% q/o/q annualized, well worse than the forecast of up .5%. Versus last year, growth was just .1% vs the estimate of up 1.1%. Exports saw their largest drop in more than 3 years and the production of electronics, the key to their economy, fell for the 6th straight month.
12)Chinese exports in June fell 1.3% y/o/y as expected but imports fell 7.3%, more than the estimate of a 4.6% decline. Many imports eventually end up in exports.
13)China said that aggregate financing in June totaled 2.26T, well more than the forecast of 1.9T with all of the upside being from non bank finance. Bank loan growth actually was a bit light relative expectations making up 1.66T of the 2.26T vs the estimate of 1.7T. Money supply growth, as measured by M2, was as expected at 8.5%, the same pace as in May. Mortgage debt and corporate loans saw the notable increases from May. Also, local government bond issuance was a likely contributor to the non bank numbers.
14)China CPI rose 2.7% y/o/y in June as expected with food price inflation remaining a big problem in response to the aftermath of the swine flu. Food prices have spiked by 8.3% y/o/y. Taking out food and energy has prices rising by a more modest 1.6%. Producer prices were flat y/o/y, a touch below the estimate of up .2% vs the tough comparison of a 4.7% rise in June 2018.
15)Wage gains in Japan continue to disappoint as regular base pay in May fell .6% y/o/y, now down for the 5th straight month y/o/y. Only a rise in overtime pay and bonus’ helped cushion the overall decline to just .2% y/o/y.
16)Japan said its May machinery orders, which are hugely volatile month to month, fell 7.8% m/o/m, about twice the estimate of a decline of 3.8%. This follows a 5.2% gain in April.
17)Turkish President Erdogan fires the head of the Turkish central bank.