1)Core retail sales in June exceeded expectations with a .7% m/o/m increase, more than twice the estimate of up .3% and May was revised up one tenth to a gain of .6%. Versus last year, core sales improved to a 4.6% y/o/y increase.
2)The July Philly manufacturing index saw a sharp snapback, rising to 21.8 from .3 and that was well above the estimate of 5.0. It printed 16.6 in May and the July read is the best since July 2018. Also positively, the 6 month outlook jumped to 38 from 21.4 and that’s the best read since May 2018. Capital spending plans rose by 7 pts to the highest since February 2018. Keep in mind that this data was in stark contrast to what the same Philly Fed said about its region in the Beige Book this week.
3)The NY July manufacturing index was a bit better than expected at 4.3 vs the estimate of 2 and an uptick from the weak June print of -8.6. It though was 17.8 in May. As for the overall business activity 6 month outlook, it got back what it lost in June and settling at 30.8 vs 25.7 in June and 30.6 in May. After falling by 16 pts last month, capital spending plans rose 8.5 pts. Spending plans on technology, the bright spot within capital spending, rose 1.6 pts but only after falling by 10 pts in June.
4)Initial jobless claims totaled 216k, exactly as expected and up from 208k last week (revised down by 1k). This left the 4 week average at 219k. Continuing claims, delayed by a week, fell by 42k after rising by 32k last week.
5)The NAHB July home builder survey rose 1 pt to 65 from June. The estimate was for no change and the 3 month average is also 65. Each of the 3 components rose 1 pt m/o/m, present conditions, future expectations and prospective buyers traffic (still below 50 though). The NAHB comments in the press release were mixed. The NAHB Chairman said that “Builders report solid demand for single family homes.” But, the NAHB chief economist said “The current low mortgage interest rate environment should be getting more buyers off the sidelines, but they remain hesitant due to affordability concerns” as “home prices continue to outpace incomes.” On the supply side, the issues remain. “They continue to grapple with labor shortages, a dearth of buildable lots and rising construction costs that are making it increasingly challenging to build homes at affordable price points relative to buyer incomes.”
6)Import prices remain soft, falling .4% m/o/m, double the estimate of a .2% drop. China is lowering prices remain competitive to offset the tariffs that US companies pay (no, China is not physically paying the tariffs intended for them). If US companies then try to offset this by raising prices, that will not show up in import prices.
7)The Band of Korea and Bank of Indonesia both cut interest rates by 25 bps, the former has little room while the latter has much more. Either way, will it really matter?
8)Chinese industrial production, retail sales and fixed asset investment all beat the estimates.
9)For the sake of its aging population and level of interest rates, June CPI in Japan ex food and energy rose just .5% y/o/y as expected and the same pace seen in May.
10)UK retail sales ex fuel surprised to the upside in June with a 1% rise m/o/m vs the estimate of a .3% drop. But, strangely the ONS said charity shop sales and auctions of antiques led the upside.
11)UK wage growth was solid for the 3 months ended May, rising 3.6% y/o/y ex bonus’, the best since the summer of 2008.
1)Housing starts in June totaled 1.253mm, slightly below the estimate of 1.260mm and May was revised down by 4k to 1.265mm. This brings the 3 month average to 1.263mm vs the 6 month average of 1.238mm and the 12 month of 1.223mm. Thanks mostly to multi family though have these figures hung in. In June, single family starts rose but is still below its 6 and 12 month averages while multi family moderated. Permits totaled 1.22mm, well below the forecast of 1.3mm and that is the least since May 2017. The weakness here was all in multi family as they fell by 82k m/o/m but after a pretty solid run. Single family starts were little changed at 813k vs 810k in May.
2)The June Architecture Billings Index broke below the 50 dividing line between expansion and contraction. It was 49.1 down from 50.2 in May. The Chief Economist of the AIA said “With billings declining or flat for the last five months, it appears that we are settling in for a period of soft demand for design services. With the new design contracts score reaching a 33 month low and the project inquiries score hitting a 10 yr low, work in the pipeline may start to get worked off, despite current robust backlogs.”
3)The average 30 yr mortgage rate jumped 8 bps w/o/w to 4.12% according to the MBA and coincident with the rise in Treasury yields. The impact though was mixed as applications to buy a home fell 3.8% w/o/w but remain up 7% y/o/y (easy comparison considering where mortgage rates are now) while refi’s were up 1.5% w/o/w but only after a decline of 6.5% last week. Versus last year, the rise is still robust in refi’s by 87%.
4)The Cass Freight Index for June fell 5.3% y/o/y in June, the 7th straight month of declines and Cass Freight repeats what it said in May, “the shipments index has gone from ‘warning of a potential slowdown’ to ‘signaling an economic contraction.’” They even raise the prospect based on this index “Will the Q2 ’19 GDP be negative?” The main concerns? 1)”We are concerned about the severe declines in international airfreight volumes (especially in Asia) and the ongoing swoon in railroad volumes, especially in auto and building materials;” 2)”We see the weakness in spot market pricing for transportation services, especially in trucking, as consistent with and a confirmation of the negative trend in the Cass Shipments Index”; 3)”As volumes of chemical shipments have lost momentum, our concerns of the global slowdown spreading to the US, and the trade dispute reaching a ‘point of no return’ from an economic perspective, grow.”
5)Industrial production in June saw no change m/o/m, one tenth less than expected. Manufacturing production however beat the estimate by one tenth with its .4% m/o/m increase. Weighing on the headline figure was the decline in utility output due to the weather while motor vehicle/parts mostly boosted the manufacturing side. Capacity utilization ticked down to 77.9% from 78.1%.
6)While inventories rose .3% as expected, sales rose .2% and the inventory to sales ratio held at 1.39, just below the highest since November 2016.
7)Japan said its June exports fell 6.7% y/o/y, more than the forecast of a 5.4% drop and follows a 7.8% y/o/y fall in May. This is the 7th month in a row of y/o/y declines. Exports to the US were fine, rising almost 5% but plunged by 10% to China. Imports fell by 5.2%, well more than the forecast of a decline of .2%.
8)Notwithstanding disappearing rates and all that QE, the BoJ loan demand survey said business demand for loans fell to the lowest since 2013 when Abenomics was just starting.
9)Australia saw almost no job growth in June as employment rose by .5k instead of rising by 9k as expected. The unemployment rate though held at 5.2%.
10)In Singapore, non oil exports plunged by 17.3% y/o/y, well worse than the estimate of a 9.6% drop. Within this and mostly driving the decline, electronic exports dropped by 32% y/o/y vs the forecast of 22%. This is now the 5thmonth in the past 6 seeing y/o/y declines and the June drop is the biggest since February 2013.
11)Exports in Indonesia fell 9% y/o/y in June vs the estimate of down 6.8%.
12)While conveniently as expected Chinese GDP growth of 6.2% y/o/y for Q2 was the slowest since data going back at least to 1992 when the data started to get collected.
13)The June CPI figure for the Eurozone was revised up by one tenth at the headline level to 1.3% while the core rate was left unchanged, higher by 1.1%.
14)UK job growth for the 3 months ended May was less than expected at 28k vs the forecast of 45k but the unemployment rate held at just 3.8%.
15)UK June jobless claims jumped by 38k, the most since May 2009 and pointing to future weakness in hiring.
16)EU28 car registrations fell 7.8% y/o/y in June.
17)In Germany, the ZEW index for July, measuring investor confidence in the German economy, fell to -24.5 from -21.1, the lowest since October 2018 and below the estimate of -22. The Current Situation component also softened further and fell below zero at -1.1 from +7.8. The estimate was +5.0. ZEW said “A lasting containment of the factors that are causing uncertainty in the export oriented sectors of the German economy is currently not in sight…the ongoing trade dispute between the USA and China is a burden not only to Chinese economic development. Furthermore, no discernible progress has been made in the negotiations as to what Brexit will look like.”