Positives
1)The further reopening of the global economy was reflected in the July goods trade data where exports rose 11.8% m/o/m after a 14.3% rise in June. Imports jumped by 11.8% m/o/m after increasing 5.1% in June. On an absolute basis for perspective, exports totaled $115b vs $136b in July 2019 and vs $137b in February 2020. Imports were $194b vs $196b in February 2020 and $210b in July 2019.
2)Core PCE for July was about as expected when we include the June upward revision. Versus last year headline PCE was up by 1% vs .9% in June. Core PCE was up by 1.3% vs 1.1% in the month prior.
3)Personal income was up .4% m/o/m in July vs the estimate of down .2%. Government transfer payments were an obvious help. Private sector wages/salaries rose 1.4% m/o/m and which compares to 1.2% in February.
4)Pending home sales in July rose 5.9% m/o/m, above the estimate of up 2%. Regionally, the Northeast was the standout with a 25% m/o/m spike. The South was up 1%, the West by 6.8% and the Midwest higher by 3.3% m/o/m. The chief economist of the NAR was ebullient, “We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market. Home sellers are seeing their homes go under contract in record time, with 9 new contracts for every 10 new listings.”
5)For the 2nd week, mortgage applications to purchase a home were little changed, up by .4% w/o/w but the y/o/y numbers are still impressive, up by 33%.
6)New home sales in July jumped to 901k from 791k and was well above the estimate of 790k. The 3 month average of 793k compares with the 2019 average of 685k.
7)Core durable orders in July were a bit better than expected with a 1.9% m/o/m increase, two tenths more than expected and enhanced by the 9 tenths upward revision to June. Versus last year, this metric is exactly flat. Orders for vehicles and parts helped a lot, rising by 22% after an 86% rise in the month prior as inventories are rebuilt after almost nothing was produced in March and April.
8)The final August UoM consumer confidence index was 74.1 vs the initial print of 72.8, which was also the estimate and up from 72.5 in July and vs 78.1 in June and 72.3 in May. The low was 71.8 in April and 101 in February. Versus July, Current Conditions were unchanged while Expectations got back some of what it lost in July. One yr inflation expectations rose a tenth to 3.1% and marks the 5th straight month with a 3 handle for the first time since 2014. The UoM’s bottom line was this: “Consumer sentiment has remained trendless in the same depressed range it has traveled in the past five months…The small August gain reflected fewer concerns about the year ahead outlook for the economy, although those prospects still remained half as favorable as six months ago.” There was “persistent optimism that an effective vaccine would ultimately end the pandemic” and this helped the expectations component.
9)The Eurozone August Economic Confidence Index improved to 87.7 from 82.4 and that was 2.7 pts higher than expected. The index got a lift from services, retail and manufacturing while consumer confidence improved just slightly and construction fell a touch. This index is at a 5 month high but still well below the 103.4 print seen in February.
10)The August German IFO business confidence index rose to 92.6 from 90.4 and that was a touch above the estimate of 92.1. Most of the gain was in the Current Assessment category as Expectations rose only slightly. The IFO wrote succinctly, as is their way, “The German economy is on the road to recovery.”
11)Business confidence in France in August jumped by 7 pts m/o/m to 91 and that was 3 pts above expectations with all components higher. This is the best read since March when it was at 94 but it is still 14 pts below where it was in February.
12)Tokyo reported its August CPI and the core/core rate fell .1% y/o/y instead of rising by .4% as expected after a .6% rise in July. The caveat here though is the main reason for the decline was because of the country’s “Go To Travel” program which subsidized the cost of hotel stays to encourage people to travel. Taking this out saw prices ex food up .2% instead of falling by .3%.
13)Hong Kong exports for July were down 3% y/o/y but spot on with the estimate while imports weren’t down as much as forecasted, lower by 3.4% vs the estimate of down 5.8%. With China just about fully open and growing again, exports there rose 5.2% y/o/y but fell by 20% to the US and Germany by 16.5% to name a few other large economies.
14)Abbott Labs new Covid single use test with results in 15 minutes and an almost 100% accuracy rate was great news.
Negatives
1)The Fed’s Powell further elaborates on the ‘inflation symmetry’ concept and implementation that had been codified in the FOMC statements this year. I listed my 10 issues with them yesterday but to say succinctly, a period of inflation running above 2% would weaken consumer spending, result in lower real wages, raise the cost of doing business, and would lead to higher interest rates which would suffocate a wildly overindebted economy.
2)Initial jobless claims totaled 1.01mm, about in line with the estimate of exactly 1mm and this is down 100k w/o/w. Pandemic Unemployment Assistance did rise for the 2nd week to 608k up from 525k last week. Continuing claims, delayed by a week, was 14.54mm vs the estimate of 14.4mm.
3)The August Chicago manufacturing index was little changed from July slipping to 51.2 from 51.9. The estimate was 52.6. It’s the 2nd month in a row above 50 for the first time since May and June 2019.
4)Refi’s took a breather, down for the 4th week in the past 5, lower by 10.2% w/o/w and up ‘only’ 35% y/o/y but off from the triple digits we saw recently.
5)The Conference Board consumer confidence index for August fell to a 6 year low at 84.8 vs 91.7 in July and well below the estimate of 93. Most of the decline was in the Present Situation component. There was weakness in the answers to the jobs questions as well as income. Spending intentions fell across the board. One year inflation expectations were 6% vs 6.1% which compares with 4.5% in February and the five yr average of 4.8%.
6)The consumer mood in Germany reversed lower as the GFK confidence index fell to -1.8 from -.2 last month and vs the average of +1.
7)There was no change in the August French consumer confidence index m/o/m at 94 and this is only 2 pts above the low seen in May and vs the 104 print in February.
8)The UK CBI retail sales index for August went back below zero at -6 from +4 and vs the estimate of +6. Also of note within, “Retail employment fell at the fastest rate since February 2009 in the year to August, with an even sharper decline anticipated in the year to September.”
9)With the flood of help from the ECB, money supply in the Eurozone region rose 10.2% y/o/y above the estimate of up 9.2% and vs 9.2% in June. Loans to households though were only up 3%, the same pace seen in June. Loans to businesses were up by 7% vs 7.1% in June.