1) Initial jobless claims totaled 213k, 7k less than expected and down from 219k last week. The 4 week average fell by 1k to 214k which hovers just above the lowest level since 1969. Continuing claims, delayed by a week, rose 29k after falling by 21k last week.
2) US producer prices in July were unchanged m/o/m instead of rising .2% as expected. The core rate was higher by .1% vs the .2% estimate and both are down from .3% gains in June. Versus last year, headline PPI was up 3.3% headline and 2.7% core, both one tenth less than expected and down one tenth from June. Both are off last month’s 7 year highs. Keeping a lid on the headline number was the m/o/m declines in food and energy prices. Goods prices though ex food and energy were higher by .3% m/o/m for the 6th month in the past 7 but tough to say what is tariff related and what is not.
3) The number of job openings in June rose a touch m/o/m in June. They totaled 6.662mm, up a bit from 6.659mm in May. Hiring’s though fell by 96k likely reflecting the difficulty finding people and the hiring rate ticked down by a tenth to 3.8%. The number of quitters fell but the quit rate held at the highest in this expansion
4) Japan’s economy in Q2 grew by 1.9%, above the 1.4% estimate but with the Q1 downward revision to a .9% contraction from .6% initially, it wasn’t that far off from the forecast. Consumer spending was better than expected, hopefully finally benefiting from the improvement in wage and salary growth and bonus pay. Business spending also was better.
5) Japan reported wage data for June and regular base pay held at 1.3% y/o/y growth which is the quickest since 1997. The drum tight labor market is finally leading to higher earnings. There was also a 3.5% jump in overtime pay and a 7% increase in bonus’. The net result was a 3.6% y/o/y spike in cash earnings, double the estimate and also the biggest rise since 1997.
6) Chinese exports in July in yuan rose 6% y/o/y, a touch above the estimate of up 5.6% while imports jumped by 21%, well more than the forecast of up 12.5%. Helping to lift imports were higher energy prices and imports jumped for oil, iron ore, coal and natural gas. It’s impossible to know what activity was pulled forward ahead of upcoming tariffs where we saw new US detailed plans this week for the next tranche.
7) China reported a very slight rise in FX reserves in July of $3.118 Trillion, just above the estimate of $3.107 Trillion.
8) Manufacturing production in France surprised to the upside in June.
9) Germany June exports were flat m/o/m, a touch above the estimate of down .3%.
10) Hopes that the Trump-Juncker meeting a few weeks ago will lead to an easing of tensions with Europe led to a jump in the Sentix Eurozone investor confidence index. It rose 2.6 pts to 14.6, off the June low of 9.3 but still well off the January high of 33. Sentix said “A complete all clear cannot yet be given, because with negative expectations, the economy is still in a cooling off phase. But investors seem to see the dangers of an escalation in the trade dispute initiated by US President Trump much less acute.”
1) The July consumer price index rose by .2% m/o/m both headline and core as expected. The y/o/y headline gain was 2.9% while the core rate accelerated to a gain of 2.4% y/o/y from 2.3% vs the estimate of no change. Go back to September 2008 the last time we saw a faster rate of core inflation. Services inflation ex energy rose .3% m/o/m and 3.1% y/o/y. On the goods side, prices rose .1% m/o/m and doesn’t sound like much at all but it is the first month since February that saw a gain.
2) More evidence of how US tariffs on China can boomerang back to hurt US business. Within the proposed $200b of additional tariffs on China, the WSJ reports today that it includes dozens of varieties of fish. “An estimated $900mm in fish and seafood on that list is first caught in the US, sent to China for processing into items like fish sticks and fillets, and then imported by US companies to sell to America consumers.” Thus, US companies would end up paying the tariff meant for China. The same is currently occurring for US semiconductor companies that send product to China for packaging and then reimport back to the US.
3) With mortgage rates at a 7 year high and the average price of a home at a record high, mortgage applications to buy a home fell 2% w/o/w and down for the 4th straight week. It is now down by 1.6% y/o/y and the index is at the lowest level since mid February. Refi’s fell by 4.5% w/o/w and 35% y/o/y. This index stands at the weakest level since December 2000.
4) The Turkish lira has collapsed 23% just this week and by 47% over the past 12 months. Their 10 yr yield now exceeds 20%. The ECB highlights the outsized bank exposure of UniCredit, BNP Paribas and BBVA. As of this writing, the Euro STOXX bank stock index is at the lowest level since December 2016. Gold is again proving its value 5000 years later for those citizens lucky enough to have some there.
5) Brexit worries grow that no deal will occur by the March exit and the pound falls to a two year low vs the US dollar and near a one year low vs the euro. Last weekend the pro Brexit Trade Secretary Liam Fox said that the odds of no trade deal by the time the UK leaves the EU in March is 60-40. Responding to this today was a UK Spokesman who said “We continue to believe that the most likely outcome is reaching a good deal because it is not only in the interests of the UK, it’s in the interests of the EU.”
6) Japanese PPI in July rose 3.1% y/o/y, two tenths more than expected, up from 2.8% in June and it’s the most since November.
7) The always volatile Japanese machine orders in June fell 8.8% m/o/m, much worse than the estimate of down 1% and follows a 3.7% drop in May and a 10.1% spike in April.
8) The UK economy grew 1.3% y/o/y in Q2 as expected and a slight uptick from the 1.2% seen in Q1. It’s the 10th quarter in a row with a 1 handle though and which began around the time of the Brexit vote. Manufacturing had the slowest quarter since 2012 but was offset by services and construction. Consumer spending and business investment rose too.
9) German industrial production was softer than expected with a .9% m/o/m drop in June, 4 tenths more than forecasted and May was revised down by 2 tenths.
10) In June German factory orders fell 4% m/o/m and .8% y/o/y vs the estimate of down .5% m/o/m and up 3.4% y/o/y. That monthly drop is the worst in about a year and a half. The weakness was across the board regionally – domestic, within the eurozone and outside. The German Ministry said “Regarding the latest development, uncertainty caused by trade policy probably played a role.”
11) China reported its inflation data and both CPI and PPI came in one tenth more than forecasted. CPI for July rose 2.1% y/o/y vs 1.9% in June. Inflation ex food and energy held at 1.9% for the 3rd straight month. As for producer prices, they were up by 4.6% y/o/y vs 4.7% in June.
12) The Russian ruble drops 6% on the week as a new batch of sanctions get announced.