China Caixin PMI manufacturing dropped to 50.4, continued recovery

    China Caixin PMI Manufacturing dropped from 51.7 to 50.4 in July, below expectation of 51.5. Caixin said there were softer increases in output and new orders. Employment fell at quicker pace. Input cost inflation slowed notably while prices charged fell again.

    Wang Zhe, Senior Economist at Caixin Insight Group said: “In general, the eased Covid situation and restrictions facilitated a continuous recovery in the manufacturing sector in July. Supply and demand continued to improve, with supply stronger than demand. Employment lagged, remaining in contractionary territory. Costs gradually rose, with output prices on the decline, posing challenges for company profits. The market held on to positive sentiment, along with concerns about the economic outlook.”

    Full release here.

    Japan PMI manufacturing finalized at 52.1, headline masked worrying trends

      Japan PMI Manufacturing was finalized at 52.1 in July, down from June’s 52.7. That’s the lowest level since September 2021. S&P Global said there were renewed reductions in output and new orders. The softest rise in outstanding business 17 months was due to weaker demand. Rising prices and delivery delays led to accelerated stock building.

      Usamah Bhatti, Economist at S&P Global Market Intelligence, said: “The Japanese manufacturing sector saw a modest improvement in operating conditions at the start of the second half of the year, however the headline PMI masked some worrying trends when looking at the underlying sub-indices, which add downside risks for the sector. New order inflows fell for the first time in ten months and at the fastest pace since November 2020, which contributed to a renewed contraction in production levels – the first since February.

      “Weaker demand conditions also contributed to reduced pressure on operating capacity. Backlogs of work increased at the softest rate in 17 months, which hints at a further weakening of output over the coming months.

      “Anecdotal evidence also pointed to an acceleration in stock building activity among Japanese goods producers. Firms often cited that rising prices and delivery delays had led to greater purchasing activity and holdings of raw materials and other inputs, while delays meant that manufacturers held on to finished items until logistical capacity improved.

      “Beyond the immediate future, firms remained confident about the year-ahead outlook for output, though the degree of optimism was little-changed from June. That said, increased downside risks from price and supply pressures remain apparent. S&P Global estimates that industrial production will rise only 0.2% in 2022, meaning that output lost to the pandemic is unlikely to be recovered until the start of 2024.”

      Full release here.

      Australia AiG manufacturing dropped to 52.5, manufacturers simply can’t meet demand

        Australia AiG Performance of Manufacturing Index dropped -1.5 to 52.5 in July. Looking at some details, production dropped sharply by -7.2 to 47.5. Employment dropped -0.9 to 50.1. New orders rose 4.2 to 59.9. Supplier deliveries dropped -4.1 to 47.4. Exports dropped -1.8 to 51.2. Input prices dropped -9.6 to 79.7. Selling prices dropped -3.3 to 64.5.

        Innes Willox, Chief Executive of Ai Group said: “The supply and labour constraints afflicting the Australian economy are weighing heavily on the manufacturing sector. Production and employment both fell in July, as manufacturers struggle with chronic labour shortages and supply chain interruptions. New orders rose this month, but our manufacturers simply can’t meet this demand without more workers.”

        Full release here.

        Fed Kashkari: Technically in a recession or not, Fed is committed to fight inflation

          Minneapolis Fed President Neel Kashkari said in a CBS interview on Sunday, “we are a long way away from achieving an economy that is back at 2% inflation, and that’s where we need to get to.”

          “Whether we are technically in a recession or not doesn’t change my analysis,” he added. “I’m focused on the inflation data. I’m focused on the wage data. And so far, inflation continues to surprise us to the upside. Wages continue to grow.”

          “Typically, recessions demonstrate high job losses, high unemployment, those are terrible for American families. And we’re not seeing anything like that,” he said.

          “Whether we are technically in a recession or not doesn’t change the fact that the Federal Reserve has its own work to do, and we are committed to doing it,” Kashkari said.

           

          Canada GDP unchanged in May, grew 0.1% mom in Jun

            Canada GDP was essentially unchanged in May, better than expectation of -0.2% mom contraction. Services-producing industries rose grew 0.4% mom while goods-producing industries contracted -1.0%. 14 of 20 industrial sectors increased.

            Advance information indicates that GDP grew 0.1% mom in June, as output was up in the construction, manufacturing, and accommodation and food services sectors. Also, GDP grew 1.1% qoq in Q2.

            Full release here.

            US PCE inflation rose to 6.8% yoy, core CPI rose to 4.8% yoy

              US personal spending rose 0.6% mom or USD 133.5B in June, above expectation of 0.5% mom. Personal spending rose 1.1% mom or USD 181.1B, above expectation of 0.9% mom. The rise in spending reflected USD 94.9B increase in goods and USD 86.2B in services.

              Headline PCE price index accelerated from 6.3% yoy to 6.8% yoy, above expectation of 6.7% yoy. That’s also the highest level since January 1982. Core PCE price index also rose from 4.7% yoy to 4.8% yoy, above expectation of 4.7% yoy.

              Full release here.

              Eurozone CPI rose to record 8.9% yoy, core CPI rose to 4% yoy

                Eurozone CPI rose from 8.6% yoy to 8.9% yoy in July, above expectation of 8.7% yoy. That’s also another record high. CPI core (all-items ex energy, food, alcohol & tobacco) rose from 3.7% yoy to 4.0% yoy, above expectation of 3.8% yoy.

                Looking at the main components inflation, energy is expected to have the highest annual rate in July (39.7%, compared with 42.0% in June), followed by food, alcohol & tobacco (9.8%, compared with 8.9% in June), non-energy industrial goods (4.5%, compared with 4.3% in June) and services (3.7%, compared with 3.4% in June).

                Full release here.

                Eurozone GDP grew 0.7% qoq in Q2, EU up 0.6% qoq

                  Eurozone GDP grew 0.7% qoq in Q2, well above expectation of 0.1% qoq. Comparing with same quarter of last year, GDP grew 4.0% yoy.

                  EU GDP grew 0.6% qoq, 4.0% yoy. Among the Member States for which data are available for the second quarter 2022, Sweden (+1.4%) recorded the highest increase compared to the previous quarter, followed by Spain (+1.1%) and Italy (+1.0%). Declines were recorded in Latvia (-1.4%), in Lithuania (-0.4%) and in Portugal (-0.2%). The year on year growth rates were positive for all countries.

                  Full release here.

                  Swiss KOF dropped to 90.1, economy to develop sluggishly in Autumn

                    Swiss KOF Economic Barometer dropped sharply from 95.2 to 90.1 in July, well below expectation of 95.2. That’s also the third decline in a row, with the value below its long-term average by almost 10 pts. KOF said the Swiss economy is likely to “develop sluggishly in autumn”.

                    KOF said: “The retreat in July is led by the bundle of indicators for manufacturing. But the outlook is also much less favourable than before in accommodation and food service activities, other services, and financial and insurance services. The negative tendency is also evident in the bundle of indicators for private consumption in general. The decline is dampened somewhat by the indicators for construction and foreign demand.”

                    Full release here.

                    Gold tentatively bullish but 1800 region as key hurdle

                      Gold’s rebound from 1680.83 short term bottom picks up further momentum on broad based Dollar selling. Further rise is now expected as long as 1733.85 minor support holds, for channel resistance at 1778.91. But there are a couple of hurdles to overcome ahead, including, 1786.65 support turned resistance, 55 day EMA (now at 1791.10), 1800 psychological level, and 55 week EMA (now at 1831.13).

                      In the bigger picture, the view is unchanged that price actions from 2074.84 (2020 high) are in form of a three wave consolidation pattern, with fall from 2070.06 as the third leg. Strong support is expected at 1682.60, with 38.2% retracement of 1046.27 to 2074.84 at 1681.92, to complete the pattern. This is what has been happening so far. Sustained break of the above mentioned resistance zone between 1786.65 and 1831.13 will solidify this view and bring stronger rally back to retest 2074.84 high.

                      France GDP grew 0.5% qoq in Q2 on dynamism of exports

                        France GDP grew 0.5% qoq in Q2, better than expectation of 0.2% qoq.

                        Foreign trade contributed to +0.4 points to GDP growth this quarter, after +0.1 points in the previous quarter. This large contribution is due to the dynamism of exports (+0.8% after +1.6% in Q1 2022), coupled with the decline of imports (-0.6% after +1.2%).

                        The contribution of final domestic demand (excluding inventories) to GDP growth was null this quarter. Household consumption expenditure fell again, but more moderately than in the previous quarter (-0.2% after -1.3%). Gross fixed capital formation (GFCF) continued to grow at a rather vigorous pace (+0.5%, as in the previous quarter).

                        Finally, the contribution of inventory changes to GDP growth was weakly positive this quarter (+0.1 points after +0.2 points in Q1).

                        Full release here.

                        Japan industrial production rose record 8.9% mom in Jun, recovery to continue

                          Japan industrial production rose strongly by 8.9% mom in June, well above expectation of 3.7% mom. That’s also the biggest monthly rise since data become available in 2013. Car production jumped 14.0% mom thanks to easing of lockdowns in Shanghai of China. Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to extend its recovery by 3.8% in July and 6.0% in August.

                          Also released, retail sales rose 1.5% yoy in June, below expectation of 2.8% yoy. Unemployment rate was unchanged at 2.6% in June. Housing starts dropped -2.2% yoy in June, versus expectation of -1.2% yoy. Consumer confidence dropped from 32.1 to 30.2 in July, below expectation of 33.0.

                          BoJ opinions: Appropriate to encourage wage increases through monetary easing

                            In the Summary of Opinions at BoJ’s July 20 and 21 meeting, it’s noted that, “Bank should support financing, mainly of firms, and maintain stability in financial markets, and should not hesitate to take additional easing measures if necessary.” Additionally, it is “appropriate for the Bank to maintain the current forward guidance for the policy rates.”

                            “While Japan’s economy is on its way to recovery from the pandemic, it has been under downward pressure due to an outflow of income from Japan caused by high commodity prices,” one member noted. “In this situation, it is appropriate that the Bank encourage wage increases through monetary easing, aiming to achieve the price stability target in a sustainable and stable manner”.

                            Full summary of opinions here.

                            US initial jobless claims dropped to 256k

                              US initial jobless claims dropped -5k to 256k in the week ending July 23, versus expectation of 248k. Four-week moving average of initial claims rose 6.25k to 249.25k.

                              Continuing claims dropped -25k to 1359k in the week ending July 16. Four-week moving average of continuing claims rose 8.75k to 1362m.

                              Full release here.

                              US GDP contract -0.9% in Q2, second quarter of contraction

                                US GDP contracted an annualized -0.9% in Q2, much worse than expectation of 0.4% rise. That’s the second quarter of contraction, after Q1’s -1.6% annualized.

                                BEA said: “The decrease in real GDP reflected decreases in private inventory investment, residential fixed investment, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by increases in exports and personal consumption expenditures (PCE). Imports, which are a subtraction in the calculation of GDP, increased”

                                Full release here.

                                Eurozone economic sentiment dropped to 99.0 in Jul

                                  Eurozone Economic Sentiment Indicator dropped from 103.5 to 99.0 in July. Industrial confidence dropped from 7.0 to 3.5. Services confidence dropped from 104.1 to 10.7. Consumer confidence dropped from -23.8 to -27.0. Retail trade confidence dropped from -5.2 to -6.8. Construction confidence dropped from 103.5 to 99.0. Employment Expectations Indicator dropped from 110.2 to 107.0.

                                  EU Economic Sentiment Indicator dropped from 101.8 to 97.6. Employment Expectations Indicator dropped from 110.2 to 106.6. In the EU, the drop in the ESI in July was due to significant losses in industry, services, retail trade and consumer confidence, whereas confidence in construction decreased more mildly. The ESI fell markedly in four out of the six largest EU economies, Spain (-5.0), Germany (-4.9), Italy (-3.4) and Poland (-3.2), while it remained broadly stable in France (-0.1) and the Netherlands (+0.2).

                                  Full release here.

                                  NZ ANZ business confidence improved to -56.7, business feeling apprehensive

                                    New Zealand ANZ business confidence improved from -62.6 to -56.7 in July. Own activity outlook rose from -9.1 to -8.7. Employment intentions rose from 0.7 to 1.1. Pricing intentions rose from 73.7 to 74.0. Inflation expectations rose from 6.02 to 6.23.

                                    ANZ said that most activity indicators were little changed, but residential construction intentions plummeted again to a fresh record low (-73.7). Inflation pressures remain intense, but may be topping out.

                                    It added: “New Zealand businesses are well aware that the Reserve Bank is on a mission to reduce customer demand for their wares in order to reduce inflation. No wonder they’re feeling apprehensive.”

                                    Full release here.

                                    Australia retail sales rose 0.2% mom in Jun, sixth-straight monthly rise

                                      Australia retail sales rose 0.2% mom to AUD 34.2B in June, below expectation of 0.4% mom. Through the year, sales rose 12.0% yoy.

                                      Ben Dorber, head of retail statistics at the ABS, said: “While the 0.2 per cent rise in June 2022 was the sixth-straight rise in retail turnover, it was also the smallest so far this year….

                                      “Given the increases in prices we’ve seen in the Consumer Price Index, it will also be important to look at changes in the volumes of retail goods, in next week’s release of quarterly data.”

                                      Full release here.

                                      BoJ Amamiya: We need to support economic activity with accommodative monetary policy

                                        Deputy Governor Masayoshi Amamiya said, “Japan’s economy hasn’t recovered yet to pre-pandemic levels… The foundations for an economic recovery remain weak and the outlook for wages is highly uncertain. As such, we need to support economic activity with accommodative monetary policy.”

                                        “Achieving our price target means having consumer inflation hit 2% on average over the business cycle, not a temporary rise to that level driven by exogenous factors such as increasing energy import costs,” he emphasized.

                                        Japan’s CPI core (all-item ex fresh food), has been above BoJ’s 2% target for three straight months. But officials are seeing it as temporary, at least until wage pressures build up.

                                        DOW resuming near term rebound as Fed Powell signals slowing tightening ahead

                                          US stocks staged a strong rebound overnight after Fed Chair Jerome Powell hinted that tightening could slow ahead. After yesterday’s 75bps hike, federal funds rate is now at 2.25-2.50%, close to the 2.5% neutral rate.

                                          “While another unusually large increase could be appropriate at our next meeting, that is a decision that will depend on the data we get between now and then,” Powell said. “We will continue to make our decisions meeting by meeting, and communicate our thinking as clearly as possible.”

                                          “As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation,” he also noted.

                                          DOW rose 436 pts or 1.37% to close at 31799. Rebound from 29653.29 is resuming and the break above 55 day EMA again is a positive signal. Further rally is now in favor, as long as 31534.08 minor support holds, towards 33272.34 resistance. Firm break there will add to the case that whole corrective fall from 36952.65 has completed.