Category Archives: China

Manhattan home prices, Capital goods imports, Rails, Euro area industrial production, China imports

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Still in contraction:

China Imports Tumble in June

Imports to China plunged 7.3 percent from a year earlier to USD 161.86 billion in June 2019, much worse than forecasts of a 4.5 percent drop, a further sign of weak domestic demand that could lead Beijing to add more stimulus. Purchases fell for: unwrought copper (-27.2 percent); iron ore (-9.7 percent); and soybeans (-25.1 percent) amid higher tariff on US cargoes and following outbreaks of African swine fever. By contrast, increases were seen in imports of crude oil (15.2 percent) and coal (6.4 percent). Among China’s largest trade partners, imports fell from the US (-31.4 percent), South Korea (-21.9 percent), Taiwan (-7.4 percent) and Japan (-5 percent), but grew from the EU (8.6 percent), Australia (8.8 percent) and ASEAN (0.4 percent).

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Employment, China, Trump speech

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The annual rate of change continues to take a dive:

Highlights

There’s still time to cancel your rate-cut party. Nonfarm payrolls shot 224,000 higher in June and well beyond Econoday’s consensus range where the high forecast was 205,000. There are no flukes in this report underscored by a 17,000 jump for what has been an uneven manufacturing sector that Federal Reserve policy makers are watching with concern. Payrolls at professional & business services jumped 51,000 as employers scramble to meet demand with contractors. Government payrolls, up 33,000, were also a large contributor to June’s growth.

China says there will be no trade deal unless existing tariffs are stripped

Continuing evidence that dementia is setting in:

“In June of 1775, the Continental Congress created a unified Army out of the Revolutionary Forces encamped around Boston and New York, and named after the great George Washington, commander in chief. The Continental Army suffered a bitter winter of Valley Forge, found glory across the waters of the Delaware and seized victory from Cornwallis of Yorktown.

“Our Army manned the air, it rammed the ramparts, it took over the airports, it did everything it had to do, and at Fort McHenry, under the rocket’s red glare it had nothing but victory. And when dawn came, their star-spangled banner waved defiant.”

Why Trump and Judy Shelton want the US back on the gold standard

‘In 2016, before his election, Trump suggested it might be time to stage a return: “Bringing back the gold standard would be very hard to do—but boy, would it be wonderful. We’d have a standard on which to base our money.” This might be dismissed as a throwaway comment, if not for Trump’s desire to put the likes of Cain, Moore, and now Shelton on the Fed board, giving a goldbug a seat at the table to steer the most powerful country’s monetary policy.’

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Small business indicators, China business survey, Car sales, FDI, Euro retail sales

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Light vehicle sales peaked a while back:


Been helping to support the $US:

Eurozone Retail Sales Fall Unexpectedly

Retail trade in the Euro Area fell 0.3% in May, following a 0.1% drop in April and missing expectations of a 0.3% growth, as sales declined for all main categories. Among the bloc’s largest economies, Germany’s retail trade decreased for the second month, while gains were recorded in France and Spain. Year-on-year, retail sales rose 1.3%, also missing forecasts of 1.6%.

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China, UK, US, Euro zone

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Global collapse continues, though you’d never know it watching the stock market:

China Inflation Rate Slows to 6-Month Low

The official Non-Manufacturing PMI in China unexpectedly inched lower to 54.2 in June, the lowest in six months, from 54.3 in the previous month and missing market consensus of

China Factory Activity Shrinks More than Estimated

The Official NBS Manufacturing PMI in China unexpectedly was unchanged at 49.4 in June 2019 and missing market expectations of 49.5. This marked the second straight month of contraction in manufacturing activity

UK Manufacturing PMI Slumps to 6-Year Low

The IHS Markit/CIPS UK Manufacturing PMI fell to 48 in June, the lowest since February 2013 and well below forecasts of 49.2. Production contracted at the fastest pace since October 2012 and new orders dropped the most for almost seven years, amid high stock levels, ongoing Brexit uncertainty, the economic slowdown and rising competition.

US Manufacturing Growth Drops to New 2-1/2-Year Low: ISM

The ISM Manufacturing PMI in the US fell to 51.7 in June 2019 from 52.1 in the previous month, beating market expectations of 51.0. Still, the latest reading pointed to weakest pace of

Markit:

US Construction Spending Unexpectedly Falls in May

US construction spending fell 0.8 percent from a month earlier at a seasonally adjusted annual rate of USD 1.29 trillion in May 2019, after an upwardly revised 0.4 percent increase in the previous…

Deeper into contraction:

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Rail traffic, Business confidence, UK imports, Trade news

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Deep in contraction:


Looks to be below 2008 levels:

So looks like the current tariffs remain. As previously suggested, the US President is narrowly focused on the money he’s collecting, as the tariffs remove $US net financial assets from the global economy and discourages transactions with the US. That is, it all functions as a transactions tax on the global $US economy:

Trump says he agreed with Xi to hold off on new tariffs and to let Huawei buy US products

Trump and Xi held their highly anticipated bilateral meeting at the G-20 summit in Japan.
The two leaders agreed to hold off on new tariffs and to proceed with trade negotiations after a series of escalations to their nations’ tariff battle threatened to disrupt the global economy.

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Manufacturing jobs, Trade, Jobless claims, Tariff news

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As previously discussed, unemployment benefits have become much harder to get than in prior cycles, which means they will go up that much less as employment slows, and also that they won’t function as an automatic fiscal stabilizer to the extent they did in prior cycles, which will work to delay a recovery:

Tariff update- more to come:

Trump says tariffs on China could be raised by another $300 billion if necessary

Former Commerce secretary: Trump’s 5% tariffs on Mexico will go into place but not any further

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Bloomberg interview, Shipping, Lending, Profits, Trade, Pending home sales

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Interest-Rate Policy Is Backward, Modern Monetary Theory Pioneer Mosler Says

Under consumption identity: for ever agent that spent less than his income, another must have spent more, or the output would not have been sold.

In other words, deficit spending, private or public, is the ‘offset’ to unspent income (savings). The chart shows one of the components of private sector deficit spending which appears to align with economic growth:

Tariffs (levied on the grounds that China and others weren’t charging us enough…) causing the collapse in exports globally, and import weakness most often is a sign of domestic demand weakness:

Highlights

Sharp declines in exports are unwelcome headlines in April’s advance data on goods trade. The monthly deficit remains very deep, at $72.1 billion with exports falling 4.2 percent year-on-year and with imports also down, 2.7 percent lower. The deficit compares unfavorably with a $71.3 billion monthly average in the first quarter that marks a weak opening for net exports in the second quarter.

Capital goods are the US’s largest exports and these fell 6.5 percent in the month to $44.3 billion. Compared with April last year, capital goods exports are down 3.7 percent. Auto exports are also down, 7.2 percent lower to $12.9 billion and 6.7 percent below last year. The only export component showing a gain is food & feeds which rose 0.5 percent to $11.2 billion but which is nevertheless 6.2 percent below April last year.

The decline on the import side is also led by a 3.5 percent decline for capital goods ($55.4 billion) but also includes 3.1 percent and 2.3 percent monthly declines in autos ($30.9 billion) and consumer goods ($54.2 billion) as well as a 1.1 percent drop in foods ($12.8 billion).

Global trade figures have been contracting and the latest US numbers are part of that picture. Today’s report gets second-quarter GDP, already held down by contractions for April retail sales and industrial production, off to a slow start.

Weakness in housing continues:

Highlights

The forecasters were optimistic but pending home sales couldn’t deliver. The index fell 1.5 percent in April vs a consensus for a 0.5 percent gain, yet the monthly drop does follow an outsized 3.9 percent revised gain in March which makes for a hard comparison. Nevertheless a decline in April is not a good indication for momentum in the spring sales season. Existing home sales have been moving higher this year but today’s report will hold down expectations for May and June.

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Retail sales, Industrial production, Interest payments, Japan profits, Euro area fiscal balance

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Weak and weaker than expected:

Highlights

The second quarter gets off to a stumbling start pulled down by a 0.2 percent headline decline in an April retail sales report where the core details show unexpected weakness. Excluding autos, in which sales were already expected to fall sharply, April sales managed only a 0.1 percent gain to fall underneath Econoday’s consensus range. Excluding autos and also gasoline sales, which were already expected to rise sharply, sales fell 0.2 percent in April to also fall below the consensus range. Just making the consensus range is a no change result for the control group, a component used in the calculation of GDP and pointing squarely to early second-quarter deceleration in consumer spending which had already decelerated sharply in the first quarter.

A 1.1 percent decline in auto sales (signaled by the prior release of unit sales at manufacturers) is no surprise and neither is a 1.8 percent jump at gasoline stations, signaled here by the price of gas. The big surprise is a 1.3 percent drop at electronics & appliance stores that follows a 4.3 percent tumble in March. Weakness here hints at lower prices for consumer electronics and also lower spending on home improvements. Furniture sales also hint at trouble for residential investment, coming in unchanged following March’s 3.1 percent decline, as do sales of building materials which fell 1.9 percent in April following, however, a 1.2 percent rise in March.

The best news in the report comes from its weakest sub-component, department stores where April sales jumped 0.7 percent. This was enough, however, to give only a small 0.2 percent lift to the overall general merchandise component. Another positive is restaurants where sales rose 0.2 percent on top of a great monthly surge of 5.7 percent in March.

Another negative surprise:

Highlights

Like retail sales earlier this morning, the headline 0.5 percent decline for April industrial production is not masking strength underneath. Also falling 0.5 percent was production at manufacturers which is even more unexpected than the headline decline.

Motor vehicles and parts, where consumer sales have been mostly soft this year, fell 2.6 percent in April for a second monthly decline and year-over-year contraction of 4.4 percent. Business equipment fell 2.1 percent in the month for yearly growth of only 0.1 percent which doesn’t point to acceleration for business investment. Consumer goods also fell, down 1.2 percent in the month with construction supplies up only 0.1 percent that follows March’s 1.7 percent dip in readings that don’t point to strength for construction in general. Selected hi tech is a positive for April, up 0.6 percent with annual growth here at 3.2 percent.

Also positive is a 1.6 percent jump in mining volumes which rose 1.6 percent in April that follows, however, three straight months of declines. Output at utilities fell 3.5 percent in April with the yearly rate of minus 4.7 percent also pointing to general industrial weakness.

However tight the US labor market may be, capacity does not appear to be tight in the industrial sector as capacity utilization fell 6 tenths in April to a much lower-than-expected 77.9 percent. Utilization in the manufacturing sector is down 5 tenths to 75.7 percent.

This report doesn’t breakdown production of goods aimed for the domestic market and those for the foreign market but it will nevertheless offer a baseline for the overall effects of increased US-China tariffs. Going into those tariffs, the manufacturing sector, which first began to slow late last year, appeared to be flat at best.


Rolling over:

Corporate Japan logs first profit dip in 3 years as China slows

Fiscal has tightened in the euro area, and now with the global trade collapse prospects are looking grim:

Euro Area recorded a Government Budget deficit equal to 0.50 percent of the country’s Gross Domestic Product in 2018. Government Budget in the Euro Area averaged -2.84 percent of GDP from 1995 until 2018, reaching an all time high of -0.50 percent of GDP in 2000 and a record low of -7.40 percent of GDP in 1995.

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Mtg purchase apps, Construction, SF home prices, ISM manufacturing, PMI chart, Trade agreement, Econ indicators

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Dismal:

Highlights

The purchase index is down a sharp 4.0 percent for a second straight week, this time for the April 26 week. Year-on-year, the index is up only 1.0 percent which is not a favorable signal for the Spring housing push. Refinancing is also coming down, 11.0 percent lower for the fourth straight weekly decline after having spiked dramatically on a break lower in mortgage rates. And rates are still very low, down 4 basis points in the week for 30-year conventional loans to an average 4.42 percent.

March was a very strong month for the housing market, evidenced not only by prior data on the month’s new and existing home sales but also yesterday’s surprisingly strong jump in the month’s pending home sales index. Yet April, based at least on this report’s purchase index, looks to have slowed significantly.

Dismal:

Highlights

Construction spending came in much weaker than expected in March, down 0.9 percent on the month and well under Econoday’s consensus range. Weakness is centered in the most sensitive spot of all: single-family homes where spending fell 1.5 percent in what may point to a downward revision to what was already a weak residential component in the first-quarter GDP report.

Private nonresidential spending did better, rising a solid 0.5 percent led by gains for manufacturing and transportation which may lift the GDP revision for first-quarter business investment. Yet spending on commercial projects remains weak, down 2.6 percent in the month with this year-on-year rate well into contraction at minus 8.6 percent.

Public spending has been holding up this report but showed sharp give backs in March, down a monthly 1.5 percent for educational projects and down 1.9 percent for highways & streets. Federal spending fell 2.7 percent in the month with state & local down 1.1 percent, though year-on-year gains are still strong at 5.7 percent for Federal and 8.9 percent for state & local.

Overall construction was down 0.8 percent on the year in March in a measure that is not pointing to improvement yet for 2019. Housing sales did show solid signs of pick-up in February and March as mortgage rates came down, but today’s results for single-family spending aren’t promising much new supply for the new home market. And in an unfavorable indication on discretionary spending and demand for building materials, spending on home improvements fell 3.1 percent in the month with this yearly rate deep in contraction at minus 14.1 percent.

San Francisco Bay Area home prices fall for the first time in 7 years

The global deceleration from the trade war includes the US:

Highlights

In the weakest report in nearly two years, the April ISM manufacturing index came in far below expectations at 52.8 for a 2.5 point decline from March. New orders, at 51.7, are down 5.7 points in April with related export orders down 2.2 points and in technical contraction at 49.5. Employment fell 5.3 points to 52.4 in what is an unfavorable indication for Friday’s factory payroll data where a solid gain was expected. The significant slowing in demand is reflected in the prices paid index which fell 4.3 points to 50.0 even to indicate no change from the prior month.

But there are pluses in the report including a 3.5 point rise in total backlog orders to 53.9 which is solid for this reading and which will help the sample keep up their production despite the slowing in new orders. Of the 18 industries tracked in the report, 13 reported monthly growth in composite activity with five, which is a large number for the breakdown, reporting contraction led by apparel makers and also including primary metals and, in an unfavorable indication for April durable goods orders, transportation equipment as well.

This report is focused on strongly by not only forecasters and policy makers but also by the financial markets. Though one month is only one month, the results are likely to raise talk that the performance of the nation’s factory sector, which has been uneven since late last year, may begin holding back the 2019 economy.


The red line, as above, is down further in April:

Some were saying this was what the US was trying to achieve and was willing to drop most of the rest to get it:

Trump drops cyber theft demands in bid for swift trade deal with China

(FT) President Trump has dropped a central demand from trade negotiations with China that it halt alleged instances of commercial cyber theft, in order to end a long-running tariff dispute. The US is instead likely to accept a watered-down commitment from Beijing as an alternative.

Tariffs That Started the U.S.-China Trade Conflict Now Dog Its Finish

(WSJ) As U.S. and Chinese officials try to close a trade deal, the punitive tariffs the governments slapped on each country’s goods in the conflict stand as a major obstacle, according to officials and others briefed on the talks.

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