Still looks to me like the rate increases have offered some support for the economy and also pushed cpi higher? Interest income channels? Forward pricing channels? ;)

Corporate debt growth decelerating;

Highlights

The Small Business Optimism Index retreated by 0.6 points in June to 107.2, the sixth highest reading in the NFIB survey’s 45 years history. Beating the consensus forecast calling for a more substantial decline after May’s upward surge to the second highest level in the history of the survey, the optimism index remained exceptionally strong in June mainly thanks to improvement in the employment and inventory components. Gains of 2 points to a net 20 percent in plans to increase employment and in plans to increase inventories to a net 6 percent were accompanied by a 4-point gain to a net 0 percent of business owners viewing current inventory levels as too low and a 3-point gain to a net 36 percent in current job openings. Expected credit conditions were the last among the gainer components in June, rising 1 point to a net minus 4 percent.

Despite the stronger than expected index reading for the month, half of the 10 survey components posted declines, most of which were sizable, though mostly from very strong levels, led by expectations of higher real sales, which fell 5 points in June to a still very solid net 26 percent. A drop of 5 points to a net 29 percent was also seen in the view that now is a good time to expand, while expectations that the economy will improve fell 4 points to a net 33 percent and earnings trends also shed 4 points to a net minus 1 percent. Plans to make capital outlays fell 1 point to a net 29 percent.

Business owners surveyed continued to point to difficulties in finding qualified workers and identified this as the single most important business problem, as 36 percent reported job openings they could not fill in the current period, up 3 points and matching the survey record high set in November 2000. Openings for skilled workers were reported by 31 percent of small firms while 13 percent have openings for unskilled labor, both ahead of the May readings.

The survey also showed the threat of inflation as subdued in the current environment, with the net percent of owners raising average selling prices falling 5 points to a seasonally adjusted net 14 percent, and a net 24 percent planning price hikes, down 2 points from the prior month. Perhaps surprising given the tightening on the jobs front, reports of higher compensation were down 4 points from May’s record reading to a net 31 percent, though plans to raise compensation did rise by 1 point to net 21 percent.

Lots of job openings at lower wages as companies work to replace higher wage employees:

Highlights

Job openings slipped back but still remain very abundant, at 6.638 million in May vs an upward revised and record 6.840 million in April. Openings are up 16.7 percent compared to May last year and are far above hiring, at 5.754 million in May for comparatively distant 4.9 percent year-on-year gain.

Openings are not only above hirings but they are also above the 6.564 million unemployed who are actively looking for work. This inversion — which strongly underscores lack of available capacity in the labor market — first appeared in April and marks a first in data going back 20 years. It’s the abundance of openings that are pulling in discouraged workers back into the workforce looking for jobs.

Of special note in today’s report is another rise in the quits rate, up 1 tenth to 2.4 percent. Jerome Powell, at his FOMC press conference last month, characterized the quits rate as elevated, a sign that workers are looking for other employers and higher pay.

Job openings represent labor demand and are a complementary statistic to unemployment which represents labor supply. And their relationship is a hot topic among Federal Reserve policy makers who are raising rates to head off potential imbalances, specifically inflationary imbalances, in the labor market.

Automotive News

DETROIT — General Motors has expanded its use of lower-paid workers in a suburban Detroit assembly plant to help defray the cost of making self-driving electric vehicle prototypes, through a deal that has raised tensions within the UAW. GM and the UAW this year reached an Autonomous Vehicle Memorandum of Understanding that lets the automaker offer reduced wages and benefits for some jobs at its plant in Orion Township, Mich. The plant makes Chevrolet Bolt EVs and its self-driving variant, the Cruise AV, as well as the Chevrolet Sonic. The agreement could be used as a template for lowering costs at other car plants that have experienced production declines because of slow-selling products. GM is analyzing the future of its car plants as its production shifts toward more crossovers, SUVs and EVs, according to the union. But the arrangement aggravates a sore spot with the UAW. The workers are typically paid less than employees of the Detroit automakers, and union leaders worry that their presence in an otherwise underused plant effectively takes work from higher-paid employees covered by the UAW’s main contracts. “Everyone agrees that this situation sucks,” Cindy Estrada, a UAW vice president, wrote in an April 19 letter to members. “But what would suck even more would be to have GM shut down any of our plants.”

This is the employment growth rate for each year compared to the same date 10 years prior. You can see how we dipped further and recovered more slowly in this latest cycle. It also gives the appearance that we haven’t yet recovered from the damage to aggregate demand from the surplus years of the late 1990’s:

Last month revised a lot lower, and this month weak as well, as inflation-adjusted spending growth remains negative:

Note from US Census:

Notice: With this release, unadjusted data have been revised back to January 2016 and seasonally adjusted data back to January 2011. All revised estimates are available on our website. With each May release, seasonally adjusted data will now be revised for an additional five years beyond the revision period for unadjusted data. Research has shown that this revision span should produce more reliable seasonally adjusted time series.

The rolling averages declined. Also note that inflation is grabbing hold, and that inflation adjustments bring this series into contraction.

Serious weakness in Manhattan real estate:

Manhattan real estate has worst second quarter since financial crisis

The Saudis continue to set price via their posted discounts to benchmarks, and then let quantity adjust to demand. The President isn’t the only one who has no clue that’s how it’s been working for a very long time:

Trump Asks Saudi Arabia to Pump More Oil, Citing High Prices

(WSJ) Publicly, Riyadh has committed to only modest output increases, but behind the scenes the kingdom is ramping up quickly—moving from just over 10 million barrels a day a few months ago to a target of close to 11 million barrels a day by July. “I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels,” Mr. Trump said in the tweet, citing a conversation with Saudi King Salman. “Prices to [sic] high! He has agreed!” the tweet said, citing “turmoil & dysfunction” in Iran and Venezuela. A senior Saudi official said the kingdom assured the U.S. of its capability to meet demand.

Highlights

Disruption tied to a fire at an auto supplier not only pulled down the previously released manufacturing component of the industrial production report but it also helped pull down durable goods orders in May which fell an as-expected 0.6 percent. Vehicle orders fell 4.2 percent in the month with vehicle shipments down 4.4 percent. Civilian aircraft orders, which had been very strong earlier in the year, fell for a second month, down 7.0 percent following April’s 30.3 percent downswing. Excluding vehicles and civilian aircraft as well as all other transportation equipment, orders were still lower, down 0.3 percent to barely make Econoday’s consensus range.

Also barely making the consensus range are core capital goods (nondefense ex-aircraft) which fell 0.2 percent though here an upward revision to April, to a 2.3 percent surge and more than double the initial reading, is a major offset. Shipments for this reading, which are inputs into business investment for second-quarter GDP, are mixed, down 0.1 percent in May but with April revised 1 tenth higher to an even stronger 1.0 percent gain.

Turning to tariff-exposed readings, orders for primary metals slipped 0.4 percent following, however, April’s upward revised 2.4 percent gain and March’s 4.7 percent spike, with fabrications, which are indirectly affected by tariffs, down 1.2 percent following gains of 3.3 and 1.3 percent in the prior two months. The May declines for these two components, which make up more than 20 percent of total durable orders, hint at a cool down following a buying surge immediately following the tariffs

Yet another housing indicator slumping:

Highlights

The resale market has been flat and may be about, despite the strength for new home sales, to turn lower. The pending home sales index for May fell 0.5 percent to just make the low end of Econoday’s consensus range. Weakness in the report is concentrated in the South which is by far the biggest housing region and where contract signings for resales have fallen 3.5 and 1.0 percent the last two reports. These results underscore recent home-price updates including yesterday’s Case-Shiller report that point to ebbing price appreciation for existing homes.

Pending Home Sales Inch Back 0.5 Percent in May

Pending home sales decreased modestly in May and have now fallen on an annualized basis for the fifth straight month, according to the National Association of Realtors®.

Read more at http://www.calculatedriskblog.com/#IAob0xYYZsAR5XfE.99

Smaller deficit than expected, but, again, signs of volatility due to timing and expectations of tariffs, and the drop in consumer imports is most often due to a general drop in US consumer spending, and not an increase in purchases of domestically produced goods and services. And most recently oil prices have moved higher:

Highlights

Forget about tariffs and trade wars. Exports in May surged a convincing 2.1 percent to pull down the nation’s goods deficit to a much lower-than-expected $64.8 billion in May. The results will add further to second-quarter GDP forecasts where high-end estimates were already approaching 5 percent.

The export gain is led by a 12.8 percent monthly jump in foods & feeds and includes a 3.7 percent gain for capital goods which are the nation’s strongest exports. And consumer goods also rose, up 3.2 percent. The overall gain comes despite a 3.1 percent decline in industrial supplies, a component where swings in oil prices dominate.

Imports were nearly neutral in May, up only 0.2 percent following a 0.4 percent decline in April. Auto imports fell 1.2 percent in the month with consumer imports, which is the Achilles heel of U.S. trade, down 1.0 percent. Imports of industrial supplies, again reflecting oil prices, fell 0.7 percent. A category that shows a gain, and here perhaps a welcome one pointing to rising business investment, is imports of capital goods which jumped 3.4 percent.

This is a very healthy report and it may offer a signpost of the nation’s trade performance going into a summer of cross-border discontent.

Trump threatens Harley-Davidson: If it moves operations overseas, ‘they will be taxed like never before!’

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Up more than expected, but last month revised quite a bit lower as well, as housing overall remains depressed:

This is not population adjusted:

OPEC ministers strike deal on oil production levels

A source confirmed to CNBC that a deal has been struck and a statement critical of the U.S. that Iran wanted to include would not be in the final communique.

A report from Reuters put the agreed upon level at a boost in oil output by around 1 million barrels per day (bpd).

The market is awaiting a press conference with oil ministers for more details on the agreement.

First, the Saudis remain as price setter, setting price through their discount policies and then selling all the crude their refiners want to buy at those prices.

So for any given level of demand, opec members will now be able to sell up to 1 million barrels per day more, if they can produce it. Most have probably already been reasonable close to producing at full production, so their total increases are likely to be maybe 500,000 bpd.

Therefore, if non Saudi production does increase, for any given level of demand the Saudis will see that much less demand for their output, which would then fall by that amount.

That means the Saudi’s price setting policy remains unchanged.

Tariffs that hit companies are (ultimately) passed through to consumers:

Trump administration’s new tariffs hit US consumers less, companies more

Consumer goods account for 1 percent of items on the June 15 lists from the the U.S. trade representative, down from 12 percent on the April 3 list, according to a report from the Peterson Institute for International Economics.

The revisions follow public pushback and come as Republicans try to hold their majority in Congress during November’s midterm elections.

For its part, Beijing’s new tariff lists “stayed far away from supply chains. They wanted to signal to the rest of the world that they are still a good place to provide value,” said Mary Lovely, economics professor at Syracuse University and nonresident senior fellow at the Peterson Institute.

Carver Yachts reports that it has already had two orders from Europe canceled as a result of the EU’s retaliatory 25% tariff on American-made boats.

Still way down, and it happened pretty much all at once with the election:

Purchase applications remain negative this year vs last:

Highlights

The June 15 week was an active one for mortgage bankers as the purchase index rose a solid 4.0 percent and the refinance index 6.0 percent. Despite the jump in the purchase index, its year-on-year rate remains in the negative column for a second straight week, at minus 1.0 percent. Turning back to refinancing, the outsized gain increased the share of mortgage activity to 36.8 percent of total applications vs 35.6 percent in the previous week. The average rate for 30-year fixed mortgages with conforming balances ($453,100 or less) was unchanged at 4.83 percent.

Higher than expected but last couple of months revised to lower numbers. In any case it’s relatively large, and the US continues to be dependent on imported oil, all of which is not $US friendly should the current trade policy result in reduced non resident desires to accumulate $US:

Highlights

A sharp rise in the nation’s deficit in goods trade made for a nearly $8 billion deepening in the first-quarter current deficit to $124.1 billion. Yet the result is much better than expected in what reflects a comparison with the fourth quarter which, when forecasters made their estimates, stood at $128.2 billion but is now revised sharply lower to $116.2 billion. Note that today’s report includes annual revisions.

The goods deficit swelled by $8.1 billion in the first quarter to $220.5 billion and was unable to be offset by other factors which were all flat including the surplus on service trade which did rise but only slightly to $0.3 billion. The main factors for the fourth-quarter revision are the surplus on primary income which was revised $5.2 billion higher, the surplus on services revised $4.2 billion higher, with the deficit on goods revised $1.9 billion lower.

As a percent of GDP, the first-quarter deficit rose to a still moderate 2.5 percent vs 2.4 percent in the prior quarter which was revised from 2.1 percent. This report, amid early skirmishes of trade war, will be taking on closer and closer scrutiny.

Confirming weakness in housing:

Highlights

The new home market is on the rise in sharp contrast to the resale market which is flat at best. Existing home sales slipped 0.4 percent in May to a lower-than-expected 5.430 million rate and a year-on-year decline of 3.0 percent. Part of the lack of sales traction may be due to prices which, in contrast to the decline in sales, rose 2.7 percent in the month to a record $264,800 for a year-on-year gain of 4.9 percent. Supply improved in the month but remains thin, up 2.8 percent to 1.850 million units on the market with supply relative to sales at 4.1 months vs 4.0 months in April.

The resale market remains a dead weight and is limiting the housing sector’s contribution to overall economic growth. In regional data, the Northeast popped higher in the month but remains the weakest resale region at an 11.7 percent yearly decline with the West at minus 4.1 percent and the Midwest at minus 2.3 percent. Sales in the South, which is by far the largest resale market, are unchanged on the year.

Wage growth continues to be depressed: