OK retail sales, strong JOLT report, weak China data and terribly missing Abe.
U.S. Retail Sales Flat in July Spending at U.S. retailers stalled in July, the latest sign of fragile consumer demand that could leave the economy on shaky ground in the second half of the year.
Excluding autos, retail sales ticked up 0.1% in July from the prior month. Economists surveyed by The Wall Street Journal had expected sales to rise 0.2% in July and climb 0.4% excluding autos.
Retail sales in July rose 3.7% from a year earlier, slipping from a 4.3% year-over-year gain in June.
Retail sales over the past three months were up 4.2% from the same period a year earlier.
Consumer spending was uneven in July. Motor vehicle and parts sales fell a seasonally adjusted 0.2% from June, furniture-store sales fell 0.1% and department-store sales dropped 0.7%.
Spending rose 0.2% at building material and garden supply stores, decelerating from a 1% jump the prior month. Spending at gas stations ticked up 0.1% from June but remained down 1.2% from July 2013.
Spending was up 0.4% last month from June at clothing stores, rose 0.2% at grocery stores and increased 0.2% at food services and drinking establishments.
Retail sales were up 0.4% M/M in May and 0.2% in June. So last 3 months: +2.8% annualized. Doug Short’s headline July Retail Sales: Another Month of Disappointing Data seems a little negative when we dig deeper. “Core” sales exclude Motor Vehicles & Parts, Gasoline, Building Materials as well as Food Services & Drinking Places and is the series that feeds directly into the GDP report.
CalculatedRisk has this chart on retail sales ex-gasoline. Up 4.2% Y/Y is not bad, considering that housing is weak and car sales are plateauing.
Not great, but not so weak. Let’s see how the important back-to-school sales go.
Job Openings Hit 13-Year High More Workers Are Quitting, Too, Pointing to Gathering Strength in Labor Market
U.S. employers had 4.7 million job openings on the last business day of June, up from 4.6 million a month earlier, the Labor Department said Tuesday. That marked the highest number of openings since February 2001. The number of workers hired ticked up to 4.8 million from May’s 4.7 million.
Meanwhile, 2.53 million Americans quit a job in June, up from 2.49 million in May and the highest level since June 2008, when the U.S. economy was in recession.
Tuesday’s report, known as the Job Openings and Labor Turnover Survey, or Jolts, suggests mounting strength and more flexibility in the U.S. labor market. (…) As a share of total U.S. employment, the quits rate remained unchanged at a historically low 1.8%.
But the rising number of workers leaving jobs could signal that workers are becoming more confident and mobile. That reverses a trend from the recession that lasted from December 2007 to June 2009 of workers clinging to their jobs.
Bespoke Investment adds these important facts:
- The Total Openings Rate, which measures openings after controlling for size of the labor force, is now at the same level as its last peak in the middle of the last decade. Similar to the un-adjusted total, the Openings Rate has ticked up noticeably over the last few months.
- There’s more good news for workers in this report. Layoffs & Discharges have fallen dramatically and keep edging lower. Below is the Private Layoff & Discharge rate; we use this statistic instead of total for the same reasons that we look at Private Quits instead of Total Quits.
Getting noisier for Mrs. Yellen…
Home-Price Growth Slowing Down
Single-family housing prices rose 4.4% in the year that ended in the second quarter, the slowest annual pace since 2012, according to a report released Tuesday by National Association of Realtors.
The association found that median prices for existing single-family homes grew year-over-year in 122 of 173 metropolitan areas it tracked, while prices declined in 47 metro areas. Only 19 areas showed double-digit year-over-year price increases, a substantial drop from the 37 cities that showed such increases in the first quarter.
While the median existing single-family home price between the second quarters of 2013 and 2014 rose 7.3% in the West to $297,400, home prices in the Northeast fell 0.9% to $255,500, the report said.
Some of the most strongly rebounding housing markets, such as Phoenix and Las Vegas, are also showing signs of cooling, Mr. Yun said. The Phoenix area, which had been experiencing double-digit year-over-year price growth, saw prices rise 8.3% in the second quarter from the previous year to $198,600, the report said.
Canadian home prices continue upward swing in July
Canadian home prices showed momentum in July, rising 1.1 per cent from June, according to the Teranet-National Bank house price index. It was the eighth month in a row that prices rose from the prior month. On a year-over-year basis prices across all the markets rose 4.9 per cent.
ALL IS NOT ROSY OUT THERE:
Macy’s Inc. M -0.60% said its second-quarter sales improved but not as much as expected, and the department store operator reduced its same-store sales outlook for the year.
Shares fell 4.5% to $57.05 in recent trading as the retailer also reported disappointing per-share earnings and weaker profitability.
While expectations for the second half of the year remain on track, the company said it was unable to make up its sales shortfall from the first quarter, leading the company to lower its same-store sales forecast for the year.
Macy’s now expects sales growth of 1.5% to 2%, compared with its previous forecast for 2.5% to 3% growth. Macy’s reiterated its per-share earnings outlook range of $4.40 to $4.50.
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Deere Hurt by Weakness at Farms Deere said a slowdown in the farm economy and lower equipment sales dragged down its fiscal third-quarter profit by 15%, and warned that it will scale back production this year.
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Stockmann Cuts Guidance as Russia Weakens
Finnish retail group Stockmann Oyj STCBV.HE -1.91% on Wednesday cut its profit forecast for the year as weak sales and a dire market outlook in Finland and Russia drove it to a second-quarter loss.
Revenue dropped 9% to €495.3 million from €543.6 million and operating profit fell to €3.5 million from €30.1 million.
The company said it now expects full-year operating profit to be significantly weaker than in 2013. In April, it said operating profit wasn’t “expected to exceed” the €54.4 million it posted in 2013. Euro-denominated revenue is expected to decline this year from a year ago, the company said.
“The market environment in Russia continues to be challenging, as the Russian ruble remains weak and the country’s future economic direction is unclear,” Chief Executive Hannu Penttilä said.
Euro-Zone Industrial Production Falls Again
The European Union’s statistics agency Wednesday said output from factories, mines and utilities fell 0.3% from May, and was unchanged compared with June 2013. That was a surprise, with 21 economists surveyed by The Wall Street Journal last week estimating the production rose by 0.3% during the month.
The WSJ story could have added that May IP was –1.1% following April’s +1.1%. Q2 is thus down 0.3% following –0.2% in Q1. Eurostat does not report IP ex-Energy. But given Energy IP being +3.5% in Q2 (-3.2% in Q1), IP ex-Energy was pretty weak in Q2. Cases in point: Capital Goods: –0.5% (-0.2% in Q1); Durable Goods: –0.5% (+1.2%); Non-durable Goods: –0.1% (-0.3%). Russia-Ukraine just beginning to hit…
Spanish Prices Drop at Fastest Pace Since 2009 Credit Crunch Consumer prices in Spain fell at the fastest pace since the depths of the credit crunch in 2009 as declining wages curbed the pricing power of retailers.
Spanish prices dropped 0.4 percent from a year earlier as measured by a harmonized European Union method. That compared with the median forecast for a 0.3 percent drop in a Bloomberg News survey of 12 economists. Prices slid 1.5 percent on the month while core inflation, which excludes energy and fresh food prices, was zero.
China data show waning stimulus impact July credit and investment data highlight slowing growth momentum
Central bank data released on Wednesday showed that local-currency bank loans rose Rmb385bn ($63bn) in July – barely a third of the Rmb1.1tn increase recorded in June and below market expectations of a Rmb728bn rise.
Total social financing, a broader gauge of fundraising that includes off-balance-sheet credit, rose Rmb273bn, down from a Rmb1.97tn jump in June.
Alongside weak credit data, a similar though less dramatic slowdown in the real economy was also evident in activity indicators eleased separately on Wednesday.
Urban fixed-asset investment growth slowed to 17 per cent year-on-year in the January-to-July period, down from 17.3 per cent in the year to June and the lowest year-to-date reading since 2001, the National Bureau of Statistics said. (…)
The statistics bureau cited real estate as the main drag on investment.
“Due to the obvious cooling of the real estate market this year, real estate enterprises have a fairly strong wait-and-see mentality, so their investment activity is more cautious,” the bureau said in its announcement.
The decline in property sales was 7.6 per cent year-on-year for the January to July period, accelerating from the 6 per cent fall reported in the first half. (…)
Other activity indicators also showed slowing growth. Industrial production rose 9 per cent year-on-year in the seven months to the end of July, down from a growth rate of 9.2 per cent in the six months to June but in line with analysts’ consensus expectations. Retail sales growth fell to 12.2 per cent year-on-year in the year to date, slowing from a rate of 12.4 per cent in the year to June.
ISI: “Important China official statistics for July were all below their prior months reading, below our estimates and below the consensus. 2Q14 data were generally improved from 1Q14, but these and other July data are starting 3Q14 on weaker footing than we had thought.”
BOE Signals Rate Hike in Early 2015
The Bank of England signaled Wednesday that it remains on course to raise interest rates early next year but only if wage growth in the U.K. picks up. (…)
But rate-setters led by Gov. Mark Carney believe that feeble wage growth suggests theU.K. economy is further from its full potential than rapidly falling unemployment implies. They also fret that poor income growth means Britons may struggle to cope with higher borrowing costs.
The central bank cut its forecast for wage growth in 2014 to 1.25% from the 2.5% it had been expecting in May. Officials hinted that further disappointment on wages could cause them to reassess when to raise rates.
U.K. Wages Post First Drop Since 2009 as Jobless Rate Falls
Wage growth is “remarkably weak” and there is enough slack in the economy to keep the benchmark rate at a record-low 0.5 percent for now, Governor Mark Carney said. With inflationaccelerating to 1.9 percent in June, real wages for many Britons are continuing to decline.
Earnings growth excluding bonuses in the second quarter slowed to 0.6 percent, the least since comparable records began in 2001.
Japan GDP Stirs Stimulus Talk A sharp second-quarter slowdown in Japan raised discussion about further stimulus, but the economy minister said he didn’t think extra steps were needed now.
Gross domestic product shrank 6.8% on an annualized basis in the April-June quarter, after rising 6.1% in the first quarter of the year. It was the biggest fall since the March 2011 earthquake and tsunami. The main reason was a sharp pullback by consumers after the national sales tax rose on April 1 to 8% from 5%.
Private consumption fell 5% in the three months through June compared with the previous quarter, and real employee compensation fell 1.8% because the sales tax led to higher prices at the cash register but workers weren’t getting raises to match.
Why Earnings Season Isn’t Prompting Bigger Stock Rally Much has already been made about the stronger-than-expected earnings season. What’s surprising is the relatively muted reaction in the stock market to these upbeat reports.
(…) Since 1990, there have been 16 other instances in which the S&P 500 fell during an earnings season in which profits rose by at least 8%. One month later, the S&P 500 generated positive returns in 13 of those 16 times, according to Mr. Goepfert.
“It’s tempting to read something negative into the fact that investors seem to be selling into this quarter’s good earnings reports,” he said. “But it isn’t uncommon, and the precedents are not at all conclusive in suggesting that this is a warning sign. As long as earnings have a positive slope, stocks tend to do well going forward.” (…)
CRUSHED:
‘Candy Crush’ Stumbles, and King Digital Shares Fall Shares of the Videogame Maker Fall on Declines in Its Key Franchise
King’s shares plunged 21% to $14.40 in after-hours trading.
ABE, WHERE ARE YOU?
This week in The Atlantic:
[Hillary Clinton] The former secretary of state, and probable candidate for president, outlines her foreign-policy doctrine. She says this about President Obama’s: “Great nations need organizing principles, and ‘Don’t do stupid stuff’ is not an organizing principle.
Great nations need principles. Indeed! So do people. Even more so people leading or seeking to lead a nation. And people in position of trust from other people, like investment managers, bankers, accountants, economists, strategists.
Then , yesterday, in the WSJ (The Hillary Metamorphosis):
Robert Gates (…) recounts the following White House exchange between Barack Obama and Hillary Clinton, back when she was serving the president loyally as secretary of state and he was taking notes as secretary of defense.
“In strongly supporting a surge in Afghanistan,” Mr. Gates writes in his memoir, “Duty,” “Hillary told the president that her opposition in Iraq had been political because she was facing him in the primary. She went on to say, ‘The Iraq surge worked.’ The president conceded vaguely that opposition to the surge had been political. To hear the two of them making these admissions, and in front of me, was as surprising as it was dismaying.”
Here’s a fit subject for an undergraduate philosophy seminar: What, or who, is your true self? Are you Kierkegaardian or Aristotelian? Is the real “you” the interior and subjective you; the you of your private whispers and good intentions? Or are you only the sum of your public behavior, statements and actions? Are you the you that you have been, and are? Or are you what you are, perhaps, becoming?
And if Mrs. Clinton supported the surge in private—because she thought it would help America win a war—but opposed it in public—because she needed to win a primary—shall we conclude that she is (a) despicable; (b) clever; (c) both; or (d) “what difference, at this point, does it make?” (…)
The political opportunist always lacks the courage of his, or her, convictions. That’s not necessarily because there aren’t any convictions. It’s because the convictions are always subordinated to the needs of ambition and ingratiation. (…)
Our elite, our leaders have no principles nowadays. Their selfish ambitions lead their actions. I trust that 99% of the population, the people we don’t hear about because there is no need to hear about them, still has principles and lives by them. Sadly, this adds to the rising inequality gap and to the general mistrust people have about the one-percenters.
I am not bound to win, but I am bound to be true. I am not bound to succeed, but I am bound to live by the light that I have. I must stand with anybody that stands right, and stand with him while he is right, and part with him when he goes wrong. (Abraham Lincoln)
It is one thing to have read about Lincoln as Obama and most other politicians claim, it is something else to have absorbed his wisdom and character and manage one’s life accordingly.
Not unrelated: