Powell Flags Rising Risks to Jobs While Avoiding Rate-Cut Timing The Federal Reserve chair says recent readings point to “modest further progress” on prices.
Speaking to lawmakers Tuesday, Powell was careful not to offer a timeline for interest-rate cuts, which investors are now betting will begin in September. But he emphasized mounting signs of a cooling job market after government data published July 5 showed a third straight month of rising unemployment.
“Elevated inflation is not the only risk we face,” Powell said in prepared remarks before the Senate Banking Committee.
“The latest data show that labor-market conditions have now cooled considerably from where they were two years ago—and I wouldn’t have said that until the last couple of readings,” he later added. (…)
Probably the most important statement Mr. Powell made was *POWELL: LABOR IS NOT A SOURCE OF INFLATIONARY PRESSURES NOW.
This chart plots wages and CPI-Services YoY. Wage growth is back on trend (upward), but services inflation (61% of CPI), at 5.2%, is still 1.2% above trend.
Another way to look at the same data is to plot private wages and the CPI-Services index with February 2020 = 100. The pre-covid almost perfect correlation has broken and it sure seems like wages are pulling inflation up.
The Atlanta Fed Wage Growth Tracker, which is composition-adjusted, shows that services wages closely track total wages and were both up 4.7% YoY, still well above the 3.5% average growth rate between 2016 and 2019. The last data point is March.
The latest employment report shows that private service-providing wages were up 3.6% YoY (not composition-adjusted) vs +4.9% for goods-producing employees and +3.9% for all private wages. Most of the slowdown was in June and could be revised. During the last 2 months, private service-providing wages rose at a 4.4% annualized rate.
It seems prudent to wait some more before concluding as Mr. Powell did.
That said, the labor market continues to slowly normalize. Indeed Job Postings have declined another 2.3% (through June 28) since the last JOLTS data (May) but remain 11% above their pre-pandemic level.
China Consumer Prices Inch Up But Deflation Pressure Lingers CPI rises 0.2% in June, just short of economist expectations
(…) That compares with an increase of 0.3% in May and a median forecast of 0.4% in a Bloomberg survey of economists.
Companies’ rolling out promotions for the annual “618” shopping festival hurt the prices of entertainment-related consumer goods, household appliances and cars last month, the bureau said in a statement.
Factory-gate prices remained stuck in deflation, as they’ve been since late 2022, with the producer price index sliding 0.8% from a year earlier, matching the result expected by economists. The index declined 1.4% in May. (…)
Core consumer inflation rose 0.6% YoY in June, matching May’s. Food prices dropped 2.1% after May’s 2.0% decline, while nonfood prices increased 0.8% in June, the same pace as in May.
Vanke Warns of $1.2 Billion Loss on China’s Housing Slump Discounts from clearing housing inventory impacted bottom line
State-backed Vanke expects to post a first-half loss of 7 billion yuan to 9 billion yuan ($962 million to $1.2 billion), it said in a filing late Tuesday. The projected loss signals a sharp downturn from the first quarter, when it lost 362 million yuan.
The homebuilder resorted to price discounts to reduce inventory and boost cash flow, squeezing profit margins. Investment in some projects has been “over-optimistic” and resulted in high land acquisition costs, it said.
At the same time, Vanke said it has made “repayment arrangements” on onshore bonds due in the second half of this year, and has no offshore notes maturing in the period. (…)
Vanke said many of its projects were developed on land acquired before 2022 that had relatively high purchase costs. Because they were sold during the subsequent market downturn, sales and gross profit margins were lower than expectations, shrinking profits. (…)
Vanke continues to face headwinds as its home sales growth stalled in June. Its month-on-month contracted sales rose 7.9%, much slower than the average 36% increase at the 100 biggest real estate companies in China. (…)
Canada: Average asking rents reached $2,185 in June as growth slows to 7 per cent: report
A new report says the average asking rent for a home in Canada reached $2,185 in June, up seven per cent compared with a year ago despite representing the slowest annual rate of growth in 13 months.
The report by Urbanation and Rentals.ca, which analyzes monthly listings from the latter’s network, says average asking rents decreased 0.8 per cent from May — the largest month-over-month decline since early 2021 and atypical compared with usual monthly increases this time of year.
Based on the report, the average asking rent for a one-bedroom unit in Canada was $1,918 in June, up 7.7 per cent from a year ago, while the average asking price for a two-bedroom unit was $2,301, up 9.6 per cent.
Overall, asking rents for purpose-built rental apartments in June jumped 11 per cent compared with a year earlier to reach an average of $2,121.
Meanwhile, condominium apartment rents, which averaged $2,320, were up 2.6 per cent. (…)