The US dollar is mostly firmer, with the dollar-bloc under-performing. Month-end flows appear to be favoring the euro though the Swiss franc is also firmer. While the dollar is within yesterday’s ranges against the euro and yen, it is firmer against sterling for the third consecutive session. Asian stocks and bonds were mostly higher though Chinese shares fell. In Europe, bond yields are slightly higher, and the equity markets are narrowly mixed.
American economic growth rose at a 2.3% annual rate in the second quarter of 2015, far below expectations.
Economists had expected a 2.9% increase, with strength from resurgent consumption leading the growth. While personal consumption expenditures (PCE) did post a 2.9% annualized increase in the second quarter, it was not enough to offset “negative contributions from federal government spending, private inventory investment, and nonresidential fixed investment,” according to the Bureau of Economic Analysis. The BEA also noted that imports rose, again hurting GDP.
In a world with an increasing focus on the importance of environmental protection, many nations have acknowledged the need to link economic and economic reform measures. Unfortunately, according to the Organization of Economic Cooperation and Development (OECD), most countries still fail to link these two priorities comprehensively, leading to uneven results that generally favor money over environment.
The US dollar is broadly firmer in the wake of the FOMC statement, but there are some notable exceptions. The market appears reluctant to sell sterling ahead of next week’s MPC meeting, where hawkish dissents are likely. There will also be the immediate release of the minutes, and new macro-forecasts. The Australian dollar is resilient in the face of a drop in building approvals nearly twice what the consensus expected (-8.2% vs -4.4%), and the continued fall in gold, copper, and Chinese stocks (Shanghai -2.2%).
The US dollar is mixed. It is recouping some of yesterday’s losses against the euro and yen but it is heavier against the other major currencies. Short covering in the dollar-bloc that began yesterday extends, and the 0.7% preliminary increase in Q2 GDP aided sterling.
Surveys suggest that a little more than 80% of the economists expect the Federal Reserve to hike rates in September. The September Fed funds futures, the most direct market instrument, have only about a 50% chance discounted.
Contrasting data releases underscore the reemergence of the dollar bullish divergence meme that had appeared to stall in the vacuum of economic data in the first half of the week. Yesterday’s unexpectedly large fall in US weekly initial jobless claims had seemed to put a floor under the dollar. Moreover, today’s poor flash PMIs for China and the euro area drove home the point.
The Office for National Statistics has produced a report on sales of popular summer-related products. Official data on sales of goods are limited in that they tend to be based on annual spending, but clearly the demand for some products tends to be seasonal. Various cold drinks, meat (for barbecues) and ice cream are identified as typical examples.
While we do not have official data on the extent to which demand for these goods varies over the year, unofficial data allow us to learn a little more about the extent to which a good (or a bad) summer can affect demand.
Some have asked what Africa can learn from Greece. I argue that Greece (and others) can learn a lot from the African experience.
Debt is on the rise again not just in Greece, but also across the world. A decline in commodity prices with a strengthening of the US dollar makes debt unsustainable in many economies. These developments have led to rising proportions of government revenues being spent on debt servicing and debt accounting for higher and higher proportions of total GDP.
American consumers are spending less on retail products and services, as confidence in the economic recovery weakens and consumers keep their pocketbooks closed.
In total, retail sales fell 0.3% from May to June on a seasonally adjusted basis, despite expectations for a rise in spending. The Census Bureau released a new report that showed total retail spending has fallen slightly, although it remains up very modestly on a year-over-year basis. Compared to June 2014, retail sales were up 1.4% this year, although that increase was much weaker than economists’ expectations.
