Clarksville, TN – China’s leadership wants the yuan to become an important reserve currency, but that means that the country would have to let the currency float freely and be set by market forces. The People’s Bank of China, the country’s central bank, decided to alter its exchange rate regime.
The currency is allowed to trade in a 2% band around a level announced before the markets open. The PBOC said that this base level would simply be set at the previous session’s close (rather than taken out of the air).
Clarksville, TN – The economic data were mixed, but generally consistent with moderately strong growth. The ISM surveys went in opposite directions – the manufacturing index was softer than anticipated, while the non-manufacturing index exceeded expectations. Unit auto sales rebounded. The July Employment Report was about as expected.
Nonfarm payrolls rose by 215,000, with a net upward revision to May and June of +14,000. That put the three-month average at 235,000 (a 2.82 million annual rate). The unemployment rate held steady at 5.3%.
Clarksville, TN – The week began with an 8.5% drop in the Shanghai Composite Index, which sent markets down worldwide (but the Chinese market appeared to stabilize later). The Fed made only slight alterations to the wording of the monetary policy statement, and did not provide a strong signal that a September move is coming.
Real GDP rose at a 2.3% annual rate in the advance estimate for 2Q15, a bit shy of expectations, but the first quarter was revised to +0.6% (from -0.2%). Annual benchmark revisions showed a somewhat slower rate of growth in the past few years (mostly in 2013), which implies that the output gap (the difference between GDP and potential GDP) is higher than it was thought to be earlier (an important consideration for the Fed).
Clarksville, TN – This week the economic calendar is busy. The focus is likely to be on the GDP report (note that financial market participants typically over-emphasize the headline figure – the devil is in the details).
Durable goods orders are expected to have been boosted by a pickup in aircraft orders in June, but the trend in non-transportation orders has been weak in recent months. The Conference Board’s Consumer Confidence Index rose sharply in June – so it wouldn’t be unusual to see a modest pullback in July.
Clarksville, TN – The week began with a renewed sense of optimism that a Greek debt deal would be worked out. Sentiment then faded after negotiations with Greece’s creditors broke down, but then hopes continued that a deal would be reached over the weekend.
The economic data were mixed. Home sales figures improved in May. Durable goods orders were disappointing. The estimate of 1Q15 GDP was revised to show a -0.2% annual rate (vs. -0.7% in the second estimate), up 3.0% from a year ago. Note that the estimate of Gross Domestic Income rose at a 1.9% annual rate (+3.7% y/y).
Clarksville, TN – In its monetary policy statement, the Federal Open Market Committee recognized that “economic activity has been expanding moderately after having changed little during the first quarter.” Labor market slack has “diminished somewhat.” Growth in consumer spending has been “moderate,” while the housing sector “has shown some improvement.”
In the revised Summary of Economic Projections, Fed officials lowered their forecasts of 2015 GDP growth, but raised slightly their expectations for growth in 2016 and 2017.
Clarksville, TN – Economists began the week wondering why consumers hadn’t spent the windfall from lower gasoline prices. By the end of the week, we had a partial answer. Retail sales rose strongly in May, as expected. More importantly, we had upward revisions to the data for March and April.
The Bureau of Census also released its quarterly survey of services. These two reports paint a brighter consumer spending outlook and imply an upward revision to the estimate of 1Q15 GDP growth (the second estimate showed a -0.7% annual rate, but should be revised to show a much more modest decline or perhaps a slight increase).
Clarksville, TN – The economic data reports were mixed, but nonfarm payrolls rose more than expected (+280,000) in the initial estimate for May. Seasonal adjustment issues may have been a factor (as education job losses were a lot smaller than usual).
The unemployment rate edged up to 5.5%, but that partly reflected increased labor force participation for teenagers and young adults (also consistent with seasonal adjustment problems).
Mining, which includes energy exploration, fell by 17,200, down 68,400 since December.
Clarksville, TN – The economic data reports remained mixed. Real GDP fell at a 0.7% annual rate in the second estimate for 1Q15 (vs. +0.2% in the advance estimate). The revision largely reflected slower inventory growth and a wider trade deficit. Consumer spending rose at a 1.8% pace (vs. +1.9%), while business fixed investment fell 2.8% (vs. -3.8%).
There is currently a debate about whether the seasonal pattern in a number of GDP components may have changed post-recession. Unfortunately, we really don’t have enough data to say for sure.
Clarksville, TN – The economic data reports were mixed. Homebuilder sentiment declined in May, but residential homebuilding was stronger than expected in April.
Some of that reflects a rebound from bad weather, but it’s also a consequence of the high level of volatility in the multifamily sector (single-family permits were higher, but not exactly booming). Consumer price inflation remained negative on a year-over-year basis (-0.2%), but core inflation rose slightly more than anticipated.
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