The pace of existing home sales increased 1.1% last month from May to a seasonally adjusted rate of 5.57 million, the National Association of Realtors said Thursday. That puts them at their highest level since February 2007.
Sales for May were revised to 5.51 million from an initially reported 5.53 million. Economists surveyed by The Wall Street Journal had expected June sales would decrease 0.7% to a pace of 5.49 million. (…)
Total housing inventory at the end of June decreased 5.8% from a year ago to 2.12 million existing homes available for sale.
The share of first-time buyers hit 33% in June, its highest level since July 2012. (…)
June was the most competitive housing market since 2009, according to Redfin, a real-estate brokerage. In June, the typical home went under contract in 41 days, the shortest time seen since Redfin began tracking the market in 2009, and four fewer days than last June. (…)
The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index declined in July to -2.9 from an unrevised 4.7 in June. Despite the lower reading, it remained up from December’s low of -10.2. (…)
Moving the other way, the ISM-Adjusted General Business Conditions Index, constructed by Haver Analytics increased to 49.9 from 46.0, though both readings continued to indicate declining activity. (…)
The decline in the Philadelphia Fed index was similar to the lower Empire State reading, released Friday.
The Latest Conference Board Leading Economic Index (LEI) for June increased 0.3 percent to 123.7 from May’s revised 123.3 (previously 123.7) and downward revisions were made to the four prior months.
Here is an overview from the LEI technical press release:
The Conference Board LEI for the U.S. increased in June after declining in May. Positive contributions from the majority of components more than offset the negative contribution from weekly hours worked in manufacturing. Over the first half of this year, the leading economic index increased 0.3 percent (about a 0.6 percent annual rate), about the same pace as in the second half of 2015. However, the weaknesses among the leading indicators have remained slightly more widespread than the strengths over the most recent six months. [Full notes in PDF]
To be watched:
TRANSPORTATION NEWS (WSJ)
- The largest trucking companies in the U.S. are restructuring operations to meet a freight market plagued by weak demand and excess capacity. Swift Transportation Co.and Werner Enterprises Inc., two of the largest operators in the truckload sector, reported steep declines in earnings in the second quarter, WSJ Logistics Report’s Robbie Whelan writes, and both suggested they’re taking aggressive action in what Swift calls “a challenging environment.”
- Union Pacific Corp. is adjusting its spending plans to a smaller freight market. The largest North American freight railroad is slicing capital spending by $600 million this year and “taking a hard look” at cutting back investment amid steep declines in volume across its commodities and intermodal lines. Revenue in the second quarter fell 12%, the WSJ’s Tess Stynes and Imani Moise report, on an 11% slide in overall freight volume. Intermodal volume isn’t helping: volume in that business fell 14% in the second quarter from a year ago, and UP says it is maintaining pricing even as rates fall in the trucking sector that competes for intermodal loads.
IMF Calls for ‘Urgent’ G-20 Action to Shore Up Global Economy Painting a dark outlook for the global economy, the IMF issued an “urgent” call for the world’s largest economies to roll out more growth-boosting policies.
(…) “A coordinated use of fiscal space would be beneficial should the global outlook weaken materially,” the IMF said.
U.S. Treasury Secretary Jacob Lew, jetting to the meeting late Thursday, said such a crisis response isn’t necessary given the current outlook.
“I don’t think this is a moment that calls for the kind of coordinated action that occurred during the ‘great recession’ in 2008 and 2009,” Mr. Lew said. “It really is a moment where we each need to do what we can to ensure that where growth is soft it gets stronger, and that prospects for the medium- and long-term are improved.” (…)
CEBM Research on China:
Judging from high frequency data and the structure of 1H16 GDP growth, China’s economy has become more fragile. Given that manufacturing sector investment and total private enterprise investment has stalled significantly, the central government will likely maintain or even increase stimulus by boosting the number of infrastructure projects to drive domestic demand and aid imports.
The Brexit referendum has brought greater uncertainty for the global economy and the possibility of a substantial improvement in seasonally adjusted external demand is very low in 2H16. Both the IMF and World Bank have adjusted growth predictions downward. Thus, China’s trade surplus may gradually narrow in the second half of 2016.
- Over the past three months, China policymakers have announced almost $700b in “fiscal stimulus”, which would be the US equivalent of roughly $1t.
- At the same time, Japan could be implementing $190b in “fiscal stimulus”, which would be the US equivalent of roughly $0.8t. (ISI)
But China’s excess capacity is extraordinary! (via The Daily Shot)
Discord Between China’s Top Two Leaders Spills Into the Open China’s top two leaders, President Xi and Premier Li, have offered conflicting messages on managing the economy, a rare departure from the Communist Party’s united front.
(…) On July 4, officials of the State Council, China’s cabinet, were read remarks by Mr. Xi calling for “stronger, better, bigger” state juggernauts, with a central role for the Communist Party in their management. Mr. Li’s prepared comments stressed the need to “slim down” state companies and to “follow market rules” in remaking them.
Party insiders and China experts say the conflicting messaging and other recent episodes, including thinly veiled criticism of Mr. Li’s policies from the Xi camp, show how discord between the top two Chinese leaders is increasingly spilling into the open, a remarkable departure from the unified front China’s leaders traditionally seek to present. (…)
“Everybody is waiting to see what others might do,” he said. The result: “inaction.” (…)
A big risk from the policy uncertainty, said Arthur Kroeber, co-founder of China-focused research firm GaveKal Dragonomics, is that needed changes, such as the closing of money-losing factories, stall. “It’s increasingly clear to me that China’s economic program is not very coherent,” he said. (…)
- 115 companies (30.0% of the S&P 500’s market cap) have reported. Earnings are beating by 6.0% while revenues are surprising by 1.3%.
- Expectations are for a decline in revenue, earnings, and EPS of -0.9%, -5.0%, and -2.6%.
- EPS is on pace for +1.5%, assuming the current beat rate for the remainder of the season. This would be +5.8% excluding Energy and the Big-5 Banks. (RBC)