Small Business Optimism Reverses Last Month’s Gain as Uncertainty Rises
Optimism faded modestly in June, with the Small Business Optimism Index slipping 1.7 points to 103.3, reversing the gain posted in May but still leaving optimism at historically high levels. The main driver came from the inventory sector, with owners marking existing stocks as very “lean” and planning to add to them. Sales and earnings trends
softened, expected credit conditions remained favorable. Uncertainty levels increased, as expectations for sales gains and general business conditions faded.Some “tariff” Inflation pressures may be surfacing as the percent of firms raising selling prices rose significantly with 30 percent of owners reporting recent changes in China trade policy negatively impacting their business. Job openings and plans to create jobs weakened a bit, but remain historically very strong. Reports of higher worker compensation also cooled. (…)
The Conference Board Employment Trends Index™ (ETI) Dropped in June
“The Employment Trends Index experienced a big drop in June, but this was primarily driven by a large negative contribution from one component – an increase in the percentage of respondents who say they find ‘Jobs Hard to Get’ in The Conference Board’s Consumer Confidence Survey,” said Gad Levanon, Chief Economist, North America, at The Conference Board. “This marks the fourth largest monthly negative contribution in the series history, which is potentially the result of noise rather than a more significant signal. (…)”
June’s decrease was fueled by negative contributions from three of the eight components. From the largest negative contributor to the smallest, these were: Percentage of Respondents Who Say They Find “Jobs Hard to Get,” Initial Claims for Unemployment Insurance, and Percentage of Firms With Positions Not Able to Fill Right Now.
Hmmm…Interesting that jobs would become hard to get with record low unemployment, help wanted signs everywhere and employers complaining about skill scarcity. Job openings have rolled over at a still very high level and are still up YoY (the May JOLT report will be released this a.m. at 10:00ET here).
The Conf. Board dismisses its own finding, the fourth largest monthly negative contribution in the series 45-year history, as noise, even though the same survey finds a decline in the Percentage of Firms With Positions Not Able to Fill Right Now.
Sticking with the noisy facts, the ETI has been flat for a while now and not solely because of Energy like in 2015-16.
U.S. Consumer Credit Growth Remains Strong
Consumer credit outstanding increased $17.10 billion during May (5.2% y/y) following a $17.50 billion April rise, revised from $17.49 billion. These gains were the strongest since the end of last year. Nonrevolving credit usage grew $9.90 billion (5.5% y/y) during May, the weakest increase since June of last year. (…) Revolving consumer credit balances strengthened $7.20 billion in May (4.5% y/y), up slightly from April’s $7.00 billion rise. (…)
U.S., China Tentatively Move to Revive Trade Talks Top American and China negotiators are set to speak this week in an effort to revive stalled trade talks, as disagreements over prior commitments and political considerations threaten to bog down discussions.
(…) Senior officials from each side, including Robert Lighthizer, the U.S. trade representative, are set to speak by telephone this week, a U.S. official said. If successful, that could lead to face-to-face talks, likely in Beijing, people following the talks said.
The last round of face-to-face meetings that took place in Washington in May ended in an impasse. (…)
White House trade adviser Peter Navarro said Beijing did make commitments. “The Chinese side promised to make immediate and significant purchase of our agricultural products,” Mr. Navarro told Fox Business Network on Thursday. “Let’s see if they keep that promise.”
China, however, has made no official mention of a commitment to purchasing more U.S. agricultural products, and a person with knowledge of the event said Mr. Xi made no such promise during his meeting with Mr. Trump. (…)
Beijing has said U.S. demands for Chinese purchases of U.S. goods should be reasonable. Chinese officials say that meant they must be based on domestic Chinese demand, rather than requiring China to divert purchases it now makes from other countries.
(…)
US barred Hong Kong consul’s tough speech on protests
Concern American diplomat’s valedictory address could derail Trump-Xi truce in trade war
Déjà-vu:
Debt-Limit Deadline Accelerates, Group Finds The U.S. government could exhaust its ability to pay its bills in the first half of September, according to a new estimate, creating pressure on Congress to suspend or raise the federal debt ceiling sooner than lawmakers had expected.
BASF Issues Profit Warning on Trade Concerns, Slowing Auto Market
The Ludwigshafen, Germany-based firm said that due to slower economic growth and trade conflicts, it now expects income and sales to decline for the full year, compared with earlier forecasts for growth in both segments. (…) Additionally, BASF said it is challenged by continued slowing demand in the auto market, particularly in China, where production fell 13% in the first half of the year.
In a release of preliminary figures for its fiscal second quarter, the chemical maker said that sales fell 4% to €15.2 billion ($17.07 billion) while earnings before interest, taxes, and special items are expected to fall 47% to €1 billion. For the full year, the company now forecasts a slight decline in sales and a drop of up to 30% in EBIT before special items.
The company previously predicted sales growth of 1% to 5% for the year and an increase of 1% to 10% in EBIT before special items. (…)
After a Strong First Half, Stocks Tend to Stay Higher
The S&P 500 ended June up more than 17% from the beginning of the year, marking one of 12 times since the index’s inception that it climbed 15% or more in the first half. Data shows that when the first six months have produced gains this large, stocks have always finished the year in the black.
But there are nuances.
Whenever the S&P 500 climbed 15%-18% in the first half, the index continued to rise in the next two quarters—albeit posting smaller gains, according to Dow Jones Market Data.
But when the S&P 500 surged more than 25% in the first half of the year, the index declined in the following two quarters. (…)
FYI
Online purchases per person: (The Daily Shot)
Source: Statista
1 thought on “THE DAILY EDGE: 9 JULY 2019”
Ponder the Fed not cutting rates in a few weeks, then a trump/market tantrum, which pushes treasury yields lower, pushing mortgage rates lower, resulting in economic stimulation, with global yields headed towards zero … then, enter trump, bitching about the dollar and the actual possibility that other global currencies are not aligned with the dollar .. seems like a mess ahead, on top of market overvaluation.
Also see: The risk of intervention increases should the Fed decide not to ease policy at its meeting this month, Rai said. Trump has staged a campaign against Fed Chairman Jerome Powell in recent months, comparing the central bank to a “stubborn child” last month for not cutting rates.
https://www.bloomberg.com/news/articles/2019-07-03/be-prepared-for-anything-as-trump-slams-europe-china-on-fx
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