The most interesting question going into next week is whether the US economy is picking up.
Did it start with the release of the June data? Is this going to frustrate a September rate cut? The Bloomberg Surprise Index (see chart below) bottomed on July 5, the nonfarm payroll release date. Since then, it has been trending higher. The move higher over the last five days (one business week) has been the biggest since September 2021 (bottom panel). Source: Jim Bianco, Bianco Research
What is happening in Poland is nothing short of economic wonder.
Standard of living in Poland overtaking Spain and Italy within just one generation is amazing. Source: Michel A.Arouet, IMF
US National debt. A bit of maths...
The current level is almost $35 trillion. And the government has baked in minimum $2 trillion deficits going forward. There are $5 trillion in government revenues per year. 100% of government revenue is consumed by Social Security, Medicare, Medicaid and interest on the debt. Interest on the debt is WAY over $1 trillion per year, more than 20% of government revenue. It takes another $2 trillion minimum per year to fund defense and all of the other departments of the government that they are unwilling to cut. There are also extra items like Ukraine and whatever the wars going on that get additional off budget funding. It should thus keep rising. Source: Wall Street Silver, ABC News
Unproductive debt...
Every new dollar of US debt generates just $0.58 of GDP Source: Mike Zaccardi, BofA
China Q2 GDP growth slowed more than expected (+4.7% yoy vs. +5.1% yoy expected), but the big surprise is just how weak retail sales were - growing only 2% in June.
-> China’s National Bureau of Statistics on Monday said the country’s second-quarter GDP rose by 4.7% year on year, missing expectations of a 5.1% growth, according to a Reuters poll. -> June retail sales also missed estimates, rising 2% compared with the 3.3% growth forecast. -> Industrial production, however, beat expectations up by 5.3% in June from a year ago, higher than Reuters estimate of 5% growth. -> Urban fixed asset investment for the first six months of the year rose by 3.9%, meeting expectations. Investment in infrastructure and manufacturing slowed their pace of growth on a year-to-date basis in June versus May, while real estate investment declined at the same 10.1% rate. The National Bureau of Statistics did not hold a press conference for the data release. China’s high-level policy meeting, the Third Plenum, kicks off Monday and is set to wrap up Thursday. Source: Bloomberg, CNBC
In Germany, the number of corporate insolvencies up by a third.
In April 2024, the local courts reported 1,906 corporate insolvencies. The courts put the creditors' claims from the corporate insolvencies reported in April 2024 at ~€11.4bn. In April 2023, the claims had totaled ~€1.3bn. Source: HolgerZ, Bloomberg
China posts biggest monthly trade surplus in at least 24 years, nearly $100B in June - Bloomberg
China’s trade surplus soared to an all-time high in June, with a jump in exports overwhelming an unexpected decline in imports and raising the risk of greater trade tensions. Exports rose to $308 billion, expanding for a third straight month to the highest level in almost two years, the customs administration said Friday. Imports fell to $209 billion, leaving a record trade surplus of $99 billion for the month. The growing imbalance has spooked China’s trade partners, who have responded with more tariffs on Chinese imports including electric vehicles. This tension has worsened ties between the European Union and Beijing, which this week opened a tit-for-tat probe into the EU’s trade barriers in what could bring the economies closer to a trade war. The surplus “reflects the economic condition in China, with weak domestic demand and strong production capacity relying on exports,” said Zhiwei Zhang, president and chief economist of Pinpoint Asset Management. However, “the sustainability of strong exports is a major risk for China’s economy in the second half of the year. The economy in the US is weakening. Trade conflicts are getting worse.” Source: Bloomberg
An important US macro data is expected today: the CPI inflation data for June. The median forecast for headline CPI inflation is 3.1%, but markets are showing a wide range.
Prediction markets currently show that there is a 19% chance of June CPI inflation coming in ABOVE 3.1%, according to Kalshi. On the other hand, there's a 31% chance of inflation coming in BELOW 3.1%. There's even a 5% chance of CPI coming in above 3.3%, which would put inflation back on the rise. If CPI inflation comes in as expected, it would mark the 3rd straight monthly decline in YoY inflation. Source: The Kobeissi Letter
