Syz the moment

Every new dollar of US debt generates just $0.58 of GDP Source: Mike Zaccardi, BofA

-> 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 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’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

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

So much so that the World Bank is now classifying Russia as a "high-income country." On Monday 1st of July, the World Bank announced it has upgraded Russia from an upper-middle-income country to a high-income country, according to a report from the financial institution's economists. "Economic activity in Russia was influenced by a large increase in military-related activity in 2023," World Bank economists wrote in their report. Last year, Russians earned $14,250 per person on a gross national income basis. The World Bank's upgrade confirms reports from Russia that suggest the growth is primarily driven by wartime activities that generate demand for military goods and services, making some sectors winners in Russia's wartime economy. Russia's trade jumped by nearly 7% last year, while activities in the financial sector and construction grew by 6.6% and 3.6%, respectively. This boosted Russia's real GDP — which is economic growth adjusted for inflation — by 3.6%. The development has made some poor Russians better off financially, complicating any calculus over how to end the war.

US government spending as a % of GDP is now ~43%, in line with THE GREAT FINANCIAL CRISIS. This is just 1 % below World War II levels. Only the COVID crisis saw higher expenditures as a share of GDP of 54%... Source: BofA, Global Markets Investor

However, 2 months net revisions were NEGATIVE with -110k. Moreover, government employment rose by a whopping 70k while PRIVATE employment with 136k was below estimates. Unemployment rate rose to 4.1% from 4.0% due to higher labor participation rate. Wage rose 3.9% YoY in line w/estimates. Bottom-line: these numbers seem to confirm our thesis that the US job market is NORMALIZING hence reinforcing the disinflation trend which will ultimately enable policy makers to NORMALIZE. More to come from our Chief Economist Adrien Pichoud... stay tuned... Source: Bloomberg, HolgerZ