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Weeks in Review: 26 June - 7 July 2023

Summary and Comment

 

These weeks have been full of economic indicator releases, which are briefly summarized here. 

Personal spending in the United States edged up by 0.1 % in May 2023, short of market expectations of a 0.2 % increase and compared to a 0.6 % gain in April. Personal income in the United States rose by 0.4% over a month in May of 2023, compared to a downwardly revised 0.3% rise in April,

United States Core PCE Price Index rose by 0.3% in May, easing from the 0.4% increase in the previous month. New orders for US manufactured durable goods jumped 1.7% month-over-month in May 2023.

The US economy added 209K jobs in June 2023, following a downwardly revised 306K in May. However, the unemployment rate in the US stood at 3.6 % in June 2023, in line with market expectations. The so-called U-6 unemployment rate, which also includes people who want to work, but have given up searching and those working part-time because they cannot find full-time employment, rose to 6.9 % in June from 6.7 % in May. The labor force participation rate was unchanged at 62.6 %, remaining at its highest level since March 2020.

The number of job vacancies in the United States fell to 9.824 million in May of 2023. The openings remain above levels prior to the pandemic, backing evidence of a tight labor market, serving as an excuse for the Federal Reserve to continue raising interest rate.

The ISM Services PMI jumped to 53.9 in June of 2023, pointing to the strongest growth in the services sector in four months. Meanwhile, "the majority of respondents indicate that business conditions remain stable; however, they are cautious relative to inflation and the future economic outlook”, Anthony Nieves, Chair of the ISM Services Business Survey Committee said.

The seasonally-adjusted unemployment rate in the Euro Area stood at a record low of 6.5% in May 2023, unchanged from the prior month and matching market forecasts. The number of unemployed are at the lowest level since comparable records began in 1995. Amongst the largest Euro Area economies, the lowest jobless rate was recorded in Germany (2.9%), while the highest rates were registered in Spain (12.7%), Italy (7.6%) and France (7%).

The consumer price inflation rate in the Euro Area decreased to 5.5 % in June 2023, down from 6.1 % in the previous month. The core rate, which excludes volatile items such as food and energy, picked up to 5.4 %, remaining close to a recent peak of 5.7 % and supporting the view that policymakers are likely to continue raising rates in the upcoming months.

The annual inflation rate in Germany was confirmed at 6.4 % in June 2023, rising from May’s 14-month low of 6.1 % and well above the European Central Bank's target of about 2 %. The core inflation rate stood at 5.8 % in June, up from 5.4 % in May.

Germany's trade surplus narrowed to EUR 14.4 billion in May 2023, compared to a downwardly revised EUR 16.5 billion in the previous month.

Inflation in the Euro Area is too high and is set to remain so for too long, ECB President Christine Lagarde said during the ECB Forum on Central Banking in Sintra, Portugal. Wage growth is now pressuring inflation which is entering a second stage and is set to linger for some time. In June, the ECB raised interest rates to 4%, the highest level since the 2008 financial crisis, and the rate on the deposit facility to a 22-year high of 3.5%. Also, President Lagarde stated that the ECB had more ground to cover and would likely continue raising rates in July.

Treasury Secretary Janet Yellen’s two-day engagement (7 and 8th July 2023) with top officials in Beijing offered a way for the U.S. and China to contain damage in their economies from the two nations’ intensifying rivalry. During Yellen’s visit, the Chinese side asked the U.S. to take concrete actions to address concerns over economic sanctions and containment, according to a statement from the Ministry of Finance on Monday. The Chinese side also reiterated its concerns about issues including tariffs, export controls and a ban on products produced in Xinjiang, according to the statement. "We have a new team on the economic side in Beijing, and it's important to establish person-to-person relationships and to open ongoing channels of communication, where concerns can be aired and discussed," Yellen told "Face the Nation" moderator Margaret Brennan. "And I do think my trip has been successful in forging those relationships and creating the opportunity for a deeper set of more frequent contacts at our staff levels."

For the week, the main stock market indices are down, with the NASDAQ losing 0.9%, the S&P500 down 1.2%, and the RUSSEL 2000 taking a hit of 1.3%. Gold and silver recovered 0.3% and 1.3%, respectively. The barrel of WTI gained 4.6% this week, while natural gas falled 6.9%. Bitcoin stabilized and lost only 1.5%.

The relative strength of the US dollar is 0.6% lower. The US 10-year yield rised abruptly to  4.07 %. The US bond yield is peaking at 5.5 % in 6 months from now, and the yield curve remains inverted (a recession indicator).

Sources

https://time.com/6293244/janet-yellen-china-trip-economic-guardrails-amid-tensions/

https://www.cbsnews.com/news/treasury-secretary-janet-yellen-china-trip-successful-forging-relationships-face-the-nation/

https://www.tradingeconomics.com

 

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