This week, a few indicators again surfaced that investors took as counter to the trend that the U.S. economy is in an extended soft patch.

Retail sales turned out being much better than expected in July, up +0.8% versus a forecast of +0.3%.  Non-core and core sales were roughly similar; pointing to across the board strength, but the best performances came from non-store (Internet) retail, sporting goods, furniture, and health/personal care items.

Industrial production was up solidly in July—by +0.6%, just a bit above the expected figure.  This was largely driven by manufacturing, much of which was due to an over-3% rise in vehicle production.  Mining and utilities output also gained.

From a regional side, the New York Fed’s Empire manufacturing survey weakened by -5.9 in August, which ran counter to expectations for a flat reading.  New orders and shipments declined, while inventories improved and employment index held steady.  The Philadelphia Fed index did improve, but not by as much as expected for August and remains negative.  Here, shipments fell, employment was flat and new orders improved a bit, however. Read more

A lighter economic week to some extent—at least compared to last week.

Consumer credit growth slowed in June, to $6.46 billion, which is about half of what was expected by analysts.  This can be a tricky measure, though, as slowing credit may mean less spending (due to Americans’ tendency to use credit cards extensively), or may mean income is growing and we don’t need the credit as much).  The ‘non-revolving’ credit (non credit card) piece increased by a large amount, mainly due to government student loans. Read more

The FOMC meeting ended with no serious action.  The only change was an alteration/toughening of language indicating the Fed was poised to act and provide accommodation, as opposed to being ‘prepared to take action.’  A small distinction, but an important one.  While markets were clearly disappointed in a lack of action (as they were with similar lack of easing by the European and U.K. central banks this week), there are two issues to consider:  either the economy is not weak enough to warrant additional action (or the data remains inconclusive at this point), or the tools the Fed is considering (‘unconventional’ stimulus) are not viewed as being quite as effective going forward. Read more

Economic news on the U.S. front was mixed this week, although signs of a slowdown continue to persist.

Firstly, the advance estimate of the 2nd Quarter U.S. GDP came out at a +1.5% annualized rate.  Believe it or not, this was largely in line with consensus expectations (lower than some, higher than some others from analysts who have been engaged in a race to lower these estimates as fast as possible).  From a composition standpoint, growth in final domestic sales increased by the same +1.5%, consumer spending increased more than anticipated and investment in equipment/software and housing were up +7% and +10% respectively.  However, government spending was down on both the federal and state/local levels.  The GDP price index and core price indexes grew in the same range (+1.6% and +1.8%). Read more

Positive

Headline CPI was unchanged in June, in line with expectations.  The food index rose 0.2% in June.  The energy index continued to fall by 1.4%, the third straight declining month following 1.7% and 4.3% drops in April and May respectively.  Fuel oil saw the steepest price reduction with a 7.9% drop from May.  Excluding food and energy, the core index increased 0.2% month-over-month and was up 2.2% year-over-year.  Overall, inflation risk is muted. Read more

It was a bit of a light week from an economic news standpoint.

The University of Michigan Consumer Confidence survey was weaker for July, falling from 73.2 to 72.0, which wasn’t a complete surprise.  The ‘expectations’ part of the survey fell by a few points, while the ‘current conditions’ component rose.  Consumers’ expectations for future inflation have fallen between 2.7-3.0% for almost every month for the past several years.  This is in line with current inflation, and historical averages.  Of course, as with many measures, the most-often guessed expected future figure is today’s number. Read more