10 Things You Need To Know: August 9, 2022
Key data releases this week include: NFIB Small Business Optimism (Tue), CPI (Wed), Thu (PPI), and consumer sentiment (Fri).
Haver
August 3, 2022
The U.S. Services PMI increased to 56.7 during July from 55.3 in June according to the Institute for Supply Management. The July reading was the highest in three months but remained below the peak of 68.4 in November 2021. The Action Economics Forecast Survey expected 53.9 for July.
Haver
August 5, 2022
The 528,000 gain in nonfarm payrolls last month (4.0% y/y) followed increases of 398,000 and 386,000 during the prior two months. It was the largest monthly increase since February and was double the expectation for a 250,000 rise in the Action Economics Forecast Survey. The increases during June and May were revised up slightly from 372,000 and 384,000.
Haver
August 5, 2022
Consumer credit outstanding jumped $40.1 billion (7.7% y/y) in June, the largest monthly advance in three months, after a $23.8 billion May increase (revised from $22.3 billion). A $25.0 billion rise had been expected in the Action Economics Forecast Survey.
Financial Times, The Wall Street Journal, The Guardian
August 4, 2022
The Bank of England’s Monetary Policy Committee voted 8-1 to raise its key interest rate by 50 basis points to 1.75%, the central bank’s steepest hike since 1995. The BoE said it expects the UK to fall into a recession that will last about 15 months and that inflation will climb to 13% by the end of the year.
Barron’s
August 8, 2022
With 432 S&P 500 companies having reported, aggregate earnings have come in 5.8% above expectations, as 77% of companies have reported better-than-expected profits. Revenue, meanwhile, is growing at a 13% clip, helping to drive those earnings beats. That hasn’t kept future earnings estimates from being revised lower, but the drastic cuts that were expected haven’t materialized.
Barron’s
August 8, 2022
There’s a difference between a “technical” recession—two consecutive quarters of negative growth—and an “official” recession determined by the National Bureau of Economic Research. The NBER gives particular importance to real personal income (excluding transfers) and to changes in nonfarm payroll employment. Based on these two measures, the odds that the NBER qualifies 2022’s first half as a recession are pretty low.
Reuters
August 4, 2022
US interest rates need to exceed 4% this year and through the first half of next year to reduce inflation, said Federal Reserve Bank of Cleveland President Loretta Mester. There needs to be strong evidence that the policy has worked before the Fed could ease up on rates, she said.
Capital Economics
August 5, 2022
The unexpected acceleration in non-farm payroll growth in July, together with the further decline in the unemployment rate and the renewed pick-up in wage pressures, suggests the economy is still a long way from recession. That raises the odds of another 75bp rate hike in September, although the outcome depends more on the evolution of the next couple of CPI reports.
The WSJ
August 7, 2022
The Senate has approved Democrats’ $740 billion climate, health care and tax package on a party-line vote in which Vice President Kamala Harris broke the tie. The Inflation Reduction Act includes $374 billion in climate and energy spending, Medicare negotiations for drug prices, a 15% minimum corporate tax and a stock buyback tax, while a proposed tax increase on private equity managers’ carried-interest income has been dropped. The House is expected to vote on the legislation Friday.