U.S. Retail Sales Up 0.5% in June, May Number Revised Up From 0.8% to 1.3%… Excluding car and fuel, sales rose 0.3%.
What it means – The gains in June were good, but it was the revisions to the May figures that stole the show. The numbers were good across the board, with autos up 0.9% and 0.8% in May and June, respectively. Health and personal care jumped 2.2% last month, and non-store retailers improved sales by 1.3%.
The numbers will definitely push up second-quarter GDP, which the Atlanta Fed now estimates will grow 4.5%. A number that high might strike fear into the hearts of investors who will worry about the Fed raising rates faster than expected.
Industrial Production Up 0.6%, Led by Manufacturing… Last month industrial production slipped a revised 0.5%, but it turned around this month. The manufacturing sector, down 1.1% in May, jumped 0.8% in June.
What it means – The May swoon in manufacturing was tied to a fire at an auto parts supplier. Without the parts, Ford couldn’t assemble their coveted F-150s, which slowed overall industrial production. Motor vehicle sales expanded 7.8% last month following the 8.6% drop in May.
Mining, which includes oil and gas exploration and production, also had a good month, up 1.2%.
Industrial capacity, which reflects how much of our industrial stock is in use, rose 0.3% to 78%. The number has been stuck below the long-run average of 80% for the entire bull run since the financial crisis.
Housing Starts Fell 12.3% and Permits Dropped 2.2%… Single-family housing starts declined 9.1% and multifamily housing starts shrank by 19.8%. Those numbers were far below expectations.
What it means – The unexpected drops brought annual housing starts down to minus 4.2% over last year and permits to 3% less than last year. The only comfort in the numbers was permits for just single-family homes, which squeaked out a 0.8% monthly gain.
Monthly housing starts are notoriously noisy, so we don’t learn much from the big swings. But the housing story has been consistently modest this spring even as prices remain firm. We’ll have to see which metric moves first. Do starts and sales increase, or do prices dip?
U.S. Crude Oil Inventory Up 5.8 Million Barrels… Inventory dropped last week by 12.6 million barrels. This week’s gain was a surprise. The increase brought overall inventory to 411.1 million barrels, 16.2% below their level a year ago.
What it means – With the Chinese buying Iranian oil and American frackers producing 11 million barrels per day, there’s more of the black gold sloshing around the system than people expected.
Oil prices have softened a bit in the past week, but still remain in the upper $60s. It’s likely that prices stay in the $60s or above because lower prices would cause issues for OPEC members. They’ve shown they can stick to production quotas, so if prices fall too far they’ll simply pledge to cut production.
Higher oil prices will help the U.S. energy complex rake in more profits and keep people employed, so it’s not all bad.
Commuters in Valencia Venezuela Take “Dog Carts”… City buses rarely run in the third-largest city in the nation, which is also home to many of the top Venezuelan industrial companies. Scarce resources such as motor oil and tires keep the busses off the road. Instead, commuters pile onto flatbed trucks that transport them for a modest fee. But, the small fee comes with a price. The trucks, called “dog carts,” lack any safety features, aren’t well maintained, and have been involved in many accidents.
The lack of public transportation is a direct result of falling revenue from oil sales. The Venezuelan national oil company pumps less oil each month because it fails to maintain its equipment. Of the oil they produce, the country sends 28% to China as a payment in kind on existing loans.
Data supplied by Dent Research/Delray Beach Publishing
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