Having fallen for two straight months, and despite the decline of US (and the rest of the world’s) Manufacturing PMIs, expectations were for a rebound in Factory Orders in June and they did, rising 0.6% (buyt less than the expected 0.7% MoM gain following a major downward revision for May to a 1.3% drop).
New orders ex-trans rose 0.1% in June after falling 0.03% the prior month
New orders ex-defense for June rise 1.1% after falling 0.8% in May
However, this is the second month in a row of year-over-year factory order declines.
With a the biggest driver a slump in defense spending…
However, based on the lagged ISM Manufacturing PMI, US Factory Orders are set to tumble further…
And Trump’s latest tariffs are unlikely to help that situation… although war would help?
via ZeroHedge News https://ift.tt/2yz3YYi Tyler Durden
US equity markets are accelerating losses following confirmation, via a Chinese media op-ed, that the US-China trade war is drifting further away from a deal following Trump’s new tariffs.
The US on Thursday unexpectedly announced on Twitter that starting September 1 it would impose a 10-percent tariff on an additional $300 billion in Chinese goods, following the resumed high-level China-US economic and trade consultations in late July in Shanghai. Both sides said the negotiations were “constructive” and mentioned China’s commitment to increase purchases of US agricultural products in their statements. It’s astonishing and inexplicable that the White House changed its tune overnight and is wielding the tariff stick once again.
The US looks quite temperamental. It accused China of backtracking on a trade deal as Beijing insisted on some of its own demands. This time, the US faulted China for not stepping up to buy more US farm products. It threatened new tariffs once again, obviously hoping to deter China.
China regrets this new, unreliable behavior. Purchasing US agricultural products in bulk is a complicated commercial activity. From Chinese importers inquiring about prices to selling the goods to Chinese buyers, the process requires much coordination. Chinese officials have said several times that the purchases are in progress. But they are not as simple as buying a bag of peanuts in the supermarket.
Despite understanding the complexity of the negotiations, the US seems very anxious and impatient. However, differences between China and the US cannot be swiftly eliminated. As a Chinese proverb says, “Eat hot tofu slowly.”
China hopes to reach a trade deal with the US and has shown its goodwill to promote the resumption of trade talks. But China’s bottom line has become increasingly crystal-clear. Although the US is stronger than China and has more power in deciding whether to talk or not, China has set realistic negotiation goals for itself and has sought to staunchly protect its core interests.
The Chinese market needs US agricultural products, but it won’t make purchases for the sake of reaching a trade agreement with the US without prior consideration of how to sell and consume them. The purchase of several million tons of US soybeans to satisfy Chinese demand is not large, but if purchased under US tariff pressure, even one kilogram is unnecessary.
Reaching a trade deal is important, but ensuring that the negotiating process is equal and reasonable is also of great importance to China. China believes mutual respect and equality is essential to safeguarding national interests.
China and the US slipped into a two-month stalemate after Washington slapped new tariffs on Beijing in May. Attempts to intimidate China with tariffs are futile. The more tariffs on China, the more pain the US will suffer. This cannot be covered up by US lies against the basic laws of economics. US stocks plummeted after the new tariffs were announced. Investors know that the White House is bringing major uncertainties to the US economy once again.
China doesn’t want to return to a stalemate, but if that’s what the US wants, China has no other choice but to withstand it. US anxieties are now obvious. Should the new tariffs take effect, by no means will they bring China and the US closer to a trade deal. Instead, they will only move the two further away from a deal.
China believes that it’s better to talk than to fight. China also adheres to the principle that it must firmly strike back against any coercion. Of the two attitudes, which one does the US expect China to take in the coming days? That’s the White House’s choice.
Kudlow was quick to jump on the wires to support the President’s actions, saying that the administration “is looking forward to more China talks,” and added that Trump “is not satisfied with progress so far with China.” We suspect, that progress is about to come to a standstill.
via ZeroHedge News https://ift.tt/2YDQAwn Tyler Durden
While the headline payrolls number was solid and just as expected, if a more detailed read showed some red flags (downward revisions, rising wages only due to less hours worked), one aspect of today’s jobs report that will likely become a major talking point for Democrats and other critics of the Trump economy, is that the number of multiple-jobholders soared from 7.855 million in May, to 8.156 million in June, to a new all time of 8,389 million in July, a monthly increase of 233K and 591,000 higher in the past three months, which was a clear indication that the jobs number was far weaker than the headline represents if one excludes all those workers who represented two jobs to the BLS’ various surveys.
Yet even this number had its silver lining, because while the Establishment Survey’s 164K increase was impressive, at the same time the BLS reported that the number of Full-Time workers soared by 291K, which together with June’s 453K increase was a dramatic reversal to the trend so far in 2019, where 218K full time jobs had been lost in the January – May period. At the same time part-time jobs rose by only 54K in July, sending the part-time total for the first half to -133K, with most of the improvement thanks to the June number.
However, in keeping with the theme that a record number of workers need more than one job to make ends meet, the BLS reported that the labor force participation rate for workers 55 and old surged to the highest level in 7 years.
As Bloomberg notes, there are several explanations, with the more innocuous one that as Americans live longer compared with prior generations, they work more at an older age. Alas, the reality probably is that Americans simply haven’t saved enough for retirement, so there’s really no choice.
And now, back to the Fed’s scheduled rate cuts which will assure that even more savers have no choice but to work until they die, most likely while working on more than one job.
via ZeroHedge News https://ift.tt/2YCRkpG Tyler Durden
A $10 billion tech contract with the U.S. military is under review, in what many perceive as a political move by President Donald Trump against Amazon.
In mid-July, Trump said his administration was looking into the Pentagon’s likely decision to award the contract to Amazon Web Services, amid “complaining from different companies like Microsoft and Oracle and IBM.”
“Amazon Web Services, which virtually created the cloud computing industry and has long provided cloud services to the Central Intelligence Agency, has always been seen as the strongest competitor,” reportsThe New York Times. But Trump—a frequent Amazon critic—told reporters in July that “great companies are complaining about it, so we’re going to take a look at it. We’ll take a very strong look at it.”
This week, a spokesperson for Secretary of Defense Mark T. Esper announced that the contract would be postponed while Esper was “looking at” it further. No word was given on how long that will take or whether the White House had in fact intervened.
Google had initially been in the running for the contract, but it “pulled out amid employee opposition to military work, though many analysts said it was unlikely to win the project because it lacked the right security credentials,” says the Times.
IBM and Oracle had also been vying for the contract, but the Department of Defense said in April that they were no longer being considered and the contract was between Amazon and Microsoft.
Woman buys billboards, hires plane to pull banner to push for NY law easing sex abuse claims. State sends her letter warning of big fines for unregistered outlays of > $5,000 to advocate re: legislation. (Pssst! Lobbying is speech!) https://t.co/myU8iUBqbohttps://t.co/6HpxOwHJjQ
New York based Locast offers viewers access to over the air broadcasts via the internet to roughly 13 cities (about 31% of the US market). Its website notes the operation is funded by donations and that access to this content (again, already accessible for free via an antenna) should be a consumer “right” given that US consumers technically own the airwaves these programs are broadcast over.
The networks disagree.
Locust is “funded in part by AT&T and Dish Networks” and “was developed by former FCC lawyer and media executive David Goodfriend, who…designed the service entirely from the ground up in a bid to try and comply with (and test the logic of) the current legal minefield,” notesTechDirt. Goodfriend toldThe New York Times: “We really did our homework. We are operating under parameters that are designed to be compliant within the law.”
QUICK HITS
Thousands of troops are being withdrawn from Afghanistan today. “The agreement, which would require the Taliban to begin negotiating a larger peace deal directly with the Afghan government, could cut the number of American troops in the country from roughly 14,000 to between 8,000 and 9,000,” reportsThe Washington Post.
The U.S. is pulling out of a missile treaty with Russia. “France and Germany and other allies have backed the U.S. plan to withdraw from the 1987 Intermediate-range Nuclear Forces Treaty on Friday unless Russia destroys missiles that the U.S. says violate the pact,” reportsTheWall Street Journal. “Moscow has shown no sign of complying with the deadline.”
Trump announced yesterday that another $300 billion in Chinese goods would face 10 percent tariffs come September. “Combined with the existing tariffs of 25 percent on about $250 billion worth of Chinese-made goods, the new tariffs will effectively cover all goods imported from China,” notesReason‘s Eric Boehm.
Jail nurse charged in inmate’s death:
This was so painful to read. Incredible reporting by @laurenk_gill on the death of Madison Jody Jensen, who died of dehydration at the Duchesne County jail. A jail nurse has been charged with negligent homicide. https://t.co/40IbNBrE3Y
— ElizabethWeill-Greenberg (@elizabethweill) August 1, 2019
Playboy is being relaunched as a quarterly magazine. CEO Ben Kohn said Playboy merchandise and services still net $3 billion annually, and so reviving the magazine worked well as a form of “brand extension.” The New York Times says Kohn “likened the future of the company to Gwyneth Paltrow’s Goop.”
The FBI thinks conspiracy theories could be a terror threat, and it has issued a bulletin warning about them. Yahoo News, which obtained the document, quotes some skeptical thoughts from Joe Uscinski, Michael German, and David Garrow.
A $10 billion tech contract with the U.S. military is under review, in what many perceive as a political move by President Donald Trump against Amazon.
In mid-July, Trump said his administration was looking into the Pentagon’s likely decision to award the contract to Amazon Web Services, amid “complaining from different companies like Microsoft and Oracle and IBM.”
“Amazon Web Services, which virtually created the cloud computing industry and has long provided cloud services to the Central Intelligence Agency, has always been seen as the strongest competitor,” reportsThe New York Times. But Trump—a frequent Amazon critic—told reporters in July that “great companies are complaining about it, so we’re going to take a look at it. We’ll take a very strong look at it.”
This week, a spokesperson for Secretary of Defense Mark T. Esper announced that the contract would be postponed while Esper was “looking at” it further. No word was given on how long that will take or whether the White House had in fact intervened.
Google had initially been in the running for the contract, but it “pulled out amid employee opposition to military work, though many analysts said it was unlikely to win the project because it lacked the right security credentials,” says the Times.
IBM and Oracle had also been vying for the contract, but the Department of Defense said in April that they were no longer being considered and the contract was between Amazon and Microsoft.
Woman buys billboards, hires plane to pull banner to push for NY law easing sex abuse claims. State sends her letter warning of big fines for unregistered outlays of > $5,000 to advocate re: legislation. (Pssst! Lobbying is speech!) https://t.co/myU8iUBqbohttps://t.co/6HpxOwHJjQ
New York based Locast offers viewers access to over the air broadcasts via the internet to roughly 13 cities (about 31% of the US market). Its website notes the operation is funded by donations and that access to this content (again, already accessible for free via an antenna) should be a consumer “right” given that US consumers technically own the airwaves these programs are broadcast over.
The networks disagree.
Locust is “funded in part by AT&T and Dish Networks” and “was developed by former FCC lawyer and media executive David Goodfriend, who…designed the service entirely from the ground up in a bid to try and comply with (and test the logic of) the current legal minefield,” notesTechDirt. Goodfriend toldThe New York Times: “We really did our homework. We are operating under parameters that are designed to be compliant within the law.”
QUICK HITS
Thousands of troops are being withdrawn from Afghanistan today. “The agreement, which would require the Taliban to begin negotiating a larger peace deal directly with the Afghan government, could cut the number of American troops in the country from roughly 14,000 to between 8,000 and 9,000,” reportsThe Washington Post.
The U.S. is pulling out of a missile treaty with Russia. “France and Germany and other allies have backed the U.S. plan to withdraw from the 1987 Intermediate-range Nuclear Forces Treaty on Friday unless Russia destroys missiles that the U.S. says violate the pact,” reportsTheWall Street Journal. “Moscow has shown no sign of complying with the deadline.”
Trump announced yesterday that another $300 billion in Chinese goods would face 10 percent tariffs come September. “Combined with the existing tariffs of 25 percent on about $250 billion worth of Chinese-made goods, the new tariffs will effectively cover all goods imported from China,” notesReason‘s Eric Boehm.
Jail nurse charged in inmate’s death:
This was so painful to read. Incredible reporting by @laurenk_gill on the death of Madison Jody Jensen, who died of dehydration at the Duchesne County jail. A jail nurse has been charged with negligent homicide. https://t.co/40IbNBrE3Y
— ElizabethWeill-Greenberg (@elizabethweill) August 1, 2019
Playboy is being relaunched as a quarterly magazine. CEO Ben Kohn said Playboy merchandise and services still net $3 billion annually, and so reviving the magazine worked well as a form of “brand extension.” The New York Times says Kohn “likened the future of the company to Gwyneth Paltrow’s Goop.”
The FBI thinks conspiracy theories could be a terror threat, and it has issued a bulletin warning about them. Yahoo News, which obtained the document, quotes some skeptical thoughts from Joe Uscinski, Michael German, and David Garrow.
We accept too much of what Fed officials say at face value.
Given that they are conducting the greatest monetary experiment in history, it is essential that we ask better questions and demand coherent answers. It is crucial we take a deeper look at their objectives, their means of achieving them, and the long run consequences of their actions.
The Federal Reserve has a so-called statutory dual mandate – maximum employment and price stability. For decades (and despite the stagflation of the 1970’s), the Fed assumed that there was a negative correlation between these mandates, i.e., if unemployment fell than inflation rose. This was known as the Phillips Curve.
In the 1990’s, a key metric discussed by the Fed was NAIRU, an acronym for Non-Accelerating Inflation Rate of Unemployment. It referred to a theoretical level of unemployment below which inflation would be expected to rise. This rate was assumed to be near 5.5%, then lowered to 4.5%.
Today the nation’s unemployment rate is 3.7% and has been below 4.5% since February 2017.
Earlier this month, the Fed admitted that the relationship in the Phillips Curve was dead. It has always been an illusion to think that increasing inflation would lower unemployment. For decades, the Fed has been using this faulty model to steer its policy decisions.
Today, the Fed appears obsessed with getting the inflation rate higher. It has shown a willingness to do ‘whatever it takes’ to achieve its self-imposed 2% inflation target. Many questions surround this obsession as well as its ability to actually navigate a pinpoint-perfect 2% landing.
The Fed readily admits that measuring overall consumer inflation is very difficult. I would think in a highly-complex $20 trillion global economy that is an understatement. But, how can Fed actions be considered respectable when its inflation metrics are so imprecise.
Nonetheless, The Fed’s preferred measure of inflation has been stable in a range of 1.3% to 2.0% for over 4 years. In July 1996 Fed Chairman Alan Greenspan defined stable prices as “that state in which expected changes in the general price level do not effectively alter business and household decisions.”
So, what’s the problem. With stable inflation, an unemployment rate near the lowest in 50 years, near record stock prices, why then is the Federal Reserve tinkering and trying to micro-manage such a large complex economy?
We should certainly not accept at face value the Fed’s assertion that inflation is too low and higher inflation should be welcomed. Inflation is not a state of Nirvana as fed officials would like us to believe. Inflation is theft of our money’s value.
A 2% inflation rate would cut the purchasing power of our money by 50% in 36 years. NY Fed President John Williams said that he would even be willing to allow inflation to move to 3% for a period of time, effectively halving the value of our hard-earned money in 24 years.
Think about that. In a 3% inflation world, if you inherit money at birth and live to 72 years old, the value of your money would be cut in half, and then cut in half again, and then cut in half a third time. $100 would be worth $12.50 over this time, all else being equal.
Furthermore, how can our politicians talk about wealth inequality without talking about Federal Reserve policy? Inflation hurts the poorest people the most, because the poor’s biggest asset is cash, not financial assets.
In addition, inflation has moral hazard ramifications by harming savers for the benefit of borrowers. Doesn’t this create all the wrong incentives in society?
The motivation behind generating inflation is to motivate the consumer to spend money as soon as possible. This becomes more important as the amount of Fed-induced global indebtedness grows to ever-higher record breaking levels. We need and deserve better answers, while the Fed needs to find an exit strategy and a policy that is sustainable and beneficial for the long run.
via ZeroHedge News https://ift.tt/2yyPwiY Tyler Durden
Yesterday’s news of 10% tariffs on a the remaining $300bn of imports from China took markets by storm today with US stocks moving from a 1% gain to almost a 1% loss on the day. Meanwhile, gold closed at a 6-year high of $1445. But the most important move, in our view, was the action in government bonds. The 10-year treasury note shattered the July low to finish at 1.89% – the lowest level since late-2016. The action came as markets were already trying to digest more evidence of a further slowdown in manufacturing activity as ISM manufacturing PMI declined by half a point to 51.2 vs expectations of a rise to 52. Even with the large moves this week, especially in government bonds, the additional tariffs foreshadow still more downside for yields for at least three reasons.
First, Manufacturing activity is being affected by tariffs and it is slowing markedly – bond yields track manufacturing activity. Manufacturing activity peaked coincident with tariffs being announced on Chinese-made solar panels and washer machines in early 2018. As the impact of trade policy has affected actual business decisions, business conditions have deteriorated. More tariffs are likely to exacerbate this trend in manufacturing activity and bring down rates as a result.
Second, Business confidence is being affected by tariffs and is falling markedly – bond yields track business confidence. Public policy affects business confidence insofar as policy uncertainty makes it more difficult for business leaders to make decisions about capex and hiring. Business confidence peaked in early 2018 coincident with the imposition of tariffs on Chinese-made solar panels and washer machines. Confidence has since fallen sharply. More tariffs are likely to exacerbate this trend in business confidence and bring down rates as a result.
The Federal Reserve is likely to be much more accommodating than they let on this week as a result of more tariffs. Third,More trade policy uncertainty seems likely to kick the Fed into action and meet the bond market’s expectations for two more rate cuts in 2019 and possibly more still in 2020. Moreover, the 10-year to Fed Funds yield spread is still inverted by 35 basis points. In other words, the likelihood of a full on rate cutting cycle has increased and that of a “mid-cycle adjustment” has decreased. This is bullish for short-term as well as long-term government bond yields.
via ZeroHedge News https://ift.tt/31cXLgW Tyler Durden
Having seen ‘success’ at the start of the year with the trade deficit with China plunge (reduced deficit), the last three months – as tariff tensions have escalated, despite a so-called trade-truce – have seen the China trade deficit accelerate once again.
America’s merchandise trade deficit with China widened slightly in June to a five-month high.
As Bloomberg reports, so far this year, the U.S. merchandise deficit with China has narrowed to a seasonally adjusted $179.8 billion, compared with $200.4 billion in the same six months of 2018.
U.S. exports to China are down 18.1% this year, while imports have fallen 12.2%, a reflection of dwindling two-way trade.
More broadly, the overall trade deficit in June showed a slightly larger decline in the value of imports than exports, capping a quarter in which the shortfall weighed on economic growth. The median estimate of economists surveyed by Bloomberg called for a deficit of $54.6 billion.
The real petroleum gap narrowed to an all-time low of $5.7 billion as inflation-adjusted petroleum exports reached a record high of $23.3 billion.
via ZeroHedge News https://ift.tt/2MBcC0o Tyler Durden
Heading into today’s payrolls report, there was some “whisper” expectation that the July print would be a blowout due to a spike in census hiring, however that did not happen and instead the BLS reported that last month 164K jobs were added, right on top of the 165K expected.
The not so pleasant news: substantial downward revisions, to wit: the change in total nonfarm payroll employment for May was revised down by 10,000 from +72,000 to +62,000, and the change for June was revised down by 31,000 from +224,000 to +193,000. With these revisions, employment gains in May and June combined were 41,000 less than previously reported.
Offsetting the slightly weaker headline payrolls – largely due to downward revisions – was the average hourly earnings which came in hotter than expected, as the monthly increase came in at 0.3%, above the 0.2% expected, while the annual increase of 3.3% was also above the 3.2% expected, and once again approaching the cycle highs.
Meanwhile, the far less notable unemployment rate was unchanged from last month, at 3.7%, just above the 3.6% expected. Of note: hispanic unemployment rose modestly to 4.5% if still near all time lows.
Developing
via ZeroHedge News https://ift.tt/339G7MD Tyler Durden
