Greetings,

Once again we begin with the United States where consumer spending remains solid, with the July figures beating forecasts.

Further reading

Personal income also continues to grow.

In response to the above data, economists are revising the Q3 GDP forecast higher again. Here is the consensus projection.

 The latest nowcast model from the Atlanta Fed (GDPNow) also moved higher - still significantly above consensus (above).

Source: @AtlantaFed

1. In other US economic developments, inflation remains benign. Here is the core PCE.

Source: St. Louis Fed (FRED)

Similarly, the US "Trimmed Mean" PCE Inflation Rate (from the Dallas Fed) turned lower.

By the way, a paper from Dallas Fed points out that healthcare services, while having only a limited effect on the headline figure, generate a significant drag on the core PCE.

Source: Dallas Fed

2. Speaking of the Dallas Fed, the Texas area manufacturing index showed improvement. However, employment and Capex components worsened. Also, the report seems to show some margin pressures.

Source: Dallas Fed

3. The Dallas Fed also highlighted San Antonio's Business-Cycle Index turning sharply lower. 

Source: Dallas Fed

4. The Wall Street Journal pointed out a sharp pickup in wage growth for lower-paid Americans (discussed here a few weeks back). This trend is explained by the implementation of minimum wage laws as well as other factors.

Source: @WSJ

5. The Treasury yield curve flattening continues. Here is the 30y - 2y treasury spread.

Source: St. Louis Fed (FRED)

Note that the curve is actually steepening at the short end as rate hike expectations increase.

Source: Bloomberg Terminal; Function "GC"

6. Here are the projections of the Fed's bond holdings which are of course dependent on when the central bank stops reinvesting maturing (or amortizing) securities. Many analysts remain skeptical of the Fed's ability to begin exiting its holdings in the years to come.

Source: NY Fed, h/t James

1. Turning to US equity markets, are US consumer discretionary shares underpriced? As we saw above, the US consumer seems to continue spending at a decent clip. Moreover, Bank of America's credit card data indicates an increase in discretionary spending growth.

Source: BofAML

Source: YCharts.com

2. Shares of US banks are now in positive territory year-to-date.

Source: YCharts.com

3. Hershey's drops almost 12% after Mondelez said the merger talks are over. Hershey's would have been bought a while ago if it was possible - the company is simply not for sale.

Source: Google, Further reading

1. Turning to credit, US HY spreads continue to decline, with the asset class up sharply over the past month.

 

Source: YCharts.com

2. Related to the above, BDCs have taken off over the past month. 

Source: YCharts.com,  h/t @MattGarrett3

3. To explain some of these trends, here are the flows into "yield-oriented" funds.

Source: BofAML

4. Leveraged loan and HY bond issuance in the first half of this year lagged the previous year.

Source: Fitch, ‏@joshdigga

In other fixed income developments, US swaptions implied vol remains near the lowest level since 2014.

1. Now on to commodities, where LME copper is drifting lower again.

2. Another China-driven bubble has burst: US cotton futures continue to fall.

Source: Investing.com

3. We also continue to see a brutal selloff in US wheat. This trend is devastating some communities and may put further upward pressure on farm business leverage.

 

Source: Investing.com

4. According to the Wall Street Journal, "the frozen concentrated orange-juice market has virtually disappeared".

Source: @WSJ

Source:  ‏@sellputs

5. Steel reserves in China are on the rise again and should start pressuring iron ore prices.

Source: @fastFT

1. Continuing with China, Credit Suisse sees the nation's housing market starting to cool.

Source: Credit Suisse

2. China's net foreign direct investment (FDI) has turned into outflows.

3. Private investment growth in China is in negative territory.

Source: Credit Suisse; Further reading

4. Hong Kong's retail sales fall for the 17th straight month.

Japan's shares rallied sharply on weaker yen as investors thank Janet Yellen.

Source: YCharts.com

Australia's housing market slump could worsen according to an industry group (HIA). The latest month-over-month decline in new home sales was the largest since 2006.

 

Source: @ABCNews

1. Switching to Latin America, Colombia's slowdown worsened, driven by stalling construction activity.

 

Source: @markets

2. Mexico's July unemployment rate fell to an 8-year low.

3. Mexico hedged its oil exports for 2017 (something the country does on an annual basis). The price (or floor) it locked is equivalent to about $42/bbl in Brent (the hedge was over $76/bbl in 2016 - wich worked out well for Mexico). 

Source: @JavierBlas2, Further Reading

Finally, we have a few updates on Europe.

1. Auto sales sharply boosted Ireland's retail sales in July.

Source: rte.ie

2. On the other hand, Sweden's retail sales took a hit (two consecutive monthly declines).

3. Italy's consumer confidence and manufacturing business sentiment have turned lower. On their own, these indicators don't tell us much, but combined with other data from Italy, an economic slowdown seems to be in the works.

 

Turning to Food for Thought, we have 5 items today:

1. Central banking metaphor usage reaches new highs.

Source: @WSJ

2. What percentage of mothers with small kids are working (by country)?

Source: ‏@paul1kirby, @OECD

3. Citizenship for sale.

Source: ‏@wef 

4.The Amur River separates a sparsely inhabited Siberia from a relatively dense population of Manchuria.

 

 

Source: ‏@BrilliantMaps 

5.  What happens to per-capita GDP of European countries without their capital cities?

Source:  ‏ ‏@wef