US ECONOMY & POLITICS

Gain in U.S. Retail Sales Underscores Solid, Steady Consumer – Bloomberg, 7/16/2021

• U.S. retail sales rose unexpectedly in June, reflecting fairly broad gains across spending categories and wrapping up a solid quarter for household demand.
• The value of overall retail purchases advanced 0.6% last month following a downwardly revised 1.7% drop in May, Commerce Department figures showed Friday. Excluding autos, sales jumped 1.3% in June.
• Sales at motor vehicle and parts dealers fell 2% in June, likely in response to limited inventory as automakers face a supply chain crunch.
• Sales at non-store retailers, which include e-commerce, advanced 1.2% in June.
• Electronics sales increased 3.3% and were up 37.3% from June 2020.
• Receipts at restaurants and bars climbed 2.3%.

Faster Inflation Takes Toll on U.S. Consumer Sentiment in July – Bloomberg, 7/16/2021

• U.S. consumer sentiment unexpectedly declined to a five-month low in early July as mounting concerns over rising prices led to a sharp deterioration in buying conditions for big-ticket items.
• The University of Michigan’s preliminary sentiment index decreased to 80.8 in July from 85.5 the prior month, data released Friday showed.
• Consumers expect inflation to rise 4.8% over the next year, the highest since August 2008.
• At the same time, they were more sanguine about longer-term prospects for prices.
• The expected inflation rate over the next five to 10 years crept up to 2.9% from 2.8% last month.
• Buying attitudes for vehicles and homes shrank to their lowest point since 1982, the report showed.
• Just 30% of all consumers cited favorable home buying conditions, the lowest level since September 1982.
• The gauge of current conditions dropped to 84.5 in July, the lowest since August, from 88.6. The university’s measure of expectations decreased to a five-month low of 78.4 from 83.5.

Service sector business activity surges in NY region -NY Fed survey – Reuters, 7/16/2021

• Service sector businesses in the New York region saw a further surge in activity in early July, according to a survey Friday from the Federal Reserve Bank of New York, as the economy rebounds from the recession caused by the coronavirus pandemic.
• The business activity index declined slightly to 41.7 in July but was still near last month’s record high, according to the survey of business leaders for service sector firms in New York, northern New Jersey, and southwestern Connecticut.
• The business climate index rose six points to 6.5, indicating that firms generally viewed the business climate as better than normal for this time of year.
• Employment levels and wages continued to rise and firms remained optimistic that conditions would continue improving, with the index for future employment staying near its record high.

Infrastructure Talks Stall Over Expanded IRS Powers – Wall Street Journal, 7/16/2021

• Disagreements over expanding the Internal Revenue Service have snarled lawmakers’ efforts to firm up their roughly $1 trillion bipartisan infrastructure agreement before an initial vote next week gauging the deal’s support.
• Lawmakers and aides said the group may abandon an effort to raise revenue through enhanced enforcement at the IRS after some Republicans said they were concerned about granting the tax agency new power.
• Dropping that proposal would mean the group would need to find alternative ways to cover the full cost of the spending, roughly $600 billion of which is above projected future federal spending on roads, bridges, and water projects.
• Prodding the bipartisan lawmakers to close out their agreement, Senate Majority Leader Chuck Schumer (D., N.Y.) said Thursday that he would hold a procedural vote on the infrastructure agreement on Wednesday.
• Mr. Schumer also set a Wednesday deadline for Democrats to reach an agreement on a $3.5 trillion blueprint for approving much of President Biden’s legislative agenda, including investments in child care, education, and healthcare programs.

Fed’s Powell Concedes Anxiety About Higher Inflation but Resists Policy Shift – Wall Street Journal, 7/16/2021

• Federal Reserve Chairman Jerome Powell said recent inflation was uncomfortably above the levels the central bank seeks, concluding two days of testimony in which he sounded somewhat less confident about the economic outlook—and the Fed’s policy path—than earlier this year.
• More broad-based price pressures or a weak rebound in the workforce could lead the Fed to conclude it needs to reverse the easy money policies it deployed during the pandemic more rapidly than officials expected a few months ago.
• “This is a shock going through the system associated with reopening of the economy, and it has driven inflation well above 2%. And of course we’re not comfortable with that,” Mr. Powell told the Senate Banking Committee on Thursday.
• Mr. Powell said Thursday that even though the central bank still expects surging prices related to bottlenecks to reverse, the Fed was watching to see if other goods and services, where price growth has been flat or modest, might accelerate as the economy heats up.

U.S. business inventories rise in May; autos stocks decline – Reuters, 7/16/2021

• U.S. business inventories increased solidly in May, but shortages of goods like motor vehicles are making it harder for retailers to restock warehouses to meet booming demand.
• Business inventories rose 0.5% after edging up 0.1% in April, the Commerce Department said on Friday.
• Inventories increased 4.5% on a year-on-year basis in May.
• Retail inventories decreased fell 0.8% in May as estimated in an advance report published last month.
• That followed a 1.7% decrease in April.
• Wholesale inventories rose 1.3% in May. Stocks at manufacturers advanced 0.9%.
• Business sales fell 0.3% in May after increasing 0.6% in April.
• At May’s sales pace, it would take 1.26 months for businesses to clear shelves, up from 1.25 months in April.

White House to meet housing industry officials to discuss supply shortage – Reuters, 7/16/2021

• The White House will meet with representatives from the housing industry on Friday to discuss a supply shortage that has led to a sharp increase in home prices, according to a White House official.
• The meeting will include builders, real estate firms, lumber companies, labor unions and loggers, the official said.
• The meeting will also include Domestic Policy Council Director Susan Rice, Secretary of Housing and Urban Development Marcia Fudge, National Economic Council Director Brian Deese and Council of Economic Advisers Chairwoman Cecilia Rouse, the official said.

EUROPE & WORLD

Euro zone inflation easing confirmed, trade surplus dips – Reuters, 7/16/2021

• Euro zone inflation slowed in June after a steady acceleration in the first months of 2021, official data confirmed on Friday, while the bloc’s trade surplus shrank in May due to a decline of exports.
• European Union’s statistics office Eurostat said consumer prices in the 19-country single-currency bloc rose 1.9% in June on the year, slightly less than the 2.0% increase in May, in the first slowdown since last September.
• One measure of core inflation, which excludes volatile unprocessed food and energy, was confirmed as stable at 0.9% in June. A narrower measure, also stripping off alcohol and tobacco prices, was also confirmed at 0.9%, slightly lower than 1.0% in May.
• In May, the bloc exported goods worth 188.2 billion euros ($222 billion) and imported 180.7 billion euros of goods, for a surplus of 7.5 billion euros.

U.S. to Warn Businesses Over Rising Risks in Hong Kong Under China Crackdown – Wall Street Journal, 7/16/2021

• The Biden administration is warning American businesses about the increasing risks of operating in Hong Kong as China’s tightening grip on the city causes business conditions to deteriorate.
• In an advisory to be issued Friday, the Biden administration warns businesses and individuals working for them that they are subject to a restrictive national security law that Beijing imposed on Hong Kong a year ago.
• The advisory cites the risks of electronic surveillance without warrants and of having to surrender corporate and customer data to the government, according to an administration official.
• The Biden administration advisory on Hong Kong follows another U.S. warning this week for companies with supply-chain ties to China’s Xinjiang region, where China has detained Muslim minorities in large numbers and drawn international condemnation.

Floods in Germany, Belgium Leave More Than 100 Dead as Rescuers Race to Find Survivors – Wall Street Journal, 7/16/2021

• Rescuers in Germany and neighboring countries were racing to find survivors from the region’s worst flooding this century, as the death toll rose to over 100 with hundreds still missing following days of torrential rainfall that some politicians and scientists linked to climate change.
• German authorities used helicopters and drones to locate survivors who fled to roofs and high ground without being able to collect any of their belongings when the homes were engulfed by flash floods that turned streets into rivers, swept away cars and crushed houses.
• Some 1,300 people are currently unaccounted for in Bad Neuenahr-Ahrweiler, a town about 35 miles south of Cologne, according to local authorities, though this may in part be due to mobile phone services being interrupted in parts of the region.

Factmonster – TODAY in HISTORY

• Russia’s Czar Nicholas II and his family were executed by the Bolsheviks. (1918)
• The first atomic bomb was tested in Alamogordo, N.M. (1945)
• J. D. Salinger’s novel Catcher in the Rye was published. (1951)
• Saddam Hussein became president of Iraq. (1979)