US ECONOMY & POLITICS

US Retail Sales Edge Higher as Key Metric Shows Resilient Demand – Bloomberg, 7/18/2023

• US retail sales rose by less than forecast, while an underlying measure of household spending pointed to a more resilient consumer at the end of the second quarter.
• The value of retail purchases rose 0.2% in June after an upwardly revised 0.5% increase in May, Commerce Department data showed Tuesday.

• So-called control group sales — which are used to calculate gross domestic product and exclude food services, auto dealers, building materials stores and gasoline stations — accelerated to a 0.6% advance, twice the prior month’s gain.
• Sales increased in seven out of 13 retail categories last month, including advances at non-store retailers, electronics stores and furniture outlets.
• The value of purchases at building materials stores, gas stations and grocery stores declined.
• Receipts at restaurants and bars — the only service-sector category in the report — edged up a modest 0.1% after surging 1.2% in the prior month.
• The state of the US consumer will become clearer when inflation-adjusted figures on spending on merchandise and services are released later this month.

US Industrial Production Decreased in June for a Second Month – Bloomberg, 7/18/2023

• US industrial production fell last month in a broad retreat, reflecting a decline in manufacturing output against a backdrop of uneven goods demand.
• The June index of production at factories, mines and utilities decreased 0.5% for a second month, Federal Reserve data showed Tuesday.

• Manufacturing output declined 0.3% in June, the most in three months.
• Output of consumer goods dropped 1.3% last month, the most since February 2021 and reflecting decreased production in a broad range of categories including autos, appliances and apparel.
• Output of materials also fell, while business equipment production was flat.
• According to the Fed’s production data, utility output decreased 2.6%, while mining eased 0.2%.
• Capacity utilization as factories, a measure of potential output being used, dropped to a three-month low of 78%.
• The overall industrial utilization rate slipped to 78.9%.

U.S. business inventories increase 0.2% in May – Market Watch, 7/18/2023

• Businesses inventories, or products waiting to be sold, rose 0.2% in May the government said Tuesday.
• That matched the forecast of economists polled by The Wall Street Journal. Higher inventories are typically a positive sign and add to gross domestic product.
• The government said sales also rose 0.2% in the month.
• The ratio of inventories to sales was flat at 1.40 That’s how many months it would take to sell all the inventory on hand.

Homebuilder sentiment rises again in July, but builders warn higher mortgage rates are hurting – CNBC, 7/18/2023

• Builder sentiment in the market for single-family homes rose 1 point in July to 56, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
• It marks the seventh straight month of gains and the highest level since June 2022.
• Builders say low supply in the resale market is driving demand for new construction, but higher mortgage rates and supply-side challenges continue to put pressure on the market.
• Of the NAHB index’s three components, current sales conditions in July rose 1 point to 62; buyer traffic increased 3 points to 40, the highest reading since June of last year; and sales expectations in the next six months fell 2 points to 60.
• The drop in expectations is due to that jump in interest rates and the resulting hit to affordability.
• Despite higher mortgage rates, however, builders are using fewer incentives.
• Just 22% of builders reported cutting prices in July.
• The median price was down over 7% from May of last year, but that median may be skewed by the mix of homes selling, which is currently leaning toward the lower end.

EUROPE & WORLD

Canadian Inflation Slows to 2.8%, Though Core Remains Sticky – Bloomberg, 7/18/2023

• Inflation in Canada slowed to within the central bank’s control range for the first time since March 2021, but progress in cooling underlying pressures has essentially stalled.
• The consumer price index rose 2.8% in June from a year ago, Statistics Canada reported Tuesday in Ottawa.
• That’s slower than the median estimate of 3% in a Bloomberg survey of economists.
• On a monthly basis, the index rose 0.1%, also weaker than expectations of 0.3%.
• Two key yearly inflation measures tracked closely by the Bank of Canada — the so-called trim and median core rates — also dropped, averaging 3.8%.
• That’s down from an upwardly revised 3.9% a month earlier but faster than 3.65% expected by economists.
• While those figures showed deceleration, a three-month moving average of the core measures — which Governor Tiff Macklem has flagged as key to his team’s thinking — rose to an annualized pace of 3.81%, from 3.71% previously, according to Bloomberg calculations.
• In June, service inflation slowed to 4.2% from 4.6% one month earlier.
• While Canadians had some reprieve in their cell phone bills, they continued to see elevated grocery prices and mortgage interest costs, with the former rising 9.1% from a year ago and the latter jumping 30.1%.
• Excluding mortgage interest costs, the headline rate would have been 2%.

Iranian Oil Is Stuck Off Coast of Texas, but U.S. Firms Won’t Touch It – Wall Street Journal, 7/18/2023

• U.S. federal prosecutors can’t auction off 800,000 barrels of seized Iranian oil sitting in a Greek tanker off the coast of Texas because U.S. companies are reluctant to unload it, according to people familiar with the matter.
• Prosecutors commandeered the Suez Rajan tanker carrying the oil earlier this year after charging its Greek owner with sanctions evasion, and directing the ship into the muddy-green waters 65 miles off Galveston’s coast.
• The U.S. Coast Guard cleared the tanker for unloading, but the companies that manage those transfers—known as lightering—say they are too worried about Iranian reprisal to handle the captured oil.
• “Companies with any exposure whatsoever in the Persian Gulf are literally afraid to do it,” said a Houston-based energy executive involved in the matter, citing worries “that the Iranians would take retribution against them.”

Tesla Outlines Plan to Create Largest Auto Factory in Germany – Wall Street Journal, 7/18/2023

• Tesla is planning to double the size of its factory near Berlin to produce up to one million electric cars a year, an expansion that could make the plant the largest auto-manufacturing facility in Germany.
• The electric-car maker has applied for approval to expand its existing factory in the eastern state of Brandenburg, to increase production capacity for vehicles and batteries, according to documents filed in recent days with local officials.
• Tesla has received tentative approval for some changes to the plant but full approval is pending completion of an environmental-impact study that will be subject to input from local citizens.
• Local officials will post Tesla’s application online from this week, and local residents will have the chance to raise objections.
• A public hearing could take place in October to discuss any issues.
• The proposed expansion would increase the factory’s workforce to around 22,500 employees from more than 10,000 today, the spokeswoman added.

U.S. Citizen Believed Held in North Korea After Crossing Border – Wall Street Journal, 7/18/2023

• A U.S. citizen crossed into North Korea without permission while on a tour on the South Korean side of the border and was believed to be in the custody of North Korean authorities, the U.S.-led United Nations Command said.
• The UNC is in touch with their North Korean counterparts in an effort to resolve the situation, the UNC said in a tweet.
• The U.S. citizen is a man who was on a tour of the Joint Security Area at the two Koreas’ border at the time he crossed over, the UNC said.

U.S. Pushes Military Cooperation in Space – Wall Street Journal, 7/18/2023

• U.S. attempts to foster closer military integration among allies are extending into space.
• The U.S. military wants allies to train and plan together for space operations, in the same way that they already do in ground, air and naval combat, Gen. Chance Saltzman, chief of space operations, said in an interview.
• The move comes amid concerns about China and Russia’s ability to disrupt the West’s satellites and new technology the two countries have developed, including satellites that can grab others.
• Russia, for instance, has conducted operations to disrupt Ukraine’s space-enabled communications.
• “The conflict in Ukraine has made it clear: access to, and use of, space is fundamental to modern war,” said Saltzman, who has recently held a series of meetings with European counterparts to push the case for greater cooperation.
• Saltzman said the aim was to have shared interoperability among allies, and to jointly train and develop tactics, techniques and procedures that exist for ground, air and sea combat forces.

ECB Hawk Klaas Knot Pushes Back on Bets for a September Hike – Bloomberg, 7/18/2023

• European Central Bank Governing Council member Klaas Knot said monetary tightening beyond next week’s meeting is anything but guaranteed — suggesting officials could soon pause their unprecedented campaign of interest-rate hikes.
• “For July I think it is a necessity, for anything beyond July it would at most be a possibility but by no means a certainty,” the traditionally hawkish Dutch central bank head told Bloomberg TV.
• “From July onward I think we have to carefully watch what the data tells us on the distribution of risks surrounding the baseline.”
• The remarks signal that market and analyst expectations for two more quarter-point increases in the deposit rate, to 4%, may be overblown.
• “It looks as if underlying inflation has plateaued,” he said Tuesday in Gandhinagar, India, where he’s attending a meeting of Group of Twenty finance chiefs.
• “But in the coming months we would then want to see a bit more decisive evidence on it actively coming down.”

Factmonster – TODAY in HISTORY

• A great fire began that ultimately destroyed most of Rome. The emperor Nero blamed it on Christians and began the first Roman persecution of them. – 64
• The first volume of Adolf Hitler’s Mein Kampf was published. – 1925
• The Spanish Civil War began. – 1936
• President Harry S. Truman signed the Presidential Succession Act. – 1947
• 14-year-old Romanian gymnast Nadia Comaneci earned the first perfect score, a ten, at the Olympics and went on to score six more tens and win three gold medals. – 1976