A partial rebound was in play in July after widespread losses dominated the global markets during the previous two months. Notably, last month witnessed a sharp increase in US real estate investment trusts (REITs)–the first increase after three monthly declines. Stock markets in the developed world were mostly higher in July as well. But July was no stranger to selling in some corners, including hefty declines in emerging-market stocks and bonds and a dramatic slide in commodities overall.
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● US employment costs decelerated sharply in Q2
● US consumer sentiment softens more than expected in July
● Puerto Rico misses bond payments over the weekend
● PMI: Eurozone manufacturing output rises “solidly” in July
● PMI: manufacturing decline in China accelerates in July
● Greek stock market crashes on Monday after 5-week shutdown

The ISM Manufacturing Index is expected to post a modest increase to 54.3 in tomorrow’s update for July vs. the previous month, based on The Capital Spectator’s average point forecast for several econometric estimates. The prediction is well above the neutral 50.0 mark and so the current outlook still calls for moderate growth for this benchmark of economic activity in the US manufacturing sector.
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● Unmade in China: The Hidden Truth about China’s Economic Miracle
By Jeremy R. Haft
Summary via publisher (Polity)
If you look carefully at how things are actually made in China – from shirts to toys, apple juice to oil rigs – you see a reality that contradicts every widely-held notion about the world s so-called economic powerhouse. From the inside looking out, China is not a manufacturing juggernaut. It s a Lilliputian. Nor is it a killer of American jobs. It s a huge job creator. Rising China is importing goods from America in such volume that millions of U.S. jobs are sustained through Chinese trade and investment.
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US economic momentum continues to print at a modestly positive level through the end of July, based on a markets-based estimate of macro conditions. The Macro-Markets Risk Index (MMRI) closed at +5.9% yesterday (July 30). The current level is in the lower range for the past year, although MMRI remains comfortably above zero, which implies that business-cycle risk remains relatively low. A decline below 0% in MMRI would indicate that recession risk is elevated while readings above 0% imply that the economy will expand in the near-term future. Analyzing market-price data in the financial and commodities markets with a probit model also suggests that macro risk is low.
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US economic growth rebounded in the second quarter, but the Treasury market isn’t convinced that GDP’s 2.3% advance in the April-through-June period is the catalyst that will bring a rate hike at the Fed’s monetary meeting in September. The benchmark 10-year yield ticked lower yesterday (July 30), settling at 2.28%, according to Treasury.gov data. That’s a touch below Wednesday’s close and well below the recent high of 2.50% that was briefly touched in June.
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● US Q2 GDP rises 2.3%…
● The Q2 gain keeps a September interest rate hike in play…
● But some analysts are looking past September for first rate hike…
● Meanwhile, US jobless claims tick up from four-decade low…
● And Bloomberg’s Consumer Comfort Index tumbles to lowest level since Nov…
● While 1-year inflation in Europe stays mildly positive and jobless rate is elevated but stable.

The US economy revived in this year’s second quarter, according to today’s preliminary GDP estimate from the government. The 2.3% increase in output in Q2 vs. the previous quarter (real seasonally adjusted annual rate) is a modest pace, although the advance offers an encouraging improvement over Q1’s tepid 0.6% rise.
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The usual routine is on hiatus while The Capital Spectator takes a holiday by way of a slow boat to Bermuda. Your seafaring editor returns as a landlubber on Monday, August 3, when the focus on macro and finance resumes anew.

Meantime, fair winds to all…

● The Global Economy in Turbulent Times
By See-Yan Lin
Summary via publisher (Wiley)
In Global Economy in Turbulent Times, Harvard economist Dr. See-Yan Lin offers his timely and incisive views on today’s key economic issues. Adapted from his hugely popular column in the Malaysia Star newspaper, these articles offer fresh and entertaining perspectives on perennial economic problems. The discussion covers the world economy, with particular attention to the US, EU, Japan, and the international monetary system, as Dr. Lin explains how the economy is broken and offers multiple paths to repair. Coverage includes emerging East Asia, ASEAN (especially Malaysia), and BRICS nations, plus the author’s own views on global demography, the need for quality education, corporate governance in Malaysia, and more.
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