The US economy may have slowed down in the second quarter, but reports from yesterday suggest that the third quarter may have gotten off to a relatively good start. Reuters reports that the NAPM-Chicago business barometer rose to 57.9 in July from 56.5 in June, while the NAPM-New York index of business activity climbed to 409.3 in July from 394.5 in June, with the outlook reading climbing to 88.3 from 75.0.
Nevertheless, Fed officials speaking yesterday hinted that the rate-hike cycle was at least near an end. From Reuters:
Janet Yellen, president of the San Francisco Federal Reserve Bank, said monetary policy is at a "tricky" stage as the Fed balances the risks of both not raising rates enough and letting inflation run, and raising rates too far and choking off growth.
Yellen said in a speech at San Francisco's Golden Gate University that the fed funds rate is "in a vicinity that is roughly appropriate," and that the Fed need not keep raising rates until the point where inflation actually turns down.
Earlier, William Poole, St. Louis Fed President, said he felt evenly split about the need for an 18th consecutive interest rate hike at the Fed's meeting next week.
"I am still very much in the 50-50 camp in terms of the probabilities for the August meeting," Poole told reporters after speaking to a breakfast sponsored by the Southern Legislative Conference in Louisville, Kentucky.
While there are doubts over US economic growth, the data on European economies continue to be strong, shortening the odds on an ECB rate hike on Thursday, as FT reports.
Economic sentiment in the Euro currency area rose to 107.7 points in July from a revised June level of 107.1...
At the same time, the rate of Eurozone inflation remained at the same level as June. The statistics office said prices were 2.5 per cent higher in July than the same month a year ago...
Both sets of figures lent weight to those observers who argue that inflation-hawks on the ECB governing council are in the ascendant, and that the bank will quicken the pace of rate increases before the end of the year.
Reinforcing the expectations for ECB rate hikes are strong German retail sales for June. From Bloomberg.
Sales, adjusted for inflation and seasonal swings, rose 1.9 percent from May, when they dropped a revised 0.4 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 1 percent, according to the median of 34 estimates in a Bloomberg News survey. From a year earlier, sales fell 0.4 percent.
UK economic data have also been relatively strong, as Reuters reports that mortgage approvals rose to their highest level in five months in June. On the other hand, growth in credit card lending slowed sharply to its weakest pace in nearly 12 years. UK consumer confidence was unchanged in July.
Finally, there was positive data from Japan as well yesterday. From Reuters/Yahoo News:
Japan's industrial production rose a stronger-than-expected 1.9 percent in June from May after dipping the previous month, government data showed on Monday, indicating an economic upturn was intact...
Manufacturers' output -- the core component of production -- is expected to rise 2.2 percent in July and increase a further 3.7 percent in August, data from the Ministry of Economy, Trade and Industry showed...
Separate data on Monday showed the NTC Research/Nomura/JMMA Purchasing Managers Index, which gives an early snapshot of manufacturing activity, came in at a seasonally adjusted 55.7, the highest since March and rebounding from a 10-month low of 54.3 in June.
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