Bernanke low on ammo but US consumer spending increases

Zachary Goldfarb at the Washington Post writes that Federal Reserve Chairman Ben Bernanke may be low on ammo.

The truth, Bernanke has said repeatedly, is that the Fed’s ability to change the direction of the economy is limited, and it’s not clear the benefits of new measures outweigh the potential costs.

Economists say new Fed actions are likely to have only a small effect on job creation. Bernanke doesn’t have control over the two biggest factors affecting economic growth: how Congress and the president handle the government’s spending and taxation choices, and how Europe’s leaders respond to their continent’s crisis.

Just as well that data on Thursday suggest that Bernanke may be able to conserve the ammo he has for the time being. Consumer spending increased 0.4 percent in July after having been flat in June. Income rose 0.3 percent, the same rate as in June.

Meanwhile, in the UK, economic data on Thursday were mixed. Mortgage approvals rebounded in July from an 18-month low and net mortgage lending rose 1.13 billion pounds. However, net consumer credit fell 220 million pounds.

There was clearer weakness in the euro area. A report from the European Commission on Thursday showed that the region's economic sentiment indicator fell to 86.1 in August, the lowest since August 2009, from 87.9 in July.

US economic growth for second quarter revised up, continues in third quarter

A Commerce Department report on Wednesday showed that the US economy grew faster in the second quarter than previously estimated. Growth was at a 1.7 percent annual rate compared to the initial estimate of 1.5 percent.

Going forward, the continuing recovery in housing looks likely to provide a boost to the economy. Another report on Wednesday showed that pending home sales rose 2.4 percent in July.

Meanwhile, the Federal Reserve's Beige Book, also published on Wednesday, indicated that the economy continued to expand gradually in July and early August.

US home prices rise but consumer confidence falls

US economic data on Tuesday were mixed.

The S&P/Case Shiller composite index of home prices in 20 cities rose 0.9 percent in June from the previous month and 0.5 percent from a year earlier, the first year-on-year price increase since September 2010.

However, the Conference Board's consumer confidence index fell to 60.6 in August from 65.4 in July.

German consumer confidence is holding steady though. GfK reported on Tuesday that its consumer sentiment index will remain at 5.9 next month.

Weak global economic data

The week started with mostly negative economic data.

In Japan, the government downgraded its assessment of the economy for the first time in 10 months.

In China, industrial profits fell 5.4 percent in July from a year ago, worse than the 1.7 percent fall in June.

In Germany, Ifo's business climate index fell from 103.2 in July to 102.3 in August, the lowest reading since March 2010.

In the US, the Dallas Fed's Texas manufacturing outlook survey showed mixed data. The manufacturing production index fell to 6.4 in August from 12.0 in July while the general business activity index rose to -1.6 from -13.2.

UK economy shrinks less, US durable goods orders jump

The UK economy contracted in the second quarter by less than initially estimated. The Office for National Statistics reported on Friday that output fell 0.5 percent in the second quarter compared to the initial estimate of 0.7 percent. It was still the biggest drop since the first quarter of 2009.

Smaller falls in construction and industrial output were behind the upward revision.

There were some ominous signs for industrial activity in the US though.

Another economic report on Friday showed that US durable goods orders jumped 4.2 percent in July. However, this was mainly driven by a jump in transportation orders, with civilian aircraft orders in particular surging 53.9 percent.

Excluding transportation, orders fell 0.4 percent in July, the second straight monthly decline. Non-defense capital goods orders excluding aircraft, an indication of business investment plans, fell 3.4 percent after having fallen 2.7 percent in June.

Economic data weak in China and euro area, better in US

Economic data on Thursday were mixed.

In China, HSBC's preliminary manufacturing PMI for August fell to 47.8 from 49.3 in July.

Markit's composite index for the euro area did rise to 46.6 in August from 46.5 in July but remained below the neutral 50 mark. The manufacturing PMI rose to 45.3 from 44.0 but the services index fell to 47.5 from 47.9.

Adding to the weak picture for the euro area was another report on Thursday showing that the consumer confidence indicator fell to -24.6 in August from -21.5 in July.

The picture was somewhat better in the US.

Markit's flash US manufacturing PMI for August rose to 51.9 from 51.4 in July.

Meanwhile, US housing showed further signs of recovery. New home sales rebounded 3.6 percent in July to a 372,000 annual pace, matching the May rate that had been the highest since April 2010. Another report showed that house prices rose 1.8 percent in the second quarter.

US existing home sales rise but Fed considering stimulus as fiscal cliff threatens recession

There was some good news on the US economy on Wednesday. Existing home sales rose 2.3 percent in July, rebounding after a 5.4 percent decline in June that took it to an eight-month low.

Inventory of existing homes did rise 1.3 percent, but Bill McBride points out that this is 23.8 percent down from July 2011, and he thinks that inventory had peaked in April this year.

Despite the signs of a recovery in housing, Federal Reserve officials seem to think that additional stimulus will be needed soon.

“Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery,” according to the minutes of the Federal Open Market Committee’s 31 July-1 Aug meeting released on Wednesday.

Indeed, a big threat looms for the US economy. From Bloomberg on Wednesday:

The U.S. economy will probably tip into recession next year if lawmakers can’t break an impasse over the federal budget, according to a report.

The nonpartisan Congressional Budget Office said today that scheduled tax increases and spending cuts in 2013 would reverse the modest economic recovery. Economic output would shrink next year by 0.5 percent, joblessness would climb to about 9 percent with “economic conditions in 2013 that will probably be considered a recession,” the agency said in a biannual report on the budget and economic outlook.

Japan's trade balance swings into deficit

The latest trade data out today show that Japan's economy is weakening. Bloomberg reports:

Japan reported a wider-than-expected trade deficit in July as Europe’s sovereign debt crisis and a slowdown in China dragged down exports and higher oil prices boosted imports.

The shortfall was 517.4 billion yen ($6.5 billion), after a revised 60.3 billion yen surplus in June, the Finance Ministry said in Tokyo today. The median forecast in a Bloomberg News survey of 28 analysts was for a 270 billion yen deficit. Exports fell 8.1 percent from a year earlier, compared with an estimated 2.9 percent decline. Imports rose 2.1 percent.

A report yesterday had shown that Japan's all industry activity index grew 0.2 percent in June, reversing the 0.2 percent fall in May.

However, another report from Japan yesterday showed that department store sales fell 3.3 percent in July from a year ago, the third straight decline.

China's home prices rebound

A report on Monday showed that home prices were up in July in 49 of the 70 Chinese cities tracked by the government, the most since May last year. Prices fell in nine cities and were unchanged in 12.

While the rebound in prices helps prevent real estate from dragging down the rest of the economy, it also complicates the government’s efforts to stimulate economic growth. “Rising property prices are constraining aggressive policy action from the central bank,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong.

Meanwhile, the US economy may have improved in July. A report on Monday showed that the Chicago Fed National Activity Index increased to –0.13 in July from –0.34 in June. However, the three-month moving average fell to –0.21 from –0.18, suggesting, according to the Chicago Fed, that economic growth was below historical trend.

Japan's economy, though, appears to be slowing. Data from the Cabinet Office on Monday showed that the leading index for June has been revised up to 93.2 from 92.6 but that was still the third consecutive month of decline. The coincident index was revised up to 94.1 from 93.8 but was also down from 95.8 in May.

Slowing US economy turns out to be outperformer

Despite slowing from the first quarter, the United States economy turned in the best second quarter performance among the major developed economies.

In the second quarter, the US economy grew 1.5 percent on an annualised basis. On a non-annualised basis, it grew 0.4 percent. This was slightly down from 0.5 percent in the first quarter.

Japan, the best performer among the major developed economies in the first quarter with 1.3 percent growth, slowed sharply to grow just 0.3 percent in the second quarter.

Germany also managed to grow 0.3 percent in the second quarter, slowing from 0.5 percent in the first quarter.

The French economy was flat in the second quarter and has been unchanged for three consecutive quarters.

That is still better than the economies of the United Kingdom and Italy, both of which shrank 0.7 percent in the second quarter. The second quarter contraction was the third and fourth consecutive quarterly contraction respectively for these two economies.

Percentage change in real GDP
	2011		2012
	Q3	Q4	Q1	Q2
United States	0.3	1.0	0.5	0.4
Japan	1.8	0.1	1.3	0.3
Germany	0.4	-0.1	0.5	0.3
France	0.3	0.0	0.0	0.0
United Kingdom	0.6	-0.4	-0.3	-0.7
Italy	-0.2	-0.7	-0.8	-0.7

Europe is clearly the weak spot in the global economy. Real gross domestic product in the European Union and the euro area fell 0.2 percent in the second quarter after having been flat in the first quarter.

In contrast, data last week showed that the US economy remains relatively robust.

Retail sales jumped 0.8 percent in July after having declined in the previous three months. With the Thomson Reuters/University of Michigan consumer sentiment index rising to 73.6 in August from 72.3 in July, the threat of a collapse in consumer spending appears to have receded for the time being.

Meanwhile, industrial production rose 0.6 percent in July and capacity utilisation hit 79.3 percent, the highest in more than four years.

Notwithstanding a 1.1 percent fall in housing starts in July, housing also appears to remain in recovery. Building permits rose to an annual rate of 812,000 in July, the highest in almost four years, while the National Association of Home Builders/Wells Fargo housing market index rose two points in August to 37, the highest level since February 2007.

Pointing to further growth in the US economy, the Conference Board's index of leading economic indicators rose 0.4 percent in July, reversing the 0.4 percent decline in June.

Ataman Ozyildirim, economist at the Conference Board, said that the “LEI’s six-month growth rate seems to be stabilizing, pointing to a continuing but slow expansion in economic activity for the rest of the year”.

Markets rally amid positive US economic data

Markets continued their rally on Friday. Bloomberg reports:

The Standard & Poor’s 500 Index climbed 0.2 percent to 1,418.16, less than one point below its highest closing level since May 2008, and the Dow Jones Industrial Average briefly topped its best close since December 2007. Rates on 10-year notes lost two basis points to 1.81 percent after yesterday climbing as high as 1.86 percent, matching their 200-day moving average. The Stoxx Europe 600 Index rose to a 13-month high and Spain’s bonds rallied as concern over the debt crisis eased.

Positive economic data from the US helped fuel the rally.

The Conference Board's index of US leading economic indicators rose 0.4 percent in July, reversing the 0.4 percent decline in June.

Also, the Thomson Reuters/University of Michigan preliminary index of consumer sentiment for August increased to 73.6, the highest level since May, from 72.3 in July.

US data mixed, UK retail sales rise

US economic data on Thursday were mixed.

Building permits rose to an annual rate of 812,000 in July, the most since August 2008. Housing starts though fell 1.1 percent from the highest rate in more than three years in June.

Initial claims for jobless benefits rose 2,000 to 366,000 last week but the four-week moving average fell to 363,750.

The Federal Reserve Bank of Philadelphia’s general economic index improved to minus 7.1 in August from minus 12.9 the previous month.

Despite the mixed housing data on Thursday, Bill McBride thinks that the “budding recovery for housing starts and new home sales is positive for GDP and employment”.

Meanwhile, UK economic data has taken a positive turn.

Following the fall in the unemployment rate reported on Wednesday, Thursday brought news that retail sales rose 0.3 percent in July. In addition, sales in June were revised to show an increase of 0.8 percent from an initial figure of 0.1 percent.

UK unemployment falls, US industrial production rises

The economic data on Wednesday were mostly good.

In the UK, the unemployment rate fell to 8.0 percent in the three months to June, the lowest level in nearly a year, and claims for jobless benefit fell by 5,900 in July.

In the US, reports on Wednesday showed that the consumer price index was unchanged in July even as industrial production rose 0.6 percent. The National Association of Home Builders/Wells Fargo reported that its confidence index rose to 37, the highest since February 2007.

Not so positive though was a report from the Federal Reserve Bank of New York showing that the Empire State Index for manufacturing in the region fell to minus 5.9 in August from 7.4 last month.

Euro area moves closer to recession but not US

The euro area appears to be on the brink of another recession after the latest GDP report showed that the economy shrank 0.2 percent in the second. The quarter had ended with eurozone industrial production falling 0.6 percent in June.

Second quarter GDP in the euro area had been kept up by Germany, who managed to grow 0.3 percent. However, the German economy looks likely to weaken further after another report on Tuesday showed that the ZEW economic sentiment indicator fell to -25.5 in August from -19.6 in July, the fourth successive decline.

While Europe edges closer to recession, fears of a recession in the US receded for the time being after retail sales there jumped 0.8 percent in July, its first gain in four months.

But even as economists consider the odds of recession in the major economies, inflation continues to linger in places like the UK. A report on Tuesday showed that UK consumer price inflation rose to 2.6 percent in July from 2.4 percent in June.

Stocks end rally, Italy sells bills as debt hits record

Stock markets fell marginally on Monday. The S&P 500 slipped 0.1, ending its longest rally since 2010, while the STOXX Europe 600 fell 0.4 percent.

The euro rose against other major currencies though after Italy managed to sell 8 billion euros worth of 364-day Treasury bills on Monday at a yield of 2.767 percent, up from 2.697 percent at a sale in July.

The problem for Italy, though, is that its debt level is already very high. A report by the Bank of Italy on Monday showed that government debt rose 6.6 billion euros in June to a record 1.97 trillion euros.

With its economy having contracted again in the second quarter by 0.7 percent, Italy's debt burden could yet force it to request a financial bailout, following in the footsteps of the likes of Greece.

Incidentally, Greece's economy also shrank again in the second quarter. It reported on Monday that the economy contracted 6.2 percent on an annual basis after having declined 6.5 percent in the previous quarter.

Japan’s economy slows in second quarter while government debt looks unsustainable

The week starts off with Japan reporting that its economy slowed more than expected in the second quarter. AFP/CNA reports:

Japan's economy grew by 0.3 percent in the three months to June from the previous quarter, the government said Monday, the country's fourth consecutive rising quarter but at a slower pace than before.

The data from the Cabinet Office came in significantly weaker than market expectations for a 0.7 percent increase, as exports slowed due to weaker global growth amid the eurozone crisis.

It also marked a sharp contrast from a brisk 1.3 percent increase in the January-March period.

Fiscal stimulus has helped the Japanese economy recover so far. However, Europe’s debt problem and weak growth will weigh on the Japanese economy.

And over the longer term, the reliance on fiscal stimulus may result in Japan facing a debt problem of its own. From a paper by Takeo Hoshi and Takatoshi Ito for the National Bureau of Economic Research (via Econbrowser):

The Japanese government debt is clearly unsustainable without a drastic change in fiscal policy... The continuing low JGB yields may reflect the market’s view that the ample amount of private sector financial assets in Japan will always be there to absorb additional JGBs, but the current calm situation is not likely to continue. The rapid aging of the Japanese population means that the growth of private sector savings is slowing down and eventually will turn negative. The Japanese government cannot rely on the private sector to continue buying JGBs beyond a certain point. Thus, the hope for fiscal consolidation can be abruptly dashed with some trigger of a crisis.

Chinese exports slow sharply, banks loans plunge

Friday brought more signs that China's economy is slowing.

China reported that its exports increased 1.0 percent in July from a year earlier, sharply down from the 11.3 percent gain in June. Imports rose 4.7 percent last month compared with an increase of 6.3 percent in June.

Another report from China showed that new bank lending plunged to 540.1 billion yuan in July from 919.8 billion yuan in June.

Market reaction to the weak Chinese economic data was relatively muted. In China, stocks fell on Friday, with the Shanghai Composite slipping 0.2 percent. US stocks rose though, the S&P 500 rising 0.2 percent to extend its advance for a sixth day.

OECD and Asian data show slower growth but US trade deficit shrinks

The Organisation for Economic Cooperation and Development reported on Thursday that its composite leading indicator for member countries fell to 100.3 in June from 100.4 in May, indicating moderating growth. The CLIs for Russia, China and India also pointed to slower growth.

Indeed, data from China on Thursday also showed that its economy continued to slow at the start of the third quarter. Industrial production grew 9.2 percent in July from a year earlier, less than the 9.5 percent growth in June. Fixed-asset investment excluding rural households increased 20.4 percent in the January to July period from a year earlier, the same pace as the January to June period. Retail sales grew 13.1 percent in July, less than the 13.7 percent increase in June.

Inflation also slowed in China, with consumer prices rising 1.8 percent in July from a year earlier compared with 2.2 percent in June.

In India, industrial production fell 1.8 percent in June from a year earlier after having risen 2.5 percent in May.

In Japan, core machinery orders rebounded just 5.6 percent in June after having fallen 14.8 percent in May while the consumer sentiment index fell to 39.7 in July from 40.4 in June.

Despite the weak data, the Bank of Japan provided no additional monetary stimulus on Thursday and left interest rates between zero and 0.1 percent.

While the data from Asia on Thursday were weak, US economic data appeared more positive. The US trade deficit shrank in June as exports rose 0.9 percent while imports fell 1.5 percent. Also initial jobless claims fell by 6,000 to 361,000 last week.

Spain and Italy downgraded, German exports and industrial output fall

There were credit rating downgrades for Europe again on Wednesday. This time, DBRS downgraded Spain to A (low) from A (high) and downgraded Italy one level to A. Ireland's rating was kept at A (low).

Europe's debt problems are compounded by weak economic growth and even financial safe haven Germany has not escaped the latter. A report on Wednesday showed that German exports fell 1.5 percent in June while imports fell 3.0 percent. Another report showed that industrial production fell 0.9 percent in June.

Meanwhile, there were mixed data on Japan's service sector on Wednesday. The Cabinet Office's economy watchers survey showed that the diffusion index for current conditions rose to 44.2 in July from 43.8 in June. However, the index for future conditions fell to 44.9 from 45.7.

Italian and other European data show economic contraction

There were a number of economic reports in Europe on Tuesday and they were quite negative.

Italy's economy shrank 0.7 percent in the second quarter, its fourth consecutive quarterly contraction.

German factory orders fell 1.7 percent in June, more than twice as much as economists expected.

UK industrial production fell 2.5 percent in June while retail sales growth slowed in July.

Greece's credit rating outlook has been revised to negative by Standard & Poor's. Greece is currently rated CCC by S&P, far below investment grade.

Japan's economy looking weak

The Cabinet Office reported on Monday that its preliminary index of coincident economic indicators for June fell 2.0 points from the previous month.

The near-term outlook is no better. The index of leading economic indicators fell 2.6 points in June.

In contrast, the US economy is looking more resilient. The Federal Reserve reported on Monday that borrowing by consumers and businesses rose in the week ended 25 July to $7.1 trillion, the most since the end of the last recession.

Doing everything necessary may not be enough for euro

Contrary to the expectations of many analysts and traders, both the Federal Reserve and the European Central Bank took no new action to ease monetary policy last week after their respective monetary policy meetings.

The lack of action from the ECB after its meeting on Thursday was particularly surprising at first after President Mario Draghi had said that he would do everything necessary to preserve the euro. Markets reacted by selling Spanish and Italian bonds.

However, the sell-off was reversed the very next day after Germany signalled that it might agree to the ECB buying government bonds.

Fund manager John Hussman's take on these developments, however, were not as positive. In his latest commentary, he wrote:

With regard to Europe, it’s interesting how the semantics of the phrase “everything necessary” has been used to obscure the differences between Euro-area countries when it comes to monetizing bad debt. The distinction can be seen in a comment last week by German government spokesman Georg Streiter: “The ECB president said that the ECB will do everything necessary to preserve the euro and the government will do everything politically necessary to preserve the euro.” As long as the phrase is shortened to “everything necessary,” everyone is in agreement. The differences are in the subset of actions that constitute “everything.” For the German government, it is everything politically necessary. For Finland, it is everything necessary provided that collateral is pledged for every loan. For the German courts, it is everything legally necessary. While everyone can be unanimous about their commitment to doing “everything necessary,” it’s important to recognize that “everything” means something different to each party.

The divergent stances will prevent what Hussman thinks is actually required to save the euro.

... ECB purchases of distressed sovereign debt would most likely have to be permanent purchases, and would therefore represent a fiscal transfer at the expense of stronger countries that would prefer to use the proceeds of money creation for the benefit of their own citizens… Germany is only willing to mutualize the debts of its neighbors if it can exert centralized authority over their fiscal policies – in Angela Merkel’s words “liability and control belong together.” But while Europe is geographically united, it is culturally and politically diverse, and a surrender of national sovereignty to the required extent is unlikely.

Markets rally on positive signals from Europe and US

After the disappointment with the lack of action from the European Central Bank on Thursday, markets rallied on Friday on renewed hope of a resolution to the European sovereign debt crisis. The S&P 500 rose 1.9 percent while the Stoxx Europe 600 jumped 2.4 percent. Spain’s two-year yield dropped 87 basis points to 3.96 percent while the 10-year yield fell 32 basis points to 6.85 percent.

Positive economic data also helped boost investor sentiment.

In the US, employment increased by 163,000 in July, well above expectations for an increase of 100,000. The unemployment rate edged up to 8.3 percent from 8.2 percent though.

Supporting the positive picture for the US economy was an increase in the Institute for Supply Management's non-manufacturing index to 52.6 in July from 52.1 in June.

In the euro area, Markit's composite index based on surveys of purchasing managers rose to 46.5 in July from 46.4 in June, helped by an increase in the services index to 47.9 from 47.1. Eurozone retail sales growth slowed to 0.1 percent in June though from 0.8 percent in May.

In the UK, the Markit/CIPS services PMI fell to 51.0 in July, its lowest level since December 2010, from 51.3 in June. This pushed Markit's UK composite index down from 51.1 in June to 49.5 in July, its first contractionary reading since April 2009.

There were mixed signals on China's services sector on Friday. The PMI from the National Bureau of Statistics and China Federation of Logistics and Purchasing fell to 55.6 in July from 56.7 in June. However, HSBC's services index rose to 53.1 from 52.3.

Draghi disappoints

European Central Bank President Mario Draghi may be prepared to do “whatever it takes to preserve the euro”, but not right now.

Reuters reports the outcome of the ECB monetary policy meeting on Thursday:

In the latest move to contain the euro zone crisis, ECB President Mario Draghi indicated that any intervention would not come before September - and only if governments activated the euro zone's bail-out funds to join the ECB in buying bonds.

"The Governing Council ... may undertake outright open market operations of a size adequate to reach its objective," Draghi told a news conference after the central bank's monthly meeting, using the central bank's code for bond-buying.

The ECB kept euro zone interest rates at a record low 0.75 percent but Draghi said the council did consider a further rate cut on Thursday amid signs that an economic recession in peripheral European countries is spreading across the continent.

Investors reacted predictably to the lack of action from the ECB. Spain's 10-year yield rose 43 basis points to 7.17 percent on Thursday. Italy's 10-year yield rose 40 basis points to 6.33 percent.

There was also no new action from the Bank of England, which held its policy rate at 0.5 percent after its monetary policy meeting on Thursday.

The UK did provide a piece of positive news in the form of an improvement in construction activity. The Markit/CIPS construction PMI rose to 50.9 in July from 48.2 in June.

However, economic data from the US on Thursday showed weakening activity. Initial claims for jobless benefits rose 8,000 to 365,000 last week while factory orders fell 0.5 percent in June, reversing the 0.5 percent increase in May.

No action from Fed as global manufacturing weakens

At the end of its latest monetary policy meeting, the Federal Reserve announced that economic activity has decelerated but did not introduce any new stimulus.

US economic data on Wednesday had been mixed. US construction spending rose 0.4 percent in June after an upwardly-revised increase of 1.6 percent in May and ADP reported that private employers created 163,000 jobs in July but the Institute for Supply Management's manufacturing PMI stayed below 50 at 49.8 in July, slightly up from 49.7 in June. Markit's manufacturing PMI stayed above 50 but fell to 51.4 in July from 52.5 in June.

Manufacturing was also mostly weak in the rest of the world.

In the euro area, Markit's manufacturing PMI fell to a 37-month low of 44.0 in July from 45.1 in June.

In the UK, the Markit/CIPS manufacturing PMI fell to 45.4 in July, the lowest reading since May 2009, from 48.4 in June.

In China, the manufacturing PMI from the National Bureau of Statistics and China Federation of Logistics and Purchasing fell to 50.1 in July from 50.2 in June while HSBC's PMI rose to 49.3 from 48.2.

US consumer spending flat amid mixed global economic data

Global economic data on Tuesday were mixed.

In the US, consumer spending was unchanged in June but income rose 0.5 percent.

Further good news on the consumer spending front came from the Conference Board, whose consumer confidence index increased to 65.9 this month from 62.7 in June.

Meanwhile, housing appears to be turning with the S&P/Case-Shiller index of property values decreasing 0.7 percent in May from a year earlier compared to a 1.8 percent decline in April.

And the Institute for Supply Management-Chicago's business barometer increased to 53.7 in July from 52.9 in June.

Elsewhere in the world, though, economic reports were less positive.

In Japan, household spending rose 1.6 percent in June, well down from 4.0 percent in May.

The Nomura/JMMA manufacturing PMI fell to 47.9 in July from 49.9 in June.

However, Japan's unemployment rate did fall to 4.3 percent in June from 4.4 percent in July.

In contrast, the eurozone unemployment rate was unchanged at a record high of 11.2 percent in June.

Meanwhile, the eurozone inflation rate remained at 2.4 percent in July, the same as in the previous two months.