Sunday, July 14, 2013

Monday: Retail Sales, Empire State Mfg Survey

by Bill McBride on 7/14/2013 10:06:00 PM

Via MarketWatch:   "China's Q2 GDP rises 7.5% from year earlier".  I strongly recommend listening to the Alphaville interview with Michael Pettis to understand why China is slowing down, and what will likely happen. Here is the podcast and some notes.  My suggestion: Pay attention to Pettis - he has been very accurate on China.

From the WSJ: China Slump Ripples Globally

Growth in China, the world's second-biggest economy after the U.S., has been slowing since 2007's peak, but that slowdown has accelerated recently. This year, according to the government's target and economists' estimates, China is likely to see its weakest growth since 1990, around 7.5%.
China is trying to pull off a tricky rebalancing. It hopes to reshape its economy to be less reliant on construction and heavy industry, and more reliant on consumer spending. ...

To boost domestic consumption, the government has raised minimum wages to put more money in people's pockets and loosened controls on interest rates to give household savers better returns. It has tilted tax and land incentives toward industries that cater to consumption, such as food and autos, and away from heavy industries suffering from overcapacity, such as steel making and ship building.
From the NY Times: Pitfalls Abound in China’s Push From Farm to City
Qiyan, previously a village of 200 households, was designated a town, and its lower reaches were leveled and rebuilt with towers to house 6,000 people. Those living in the surrounding hills were encouraged to live in the valley — and not in big cities like Xi’an. The process is known as chengzhenhua, moving into towns, and has become one of the most-debated topics in China. The idea is to limit the number of megacities by keeping farmers closer to the land they farmed instead of moving them to giant cities. The problem is jobs, or the lack of them, in these areas.

During a visit in February, townspeople sat in their front yards, huddled around open fires. Their homes were brand-new, with indoor heating and modern appliances, just as Mr. Li’s plan envisions, but it all runs on an unaffordable luxury: electricity. Hence the fires to keep warm.
• At 8:30 AM ET, Retail sales for June will be released. The consensus is for retail sales to increase 0.8% in June, and to increase 0.5% ex-autos.

• Also at 8:30 AM, the NY Fed Empire Manufacturing Survey for July. The consensus is for a reading of 5.0, down from 7.8 in June (above zero is expansion).

• At 10:00 AM, Manufacturing and Trade: Inventories and Sales (business inventories) report for May. The consensus is for no change in inventories.

Schedule for Week of July 14th

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are down 2 and DOW futures are mostly unchanged (fair value).

Oil prices have increased recently with WTI futures at $105.60 per barrel and Brent at $108.66 per barrel.