U.S INDUSTRIAL PRODUCTION ROSE IN JULY

US industrial production grew 0.6% in July, representing a big improvement on the 0.1% increases seen in the previous two months. The more stable three-month on three-month rate also picked up, rising from 0.6% in June to 0.7%, the strongest since April.

The data add to signs that the US economy started the third quarter on an upbeat note. Non-farm payrolls rose a much better than expected 163 thousand, having disappointed throughout the second quarter, and retail sales rebounded 0.8% in July.

  Whether this is possible remains unclear, however, as PMI data suggest that the manufacturing sector saw new orders grow at the slowest rate for over three years in July, largely due to worsening export performance, in turn often attributed to the crisis in the euro zone. There are also signs of manufacturing struggling in the official data: although factories reported 0.5% growth of production in July, the three-month rate of increase slowed to 0.2%, the joint-weakest for three years, matching the downbeat signal from the PMI. (Markit)

And yesterday we got the Empire State Manufacturing survey for July which dropped 13 points to -5.9 on weak new orders.

  Home Builders’ Confidence Hits Five-Year High

The National Association of Home Builders said Wednesday its housing market index rose two points to 37 this month, the highest level since February 2007.

Every component of the index rose in August. Traffic from potential buyers and current sales conditions both rose by three points. Builders’ expectations for sales, over the next six months, rose one point. (Chart from Bespoke Investment)

U.S. INFLATION NOT SO TAME

The seasonally adjusted CPI for all urban consumers was virtually flat at 0.0% (0.6% annualized rate) in July. The CPI less food and energy increased 0.1% (1.1% annualized rate) on a seasonally adjusted basis.

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.5% annualized rate) in July. The 16% trimmed-mean Consumer Price Index increased 0.1% (1.3% annualized rate) during the month.

Over the last 12 months, the median CPI rose 2.3%, the trimmed-mean CPI rose 2.0%, the CPI rose 1.4%, and the CPI less food and energy rose 2.1%.

Here’s the Cleveland Fed data on U.S. inflation:

Total and core CPI behaving rather well:

But median-CPI remains sticky around the 2.0-2.5% level:

Median-CPI has been rising in the 0.15% monthly range for six months. That’s 2.0-2.5% annualized.

Euro-Zone Inflation Hovers Above Target

Consumer prices in the euro zone held steady for a third straight month in July, just above the European Central Bank’s annual target rate, official data showed.

Figures published by the European Union’s statistics agency Eurostat showed consumer prices in the 17 euro-area countries fell 0.5% on the month in July, compared with a fall of 0.1% on the month in June.

On the year-earlier, prices rose 2.4% in July, the same as in June.

Core inflation, which excludes the prices of food, alcohol and tobacco, picked up marginally, rising 1.7% on the year in July from a 1.6% gain in June. Excluding tobacco, inflation accelerated 2.3%, the same as in June.

Also in the 2.0-2.5% range, in spite of the very weak economy.

  MORE EUROWOES

Crude oil denominated in euros hits record

  UK employment growth hits two year high

The rate of unemployment fell to 8.0% in the UK as employment rose by 201,000 in the three months to June, its largest quarterly rise for almost two years. The improvement is surprising, given other official data show the economy to have contracted by 0.7% over the same period.

While the Olympics are likely to have temporarily boosted the employment numbers, the increase looks far too high to have been fueled by the Games, adding to the confusion about the underlying health of the UK economy. (Markit)

U.K. Retail Sales Buck Gloom

The Office for National Statistics said retail sales volumes rose 0.3% in July from June. The ONS revised June’s figures to show sales increased 0.8% on the month from the originally reported increase of 0.1%.

The main driver of the increase in sales volumes in July was automotive fuel, sales of which increased by 2.6% on the month.

The July trading period covered two days of the Olympics—July 27 and 28—but the ONS said feedback from retailers suggests there was no impact on sales.

The FT adds this:

Vicky Redwood, economist at Capital Economics, said the revisions added to evidence suggesting there was a jubilee boost. “The fall in sales in the second quarter overall was revised from 0.7 per cent to 0.3 per cent, adding to other evidence suggesting that the initial estimate of GDP will be revised up in next week’s second estimate,” Ms Redwood said.

The retail sales increase over the past three months has been broad, with all main sectors, with the exception of petrol stations, recording rising volumes.

CHINA WOES

  Foreign Investment in China Declines as Wen Sees Room for Easing: Economy  Foreign direct investment in China fell to the lowest level in two years in July, fueling concern that waning confidence in the nation’s growth prospects may restrain any economic rebound.

Investment declined 8.7 percent from a year earlier to $7.58 billion, the eighth drop in nine months and the smallest inflow since July 2010.

Chinese financial institutions sold a net 3.8 billion yuan ($600 million) of foreign currency last month, indicating capital is flowing out as property curbs and weakness in exports slow growth and the yuan weakens. Premier Wen Jiabao stoked speculation that the government may cut banks’ reserve requirements to support the economy when state media reported yesterday that he saw room to adjust monetary policy.

Caterpillar Inc. (CAT), the world’s largest maker of construction and mining machinery, shut its main excavator factory in China for much of July and had employees on shortened work weeks, Mike DeWalt, director of investor relations at the Peoria, Illinois, company, said in an Aug. 8 conference presentation, according to a transcript.

  “The current sales level in China is quite depressed,” DeWalt said. “We’ve cut production there.”

China H2 trade outlook severe, inward investment slows

China’s trade outlook for 2012 is worsening, darkened especially by growing problems in Europe, the Commerce Ministry said on Thursday as it revealed the longest run of falling inward investment growth in the economy since the 2008-09 global crisis.

“With the European debt crisis spreading and the global economy recovering at a slower than expected pace, we expect China’s trade situation in the second half will become more severe and we are facing more pressure to meet the annual target for trade growth,” Shen added.

 

CONTAGION

Mexican Economic Growth Probably Slowed as U.S. Expansion Cooled

The U.S. buys 80 percent of Mexico’s exports.

BHP warns of job cuts in coal as China cools

BHP Billiton said on Thursday jobs could go at its Australian coal mines as the company faces a deteriorating market, the latest sign of global miners scaling back operations due to slowing industrial activity in China.

Brazil unveils $66bn stimulus plan

Rousseff moves to bolster flagging confidence

In the first of what are expected to be a series of announcements in the coming weeks, Ms Rousseff said the government would sell concessions in nine highways and 12 railways before moving onto other areas of infrastructure.