The Busiest Economic Week of Summer Is Over: Here’s Everything We Learned

The impact of the past seven days will reverberate over the coming weeks. around the abandoned corridors of Wall Street and Washington DC as politicians and investors retreat to the Hamptons or Martha’s Vineyard or wherever they summer.
Are we in a recession? It’s hard to say, but hopefully by September, the insights we’ve gleaned over this perilous week will be fully absorbed and our understanding of the US economy will be clearer.

So what are we working with here? Let’s summarize.

  • The Federal Reserve raised interest rates an additional 75 basis points. The market was expecting this move, but it was still a historically significant rise. The Fed’s actions raised the rate banks charge themselves for overnight borrowing to a range between 2.25% and 2.50%, the highest since December 2018.
  • The main inflation indicators showed that prices remain high. The personal consumption expenditure price index rose 6.8% in June, the largest 12-month rise since January 1982.
  • Consumer spending was higher, which is usually a sign that the economy remains strong. This time, however, the increase is likely due to rising prices and not thickening wallets. Personal consumption expenditure rose 1.1% for the month, above the estimate of 0.9%.
  • The economy contracted for the second consecutive quarter. GDP contracted at an annual rate of 0.9%. This drop marks a key symbolic threshold for the most commonly used – albeit unofficial – definition of a recession as two consecutive quarters of negative economic growth.
  • Americans have become more pessimistic about the economy. The Conference Board’s consumer confidence index fell in July for the third consecutive month. About 43% of the 3,000 people polled said they thought there was a greater than 50% chance that the United States would fall into a recession in the next 12 months, while only 13% said so in april.
  • Home price growth slowed for the second month in a row. Prices in May were still robust, posting a 19.7% increase from the same month last year, according to the S&P CoreLogic Case-Shiller National Home Price Index. But the market is cooling due to rising mortgage rates and concerns about inflation. In April, they increased by 20.6%.
  • Congress passed a $280 billion package to bolster the nation’s chip manufacturing industry. The bill will increase production of critical computer chips in the United States to avoid future supply chain issues and increase competition with China.
  • Senators Chuck Schumer and Joe Manchin reached a $700 billion deal on a sweeping climate, tax and health care bill. The plan includes $370 billion in energy and climate spending, about $300 billion in deficit reduction, subsidies for Affordable Care Act premiums and tax changes.
  • 170 companies released their second quarter results, including Microsoft (MSFT), Alphabet (GOOG), Metaplatforms (Facebook), Apple (AAPL)and Amazon (AMZN). Results were mixed, with many companies warning of inflation and slower growth in the future. Still, markets managed to end the week and month up.
It’s a lot to digest. Especially during very persistent heat waves.

Unfortunately, we have another busy week of data before we take a break.

The gains continue next week with Starbucks (SBUX), Uber (UBER) and Airbnb reports.

We also anticipate the release of some important economic data: JOLT (job openings) unemployment rates and the PMI, a key indicator of US economic activity, are all heading our way.

So forgo swimwear and SPF for now. Or don’t, and bring the beach to your desk. Holidays are a state of mind, right?

Ducati conquering the world

My CNN colleague, Jonathan Hawkins, recently had the opportunity to sit down with Ducati CEO Claudio Domenicali in Misano, Italy, where World Ducati Week drew around 80,000 passionate fans and owners over three days. .

The company, which is owned by Volkswagen, said on Friday it posted record revenue of 542 million euros ($552 million) in the first half of 2022 and increased operating profits by about 15%.

But the Ducati chief described a tough mix of business conditions that have made it harder to meet a surge in demand for the bikes.

Supply chain issues since the pandemic have been a “complete nightmare,” Domenicali said.

“It’s been a very complicated mix of everything,” he said, noting that the time it takes to get a container from Asia to Europe has doubled, while lockdowns in China have made it difficult to secure containers. necessary parts.

Still, he pushed back against the idea that supply chains should become more localized, noting the pitfalls of reversing decades of globalization.

“When you do business for the whole world, you stay more connected,” Domenicali said.

Amid the uncertainty, the company has an advantage. The cheap euro, which fell to par with the US dollar in July for the first time in two decades, benefits exporters like Ducati as it makes their products cheaper for overseas customers.

“It’s a help,” Domenicali said, not a problem.

And he said the company, one of Italy’s best-known brands, has not been shaken by the collapse of Prime Minister Mario Draghi’s government. Ducati has become accustomed to executing its long-term plans without relying on the government, according to Domenicali.

Next

Monday: ISM manufacturing PMI (July).

Tuesday: JOLT (June); Starbucks, Airbnb and Uber announce their earnings.

Wednesday: ISM PMI non-manufacturing (July).

Thursday: Initial weekly unemployment claims.

Friday: Unemployment rate (June); Berkshire Hathaway announces earnings.

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