Retail sales stronger than estimates and Turkey tensions rise

___

Published Date 8/15/2018

Turkey continued to ramp up the diplomatic feud with his U.S. counterpart Donald Trump with new import tariffs, the nation’s banking regulator published new rules that have so far succeeded at lifting the lira off record lows. Turkey is also buddying up with Russia. Adding higher taxes on American goods from cars to tobacco. Bloomberg estimates the items listed accounted for $1B of imports last year, similar to the amount of Turkish steel and aluminum exports that were subjected to higher levies by President Trump last week. A Turkish criminal court today refused to release the U.S. pastor at the center of the dispute. Treasuries climbed with the dollar, and U.S. stock futures slipped. Metals plunged. The lira rallied after the Turkish banking regulator acted to deter short-selling.

Lots of data this morning, starting with weekly MBA mortgage applications at 7:00 am EST; down again 2.0%, purchase apps lower by 3.0%, refinance apps unchanged from the previous week. The fifth consecutive weekly decline in a row and taking the unadjusted purchase index to a level 3% lower than in the same week a year ago.

At 8:30 July retail sales stronger than estimate 0f +0.1% increased 0.5%, ex-auto sales expectations were for an increase of 0.4% as reported +0.6%. June sales were revised slightly weaker; sales revised to +0.2% from +0.5%; ex-autos June sales originally reported +0.4% revised to +0.2%. The revisions lower for June offsets the better gains in July.

At 8:30 the preliminary Q2 productivity was thought to be +2.5%, productivity increased 2.9%; Q2 unit labor costs expected -0.2% dropped to -0.9%. Higher productivity lowers the unit labor costs, a plus for the inflation outlook not showing up in labor costs. Productivity has been stubbornly low this year; the jump is positive for economic forecasts.

t 8:30 August NY Empire State manufacturing index expected at 20.0 from 22.6 in July, jumped to 25.6.

At 9:15 July industrial production thought to be +0.3% increased 0.1%, manufacturing up 0.3% as expected. June production revised from +0.6% to +1.0%. July Capacity utilization at 78.1%, forecasts were 78.2%.

At 10:00 August NAHB housing market index was expected unchanged from July at 68, as reported 67, the weakest reading since Sept 2017. June business inventories +0.1% as expected.

Yesterday the bellwether 10 yr increased to 2.89% just shy of minor support at 2.90%, holding this morning at 2.85%. The last four sessions have kept the 10 yr trading between 2.85% and 2.89%, a very narrow trade range. Turkey is sending the dollar higher and pushing money into treasuries, but there hasn’t been any real movement since last Friday when markets were shocked by Turkey’s lira crumbled, and tensions exploded between the US and Turkey’s unwillingness to release the American pastor being held as a terrorist. Trump appears resolved to keep increased tariffs and political pressure on Turkey as the country moves closer to Russian influence. A NATO member buying Russian missile defense system, the US could stop the sale of 100 F-35 fighters that had been approved, and Turkey’s President Erdogan continues to ramp up his rhetoric that Turkey is the target of an economic war. The situation unlikely to ease, the lira while stable today likely to fall further and Turkey’s economy will continue to weaken. Until the American is released, President Trump appears willing to keep the pressure increasing.

We noted two days ago that the US stock market was looking soft, this morning so far the indexes are being slapped down in huge declines. Good economic data, string earnings both completely discounted at present price levels.

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

“Equal Housing Lender. NEXA Mortgage, LLC NMLS 1660690. I am a licensed mortgage originator, NMLS # 630337, and licensed to originate mortgage loans in the state of Arizona, Arkansas, California, Florida, Georgia, Illinois, Missouri, Nevada, Tennessee, and Texas. To learn more, visit my NEXA Mortgage website at http://lillianwong.net."