As I mentioned last week Greece and the Eurozone reached an agreement for a three year bailout. The Greek parliament this week passed pension and tax changes required by the creditors and the ECB increased emergency funding to the Greek banks which should reopen on Monday. Still, the International Monetary Fund is pushing for more debt relief as they believe the level of Greek debt is unsustainable meaning we will be back here in three years. Stocks reacted positively. Treasury yields were volatile but finished the week slightly lower as prices rose. Commodities were lower and the dollar strengthened. US retail sales were surprisingly lower in June but housing data was strong. In economic news this week:
- Chinese exports rose 2.8% in June from a year ago a significant change from the 2.5% decline in May. Imports fell 6.1% from the previous year, significantly better than the 17.6% decline in May. Exports to the US increased a robust 12% year over year.
- China reported the economy grew at a 7% pace in the second quarter, better than expectations. While there are signs of improvement in the Chinese economy, several economists have questioned the accuracy of the government figures.
- The Commerce Department reported
- US retail sales fell 0.3% in June versus a forecast increase of 0.2%. May was revised lower from a 1.2% increase to a 1.0% increase. April was revised down from 0.2% increase to unchanged. The numbers indicate a leveling off of consumer spending following a snapback from the severe winter weather. The June decline affected most categories except for gasoline sales which saw a 0.8% increase. Compared to a year ago retail sales were 1.4% higher than last June.
- Housing starts rose 9.8% in June. However, gain was attributable entirely to multi-family housing. The volatile housing start number may have had a lot to do with a spike in apartment construction in New York City just before the expiration of tax incentives. Applications for building permits also rose 7.4% in June. Housing starts were revised to a 24.7% gain in April and a 10.2% decline in May.
- The Labor Department reported
- Import prices fell 0.1% in June. Over the past year import prices were 10% lower. Over the past year non-fuel import prices were 2.3% lower. US export prices fell 0.2% in June.
- Producer prices rose 0.4% in June following a 0.5% increase in May. Core prices, excluding volatile food and energy rose 0.3%. From a year ago, producer prices are down 0.7% while the core prices are up 0.8%.
- First time claims for unemployment fell in the prior week by 15,000 to 281,000. The four week moving average also fell by 3,250 to 282,500.
- Producer prices rose 0.3% in June. However, over the past year producer prices have risen only 0.1%. Excluding volatile food and energy producer prices rose 0.2% in June.
- The Treasury Department reported that the federal budget deficit over the past 12 months is nearly 20% lower than the same period last year. Still the US government has borrowed $313BN since October 1. More political battles are coming as the Republican majority wants to raise defense spending above the sequester and the president wants both defense and non-defense spending increased in the next fiscal budget.
- The Federal Reserve reported that industrial production rose a seasonally adjusted 0.3% in June. However, for the second quarter industrial production fell at an annual rate of 1.4% mainly due to decreased energy production. The mining output segment that includes oil production fell at an annual rate of 5.7% in the second quarter.
- Housing starts rose 9.8% in June. However, gain was attributable entirely to multi-family housing. The volatile housing start number may have had a lot to do with a spike in apartment construction in New York city just before the expiration of tax incentives. Applications for building permits also rose 7.4% in June. Housing starts were revised to a 24.7% gain in April and a 10.2% decline in May.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF® Erik Smith
Generations Financial Planning & Wealth Management 269-441-4143
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Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
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