Macro Roundup (Jul 16)

SHANGHAI, Jul 16 (SMM) – This is a roundup of global macroeconomic news last weekend and what is expected today.

Last weekend

The US dollar index dipped after it rose, with pressure from poorer-than-expected US consumer confidence. 

Base metals mostly inched up but faced resistance from a potential fallout from the trade war. LME tin grew 0.61%, lead and zinc edged up, copper went flat, while nickel lost nearly 2%, and aluminium dipped slightly to a three-month’s low. SHFE lead gained over 2%, copper, zinc, and tin inched up, while nickel fell over 1% and aluminium edged down. 

China's trade balance for June came in at 261.9 billion yuan, compared with the expected 187 billion yuan and 156.51 billion yuan in May. Exports rose 3.1% year on year, less than the expected 4% and the previous gain of 3.2%. Imports gained 6% year on year, compared with the expected 12.6% and previous 15.6%.      

In US dollar terms, export rose 11.3% over a year earlier, down from 12.6% in May. Imports expanded by 14.1%, down from 26% in May. Overall, China ran a trade surplus of $41.61 billion in June, up from the expected $27.72 billion and $24.92 billion in May.

China's imports and exports in the first half of the year progressed steadily, with further optimized structure, and an accelerated power conversion pace. However, increasing uncertainty from the macroeconomy will pose some challenges in the next half of the year. 

The broad M2 money supply grew 8% in June from a year earlier, the lowest growth in history. It missed forecasts for an expansion of 8.4% and compared with 8.3% in May. 

Chinese banks extended 1.84 trillion yuan in net new loans in June, up considerably from the previous 1.15 trillion yuan and beating analysts’ expectations. 

The total social financing (TSF), a broad measure of credit and liquidity in the economy, rose sharply to 1.18 trillion yuan in June from 760.8 billion yuan in May. 

TSF during the first half of the year stood at 9.1 trillion, down 2.03 trillion from the same period last year. The decline in the growth rate is related to strengthening supervision and de-leveraging policy effects that reduced irregular financing, said Ruan Jianhong, an official at the People's Bank of China (PBOC). 

The US import price index fell 0.4% in June, after rising 0.9% in May, marking the largest monthly drop since the index decreased 0.5% in February 2016. Falling prices of oil and a stronger US dollar weighed on prices of imports and accounted for the month on month decline.

Despite the downturn, June’s overall import prices increased 4.3% from a year ago. Prices for nonfuel imports decreased 0.3% in June following a 0.2% increase in May. The trade-weighted dollar index has risen 3.8% so far this year, which may help offset the boost in import prices due to higher tariffs on imported timber, steel, and aluminium products.

The University of Michigan's monthly confidence index, a gauge of consumer sentiment, fell to the lowest in six months, to 97.1 in July, compared with previous 98.2. 

Although consumers remain bullish on their prospects amid low unemployment, negative concerns about the impact of tariffs accelerated, rising from 15% in May to 21% in June and 38% in July. 

Day ahead

Key factors to watch today include China’s total retail sales of consumer goods in June, its gross domestic product (GDP) in the second quarter, the value-add of industries above designated size last month, and the US retail sales data in June.