Every Friday, Brian Jacobsen provides perspective on key events and topics of the current week and his thoughts about what the week ahead may hold. Here’s his report for the week of July 10–16, 2021.

The week that was

·         Second-quarter earnings season kicked off. Just before earnings began rolling in, at the index level, companies within the S&P 500 Index were expected to see an average increase in earnings per share of more than 63% and an average increase in sales of just under 20% year over year, according to FactSet. Second-quarter earnings in 2020 were down 32%, so the year-over-year comparisons are distorted.

·         Federal Reserve (Fed) Chair Jerome Powell testified before Congress, giving his semiannual report to Congress. He didn’t really share much new information. He believes the economy is improving but still is a ways away from meeting the Fed’s “substantial further progress” criterion for beginning to slow its asset purchases. While inflation has been high, Chair Powell tried to sound reassuring in stating that the high rate of inflation should only persist for a few months.



·         The European Central Bank’s (ECB) president, Christine Lagarde, said there could be a change in policy guidance at next week’s ECB policy setting meeting.

·         U.S. consumer prices in June jumped more than most economists forecast. A 10.5% increase in used car and truck prices contributed more than half of the overall jump in prices. Hotel prices rose 7.0% for the month as people ventured out on vacation. Gasoline prices rose 2.5% for the month and are up 45.1% year over year.

·         China released its second-quarter gross domestic product (GDP) numbers, which weren’t too bad despite how some areas have had renewed restrictions on activity due to the delta variant of the coronavirus. Second-quarter GDP grew 7.9% year over year. That might seem like a slowdown from the first quarter’s 18.3% year-over-year number, but the first quarter of 2020 was the deepest part of the lockdowns in China, so the year-over-year comparisons are distorted. I prefer to look at the quarter-over-quarter changes, and with a growth rate of 1.3% in the second quarter compared with a 0.6% growth rate in the first quarter, growth actually accelerated. Compared with May, industrial production in June rose 0.56% and June retail sales grew 0.81%, which are both decent gains. In the U.S. for the same time frame, industrial production rose 0.4% month over month, although a lot of that was due to utilities output. U.S. manufacturing output fell 0.1%. Consumers must have been feeling perky as retail sales surprised to the upside by rising 0.6% in June.

·         There were a lot of central bank policy announcements this past week.

o   The Bank of Korea sounded “hawkish” (meaning they seem poised to hike rates at some point soon) when they said each meeting is going to be a “live” meeting going forward.

o   The Reserve Bank of New Zealand surprised markets by deciding to end its asset purchase program by July 23 and announcing it might raise rates beginning in August.

o   The Bank of Canada slowed the pace of its asset purchase program further while boosting up its growth and inflation forecasts.

o   The Bank of Japan will offer banks interest-free financing for climate-linked loans or investments. It will also buy green bonds (bonds used to finance projects that help fight climate change) denominated in foreign currencies.



·         The Group of 20—a group of finance ministers from 20 developed and emerging economies—backed a proposal to set a minimum corporate income tax. Each country would need to propose and ratify any agreement, so the agreement does not have any immediate effect.

·         In Cuba, people took to the streets in protest of economic conditions in the communist country.

·         Riots broke out in South Africa in response to the jailing of former President Jacob Zuma.

·         U.S. Senate Democrats agreed to a $3.5 trillion spending bill. This could serve as the basis for the budget that is to be passed later this year under the budget reconciliation rules, which only require a simple majority to pass.

·         The Organization of the Petroleum Exporting Countries came to a compromise with the United Arab Emirates in a deal to boost the global supply of oil.


The week to come

·         It’s second-quarter earnings season!

·         In the U.S., the National Association of Home Builders/Wells Fargo Housing Market Index for July is released on Monday. Later that day, Japan’s inflation data are released.

·         U.S. building permits and housing starts for June will be released on Tuesday.

·         The ECB releases its policy statement on Thursday. Later that day, U.S. existing home sales data will be released.

·         On Friday, U.K. retail sales data are released. Preliminary survey results from purchasing managers, measuring changes in economic activity for the eurozone and the U.S., are also to be released.


Thanks for reading, stay informed!

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