Summer’s busiest economic week is over: here’s everything we’ve learned

The impact of the past seven days will reverberate in the coming weeks around the abandoned halls of Wall Street and Washington DC as politicians and investors retreat to the Hamptons or Martha’s Vineyard or wherever they are summer.
Are we in a recession? It’s hard to say, but hopefully by September the knowledge we’ve gathered during this treacherous 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 by another 75 basis points. The market expected this move, but it was still an all-time high. The Fed’s actions have increased the rate banks charge each other for overnight lending to a range of between 2.25% and 2.50%, the highest since December 2018.
  • The main inflation gauges showed that prices remain high. The consumer spending price index rose 6.8% in June – the largest 12-month increase since January 1982.
  • Consumer spending was higher, typically a sign that the economy remains strong. This time, however, the increase is likely due to rising prices, not thicker portfolios. Personal consumption expenditure increased by 1.1% this month, above the estimate of 0.9%.
  • The economy contracted for the second quarter in a row. GDP shrank by 0.9% year-on-year. That drop marks an important symbolic threshold for the most widely used – albeit unofficial – definition of a recession as two consecutive quarters of negative economic growth.
  • Americans became more pessimistic about the economy. The Conference Board’s Consumer Confidence Index fell for the third straight month in July. About 43% of 3,000 respondents said they think there is more than a 50% chance that the US will enter a recession in the next 12 months, while only 13% said so in April.
  • House price growth slowed for the second month in a row. Prices in May were still robust, up 19.7% 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 higher mortgage rates and concerns about inflation. In April, they grew by 20.6%.
  • Congress approved a $280 billion package to support the domestic chip industry. The bill will increase production of essential computer chips in the US to avoid future supply chain problems and increase competition with China.
  • Senators Chuck Schumer and Joe Manchin reached a $700 billion deal on a sweeping bill for climate, tax and health care. 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 reported second quarter results, including: Microsoft (MSFT), Alphabet (GOOG), Metaplatforms (FB), Apple (AAPL)and Amazon (AMZN). Results were mixed, with many companies warning of inflation and slowing growth in the future. Still, the markets managed to close the week and month higher.
That’s a lot to digest. Especially in a very persistent heat wave.

Unfortunately, we have another data-heavy week before we get a break.

The win continues next week with Starbucks (SEX), Uber (UBER) and Airbnb reporting.

We also expect the release of some key economic data: JOLTs (job openings), unemployment figures and PMI, a key indicator of economic activity in the US, are all heading our way.

So hold off on the swimsuits and SPF. Or not, and bring the beach to your desk. Vacation is a state of mind right?

Ducati conquers 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 attracted approximately 80,000 enthusiastic fans and owners over three days.

The Volkswagen-owned company announced Friday that it brought in record revenue of €542 million ($552 million) in the first half of 2022 and increased operating profit by about 15%.

But the Ducati head described a difficult mix of business conditions that have made it harder to meet the rising demand for bikes.

Supply chain problems 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 closures in China have made it difficult to get the necessary supplies. to secure parts.

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

“Doing business for the whole world keeps you more connected,” Domenicali said.

In the midst of uncertainty, the company does have an advantage. The cheap euro, which fell to parity with the US dollar for the first time in two decades in July, benefits exporters like Ducati as it makes their goods cheaper for foreign customers.

“It’s a help,” Domenicali said, no problem.

And he said the company, one of Italy’s best-known brands, is not shocked 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, Domenicali said.

Next one

Monday: ISM Manufacturing PMI (July).

Tuesday: JOLTs (June); Starbucks, Airbnb and Uber report earnings.

Wednesday: ISM PMI for non-manufacturing (July).

Thursday: Weekly first unemployment applications.

Friday: Unemployment rate (June); Berkshire Hathaway reports profit.

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