News Recap | Written by CEP News | Jul 01 08 20:27 GMT | (CEP News) - The major U.S. release was the ISM manufacturing survey for June, which rebounded into growth mode to a level of 50.2. Weekly retail sales in the U.S. slipped on the week, U.S. construction spending fell further in May and car manufacturers reported sales for June. It was a quiet day in Canada with markets closed to observe the Canada Day holiday.
The U.S. manufacturing sector halted a four-month trend of deterioration and rebounded into growth mode at 50.2 in June, against expectations of a decline to 48.5, according to the ISM manufacturing survey. Despite the headline advance, prices paid moved up to the highest level since July 1979 and employment fell to its lowest in five years.
"While the PMI indicates minimal change is taking place month over month that is hardly the situation. When viewed from the manufacturer's perspective, they are experiencing higher prices for their inputs while demand for their products is slowing," said Norbert J. Ore, chairman of the ISM Survey Committee.
"This report appears positive enough to shake off some of the bond bullish sentiment of recent sessions," T.J. Marta, a fixed income strategist at RBC Capital Markets, noted after the release. "However, to the extent that outside economies slow, thereby reducing demand for US exports, the extraordinary price pressures are likely to create downward pressure on activity measures such as the ISM in the future."
Major U.S. automakers released year-over-year sales figures for June. General Motors said its U.S. sales sank 18.5%, Ford lost 28% and Chrysler plunged 36%. Honda and Volkswagen each gained about 1%.
According to a report from the U.S. Department of Commerce, construction spending in the United States declined 0.4% month-over-month in May. Residential construction fell by 1.6%, unchanged from April's 1.6 % decrease, while non-residential construction gained 0.3% after rising 0.8 % in the previous month.
Retail sales advanced on a year-over-year basis in the week ending June 28, according to both the International Council of Shopping Centers (ICSC), which showed a 2.2% increase, and Johnson Redbook retail survey, which recorded a 2.9% gain in the week. On a week-to-week basis, sales showed a 0.1% decline in the ICSC report following a 0.6% decline in the previous week.
"There is little driving consumer spending other than staples and basics," said Michael Niemira, chief economist at the ICSC.
In a related release, the Redbook report, which measures 9,000 retail units, has shown a 0.6% loss so far in June compared to May's figures.
An International Energy Agency report said oil supply will rise less-than-expected by 2013. Demand in the developed world is expected to decline because of high oil prices but worldwide demand will increase because of economic expansion in developing countries.
On Monday night, ABC news said quoted an unnamed Pentagon official saying a conflict between Iran and Israel was increasingly likely. On Tuesday, U.S. State Department spokesman Tom Casey responded: "I have no information that would substantiate that, and I think it's rather foolish of people who often have no clue what they're talking about to assert things and not even have the courtesy to do so on the basis of their name."
Speaking to reporters in Berlin after meeting with German Economic Minister Michael Glos on Tuesday, U.S. Treasury Secretary Henry Paulson said Germany and the U.S. are "on the same page" regarding the current subprime mortgage crisis and how to deal with its impacts on the global economy.
There were no releases out of Canada on Tuesday as markets were closed to observe the Canada Day holiday.
Overnight, markets received euro zone unemployment data, which showed the euro zone unemployment rate remaining steady at 7.2% in May against forecasts that it would fall to 7.1%. April's unemployment figure was revised up to 7.2% from 7.1%.
Germany's unemployment rate fell to 7.8% in June, the Federal Labour Agency reported, against economist expectations for the rate to remain unchanged at 7.9%. Meanwhile, the German unemployment rate as measured by the Federal Statistics Office Destatis reported that the rate stayed unchanged at 7.4% in May.
The Euro zone final manufacturing purchasing managers index was also released overnight, which fell to 40.6 in June following May's slip to 50.6. June's reading is the lowest level since May 2005, though economists had forecast a fall to 49.1.
The UK's manufacturing PMI fell to 45.8 in June - its lowest reading since December 2001. Economists had expected an improvement in June with the PMI figure rising to 49.8 after falling to 49.5 in the previous month.
By Stephen Huebl, shuebl@economicnews.ca, with contributions from Patrick McGee, pmcgee@economicnews.ca, Steve Stecyk, sstecyk@economicnews.ca, Todd Wailoo, twailoo@economicnews.ca and Adam Button, abutton@economicnews.ca, edited by Cristina Markham, cmarkham@economicnews.ca
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