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Sales Are Up But Maybe Not For Long
U.S. retail sales rose strongly in June for the second straight month as stores and restaurants reopened. Sales were up a seasonally adjusted 7.5% on the month, Harriet Torry reports. The coming months could look grimmer, however, as the surge of new cases has caused states and businesses to shut down again.
Sales may be up but that won’t be enough to keep many stores open. Retailers are on track to close as many as 25,000 stores this year, up from 9,832 last year, as the pandemic pushes more shopping online, write Luis Santiago and Suzanne Kapner.
Meanwhile, new filings for unemployment benefits, which are released every week, have stabilized at 1.3 million, a worrying sign that the recovery in the labor market has stalled. That’s around five times more than the number of weekly claims that were routinely filed in the weeks before the pandemic started. The labor market still has a long way to go and the last few weeks haven’t been encouraging, economists said.
The economic downturn caused by the pandemic has tested food banks as they struggle to keep up with a surge in demand. More than 82% of U.S. food banks have seen demand increase with an average increase of 50%, reports Jennifer Smith. Donations of items like rice and soup have dried up, forcing the food banks to compete with retailers and other food banks to buy canned goods. Increased volumes to meet rising demand has also put pressure on their warehouse space. And maintaining social distancing requirements is making it harder for them to hand out donations efficiently.
What to Watch Today
U.S. housing starts for June are released at 8:30 a.m. ET and are expected to show an 18.1% increase over the previous month.
The University of Michigan’s index of consumer sentiment for July comes out at 10 a.m. ET and is expected to post 77.8.
U.S. regional and state employment figures are released at 10 a.m.
U.S. Treasury Secretary Steven Mnuchin testifies before the House Small Business Committee at 10:30 a.m.
Top Stories
Record Rates
Here’s another sign of how the pandemic is shaking up the economy: U.S. mortgage rates have crossed below the 3% threshold for the first time on record. The average rate on a 30-year fixed mortgage fell to 2.98%, Orla McCaffrey reports. That’s partly due to low yields on government debt. Usually, low rates boost home sales but that isn’t the case now. More people are out of work and those who do have jobs are being more cautious. And if you’re looking to buy, you might find people aren’t in a hurry to sell their homes right now, keeping inventory tight and prices high.
Bubble Bubble
The world’s biggest asset bubble is getting bigger, despite the coronavirus pandemic. China’s property boom is now larger than the U.S. housing bubble of the 2000s, many economists say. In the 12 months through June, investors poured $1.4 trillion into Chinese housing, write Stella Yifan Xie and Mike Bird. After a brief pause in buying in February during the height of the pandemic in China, the market has resumed and is firing on all cylinders. Urban home prices were up 4.9% in June from the previous year. The Chinese government has tried to keep a lid on housing prices but hasn’t so far succeeded in bringing the buying frenzy under control.
China on the Mend
China’s economy grew by 3.2% in the second quarter, a sign that the country’s aggressive efforts to control the pandemic are paying off. With other countries, most notably the U.S., still mired in an economic downturn, Chinese factories have been able to step in and fill the gaps in global supply chains. But there are reasons to caution. Retail sales and real disposable income are down and tensions with the U.S. are flaring up again, reports Jonathan Cheng.
No Move From the ECB
The European Central Bank left its stimulus program unchanged and said it would continue to support the region’s economy as it recovers from the pandemic-induced downturn. ECB President Christina Lagarde struck an upbeat note but warned the recovery would be slow and uneven, Tom Fairless reports.
More Money For Cops
Despite nationwide calls to defund the police, some cities are boosting their police department budgets. Houston, Phoenix and San Diego have all raised police funding levels, contrasting with a larger number of cities that have cut spending or said they plan to cut spending, report Talal Ansari and Jennifer Calfas.
What Else We’re Reading
The coronavirus pandemic could accelerate the shift to automation, as businesses look to protect themselves from future disease outbreaks, write Alex Chernoff of the Bank of Canada and Casey Warman of Dalhousie University. They identify local labor markets and demographic groups at risk of losing jobs based on their work’s automation potential and transmission risk. Women are about twice as likely as men to work in jobs that can be automated and where the risk of infection is higher, they conclude. Most at risk are customer service representatives, licensed practical nurses, medical assistants, correctional officers and pharmacy technicians, they find.
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