Chinese Surplus Surges; US CPI Rises
Riskier assets such as stocks are melting up in the wake of Fed Chair Powell’s testimony in front of congress. The Fed Chair wrapped up his two days of testimony on Thursday. The markets perceive that the Fed will lower Fed Fund rates at the end of July. Inflation rose more than expected in the US while China reported a decline in exports in June.
Chinese Surplus Rises More than Expected
Chinese exports and imports generated a $51 bl surplus, 20% wider than May. It is the largest monthly surplus in the first half. China's surplus averaged a little more than $30 bill during the past six months. The surplus was created by a 1.3% decline in exports in June, which were in line with expectations, and a 7.3% drop in imports, which were more than expected. China's bilateral surplus with the US rose to $30 billion, the widest this year. President Trump complained yesterday that China has not stepped up their purchases of US agriculture goods. Additionally, China reported a rise in lending in June. Total lending jumped to 2.26 trillion yuan up nearly 1-trillion yuan.
US core consumer prices rose to a 1.5-year high in June. According to the Labor Department CPI excluding the volatile food and energy components rose 0.3% last month. That as the largest increase since January 2018 and followed four straight monthly gains of 0.1%.
Core Inflation Rises to 18-month High
The so-called core CPI was boosted by strong increases in the prices for apparel, used cars and trucks, as well as household furnishings. There were also increases in the cost of healthcare and rents. In the 12 months through June, the core CPI climbed 2.1% after advancing 2.0% in May. The headline consumer price index CPI edged up 0.1% last month, held back by cheaper gasoline and food prices. Expectations were for CPI to remain unchanged in June and rising 1.6% year-on-year. The CPI rose 0.1% in May. It increased 1.6% year-on-year in June after rising 1.8% in May.
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