- McConnell attacks Democrats’ dual-track infrastructure process
- June U.S. consumer confidence expected to show a 15-month high
- April U.S home prices expected to show another sharp increase
- China’s PMIs expected to be little changed
McConnell attacks Democrats’ dual-track infrastructure process — Senate Minority Leader McConnell on Monday called on House Speaker Pelosi and Senate Majority Leader Schumer to drop the dual-track infrastructure process of pursuing both the bipartisan infrastructure agreement and a reconciliation infrastructure bill.
Mr. McConnell made it clear that he would not support a bipartisan infrastructure bill if it were paired with a Democratic-only reconciliation infrastructure bill. Mr. McConnell’s opposition makes it even less likely that there will be enough Republicans to get a bipartisan infrastructure bill past a filibuster.
If the bipartisan agreement fails, then Democrats will be forced to try to pass one large infrastructure bill through reconciliation. However, it remains unclear whether that will be possible since it would depend on the approval of Democratic Senators Manchin and Sinema, who have insisted on a bipartisan bill.
For now, Democrats will proceed down the dual-track infrastructure road regardless of Mr. McConnell’s complaints. Senate Majority Leader Schumer is planning to hold votes in the Senate in July on both a bipartisan infrastructure bill and the budget resolution necessary to kick-start a reconciliation infrastructure bill. The legislation for the bipartisan infrastructure bill is expected to be written while the Senate is away on its Fourth of July recess through July 12.
The stock market would like to see more infrastructure spending as a boost to the economy and corporate profits. However, the stock market obviously does not want to see the higher corporate taxes that Democrats plan to use to pay for infrastructure spending. Higher corporate taxes take a direct bite out of earnings, thus taking a direct bite out of stock prices as well.
June U.S. consumer confidence expected to show a 15-month high — Today’s June Conference Board U.S. consumer confidence index is expected to show a +1.8 point rise to 119.0, overcoming May’s small decline of -0.3 to 117.2.
Today’s expected increase to 119.0 would be a new 15-month high, taking out the current 15-month high of 117.5 posted in April. Expectations for an increase in today’s Conference Board report are supported by last Friday’s news that the University of Michigan’s U.S. consumer sentiment index in June rose by +2.6 points to 85.5.
U.S. consumer confidence is near the highest level seen since the pandemic began last year. Consumer confidence has been bolstered as vaccinations have successfully curbed the pandemic and have produced a roaring economy. The consensus is for U.S. GDP in Q2 to soar by +10.0% (q/q annualized) and then remain strong at +7.0% in Q3 and +5.0% in Q4. The consensus is for GDP growth in calendar 2021 to rise sharply by +6.6%, more than recovering from the -3.5% decline in 2020.
Consumer confidence is also being fueled by job and wage gains as the economy recovers. However, there are still 7.6 million missing jobs that need to be recreated to get U.S. employment back to where it was before the pandemic.
Consumer confidence is being dampened by the sharp rise in gasoline prices, which is soaking up consumers’ disposable income. The current surge in inflation is also a negative factor for consumer confidence since a dollar of spending buys fewer goods and services.
April U.S home prices expected to show another sharp increase — Today’s U.S. home prices reports are expected to show another sharp increase. The consensus is for today’s April FHFA house price report to show a sharp increase of +1.7% m/m, adding to March’s +1.4% surge.
Meanwhile, today’s April S&P CoreLogic composite-20 home price index is expected to show increases of +1.8% m/m and +14.9% y/y, which would be even larger than March’s increases of +1.6% and +13.3%, respectively.
U.S. home prices have surged since the pandemic due to both strong demand and tight supplies. U.S. home sales in May remained strong at 5.80 million units, which was 7% above the pre-pandemic level of 5.41 million seen in January 2020, although down from the 15-year high of 6.73 million posted in October 2020.
The supply of homes on the market is very tight, meaning a large number of buyers are competing for a limited number of available homes. The supply of homes available on the market was at 2.5 months in May, which was above the record low of 1.8 months posted in December and January but below the pre-pandemic level of 3.1 months seen in January 2020.
China’s PMIs expected to be little changed — The consensus is for today’s China national June manufacturing PMI to show a small -0.2 point decline to 50.8, adding to May’s -0.1 point decline to 51.0. Meanwhile, today’s June non-manufacturing PMI is expected to show a small +0.1 point increase to 55.3, adding to May’s +0.3 point increase to 55.2.
The Chinese economy showed very strong growth in Q1 of +18.3% y/y as the pandemic ebbed worldwide. China’s GDP is expected to downshift but remain strong at 7.8% in Q2, +6.0% in Q3, and +5.0% in Q4. The consensus is for China’s GDP in 2021 to show strong growth of +8.5%, picking up the pace from 2020’s small increase of +2.3%. China’s GDP is then expected at +5.5% in 2022 and 2023.
