The Day at a Glance | August 14 2020

The Top

· Recovery in China loses momentum.

· Retail sales in the United States disappoint in July.

· Negotiations regarding a fiscal package in the US stopped due to a lack of agreement on aid to state and local governments.

· Chinese and US trade representatives will meet tomorrow to assess the advancements made concerning the “phase 1” agreement.

· COVID-19 cases exceed 21 million at a global level; an acceleration in cases in Europe raises concerns.

· Economic indicators: July`s industrial production data is expected to be published in the US today (3% monthly e. vs 5.4% prev.).

Economic environment

Retail sales in China disappointed during July and the industry`s recovery was not able to accelerate, which is something that has increased concerns regarding the recovery’s fragility in the world`s second largest economy. Retail sales contracted at an annual rate of 1.1% in July, a figure way below the 0.1% estimated by the consensus and confirmed that 7 consecutive months have recorded a setback. Industrial production grew 4.8% annually in July but also fell short compared to the estimated 5.1%. The weak figures are attributed to quarantines being implemented again due to new COVID-19 outbreaks and floods that have affected the southern part of the country. The drop in sales in consumption were widespread, even though automobile sales grew 12.3% after an 8.2% fall in June. Unemployment stayed at 5.7% and investment was the only positive piece of information as it confirmed a moderation in its rate of contraction to 1.6% in the January-July period (vs 3.1% January-June), compared to the same period of 2019. Investment in infrastructure and construction are still the recovery`s main drivers.

Retail sales in the United States speed up slightly less than estimates during July, according to official figures. Sales grew 1.2% month over month (2.7% annually) after recording contractions in motor-vehicles and auto parts (-1.2% monthly), construction materials (-2.9%) and sporting and recreational goods (-5%). The rest of the components increased, with the greatest expansion seen in electronics (22.9%). The data continues to be consistent with a sustained recovery in the economy, with the least volatile component of sales recording an increase above expectations (1.4% vs 0.8% e.). US consumers continue to show willingness to spend and give confidence regarding the economy`s recovery, even though the outlook still faces risks given the lack of agreements to extend extraordinary aid to unemployed people as well as the latent risk of new outbreaks of the virus in autumn/winter.