Greetings,

1. We begin with the United States where industrial production rose 0.7% in July, the largest jump since 2014. Capacity utilization rose as well (second chart below). Both measures were better than expected.

2. The US industrial production improvement was fairly broad as the mining and materials sector drag dissipated. However, the big jump came from utilities, with the heat wave raising demand for power.

Source: FRB

3. US housing starts beat expectations (chart below), driven by multi-family construction (second and third chart below).

In fact, single-family construction permits were down for the month.

4. Are US homebuilders halting the multi-decade trend of building ever larger houses? Anecdotal evidence suggests that to be the case. 

5. The Atlanta Fed Q3 GDP tracker (GDPNow) is staying above 3.5%, based on the recent data releases. The median economists' forecast, however, is 2.5%.

Source: @AtlantaFed

6. US CPI release was below consensus for both the headline and the core figures. As a whole, inflation remains benign, with the ex-shelter CPI (third chart below) moving back into negative territory.

The so-called sticky CPI (the low-volatility components of the headline CPI) is grinding higher, driven by shelter inflation.

One item worth noting is the 62-and-older medical care inflation hitting the highest level since 2008. This has to be frustrating when the Social Security adjustments barely budge. 

7. The Atlanta Fed wage growth tracker turned lower last month.

Source: @AtlantaFed

Separately, US male and female wage growth (not to be confused with the absolute wage levels) have converged. 

Source: @AtlantaFed

8. The NY Fed District Business Leaders Survey turned sharply lower. Yesterday we saw some rather weak numbers from the region's manufacturing sector (Empire Manufacturing Index), including a rapid deterioration in hiring plans. Is the New York area headed for a recession?

9. The Johnson Redbook retail index growth is cratering. According to the WSJ, "sales were hurt by the hot weather and more purchasing of back-to-school clothing as needed instead of ahead of time."

10. On Tuesday morning, the Fed's William Dudley was jawboning the frothy debt and (according to many) equity markets. Will the markets pay attention?

Source: Fox Business

Here is the 5y treasury reaction to Dudley's comments.

1. Switching to the UK, the nation's house price appreciation accelerated to 8.7% in June.

2. UK's consumer inflation rose more than expected, driven by higher fuel prices.

3. There is nothing like a little currency depreciation to get your raw materials inflation up. Here is UK's input PPI.

4. The British pound jumped on Tuesday afternoon (intraday chart shown below). This reversal has to make the massively net short speculative accounts really nervous.

6. The 10y gilt - Bund (UK - Germany government bonds) spread continues to tighten.

1. Now on to the Eurozone where the German ZEW economic sentiment indicator missed consensus. While the current conditions index was robust, the expectations index came in quite soft.

2. Spanish 12-month government bill was auctioned off deeper in negative territory.

3. Apparently, some European banks are looking into cheaper ways to store the €200 notes. Negative rates will do that.

Source: @FT, @MarathonWealth

 1. Turning to the nations Down Under, Australia's wage inflation is now the slowest on record.

2. New Zealand doesn't seem to struggle with declining labor force participation rates. Importing some younger people and a relatively strong economy help.

On Tuesday morning, dollar-yen fell below 100. This yen strength has to be bothering officials in Tokyo, and we are likely to hear more intervention threats.

Related to the above, the US dollar index also weakened sharply on Tuesday morning, recovering somewhat later in the day.

1. In emerging markets, we see a rapid recovery in the Mexican peso (the dollar now buys less than 18 pesos). All the capital inflows into emerging markets help. The second chart below shows shares outstanding in a large Mexico equities ETF.

2. The Nigerian naira remains under pressure. It will be interesting to see how much FX reserves will be left as the central bank tries to defend the currency.

3. Singapore exports sag. The chart below shows electronics exports (YoY).

4. China's dollar corporate bond spreads hit the lowest level since 2008 on rising demand for fixed income product gloabally.

Source:  ‏@markets

5. India's wholesale inflation accelerated to 3.6% in July, driven by food inflation. Rate cuts are off the table for now.

Source: The Hindu

In commodity markets, the crude oil rally over the past few days has been relentless.

Finally, in the equity markets, US small caps are outperforming year-to-date on higher risk appetite.

Source: Ycharts.com

Turning to Food for Thought, we have 5 items today:

1. Millennials are less likely to be affiliated with a specific religion than the older generations.

Source:  ‏@joshdigga

2. What percentage of total household expenses is allocated to food (eaten at home) - by country. 

Source: ‏@VoxMaps

3. What Americans and Germans think is morally (un)acceptable.

Source:  ‏@pewresearch

4. Weather-related fatalities in the US.

Source: ‏@wef

5. The number and top origins of Muslim refugees coming to the U.S.

Source: ‏@PewReligion

Source: ‏@PewReligion