Daily Commentary

MarketMinder’s View: The eurozone’s fastest-growing big economy looks to have maintained momentum in Q2, as Spanish GDP grew 0.7% q/q and 2.8% y/y, a slight acceleration on a quarter-over-quarter basis. Domestic demand drove growth, “contributing 0.9 percentage points to quarterly growth,” which is helping the country outpace estimates thus far this year. Looking forward, cooling inflation and rising wages suggest households should be in fine fettle, and “‘Given Spain’s small share of trade with the US and strong domestic economy, it looks well placed to continue to outperform the euro area over the coming quarters,’ said Ángel Talavera, head of Europe economics at Oxford Economics.” According to data from Spain’s Ministry of Economy, Commerce and Business, just 4.7% of 2024 goods exports went to the US, so that statement makes some sense to us.

MarketMinder’s View: The US Bureau of Labor Statistics’ Job Openings, Layoffs and Turnover Survey (JOLTS) report showed openings inched down from 7.7 million to 7.4 million in June, while hiring fell to a one-year low and layoffs remained far below average—with some, including an economist quoted herein, declaring America’s state a “‘no-hire, no-fire economy.’” This article casts this, along with a relatively high number of quits, as a reason for optimism about the economy’s direction, which, sorry, we just don’t buy. For one, jobs data like these follow economic growth—they don’t lead or determine it. Firms hire when demand pushes them to necessitate it; they fire when they must because business is weak. So the notion that, “As long as most Americans are working and spending, the US economy will continue to expand and avoid a recession,” doesn’t hold water. Listen, we aren’t forecasting a recession (though we also can’t rule it out), but this isn’t why. Consumer spending is historically quite stable versus things like exports and investment, which tend to be the economy’s swing factors. We mean, “most Americans” (whatever that means) have been working and spending through virtually every recession on record. Basing optimism on the job market’s health is faulty logic.

MarketMinder’s View: Some with a protectionist streak may cheer the headline result from today’s advance estimate of June international trade in goods, which showed a -10.8% m/m reduction in the trade deficit. That will likely buoy headline Q2 GDP to some extent, based on the statistic’s mathematics. But make no mistake: This was not a good report. “While the unexpected contraction [in the goods trade deficit] reported by the Commerce Department on Tuesday could prompt economists to upgrade their gross domestic product estimates for last quarter, the steep decline in imports flagged slowing domestic demand. … Imports of goods decreased $11.5 billion, or 4.2%, to $264.2 billion, the lowest level since March 2024. The decline was led by a 12.4% plunge in consumer goods imports. … Goods exports slipped $1.1 billion, or 0.6%, to $178.2 billion.” Both imports and exports fell. Look, this was all to be expected after tariff frontrunning pulled forward import demand. But it is also worth watching to see how such reports fit with sentiment—and how long a potential trade pothole lasts.