United States
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Highlights:

US

·      Why would Warren Buffett own 7% of Sears’ REIT (Seritage)?

·        Thinking of everyone in Houston: Revisiting the economic impact of Sandy and Katrina and why would homebuilders be hurt by Harvey?  Also: why Houston is better positioned than New Orleans to recover.

·        What to look for in today’s speech on tax cuts.

·        Yesterday’s consumer confidence figure for August soared to the second highest reading since late 2000.

·        Brookfield said to be putting Las Vegas’ Hard Rock casino up for sale with JPMorgan.

·        ADP’s estimates for August payrolls surpass expectations; show largest gain in 5 months.

 Retail 

·        Simon Properties sues Starbucks

·        Kohl’s plans to trim sf in half of its stores 

Tech

·        PayPal  is turning to its old nemesis, plastic, to help it expand beyond the digital realm with a 2% cash-back card.

·        Blurry vision: Warby Parker’s value gets cut.

·        Apple builds out a $1B+ data center in…Iowa

 UK

·        UK consumer borrowing cools as slowdown, BOE action take toll

·        The latest Brexit-led pound drop


 

US GDP growth revised to 3% in Q2; increase marks the largest gain in 2 years What’s behind the strength?  

         Second estimates for Q2 GDP were lifted by stronger spending on goods and services as well as non-residential investment,partially offset by a larger decrease in state and local government spending.

·        Spending on goods and services were revised higher in the second of three estimates for Q2 GDP, led by an 8.9% increase in spending on durables. Note: the strength wasn’t from autos but “recreational goods” (iPhones, anyone?); GDP ex-autos actually rose by 3.1%.) 

·        Residential investment contracted but at a smaller pace than previously estimated; non-residential investment saw gains from all three major sub-categories (equipment, structures and intellectual property.)  

 

Profits up in aggregate, but down for domestic financial corporations. 

·        Profits from current production (corporate profits with inventory valuation adjustment and capital consumption adjustment) increased $26.8 billion in the second quarter (versus a decrease of $46.2 billion in Q1) but only because of growth from nonfinancial corporations.

·        Profits of domestic financial corporations decreased $29.4 billion in Q2—the second straight quarter of decline—while profits of domestic nonfinancial corporations increased $64.8 billion, following a modest increase of $3.8 billion in Q1.

·        Total pre-tax corporate profits without adjustments for capital consumption and inventory valuation fell by -0.5% annualized QoQ; adjusting for inventories and depreciation, the figure is modestly better, at 1.3%.   Even so, the 1.3% gain is better than the pre-tax adjusted 2015 and 2016 profit figures, which showed declines of -1.1% and -2.1%, respectively.  

 

Investment in non-residential structures is up, but it’s all oil wells. 

·        Even as investment in residential structures fell by 6.5% on the quarter--trimming ¼ of 1 percentage point from Q2 growth--investment in non-residential structures rose by 6.2%, following an already-robust 14.8% increase in Q1.   

·        However, the entirety of the gain in Q2 is due to an increase in investment in mining structures (oil wells and shafts).  Private nonresidential fixed investment in commercial and health care structures declined modestly (down -0.2%) following Q1’s 2% gain. Investment in other categories fared even worse: investment in manufacturing facilities fell by-16.7%, while investment in private power/communications infrastructure fell by -13.6%, the third consecutive quarter of decline. 

 

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Heidi Learner

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