Good day. The U.S. economy’s 2021 growth surge likely peaked in the spring, but a strong expansion is expected to continue into next year, say economists surveyed by The Wall Street Journal. As China’s factory-gate prices soared this year, investors worried the country would become a new source of inflation for the rest of the world. Instead, the world’s second-largest economy has helped alleviate some price pressures. On the regulatory front, stablecoins, digital currencies pegged to national currencies like the U.S. dollar, are increasingly seen as a potential risk not just to crypto markets, but to the capital markets as well.

Widespread business reopenings, rising vaccination rates and a big infusion of government pandemic aid this spring helped propel rapid gains in consumer spending—the economy’s main driver. But that burst of economic growth is starting to slow, economists say. With more moderate growth, the rates of job gains and inflation should ease as well, the economists said.

• Higher June Retail Sales Bolsters U.S. Recovery

While inflation expectations data has been on the upswing, it appears to be roughly in line with the Federal Reserve’s outlook that the current price pressure surge will start to dissipate after this year. Read more.

• China Steels Itself for Fight to Cool Rising Commodities Prices
   

The number of Americans filing applications for jobless benefits continues to decline to the lowest levels since the economy shut down last year. As many return to work, the amount of federal Covid-era benefits that unemployed people are receiving has splintered from one state to the next. See how that is playing out across states.

Treasury Secretary Janet Yellen is scheduled Monday to hold a meeting of the President’s Working Group on Financial Markets to discuss stablecoins, the Treasury Department said Friday. The group includes the heads of the Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission.

• Accountants, Lawmakers Urge Rules on Crypto Accounting

8:30 a.m.: U.S. Commerce Department releases June housing starts
7:50 p.m.: Bank of Japan releases June 17-18 meeting minutes

Time N/A: Bank Indonesia releases policy statement; South African Reserve Bank releases policy statement
4:30 a.m.: Bank of England’s Broadbent gives speech
7:45 a.m.: European Central Bank releases policy statement
8:30 a.m.: European Central Bank’s Lagarde holds press conference
10 a.m.: National Association of Realtors releases June U.S. existing-home sales

Federal Reserve officials have said repeatedly that despite massive inflows into the central bank’s reverse repo facility, everything is working with the facility as planned. Barclays Capital in note Friday agreed, saying that “The rapid [overnight reverse repo] growth is not a cause for concern but rather represents a monetary policy tool working effectively and exactly as designed.” Surging inflows stem from “elevated” amounts of cash in the financial system tied to Fed stimulus and the rise in the overnight repo rate from zero to 0.05%, the note added. On Friday, the reverse repo facility took in $818 billion. It was barely used during the spring. 

—Michael S. Derby

• U.S. lawmakers have dropped plans to help fund a roughly $1 trillion infrastructure package by boosting tax-collecting enforcement at the Internal Revenue Service, according to a key negotiator, adding new difficulties to funding the bipartisan measure ahead of a looming deadline for agreement.
• Americans' expected inflation rate rose in July compared with June, a University of Michigan survey showed, with consumers' complaints about rising prices on homes, vehicles and household durables reaching an all-time record. (Dow Jones Newswires) 
• U.S. manufacturing and trade inventories rose 0.5% over the previous month in May, according to the Department of Commerce. The increase matches expectations of economists polled by The Wall Street Journal and follows an upwardly revised 0.1% month-on-month rise in April. (DJN)
• Eurozone exports fell in May for the fifth consecutive month, signaling international goods trading remained on a weak footing despite the easing of most coronavirus-related restrictions. The European Union’s statistics agency said exports declined by a seasonally adjusted 1.5% compared with April. Imports rose 0.7%. (DJN)
• tThe European Automobile Manufacturers Association said European new car registrations, which reflect sales, rose 10% year-on-year to 1.05 million units in June, with growth of 25% from January to June to 5.4 million units. (DJN)
• Canadian wholesale transactions increased 0.5% on a seasonally adjusted basis in May to 72.22 billion Canadian dollars, or the equivalent of $57.34 billion , with the gain powered by sales in the food sector, Statistics Canada said. (DJN)
• Housing starts in Canada in June came in at a seasonally adjusted annualized rate of 282,070 units, a 1.5% decrease from 286,296 units in May, the Canada Mortgage and Housing Corp. said. (DJN)
• Annual inflation in Nigeria, Africa's largest crude-oil exporter, dropped further to 17.75% in June from 17.93% in May, the National Bureau of Statistics said. The inflation rate has now declined for three months in a row, after standing at 18.72% in March and 18.12% in April. (DJN)

This newsletter is compiled by James Christie in San Francisco and Ed Ballard in London. 

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