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Consumer Spending in U.S. Advances for Fourth Consecutive Month

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retail sales

Consumer spending advanced for a fourth straight month in July, bolstered by stronger income gains, sending the biggest part of the U.S. economy to a solid third-quarter start, Commerce Department figures showed Monday in Washington.

Key Points

  • Purchases climbed 0.3 percent (matching median estimate) after 0.5 percent rise that was revised up
  • Incomes grew 0.4 percent (matching median forecast) following 0.3 percent advance that was also revised up
  • Saving rate increased to 5.7 percent from 5.5 percent
  • Disposable income adjusted for inflation climbed 0.4 percent, the most this year

Big Picture

The figures support economists’ projections that economic growth will rebound this quarter after the weakest first half since 2011. Adjusted for inflation, a 0.3 percent advance in July purchases followed an upwardly revised 0.4 percent gain in the previous month, indicating a better start to the third quarter. Ian Shepherdson at Pantheon Macroeconomics said in a note to clients that spending this quarter may rise 3 percent after a robust 4.4 percent second-quarter surge. A solid August jobs report would further boost expectations for Federal Reserve policy makers to raise interest rates as soon as next month.

Economist Takeaways

“The consumer is going to remain the main driver of growth,” said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, who correctly projected the rise in spending. “Continued improvement in the labor market is supporting income growth. It’s consistent with a solid third quarter.”

The Details

  • Disposable income, or the money left over after taxes, increased 0.4 percent after adjusting for inflation, the largest gain in 2016
  • Price gauge based on the personal consumption expenditures index — the Fed’s preferred measure — was unchanged from the prior month and was up 0.8 percent from year earlier
  • The core price measure, which excludes food and fuel, rose 1.6 percent for a fifth month on a year-over-year basis
  • Purchases of durable goods, which include automobiles, increased 1.9 percent in July after adjusting for inflation, the biggest gain in three months; spending on non-durable goods fell 0.1 percent, the first drop since February, while outlays on services rose 0.2 percent

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Markets

Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020

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Revenue of OPEC Members to Drop to 18 Year Low in 2020

The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.

EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.

If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.

The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.

It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.

It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.

“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”

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