Defense economics

Daily update

Defense spending is a focus as NATO leaders meet on Wednesday. Obviously, total defense spending is rising in most economies. Markets tend to get too excited about what that means for growth. Defense spending drips into the economy slowly. It will take the US more than three years to rebuild some of its missile stockpiles after the Gulf war, spreading the economic consequences.
The type of military procurement is also evolving. Ukrainian strikes on Russia and Crimea demonstrate the importance of drone wars. There may be changes in the countries used to provide defense equipment. Europe has started to shift away from buying US military hardware. Where the Middle East spends defense budgets is in focus.
German May factory orders were stronger than expected, with positive revisions to April. Eurozone May producer price and retail sales data are unlikely to interest investors much, but should confirm Eurozone consumer resilience.
US business sentiment polls are due. There are also some central bank speakers. Mann of the Bank of England and Lane of the ECB are scheduled, but we have heard from them recently. Waller of the Federal Reserve may be of interest, especially with Fed Chair Warsh’s refusal to indicate what the Fed might do next likely to add uncertainty risk to markets.