Kia ora,

Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead with news bond curves are steepening again as progress in the fight against inflation shows some promise.

American producer prices actually fell in July from June, an unexpected dip. There are now +9.8% higher than the same month a year ago, and that is much less than the +11.3% rise recorded in June. This is more evidence the current inflationary surge has topped out. The July dip in their PPI is their first in more than 2 years.

American petrol prices have fallen again, now below US$4/gallon on a national basis for the first time since March. It follows effective action from the federal administration. These falls are now showing up in both consumer price monitoring as well as today's producer price data.

US jobless claims rose to +204,000 last week (actual) and there are still only 1.454 mln people on these benefits, unchanged in a week and still near a record low. But note that the seasonally-adjusted rise was to +262,000 last week, so other media are reporting this is a nine-month high.

In a sign that recession fears may be waning, American high-yield bond funds are attracting heavy investments, a turnaround from the selloffs of the first half of this year. Investors are essentially betting that the Fed will limit future interest rate hikes to try to avert an economic slowdown. But one prominent Fed voter, Mary Daly, is saying it is too early to declare victory against inflation's pressures.

The Mexican central bank has pushed through a +75 bps official interest rate increase to 8.5% in the face of 8.2% inflation. Their new policy rate is their highest ever.

But it is conservative compared with Argentina's new rate, up +950 bps to 69.5% where they are battling inflation running at over +5.3% per month, 64% per year.

Turkey is also battling very high inflation with theirs running at +80% still, in their case partly cause by running an excessively low policy interest rate of just 14%.

In China, passenger car sales surged 30% in July from a year earlier to 2.42 million units in the month, extending a recovery that began in June with the help of eased COVID curbs and government incentives. Sales of new energy vehicles, which include pure electric vehicles, plug-in hybrids and hydrogen fuel-cell vehicles, accounted for much of the recovery. China's car market is the world's largest.

Reflecting an uptick in Chinese industry, the price of copper is back rising again and is at a six week high.

The Singapore economy grew by +4.4% on a year-on-year basis in the second quarter, faster than the +3.8% growth recorded in the first quarter. On a quarter-on-quarter seasonally-adjusted basis however, their economy contracted slightly by -0.2%, a reversal from the +0.8% expansion in the March quarter.

Inflation expectations in Australia are slipping. The respected Melbourne Institute's August survey pegs the one year expectation at 5.9% now, down from 6.3% in July and 6.7% in June (which was a 14 year high).

And staying in Australia, regulator ASIC says "there are limited protections for crypto-asset investments given they have become increasingly mainstream and are heavily advertised and promoted. There is a strong case for regulation of crypto-assets to better protect investors." ASIC is Australia's integrated corporate, markets, financial services and consumer credit regulator.

Global container shipping freight rates fell faster last week, down -3% in a week, and the 24th consecutive weekly decrease. These freight rates have now dropped by -32% when compared with the same week last year. The rates to and from China are falling the fastest. Bulk cargo rates are lowish and stable. Tanker rates are rising.

The UST 10yr yield starts today at 2.88% and +10 bps higher than this time yesterday. 

The price of gold will open today at US$1789/oz which is down -US$7/oz from this time yesterday.

And oil prices start up +US$2.50bbl from this time yesterday at just under US$94/bbl in the US, while the international Brent price is now just over US$99/bbl.

The Kiwi dollar will open today at 64.3 USc which is holding yesterday's jump. Against the Australian dollar we are holding higher at 90.5 AUc. Against the euro we still up at 62.3 euro cents. That all means our TWI-5 starts today still just on 72.3, our highest in more than three months. A higher exchange rate will help in our fight against imported inflation.

The bitcoin price is essentially unchanged from this time yesterday at US$24,332. Volatility over the past 24 hours has been high at just under +/-3.0%.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again on Monday.