Kia ora,

Welcome to Monday’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.

And today we lead with news China is starting to roll out more industry support to bolster its flagging economy.

But first, this coming week will be a busy one. And it will be dominated by the US Fed rate decision on Thursday (NZT). Analysts expect a +25 bps rise to 5.50%.

The Americans will also release their first estimate of Q2 GDP growth, and there will be more earnings results for more large companies. Other important releases to watch out for include the US PCE price index, durable goods orders, and many PMI survey results for July.

Both the ECB and the Bank of Japan will also review their benchmark rates and we will get Q2 inflation rates for Germany, France, Spain, and Australia.

Over the weekend data showed that Canadian retail sales stalled in June following a small rise in May. Things would have been worse if it wasn't for strong new car buying.

In China, their economic weakness is spreading and now coming out in corporate earnings. Listed companies, especially in industrial sectors, have issued profit warnings for the first half of the year, raising questions about the government's optimistic depiction of the economy. Analysts say almost a third of mainland-listed companies have released first half earnings previews, with less than half making positive announcements. Basically there is no 'recovery', or if there is one, it is weak. Beijing is clearly rattled.

Beijing outlined a ten-step program to support their car-making industry, emphasising electric vehicles. A lot of it involves local government becoming a big buyer, and extending EV infrastructure into the countryside.

In Japan, inflation continues to run above their central bank's 2% target. It edged up to 3.3% in June from 3.2% in May but less than market forecasts of 3.5%. Core inflation also ticked higher to 3.3% in June from 3.2% in May. It has been higher than 2% for 15 straight months now. Note that Japan's 3.3% CPI rate is higher than the US's 3.0%. That is a generational rarity.

In other media, a lot has been made about the potential 'surging' wheat price after the Russian abandonment of the grain deal with Ukraine and the subsequent missile strikes on port facilities. But it seems like the wheat market is ignoring the chatter, focusing on the rising wheat output in many other countries. Yes the price rose but the recent rises were modest in the perspective of the past year.

In the US, their cattle herd shrank more than expected to the lowest seasonal levels since 2014. That will underpin good prices for beef for the next few years. The decline was -2.7% in this latest survey, more than the -2.3% expected. In an industry are large as that, this is a significant shortfall.

Also shrinking rather fast are asset values for icon office buildings. Bloomberg has a scary story for Korean investors who bet big a while ago in London, Paris and New York. They are facing a disastrous outcome now. And big banks are raising their provisioning for loans for commercial real estate, expecting a wave of defaults.

And in Australia, Jardens are noting that investors are increasingly selling properties to reduce leverage and improve cash flow, as the fastest interest rate tightening cycle in a generation makes it increasingly difficult for them to service multiple loans. The trend is strong enough for analysts to worry that it could reverse the recent rises in prices there.

The Spanish are voting today in snap national elections. It is expected to be close but with the right taking power this time. Voter turnout is reported as low. Early indications are that the swing right isn't as strong as anticipated. But it is early; polls have just closed. Of special interest will be the extent of influence the far-right party (Vox) gains. There has been a shift right in southern Europe in recent elections, from Greece to Italy and now Spain, mostly based on anti-immigrant sentiment. So far, the resulting governments seem to have been more moderate than feared.

The UST 10yr yield will start today at 3.84% and exactly where it was a week ago. 

The price of gold will start today at US$1961/oz and little-changed.

And oil prices are holding at just under US$77/bbl in the US. The international Brent price is now at US$80.50/bbl.

The Kiwi dollar starts today unchanged from Saturday at just under 61.7 USc. But a week ago it was 63.8 USc so the cumulative fall is more than -2c, or a -3.4% devaluation. Against the Aussie we are slightly lower at 91.7 AUc. Against the euro we are down at 55.5 euro cents. That all means the TWI-5 has fallen to 69.5 and is down -150 bps from a week ago.

The bitcoin price is still in in its recent yoyo pattern and now is at US$30,115 and back up +1.1% from this time yesterday. A week ago it was at US$30,316 so a -0.7% slip from then. Volatility over the past 24 hours has been low at just over +/- 0.9%.

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

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

Kia ora. I'm David Chaston. And we will do this again tomorrow.