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 there are some indications popping through that inflation pressures might be topping out.

But first, American jobless claims rose last week to a bit more than expected, at +241,000 new claims for the week, to put 1,327,000 on these programs and no longer at a record low level.

And their producer prices rose more than expected, like yesterday's CPI, but these costs are rising faster than the consumer set. They were up +11.3% in a year, nearly back at the March 2022 +11.6% level again. But just like the CPI, costs other than for energy are rising slower now, up +6.4% and an eight month low.

And there are indications the American petrol price pressure is past its peak. Average prices nationwide are down -8.2% over the past month in a consistent declining trend now. If this continues, it will show up in CPI and PPI data quite soon.

In China's cities, their economic slowdown is weighing on households. Middle-class consumers are feeling anxious and making painful cuts to their household budgets. Their savings rate is suddenly rising sharply as spending is curtailed. With tough lockdowns hanging over their heads, most Chinese households who can are choosing to save, and that is making life tough for policymakers trying to restart a very sluggish economy. Helicopter money in these situations is less of an option because such moves are less likely to be spent. For those who can't save they may help, but their prospects now look much tougher.

The mortgage boycott is a rising trend there too and with the regional bank run pressure, it is piling pressure on policymakers. Rumours are swirling now. The upcoming Party Congress will have these darkening shadows over it and they won't be appreciated.

On top of the property wreck, the consumer hesitancy is raising Chinese bond market stress which is now as bad as it has ever been. And as if this not enough, heatwaves and floods are as bad this year as they have ever been (although that is not just a Chinese problem - although as the world's largest emitter, they are a primary cause).

Singapore reported no growth in the June quarter from the March quarter, a weaker-than-expected result. That means their economy grew +4.8% over the last 12 months, far less than the expected +5.2%, so a big leakage in momentum there.

And Singapore tightened its monetary policy yesterday, its fourth such move since October and an off-cycle move for them as they saw inflationary pressure rising on the back of Russia's invasion of Ukraine. Singapore targets its exchange rate to achieve price stability rather than an interest rate.

The Australian employed workforce rose by +88,000 in June, a bit more than half full-time jobs, and a surprising number were part-time. That took their unemployment rate down from 3.9% to 3.5% (a record low for them) and involved a small uptick in their participation rate. This lower than expected jobless rate will put pressure on the RBA to act harder and sooner. (The last time NZ reported its jobless rate, it was 3.2% in March. We get our June data on Wednesday, August 3, 2022. They are unlikely to change much given the strong jobs market here.)

Globally, freight rates for shipping containers were marginally softer last week, continuing the easing trend. Bulk cargo rates eased too.

The UST 10yr yield starts today down at 2.96% and a +5 bps rise from yesterday. There is less talk today of a +100 bps Fed hike in July, now more like +75 bps. 

The price of gold will open today at US$1711/oz which is -US$29 lower than this time yesterday.

And oil prices are -US$1.50/bbl lower at just under US$93/bbl in the US, while the international Brent price is just on US$96.50/bbl.

The Kiwi dollar will open today -½c weaker from this time yesterday at 61.1 USc. Against the Australian dollar we are firmer at 90.8 AUc. Against the euro we are little-changed at 61.1 euro cents. That means our TWI-5 starts today at just on 70.6 and little net change.

The bitcoin price from this time yesterday by +3.4% to US$20,549. Volatility over the past 24 hours however has been moderate at +/-2.6%.

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.