Kia ora,

Welcome to Wednesday’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 August data is starting to show the turn in global economic sentiment is turning 'south'.

But first, after the prior week's recovery in the American retail impulse, last week's same-store survey built on that, returning to the good year-on-year weekly gains we have seen since early July. These are gains far better than can be accounted for by inflation

However American new home sales fell sharply again in July to an annual rate of only +511,000 and way lower than that +575,000 rate expected. In fact, that is now the slowest pace of new home building in six years.

And there are increasing reports of company layoffs, and we would expect the data to start to show that, and a turn down in their long-running labour market expansion. The 'Great Resignation' trend may be over, in the US at least.

The Richmond Fed's factory survey, covering the active mid-Atlantic states region, was another that is reporting a contraction now. But to be fair, they report a 3 month average, whereas the month result itself for August isn't a contraction. But the trend is definitely lower, led by retreating new order levels.

There were a raft of 'flash' PMI's released overnight for August, and the one for the US reported a slower expansion in their factory sector, but a further contraction in their services sector. Having noted that, the factory sector expansion was its weakest in two years. The survey results point to "weak client demand" to explain the retreats.

It was the same story in Japan where the same survey found a factory sector still expanding but at a much reduced pace in August - and a services sector that moved down into a small contraction.

In China, another dairy company has been caught with undeclared additives in their 'pure milk' products. The downturn in China is starting to have ripple impacts regionally, including in the Australian mining industry

Taiwanese inflation is picking up, now at 3.4% in July. And their industrial production rose but at a slower pace and consistent with the sharp slowing in export orders we noted yesterday. Meanwhile their retail sales, which has lagged for years, is now rising quite sharply.

Singapore's inflation rose to 7.0% in July from a year ago, although the month-on-month rise was tamer than they have had recently.

In a surprise hawkish pivot, the Indonesian central bank hiked its policy rate by +25 bps yesterday to 3.75%, saying it needs to mitigate rising inflation risks there.

After falling to an all-time low in July, the EU's consumer sentiment survey in August stayed worryingly weak even if it did 'improve' marginally. They are building a 'fear of winter' given the Russian shutoff of energy shipments.

The EU 'flash' August PMI's reported small contractions in their factory sectors, but a steady-state in their service sectors. Things are tougher in Germany than France, but they are not easy anywhere.

The 'flash' Australia manufacturing PMI fell to 54.5 in August 2022 from 55.7 in July, hitting the lowest level in a year but marking the 27th consecutive month of expansion within their factory sector. The same report suggests their services sector is contracting in August.

The UST 10yr yield starts today at 3.05% and little-changed from this time yesterday. 

The price of gold will open today at US$1748/oz which is up +US$11/oz from this time yesterday.

And oil prices start today at just under US$94/bbl in the US which is a sharp +US$4.50 rise, while the international Brent price is still just under US$99/bbl.

The Kiwi dollar will open today at 62.1 USc and +½c higher than this time yesterday. Against the Australian dollar we are little-changed at 89.7 AUc. Against the euro we have risen about +¼c to just over 62.3 euro cents. That all means our TWI-5 starts today at 71.3 and a further firming.

The bitcoin price is now at US$21,429 and a +1.0% rise from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.

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 tomorrow.