US PPI slips but rail strike a new inflation threat. China's borrowers turn very cautious. Japanese machine orders rise. Google loses big. Aussie house new house sales weak.
Kia ora,
Welcome to Thursday’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 of more evidence inflation may be topping out.
But first, US mortgage applications fell -1.2% last week, a fifth consecutive decline as the base mortgage rate hit 6% for the first time since 2008. That is now nine weeks in the past twelve that they have fallen, suggesting their housing markets are in retrenchment mode. But that isn't coming with excess stress, it seems. Delinquency rates remain very low on housing loans. We are seeing declines, yes, but without stress.
American producer prices fell -0.1% in August from July and this was as expected. Year on year they are up +8.7% which was less than expected and less than the +9.8% rise in July and was the least it has risen in any month over the past year. There are definite signs here that the punchiness of price rises are easing. Maybe yesterday's CPI data wasn't the harbinger it seemed.
But concerns are mounting over the potential upward pressure on prices if a huge rail strike snarls supply chains and hurts economic activity.
In China, a new people's movement is underway. After going on a mortgage strike over undelivered housing, others are now rushing to repay their mortgages. As the property market slumps, the once sought-after leverage has turned into a burden. Now increasing numbers of borrowers are cashing up their "wealth management products" (essentially money market funds) to pay down the home loan. The drive is helped because those funds are now returning very meagre results. A disinvestment push like this won't help reinvigorate their economy. And it could be deflationary.
Japan reported machinery orders for July, and they were up strongly (just like the machine tool orders we noted yesterday for August). It was a rebound that wasn't expected, showing the company board rooms are still investing. These orders were up +5.3% from June and up +12.8% from year-ago levels.
In India, their widely watched wholesale price inflation rose by 12.4% in August. But this was less than July's 13.9% rise and less than the expected 13% rise. Food prices were also up 12.4% in this survey.
The annual inflation rate in the UK unexpectedly edged lower to 9.9% in August from 10.1% in July, which was the highest reading since 1982. Analysts had expected it to rise to a 10.2% rate. It was milk and cheese that is helping propel their costs higher. Their food prices were up more than +13% in August.
In Sweden the ruling center-left coalition has been beaten by a centre-right grouping in a razor-thin result. The center-right only wins however because of a surge in support from a far-right anti-immigrant party which will be part of the new government. The new government may not be very stable. Failure to deal with rising gang violence undid the center-felt parties.
And staying in Europe, their General Court in Luxembourg has upheld an NZ$8.5 bln fine on Google for the way it used its Android operating system to favour Google Search.
In Australia, new home sales are still declining. They were down -13% in July. Now new data shows they are down another -1.6% in August. They have been falling all year from the peak in December 2021 and are down -28% since then
The UST 10yr yield starts today at 3.41% and little-changed from this time yesterday.
The price of gold will open today at US$1697/oz and down another -US$7 from this time yesterday. But most other precious metals made some sort of recovery overnight.
And oil prices start today +US$1.50 higher at just under US$89/bbl in the US while the international Brent price is now just under US$94.50/bbl.
The Kiwi dollar will open today at just on 60.2 USc and little-changed from this time yesterday. Against the Australian dollar we are firmer than yesterday at 89.1 AUc. Against the euro we have remained lower at 60.2 euro cents. That all means our TWI-5 starts today at 69.8 and still at its two year low.
The bitcoin price is now at US$20,116 and another -3.0% fall from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.3%.
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.