American PMIs slip. US house building rises. China pressures spread. Japan PMIs rise. EU sentiment slips. India successful.
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.
And today we lead with news the northern summer data is full of variety today, some positive, others not so much.
The early look at the American PMIs shows a small slip in August with their services sector expanding slower, and the contraction in their factory sector easing slightly. Both measures seem to be heading to a steady state in this PMI review. (We won't get the widely-watched ISM PMI results until Saturday, September 2 (NZT). That one will more likely move markets.)
But new US mortgage applications fell hard last week as mortgage interest rates rose. In fact, applications dropped to their lowest level since April 1995. Benchmark rates rose to 7.31% plus points which was their highest since December 2000. The existing home market seems to be closing up shop.
So it was somewhat unexpected that new home building starts came in strong in July, up to a +714,000 annual rate of build from a +684,000 rate in June and a surge way above what was expected. And the latest rate is more than +30% higher than the year-ago rate. Perhaps this corner of the American residential housing market is on the move again. All this is happening despite those much higher mortgage rates and correlates well with the positive home builder sentiment survey.
In China, the failure of one of their largest non-bank 'trust' companies to pay interest on its investment products has hit the books of at least six listed companies, in a sign that the turmoil in the nation's property market is spreading to the wider economy.
Meanwhile, the US Administration has removed 33 firms from their trade "Entity List", 27 of them Chinese. One criteria for removal is agreeing to adhere to international sanctions. This should help trade resumption, and it is interesting that the Chinese companies, at least, have [seemed to] fallen into line with what the Americans want.
Things are looking up in Japan. Their factory PMI erased the July contraction, almost. And their services expansion gathered pace. In Australia, declining new order levels saw both their factory and services PMIs contract in August.
The early look at EU consumer confidence found it hesitated in August, interrupting the long recovery from September 2022.
And that is mirrored by the slip in the EU services PMI. The EU factory PMI was already very low and its small improvement isn't particularly impressive. Essentially their downturn became a little steeper, and the inflation signs are really improving.
Although crash landings seem to be a "thing" in Russia, India has managed to land a spacecraft on the moon. The contrasts say a lot.
The UST 10yr yield will start today at 4.20%, down -13 bps from this time yesterday in a sharp correction.
The price of gold will start today at US$1917/oz and up +US$20 from this time yesterday.
And oil prices are down another -50 USc at just over US$79/bbl in the US. The international Brent price is now just over US$83/bbl.
The Kiwi dollar starts today another +¼c firmer at just under 59.8 USc. Against the Aussie we are softer at 92.4 AUc. Against the euro we are +¼c higher at 55.1 euro cents and a two week high. That all means the TWI-5 is at 68.8 and up +20 bps from yesterday.
The bitcoin price is higher today and now at US$26,514 and up by +2.6% from yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.4%.
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.