Here’s our roundup of the weekend’s major economic events affecting New Zealand, with news that the rise in US personal income and personal spending beat expectations in June, but bond markets shrugged off that strength.

But first in China, they said they had an influx of foreign investment in June of +24.5 billion US dollars during the month. This is their best monthly result for over a year.

But that comes after Beijing Dating about their economic downturn and how they are responding. Missing is any mention of the 5½% growth target for 2022. Superseded are calls for measures to “broaden demand”, work to “prevent decline” and “stabilize the current situation”.

And during the weekend, their Official PMIs were released for July. After experiencing a rare expansion in June, July’s manufacturing PMI contracted again, as it had in each of the months from March to May. This therefore represents four contracts over the last five months. New orders and especially new export orders fell. It was not a contraction analysts expected. Their services PMI index was still rising at a good pace in July, but less than in June, and their claim seems an odd result when only three of the ten sub-indices actually rose. New orders have contracted for 12 of the past 13 months.

And it is becoming increasingly difficult for non-domestic companies to operate in China. Automotive giant Stellantis (Chrysler, Jeep, Fiat, Citroën, Opel, etc.) got out quite, citing the growing political interference in his activities there and the risk of being caught up in geopolitical fights and sanctions. Political stability is “one thing” in investment decisions.

However, the easing of Chinese lockdowns, timid and uncertain as it has been, has supercharged Japanese industrial production. After being hit hard in May, this June rebound more than offset the prior shortfall and was much better than expected. This is the first increase in industrial production since March and the fastest pace on record. but japanese retail sales growth slowed in June.

In the United States, the much-watched PCE inflation gauge rose by +1.0% in June compared to May, more than expected and up by +6.8% year-on-year. But these inflation levels are well below the US CPI inflation measure (+9.1%).

For a fourth consecutive week, Gasoline prices in the United States have fallen. So some heat comes out of that source of inflation.

Perhaps more importantly, the PCE dataset shows both income and spending growing faster than expected. Personal income is up +7.2% over one year, a stable rate for many months. Personal spending growth increased more, but it is a more volatile series and grew at the rate of +7.6%. These changes show that, on average, most households do not quite keep up with inflation. However, the slippage is assumed to be larger than it really is, which is why sentiment polls are rather negative.

All of these indicators are keeping the pressure on the Fed.

The widely-watched University of Michigan sentiment survey rebounded from its lows in July, but remains deeply pessimistic. In fact, it’s still at an all-time low in a record dating back 44 years, six recessions and some of them long and deep. Yet the United States has record unemployment and is not currently in a recession, and yet these types of sentiment surveys are registering the lowest mood depths on record. But corporate earnings remain very strong. It’s not easy to reconcile. They can talk to each other about a recession.

At the end of the coming week, we will receive the July update for US nonfarm payrolls. They should register +250,000 additional people added to the payroll in July. This is the seasonally adjusted level. Regular readers will know that we are looking at the real increase, and over the last five months the monthly increase has averaged over +1 million per month on the “actual” basis. Their the employed workforce increased by +5.2 million in these five months. There is no way that indicates a struggling or shrinking economy. The purchasing power of these 5 million new workers is considerable. We will be watching the actual July change as much as the seasonally adjusted data reported universally.

Expansion at a moderate pace, even if less, is the heart Chicago PMI. But it is worth noting in this survey the sharp contraction in new orders. Stocks are increasing.

On the heels of Friday’s second-quarter U.S. GDP advance release, many countries released reports on second-quarter economic activity over the weekend. Canada‘s was stable from May but up +1.1% over the year. That of Taiwan is up +3.1% over the year. Mexico says it was up +2.1% for them. And the overall EU rate was +4.0% and a better than expected result. It was below the +5.4% in Q1, but well above the +3.4% expected. These come after a string of domestic outflows including France which said it was up +4.2% over the past year. Germany recorded an expansion rate of +1.1%. New Zealand will not release its Q2 GDP result until September 15.

In Australia, producer price rose +5.6% in the year to June, slightly faster than the previous year in March, but less than the CPI increase of 6.1%. The equivalent New Zealand data for the June quarter is not expected to be released until August 17, 2022.

Staying in Australia, the last ARPA data shows moderate growth in homeowner mortgages as rate hikes and rising costs of living curb household borrowing, but investor lending rises sharply – in anticipation of increased migration. Overall, loans to the private sector increased by more than +9% over one year.

The 10-year UST yield starts today at 2.66% where it ended in New York last week. A week ago, it was at 2.75%, a net decline of -9 basis points. The UST 2-10 yield curve is less inverted today, now at -24 bps and their 1-5 curve is more inverted, at -30 bps. Their 30-day-10-year curve is now at +47 basis points and slightly steeper than at this time on Saturday. The Australian 10-year bond is down -1bp at 3.07%. The 10-year Chinese government bond is still down at 2.77%. And the New Zealand 10-year government will start today down to 3.40%. A week ago it was at 3.72%, so that was a substantial weekly decline.

The price of gold opens today at US$1,767 an ounce in New York, up +US$2 from this time on Saturday.

And oil prices are starting the week slightly lower at just US$97.50/barrel in the United States, while the international Brent price is now at US$103.50/barrel. Number of North American oil rigs in operation has now returned to pre-pandemic levels.

The Kiwi Dollar opened slightly firmer today from this time Saturday at 62.9 USc. Against the Australian dollar, we are also slightly firmer at 90 AUc. Against the euro, we are a little softer at 61.5 euro cents. All of this means that our TWI-5 starts today at 71.2 and has changed little in a week.

Bitcoin price moved sideways from this time on Saturday, down just -0.8% at US$23,735. Volatility over the past 24 hours has been moderate at just over +/- 2.2%.

The easiest place to stay on top of the risks associated with today’s events is to follow our Economic calendar here ».