Episode Details

Welcome to Tuesday’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 the unavoidable reporting of a Chinese economic stumble.

But first up today, we should note that Fed boss Powell was speaking and said the three American inflation readings in the June quarter do "add somewhat to confidence" that the pace of price increases is returning to the Fed's target in a sustainable fashion. They were remarks that suggest interest rate cuts may not be far off for them.

In their real economy, the NY Empire State survey of factories wasn't particularly positive, although to be fair it was little-changed in June. And expectations in this survey continue to be quite positive however.

Indian goods exports in June were little-changed from a year ago at a modest US$35 bln, up +2.6% from the same month in 2023. Services exports rose +8.9% however. Services exports are at about the same value as for goods, in India.

China's economy faltered in Q2-2024, keeping alive expectations Beijing will need to unleash even more stimulus.

Despite expectations that CCP discipline would press China's Q2 GDP result to the party's target, in fact they published a much lower than expected growth result. The Chinese economy expanded +4.7% in Q2 from the same period in Q3, missing market forecasts of +5.1% and slowing from a +5.3% growth in Q1. It was the weakest yearly advance since Q1-2023, and comes amid their persistent property downturn, weak domestic demand, a falling yuan, and trade frictions with the West. Irt also comes on the opening days of the CCP "Third Plenum", a huge set piece of Chinese policy making. Real reform is not anticipated however.

Underscoring the real estate industry problems, China said new dwelling sales were -25% lower in June than a year ago. New house prices in 70 cities declined by -4.5% year-on-year in June, after a -3.9% equivalent fall in the previous month. It was the 12th straight month of retreat and the fastest pace since June 2015. Only one of those 70 cities recorded a year-on-year rise. None recorded rises for second hand home sales. Some cities are now recording -12% sales price falls.

China also said June retail sales were up +2.0% from the same month a year ago, up +3.0% in you exclude car sales. At least this is better than inflation, so it records 'real' gains.

And China reported that electricity production rose +2.3% in June from year-ago levels. It is crude, but this may be a better indicator of 'growth' than the official GDP data. Still, they claim industrial production rose +5.3% in June on the same basis. It seems unlikely unless they are making impressively large energy efficiency gains nationwide. (Maybe readers know how to reconcile these various data claims better th