Episode Details

Kia ora,

Welcome to Friday’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 the gloomsters are going to have to wait even longer for a US slowdown and 'recession'. Markets are reducing the chance of a Fed rate cut in mid-September.

First up in the US, initial jobless claims came in less than last week, a surprise because an increase was expected. But to be fair the actual shift wasn't large.

But markets took more notice of the surprisingly strong +1% rise in retail sales in July, far more than expected. Americans are still spending big - on cars, appliances and furniture - in a surprise burst of activity that’s propelling their economy and helping shake off fears of an impending downturn. This was the largest jump in more than two years. Car sales were particularly strong. But there were gains across the board at restaurants and bars, as well in groceries, electronics, furniture and health goods. Year on year, American retail sales were up +4.0%, delivering real, inflation-adjusted gains.

Helping was that business inventory growth was minimal, so their inventory-to-sales ratio stayed quite healthy.

But spoiling the party somewhat was a small drop in industrial production in July and one that was more than expected from June but only easing -0.2% from a year ago.

However, the New York State factory survey improved more than expected, although the Philly Fed's similar survey turned lower. Both are positive about the future however.

In Canada, despite central bank rate cuts there, home sales fell in July. A looming rail strike there may not help future sales.

In Japan, they released their Q2-2024 GDP result late yesterday and it expanded a very strong +3.1%, way more than the +2.1% expected, and far better than the -2.3% fall in Q1-2024.

In India, their July passenger vehicle sales fell almost -2% in July from the same month a year ago. This was not expected, but to be fair these are settling into a higher level than has been seen in over the past 20 years, just not as high as you might expect given their booming economy. But two-wheeler growth was a very strong +12.5%.

In China, the data out yesterday reinforced their tough economic conditions are extending there. Retail sales were up just +2.7% from a year ago, industrial production rose less than expected at +5.1% but electricity