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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 giant US economy is slowing. It hasn't had three consecutive lackluster quarters in at least a decade, certainly not since the GFC.

US jobless claims fell last week but by less than seasonal factors would have suggested. There are now 1.85 mln people on these benefits, less than last year at this time but only marginally less than two years ago.

US PCE inflation fell in June to 3.7% from 4.0% in May, as analysts had expected. But that is way higher than the Fed used to say it would tolerate. Personal disposable income rose less than personal spending, and for a fifth consecutive month.

Meanwhile, their Q2-2026 GDP update sagged in its first estimate, now up +1.5% and lower than the Q1-2025 final reading of +2.0%. Analysts had expected Q2 to come in at 2.1% so this data is a disappointment. It does mean a Fed rate hike is probably off the table, so equity markets rose. But so did long term bond yields although there was a notable pullback in short term yields and so their rate curve steepened sharply. The USD also took a tumble and is now down -1.6% in just the past two days.

As expected, China’s top leadership pledged to roll out targeted stimulus measures to support their economy in the second half of the year. The directives, issued at a Politburo meeting yesterday, come as the world’s second-largest economy faces weak domestic demand and deepening structural imbalances. Second-quarter growth has been lower than they need to reach their targets.

In Japan, observers see a Bank of Japan market intervention to support the yen. The yen rose sharply to the 157 range against the US dollar at one point yesterday, its strongest level since mid-May.

Staying in Japan, consumer sentiment picked up in July but that is off a lowish base and it is barely back to its 2023-2024 levels.

Sentiment surveys in the EU were out too for July and they rose again to extend their streak for both consumers and business sentiment..

EU GDP results for Q2-2026 were also released overnight, rising to 1.2% from a year ago. For them, that is quite positive.

In Germany, CPI inflation rose 2.8% in July, up from 2.3% in June which was below what they had in prior months, so more back at trend.

The Bank of England reviewed their monetary policy overnight, but made no changes.

In Australia in a

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