US July CPI inflation comes in as expected; US jobless claims tick up; Japanese PPI rises, Australian inflation expectations fall; UST 10yr 4.09%; gold and oil slip; NZ$1 = 60.4 USc; TWI-5 = 69.1

Here's our summary of key economic events overnight that affect New Zealand, with news market chatter is building for a Fed rate pause.

First up today, the American consumer inflation rate came in at 3.2% in July, almost exactly as expected (3.3%). Base effects and rising rents were behind the tick up, and it marks a halt in the 12 consecutive months of declines. A year ago they were reporting CPI inflation of 9.1% so it is actually huge progress from there and a solid tick for monetary policy positioning, especially as a year ago it was widely predicted the US would be in recession now, and it obviously it isn't.

Because this result was as expected, there has been only muted financial market responses. But one is that core inflation is still high even though it eased to 4.7% from 4.8% in June. The bond market sees this as a reason the Fed might keep rates high, or even raise them again. But most others see encouraging signs in the detail that inflation will fall from here. The next US Fed (FOMC) rate review is on September 21 (NZ).

US jobless claims rose by +20,000 last week to 226,000. That isn't a lot in such a large labour market but is was more than anticipated. There are now 1.8 mln people on these benefits, a decrease because qualification expired faster than new claimants.

The US Federal government deficit came in at -US$221 bln in July, almost the same as it was in June. But it was expected to be about half that. Of more concern is that they are heading for a -US$2.3 tln deficit this year or -8.5% of GDP and that would be up from -5.3% last year. The tax-breaks extracted by Republicans to pass the last funding extension are really starting to bite now. The total Federal debt outstanding is now US$32.6 tln of which US$6.9 tln is between Federal agencies. So the debt held by the public is US$25.7 tln or 97% of GDP. Some of this is held by foreigners (US$7.4 tln or 28%) so the other 71% is an earning asset by Americans internally. (And don't forget their States have combined surplus balances exceeding US$220 bln.)

Meanwhile, despite the widely publicised stumbles, it seems that overall the 6500 American banks with a Federal charter are in good financial shape. It is data that supports the regulator judgments.

In Japan, producer prices are still rising, but at a slower rate. They rose 3.6% year-on-year in July, the least since March 2021, after an upwardly revised 4.3% rise in June and compared with market expectations of 3.5%. The latest result also marked the 7th straight month of a slowdown in producer inflation, amid the easing global cost pressures. (Japanese consumer price inflation ran at 3.3% in June and their July CPI data will be released on August 17, 2023.)

In India, their central bank kept its policy rate at 6.5%, even though their hot economy is now generating rising inflation (4.8%) although mainly driven by food prices.

In Australia, inflation expectations fell to 4.9% in August, from 5.2% in July.

Container shipping rates rose again last week, this time by another +1.7% with increases across all major trade routes. But bulk cargo rates were unchanged last week at historically average levels.

The UST 10yr yield will start today at 4.09% and up +8 bps from yesterday. Their key 2-10 yield curve inversion is less, now at -73 bps. Their 1-5 curve is now at -113 bps and 10 bps less. Their 3 mth-10yr curve is less by 7 bps as well at -128 bps. The Australian 10 year bond yield is now at 4.08% and up +8 bps from yesterday. The China 10 year bond rate is little-changed at 2.67%. The NZ Government 10 year bond rate is now at 4.84% and also unchanged.

Wall Street was up in its Thursday session with the S&P500 in a +0.3% gain. Overnight European markets were all up, with London up +.04%, Frankfurt up twice that by +0.9%, and Paris topping them all, up +1.4%. Yesterday Tokyo ended its Thursday session up +0.8%. Hong Kong was unchanged however, but Shanghai rose +0.3%. The ASX200 ended Thursday up +0.3% but the NZX50 was the odd-man-out, ending down -0.2%.

The price of gold will start today at US$1913/oz and down another -US$2 from yesterday.

And oil prices are -50 USc and now at just on US$82.50/bbl in the US. The international Brent price is now at just over US$86/bbl.

The Kiwi dollar starts today -20 bps lower at just on 60.4 USc. Against the Aussie we are down similarly at 92.5 AUc. Against the euro we are softened -20 bps too to 55 euro cents. That all means the TWI-5 is now down at 69.1.

The bitcoin price is marginally lower today since this time yesterday and now at US$29,380 which is down -0.3%. Volatility over the past 24 hours has been low at just under +/- 0.6%.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».