Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that China's industrial output growth slowed in May, but its inflation rate rose more than expected to 5.5%.
The contrasting signs of a slowing economy in tandem with rising inflation highlight the challenges for the Chinese authorities. They are trying to engineer a soft economic landing that avoids the political pain of job losses and food price inflation. See more here at NYTimes.
The outcome is crucial for the New Zealand and Australian economies, given our heavy reliance now on China's growth rate both for our trade and for its influence on commodity prices. A sharp China slowdown could hit commodity prices and slow the Australasian economies, which would delay increases in the Official Cash Rate here and probably drag the New Zealand dollar lower.
Chinese industrial output growth slowed to 13.3% in May, while retail sales growth slowed to 16.9%. The stronger than expected inflation triggered another tightening of China's reserve assets ratio.
This makes it harder for China's banks to lend more and has often been preceded by a hike in Chinese official interest rates.
The 50 basis point increase in the reserve assets ratio to 21.5% is the sixth hike this year.
Meanwhile Indian inflation rose to 9.1%, emphasisng the inflationary impact of high commodity prices, driven some argue by loose monetary policies in America and Europe. See more here at BBC.
Elsewhere, US Federal Reserve Chairman Ben Bernanke warned the US Congress that any failure to lift America's debt ceiling before a likely US default on August 2 would prove disastrous for financial markets. See more here at Reuters.
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