Deficit spending juices US Q2 growth; core PCE lower; US savings rate revised up; Canadians tighten belts; China profits rise; Japan's banks cash problem; UST 10yr 2.96%; oil and gold down; NZ$1 = 68 USc; TWI-5 = 71.4

Here's our summary of key events overnight that affect New Zealand, with news some economic data isn't quite what is seems.

In the first advance estimate of American GDP, it rose at an annualised growth rate of +4.1% in the June quarter over the March quarter. This was just slightly lower than analysts were expecting, but was the fastest quarter-on-quarter rate since the third quarter of 2014. It follows a 2018-Q1 rise of +2.1%. It was buoyed by faster rises in personal consumption (core and non-core), commercial construction and a big jump in Government spending. It was held back by housing and private sector investment. Compared to the same quarter of 2017 however, the gain was +2.8% and up from +2.6% in the year to March - and as such, very average.

Core personal consumption spending however grew just +2.0% and that is a slowing rate as well as being lower than analysts expected. This slowdown is a key reason few analysts think the Q2 data can be repeated. Wall Street fell on the news. Bond yields retraced some gains. The USD slipped. And the Wall Street fall was despite Amazon reporting record results, above analysts expectations.

Trade concerns slightly dimmed US consumers’ outlook on the economy in July.

And in a little-noticed review, the main official economic data agency at the US Department of Commerce has revised many long series by fixing some stubborn seasonality problems they identified. One telling result is that the US savings rate is much higher, and not falling, as has been previously been assumed. But it is not all positive; that higher savings rate is almost all because small-business owners and other proprietors made more money to salt away, not because workers got bigger wage increases. However, the overall data does ease concerns that consumers are over-stretched as had been the assumption previously. The US household savings rate has been pretty stable over the past five years and nearly twice the level previously assumed, and not falling as previously assumed.

Another little-noticed action in the US Senate has seen them unanimously pass a bill that would cut or eliminate tariffs on troughly 1,660 items made outside the United States, half of which are made in China.

And staying in the US, the rate at which foreigners are buying American houses is falling steeply, declining -20% in the year to March. Related data shows that 8% of US houses were bought by foreigners, down from 10% in the earlier period. (New Zealand reported similar data yesterday and the national level is 2.8%. Like the US, regional data varies widely.)

In Canada, a new poll shows that Canadians are reacting to worries about impending economic stress by cutting back spending.

Profits at Chinese industrial firms grew rapidly in first half of 2018, according to official data. They were up +17.2% on a year-on-year basis, the fastest level for any month in 2018.

In Japan, their big banks have a cash problem. They have so much of it and it is piling up so fast that they can only store it at the central bank. And this could mean they will have to pay to do that. This will raise bank costs and raise Japanese bank interest rates.

France's economy grew more slowly in the June quarter than the same quarter a year ago, up just +1.7%. Anti-reform strikes held the results back.

In Indonesia, officials there are warning that their current account deficit will grow by nearly +50% this year. However, even after that increase it will still be less than -2% of GDP. But for an emerging economy, especially one as large as Indonesia, this is an unwelcome trend.

The UST 10yr yield has stayed high at the market close to 2.96% but that is -2 bps lower from yesterday. Their 2-10 curve has remained just under +29 bps. The Chinese 10yr is at 3.56% (up +1 bp from yesterday) while the New Zealand equivalent is now at 2.76%, down -1 bp after its sizable fall yesterday.

Interestingly, the VIX is rising again and now at 13.7, the highest in almost three weeks. The average index level over the past year is 12. The Fear & Greed index has is moved firmly over to the 'greed' level.

Gold is down -US$2 from yesterday and now a just over US$1,222/oz in New York and that is a -US$9 retreat over the week.

US oil prices are down today from yesterday and now just under US$69/bbl. The Brent benchmark is now just under US$74.50/bbl. The US rig count is marginally higher this week.

The Kiwi dollar is ending the week at 68 USc, unchanged from this time last week. On the cross rates we are also little changed at 91.8 AUc, and at 58.3 euro cents. That puts the TWI-5 at 71.4.

Bitcoin is now at US$8,225 which is up +4.3% from yesterday, and up +12% over the past week.

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