Australia’s Westpac leading index saw a slight improvement, rising from -0.28% to -0.13% in June. Despite this uptick, economic activity is expected to remain below trend until early 2025.
Westpac said while growth is expected to pick up slightly in the latter half of 2024 and into early 2025, it will still be modest, at an annual pace of 2.2%, and is about flat in per capita terms.
New Zealand’s CPI for Q2 rose by 0.4% qoq, down from previous quarter’s 0.6% qoq and missing the expected 0.5% qoq.
Tradeable inflation, which includes goods and services that are subject to international competition, fell by -0.5% qoq, an improvement from previous -0.7% qoq. Conversely, non-tradeable inflation, covering domestic goods and services, rose by 0.9% qoq, down from prior 1.6% qoq.
Over the past 12 months, CPI growth rate slowed from 4.0% yoy to 3.3% yoy, falling short of anticipated 3.5% yoy. This marks the lowest level since Q2 2021 but remains slightly above RBNZ’s target band of 1-3%.
Tradeable inflation saw a significant decline from 1.6% yoy to 0.3% yoy, reflecting lower imported inflationary pressures. Non-tradeable inflation also eased, dropping from 5.8% yoy to 5.4% yoy, indicating some cooling in domestic price pressures.
IMF chief economist Pierre-Olivier Gourinchas stated in a Reuters interview that Fed can afford to “wait a little bit” before lowering interest rates. He expected that one Fed rate cut is likely this year but refrained from specifying the timing.
Gourinchas noted that the IMF expects US inflation to reach Fed’s 2% target in the first half of 2025, ahead of Fed’s internal projection of 2026. This suggests that there would not be an “extended period” before rate cuts become appropriate.
In a speech overnight, Fed Governor Adriana Kugler noted that despite “a few bumps” earlier in the year, inflation has “continued to trend down” across “all price categories.”
She mentioned that supply and demand are “gradually coming into better balance,” with supply bottlenecks easing and demand moderating due to high interest rates and the depletion of households’ excess savings.
Kugler also pointed out that the labor market has seen “substantial rebalancing,” with nominal wage growth moderating. This trend suggests that inflation will continue moving toward Fed’s 2% target.
Kugler indicated that if economic conditions continue to evolve favorably, with more rapid disinflation and resilient employment, “it will be appropriate to begin easing monetary policy later this year.” However, she stressed that her approach will remain data-dependent.
She added that if the labor market cools too much and unemployment rises due to layoffs, it might be necessary to cut rates “sooner rather than later.” On the other hand, if data do not confirm that inflation is moving sustainably toward 2%, it may be appropriate to “hold rates steady for a little longer.”
Canada’s CPI slowed from 2.9% yoy to 2.7% yoy in June. The deceleration was largely the result of slower year-over-year growth in gasoline prices, which rose 0.4% in June following a 5.6% increase in May. Excluding gasoline, the CPI rose 2.8% yoy.
Looking at the core measures, CPI median fell from 2.7% yoy to 2.6% yoy. CPI trimmed was unchanged at 2.9% yoy. CPI common slowed from 2.4% yoy to 2.3% yoy.
On a monthly basis, CPI fell -0.1% mom in June, following a 0.6% mom increase in May. The monthly decrease was driven by lower prices for travel tours (-11.1%) and gasoline (-3.1%).
US retail sales was steady mom at USD 704.3B in June, above expectation of -0.20% mom. Ex-auto sales rose 0.4% mom to USD 573.6B, above expectation of 0.1% mom. Ex-gasoline sales rose 0.2% mom to USD 652.4B. Ex-auto and gasoline sales rose 0.8% mom to USD 507.1B.
Total sales for the April through June period were up 2.5% from the same period a year ago.
Eurozone goods exports fell -0.5% yoy to EUR 241.5B in May. Goods imports fell -6.4% yoy to EUR 227.6B. Trade balance showed a EUR 13.9B surplus. Intra-Eurozone trade fell -5.6% yoy to EUR 216.0B.
In seasonally adjusted term, goods exports fell -2.6% mom to EUR 237.4B. Goods imports fell -0.1% mom to EUR 225.1B. Trade balance recorded EUR 12.3B surplus, smaller than expectation of EUR 20.3B. Intra-Eurozone trade fell -2.8% mom to EUR 210.4B.
Germany ZEW Economic Sentiment fell from 47.5 to 41.8 in July, below expectation of 44.3. That’s also the first decline in a year since July 2023. Current Situation Index rose from -73.8 to -68.9, above expectation of -73.0.
Eurozone ZEW Economic Sentiment fell from 51.3 to 43.7, below expectation of 50.2. Current Situation Index rose 2.5 pt to -36.1.
“The economic outlook is worsening. For the first time in a year, economic expectations for Germany are falling. The fact that German exports decreased more than expected in May, the political uncertainty in France and the lack of clarity regarding the future monetary policy by the ECB have contributed to this development,” comments ZEW President Professor Achim Wambach.
San Francisco Fed President Mary Daly, speaking at a conference overnight, expressed optimism about the Fed’s progress in controlling inflation. “Confidence is growing that we are getting nearer a sustainable pace of getting inflation back down to 2%,” Daly noted.
However, she refrained from providing specific timelines or numbers for potential rate cuts. “I’m not going to give time-based guidance. I’m not going to tell you when the rate cut is, how many rate cuts might come,” Daly stated.
“Over time, as inflation comes down and the labor market slows, we have to make sure that we’re holding rates high enough that we don’t lose that inflation fight, but not hold them too long and risk worsening the labor market to a point where it’s challenging for people to get jobs,” Daly added.
Fed Chair Jerome Powell, speaking at an event overnight, highlighted that in Q2, the economy made “some more progress” on taming inflation. He noted that there have been “three better readings” on inflation, averaging them places Fed in a “pretty good place.”
Powell reiterated that it wouldn’t be appropriate to start loosening policy until there is greater confidence that inflation is sustainably returning to 2% target. However, he also acknowledged that Q2’s data “do add somewhat to confidence”.
Eurozone industrial production fell -0.6% mom in May, better than expectation of -1.0% mom. Production decreased by -1.0% for intermediate goods, 1.2% for capital goods, and 1.8% for durable consumer goods. Production increased by 0.8% for energy, and 1.6% for non-durable consumer goods.
EU industrial production fell -0.8% mom. The largest monthly decreases were recorded in Slovenia (-7.3%), Romania (-6.2%) and Denmark (-4.9%). The highest increases were observed in Ireland (+6.7%), Luxembourg (+3.9%) and Estonia (+3.8%).
Bitcoin jumps sharply higher today as rebound from 53426 extended. The break of 55 D EMA (now at 62400) is taken as a sign that corrective pattern from 73812 has completed with three waves down to 53426. That came after hitting 38.2% retracement of 24896 to 73812 at 55126.
Sustained trading above 55 D EMA will strengthen this bullish case. Bitcoin should then target 73812 record high, and then 61.8% projection of 24896 to 73812 from 53426 at 83656.
Similarly, Ethereum’s corrective pattern from 4092.55 could have finished with three waves to 2797.60, after hitting 50% retracement of 1519.15 to 4092.55 at 2805.85. Sustained trading above 55 D EMA (now at 3333.45) would solidify this bullish case. Ethereum should then target 4092.55 high and then 61.8% projection of 1519.15 to 4092.55 from 2797.60 at 4387.96.
China’s GDP grew 4.7% yoy in Q2, down from 5.3% in Q1 and missing expectations of 5.1%. For the first half of the year, GDP growth stood at 5% year-on-year.
The National Bureau of Statistics noted, “The current external environment is complicated, while domestic demand remains insufficient. We still need to consolidate the foundation for economic recovery.”
June’s industrial production increased by 5.3% yoy, exceeding expectations of 5.0% yoy. However, retail sales grew only 2.0% yoy, well below the forecasted 3.3% yoy.
Fixed asset investment in the first six months rose by 3.9% ytd yoy, meeting expectations. Property investment saw a -10.1% yoy decline, consistent with May’s fall. Additionally, home sales by floor area dropped by -19.0% yoy.
New Zealand BusinessNZ Performance of Services Index fell from 42.6 to 40.2 in June, marking the lowest level for the sector outside a COVID lockdown month since the survey began in 2007.
BusinessNZ chief executive Kirk Hope noted that after a poor May result, June’s figures “simply got worse”. Activity/Sales dropped to 35.6 and New Orders/Business fell to 38.3, both hitting record lows for non-lockdown months. Employment decreased to 45.6, the lowest since February 2022, while Supplier Deliveries declined to 41.6, the lowest since March 2022.
Negative comments rose to 67.0% in June, up from 65.4% in May and 66.3% in April, with respondents citing recessionary pressures.
BNZ Senior Economist Doug Steel observed, “The Performance of Services Index has been well below average for more than a year. Moreover, the weakness appears to be accelerating.”
In a podcast today, BoE MPC member Swati Dhingra emphasized that “now is the time” to start normalizing interest rates and to “stop squeezing living standards” as the central bank has been doing to curb inflation.
Dhingra pointed out that demand in the UK is too weak for inflation to surge again, noting that inflation returned to 2% in May. She stated, “I don’t see some kind of consumption boom and if we’re going to start moderating from the very high level of interest rate that we are at now… it is going to take some time for that to happen, for us to moderate it as well as for that to then feed into the real economy.”
Known as a dove within the MPC, Dhingra has consistently voted since February to cut the Bank Rate from its 16-year high of 5.25%.
US PPI for final demand rose 0.2% mom in June, slightly above expectation of 0.1% mom. PPI rose 2.6% yoy for the 12 months ended in June, above expectation of 2.2% yoy. That’s also the largest annual advance since March 2023.
PPI less foods, energy, and trade services were unchanged at 0.0% mom. For the 12 months period, PPI less foods, energy, and trade services rose 3.1% yoy.
New Zealand BusinessNZ Performance of Manufacturing Index fell sharply from 46.6 to 41.1 in June, well below the long-term average of 52.6 and marking the lowest non-lockdown monthly level since February 2009.
Breaking down the details, production dropped from 44.0 to 35.4, and new orders fell from 43.9 to 38.8. These sub-40 activity levels for production and new orders are the lowest seen outside of COVID lockdowns since November 2008. Employment also declined significantly, from 50.4 to 43.8, its lowest non-COVID monthly result since July 2019. Finished stocks decreased from 52.3 to 47.9, while deliveries remained unchanged at 44.9.
BusinessNZ’s Director of Advocacy, Catherine Beard, expressed significant concern over the “freefall in activity from May to June,” highlighting the severe challenges facing a sector that has been contracting for the past 15 months. The proportion of negative comments surged to 76.3%, up from 63.5% in May and 69% in April, with respondents highlighting an overall economic slowdown and tough recessionary conditions.
Several Federal Reserve officials welcomed the US June CPI data released yesterday, which showed better-than-expected disinflation progress. This has intensified expectations that Fed would start cutting interest rates in September, with Fed fund futures indicating a 93% chance. More importantly, there is now over 90% probability of two rate cuts by the end of the year, lowering rates to 4.75-5.00%.
Chicago Fed President Austan Goolsbee described the latest inflation data as “excellent,” noting the significant deceleration in shelter inflation as “profoundly encouraging.” He added that “this is what the path to 2% looks like.”
St. Louis Fed President Alberto Musalem also saw the June CPI data as “encouraging further progress toward lower inflation.” He emphasized the need for greater confidence that inflation will converge to 2% before lowering rates. Musalem noted the importance of seeing a moderation in demand and data that shows inflation converging to 2% by mid to late next year, adding, “we’re on a good path.”
San Francisco Fed President Mary Daly highlighted the broader economic context, saying, “With the information we have received today, which includes data on employment, inflation, GDP growth, and the outlook for the economy, I see it as likely that some policy adjustments will be warranted.” However, she noted that the timing of these adjustments is still uncertain.
US initial jobless claims fell -17k to 222k in the week ending July 6, below expectation of 239k. Four-week moving average of initial claims fell -4k to 233.5k.
Continuing claims fell -4k to 1852k in the week ending June 29. Four-week moving average of continuing claims rose 10k to 1840k, highest since December 4, 2021.
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UK CPI steady at 2% in Jun, core CPI unchanged at 3.5%
UK CPI was unchanged at 2.0% yoy in June, matched expectations. CPI core (excluding energy, food, alcohol and tobacco) was unchanged at 3.5% yoy, above expectation of 3.4% yoy. CPI goods annual rate fell from -1.3% yoy to 1.4% yoy. CPI services annual rate was unchanged at 5.7% yoy.
For the month, CPI rose 0.1% mom , matched expectations.
Full UK CPI release here.