China & EU make dovish moves, US data positive

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.And today we lead with news central banks in both China in the EU have been active overnight, both dovishly.But first up, initial American US jobless claims last week came in little-changed at +220,000 so there are now 1.69 mln people on these benefits, also very little-changed. Their long-awaited labour market stress still hasn't arrived. It surely will, but has defied the gloomsters for nearly two years now. They may have a long time to wait yet before their stopped-clock position is achieved.American retail sales rose +0.6% in August from July and easily beating forecasts of a +0.2% rise. Year-on-year these sales are up only +2.9% however which is less than inflation. But the recent rises point to good consumer spending despite high prices and borrowing costs. But part of the recent increase is due to higher fuel costs. Excluding those fuel costs, retail sales only rose +0.2% in August from July, but they were +4.3% higher than year-ago levels which bests inflation by +1.0%.On the factory floor, producer prices rose by +0.7% in August from July, the highest level since June 2022, and higher that analysts expected of a +0.4% rise. On an annual basis however, producer price inflation reached a four-month high of +1.6%, while the core rate actually eased and to +2.2%, which interestingly was its lowest level since January 2021.Meanwhile, neither wholesale nor retail inventories are rising, so there is no inventory stress building in this economy.In Japan they recorded a drop in new machinery orders in July. This series does not include orders for ships or electric power systems. Including them, orders rose sharply. The decline in core orders was driven mainly by a -5.3% decrease in the manufacturing sector, while the non-manufacturing sector posted a +1.3% increase. Industries in the manufacturing sector with the sharpest falls include for petroleum & coal products where orders fell a startling -57%.Overnight, the People's Bank of China has announced a -25 bps cut in their reserve requirement ratio for all banks, taking it to a weighted average deposit reserve ratio of 7.4%. The banks already on 5% however got no change. At the same time they doubled down on defending the yuan and the managed rate they want to see.The ECB hiked its policy interest rates for the 10th consecutive time overnight. But it also signaled that it is likely done with its tightening policy, as inflation has started to decline. After this change, their main refinancing operations rate reached a 22-year high of 4.5%, and the deposit facility rate set a new record at 4%. According to the projections released with this policy change, average inflation is forecasted to be at 5.6% in 2023 and 3.2% in 2024, both higher than previous estimates, primarily due to higher energy costs.In Australia, there was a bigger than expected surge in employment