China inflation slows, eases pressure to cool demand

China's annual consumer price inflation cooled slightly to 6.2 per cent in August from July's three-year high, raising expectations that the central bank will hold off on further policy tightening amid worries about a global economic slowdown.
The consumer price index rose 0.3 per cent in August from the previous month, after a 0.5 per cent rise in July. The figure is not seasonally adjusted.
Giving a more detailed breakdown of the index, the bureau said food prices rose 13.4 per cent in the year to August, with non-food prices up 3.0 per cent.

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In month-on-month terms, food prices rose 0.6 per cent, while non-food prices were up 0.2 per cent.
The producer price index rose 7.3 per cent in the year to August and was up 0.1 from July.
Reuters

Japan's economy shrinks as strong yen hurts

Japan's economy contracted more than the government initially estimated in the second quarter, adding to concern the stronger yen may derail the nation's recovery from the March 11 earthquake.
Gross domestic product shrank at an annualised 2.1 per cent rate in the three months ended June 30, more than the 1.3 per cent contraction reported last month, the Cabinet Office said today in Tokyo. The reading was in line with the median forecast of 21 economists surveyed by Bloomberg News.
Reports in the past week indicate growth in the world's third-largest economy may stall toward the end of the year.

Machinery orders, a leading indicator of capital spending, fell the most in 10 months in July and companies are also struggling with a yen near a postwar record, risking an erosion of oversea profits when they're repatriated.

Wealth fund would preserve golden era

It is maybe a considerable blow to our national pride that the Philippines boasts the world's biggest crocodile, but when it comes to the national accounts Australia can stand tall.
While other Western economies are ailing, ours is plodding along quite nicely at 1.2 per cent, according to the second-quarter gross domestic product numbers.
Mind you, that's well below the 3.2 per cent trend, and it's before August ructions on global markets and the recent slather of downgrades in Europe and the US.

 

Still, it surpassed expectations and sparked the strongest rise in the sharemarket in a year. Here was evidence, against the prevailing and bearish tide of economic punditry, that things were not too bad.
Really, not too much to whinge about - and certainly a superior performance to that of our peers.
It seems the clamour by sections of the media and business designed to talk down the economy and skewer the Gillard government had become a tad too infectious.
On the consumer front, the message from the numbers is don't expect a rate cut too soon, unless perhaps the global market ructions turn into a violent rout. The next relevant data point comes in late October with the consumer price index. Meantime, the jury is entirely out.

Clockwatching: the threat in hours worked

Quarterly GDP hours worked trend. Source: ABS

Amidst the mostly good news in yesterday's national accounts figures, there was one potentially worrying chart - the history of quarterly GDP movements plotted against the trend figure for hours worked.
Given today's uptick in unemployment, it was a very timely reminder of the labor force implications of even a mildly slower rate of economic growth.
Superficially, the chart above confirms what everybody knows about employment being a lagging indicator, but a closer look shows it's a little more complicated than that. Employment (or at least hours worked) lags more on the upside than it does on the down.

 

In the two major downturns this century, growth in hours worked dived pretty much in unison with GDP growth slowing and then overshot GDP into negative territory, taking several months to get back into the positive.

Global investors lukewarm on Obama plan

European stock index futures fell on Friday, following Asian markets lower, as a $USUS447 billion jobs package from US President Barack Obama failed to entice investors back into equities amid concerns that it could be hamstrung by political wrangling.
The euro languished near a two-month low against the US dollar reached on Thursday after the region's deepening debt crisis forced the European Central Bank to drop its tightening policy bias, a key driver in the single currency's rally this year.
Euro STOXX 50 index futures fell 1.1 per cent, with DAX and CAC-40 futures also in the red, and spreadbetters called the FTSE 100 to open down 0.3 per cent.

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Asian markets were down around half a per cent, after see-sawing between gains and losses, while S&P 500 futures surrendered early gains and slipped 0.2 per cent.
"Obama's plan was in line with expectations, and US stocks are unlikely to rally on it," said Takashi Ushio, head of investment strategy at Marusan Securities Co. in Tokyo. "Uncertainty about the direction of the US economy remains."
Market confidence had been fragile after Western central banks failed to offer any clues on fresh stimulus plans this week, with a looming deadline for bond holders to decide on Greece's swap offer also adding to the nervousness.