July shows the economy back on growth track

Australia: 

Private sector credit grew at a modest pace of 0.4% in July.

The annual rate of credit growth at 3.2% was the strongest annual growth in four months, although this rate of growth remains subdued in comparison to earlier years.

There were however, signs of improvement which was predominantly evident in business credit and credit for investor housing.

Credit for investor housing had its strongest annual growth in two years.

The 25 basis point rate cut by the RBA in August and lag impact of earlier rate cuts will support further growth in credit.

However, the lingering reluctance since the GFC to take on debt by households and businesses suggests that credit growth will unlikely pick up much beyond the rate of growth in the economy.

Share Markets:

Risk appetites diminished at month end, with concerns about Syria weighing on sentiment after US Secretary of State Kerry made a case for action.

After the markets closed, however, President Obama said he will seek authorisation from congress before ordering any military strike, a move likely to support risk appetites.

The US stockmarket weakened on Friday night on the uncertainty regarding Syria ahead of the US Labor Day long weekend.

The Dow slipped 0.2%, the S&P 500 lost 0.3% and the Nasdaq fell 0.8% for the session.

Bonds:

US government bonds edged lower at the long end (yields rose slightly) despite the weakness in the stockmarket on Friday night, with mixed economic data having little market impact.

Foreign Exchange:

The Aussie dollar appreciated against the major currencies, opening higher this morning following the release of upbeat Chinese manufacturing data on the weekend.  

Commodities: 

The oil price fell amid ongoing uncertainty regarding a possible military strike on Syria after the UK parliament voted against joining any military action on Syria.

Australia: 

Private sector credit grew at a modest pace of 0.4% in July.

The annual rate of credit growth at 3.2% was the strongest annual growth in four months, although this rate of growth remains subdued in comparison to earlier years.

There were however, signs of improvement which was predominantly evident in business credit and credit for investor housing.

Credit for investor housing had its strongest annual growth in two years.

The 25 basis point rate cut by the RBA in August and lag impact of earlier rate cuts will support further growth in credit.

However, the lingering reluctance since the GFC to take on debt by households and businesses suggests that credit growth will unlikely pick up much beyond the rate of growth in the economy.

China:

The official manufacturing PMI for August was stronger than expected, rising to a 16-month high of 51.0, from 50.3 in July.

A reading above 50 indicates expansion, implying manufacturing activity expanded at a more rapid pace in August. In a promising development, China's export outlook improved, with the new foreign orders component rising above 50 for the first time since March this year.

The final reading on China's HSBC manufacturing PMI for August is due for release today.

Europe:

Euro zone inflation eased from 1.6% in the year to July to 1.3% in the year to August, although the core reading was steady at 1.1% in the year to August.

The unemployment rate was steady at the record high of 12.1% in July.

Euro zone economic confidence jumped from 92.5 in July to 95.2 in August, its highest reading in two years. The business climate indicator rose from -0.52 to -0.21 in August, its highest in around 18 months.

Separately, German retail sales fell 1.4% in July, after falling 0.8% in June.

Japan:

Household spending rose a slight 0.1% in the year to July, but was below consensus expectations for 0.3% annual growth.

Labour market indicators showed improvement in July.

There was an increase in the availability of jobs with an increase the jobs-to-applicants ratio from 0.92 to 0.94. Meanwhile the jobless rate fell from 3.9% to 3.8% in July. 

Housing starts lifted 12.0% in the year to July, stepping down from 15.3% annual growth in June. The outcome was below consensus estimates for growth of 14.3%. 

Industrial production rose 3.2% in July, recovering from a 3.1% drop in the previous month. The gain was below consensus expectations for a 3.6% increase, but saw annual growth step up from a 4.6% decline to 1.6% positive growth in the year to July. 

In other data, Japan's emergence from deflation was sustained in July. Headline consumer prices rose 0.7% in the year to August as did the core rate, which excludes fresh food. 

The headline rose from 0.2%yr in July to 0.7%yr in August. Excluding fresh food and energy, prices remained in decline but edged higher from an annual pace of -0.2% to -0.1% in the year to July.

Eliminating deflation is a positive step, although the current rate of inflation remains far from the Bank of Japan's 2 percent target.

New Zealand:

Building consents fell 0.8% in July, following a 4.3% fall in June. Excluding apartment units, consents rose about 3%, reversing most of the 4% drop in June.

Looking through the month-to-month volatility, the underlying trend has been upwards over the last two years.

United Kingdom:

Mortgage approvals rose to 61k in July, the first reading above 60k since 2008. Mortgage outstandings grew £0.7bn in July, consumer credit outstandings were up £0.6bn and house prices were reported up 3.5% in the year to August by Nationwide.

Meanwhile GfK reported consumer confidence improved from -16 to -13 in August, matching its post recession high.

United States:

Personal income and spending both rose just 0.1% in July, constrained by falling hours worked and earnings, and previous savings rundown.

The core PCE deflator rose by less than 0.1% in July, although its three-month annualised pace rose to 1.2% in July, from 0.8% in May and June.

The Chicago MPI edged up from 52.3 to 53.0 in August, however, the production, orders and employment components all showed weaker growth in August relative to July. The Milwaukee ISM fell from 52.4 to 48.2 in August.

The University of Michigan consumer sentiment reading was revised higher to 82.1 for August, from its earlier reading of 80.0. This is still down from 85.1 in July.



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