Inverted yields and sinking commodities point to slowdown ahead

<p>Kia ora,</p><p>Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news bond investors are pricing their yields for a sharp slowdown coming soon with some key yields getting more inverted. Attention is shifting to what the US Fed will announce on Thursday.</p><p>But first up, Japan <a href="https://www.stat.go.jp/data/cpi/sokuhou/tsuki/pdf/zenkoku.pdf" target="_blank"><strong>reported</strong></a> June CPI inflation at the end of last week with their headline rate now at 2.4%, down fractionally from 2.5% in May, but still above the Bank of Japan's target of 2%. It's been above that target for three consecutive months now. And it's been seven years since they have had inflation like this although that was because of a GST hike. Excluding that, it's been 32 years.</p><p>In China, the central bank <a href="https://www.chinabankingnews.com/2022/07/22/china-sees-nearly-6-6-trillion-yuan-in-bond-issues-in-june/" target="_blank"><strong>said</strong></a> there were NZ$1.6 tln of bonds issued in June, taking their total issuance to NZ$33.7 tln. That is about 125% of annual Chinese economic activity, just for this official debt. Much of this new issuance will be just to keep the lights on, rather than investing for future gains.</p><p>In Russia, they <a href="http://www.cbr.ru/press/pr/?file=22072022_133000Key.htm" target="_blank"><strong>slashed their official interest rate by -150 bps</strong></a>. Earlier in the year it was raised fast to weigh against a spike in inflation. Now it is being cut hard to try an invigorate a war-damaged economy with sinking demand.</p><p>Globally, the 'flash' business activity surveys were out over the weekend for most major economies and they paint a somber picture.</p><p><a href="https://www.pmi.spglobal.com/Public/Home/PressRelease/52db97a5557c433d855b74a46c5ecff6" target="_blank"><strong>The American one</strong></