Lower economic activity brings lower inflation

<p>Kia ora,</p><p>Welcome to Tuesday’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 inflation might be easing, but the level of economic activity is as well.</p><p>In the US, consumer inflation expectations are falling now. <a href="https://www.newyorkfed.org/newsevents/news/research/2022/20221212" target="_blank"><strong>A Fed survey</strong></a> revealed they fell to 5.2% in November, the lowest since August 2021. That is down from 5.9% in October and is the sharpest single-month fall since this survey started in 2013.</p><p>The US reveals its CPI data tomorrow and a 7.3% headline rate is expected, down from October's 7.7% rate</p><p><a href="https://www.boj.or.jp/statistics/pi/cgpi_release/cgpi2211.pdf" target="_blank"><strong>Japanese producer prices</strong></a> rose at an annualised +7.2% rate in November from October to be +9.3% higher than year-ago levels. This recent slowing isn't as much as the +6% annualised rate expected, but at least it is slowing now. Japan's factories have been hit with the combination of high commodity prices and a weak yen. But starting in mid-November these weaker trends started to reverse, so the pressure may be coming off faster in December.</p><p><a href="https://www.jmtba.or.jp/wp-content/uploads/sokuhou2211vndfu.pdf" target="_blank"><strong>Orders for Japanese machine tools</strong></a> also fell sharply in November. This is leading-edge data for essential technical components in the global economy. The fall was a sharp -4.9% from October and -7.9% from the same month a year ago. Export orders fell -8.4% in November from October.</p><p><a href="http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4734259/index.html" target="_blank"><strong>China's new yuan loans swelled +11% in November</strong></a>, but that was actually slightly less than was expected. But it is very sharp loan growth year-on-year and approaching