US turns lower as China's prospects improve

<p>Kia ora,</p><p>Welcome to Thursday’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 that the economic pace is shifting lower in the US  and higher in China.</p><p>Although American <a href="https://www.mba.org/news-and-research/newsroom/news/2023/01/18/mortgage-applications-increase-in-latest-mba-weekly-survey" target="_blank"><strong>mortgage applications</strong></a> rebounded strongly last week from the New Year break, they remain well below year-ago levels. But mortgage rates are now falling and are their lowest since September. Despite that, the recovery in transactions in their real estate market are very modest at best.</p><p>There is a similar weak rebound in their <a href="https://www.redbookresearch.com/" target="_blank"><strong>retail markets</strong></a> for the new year. Sales are up on a same-store basis last week, but not up enough to account for inflation.</p><p>And their respected <a href="https://www.census.gov/retail/marts/www/marts_current.pdf" target="_blank"><strong>Advance Retail Sales data</strong></a> shows overall December sales fell -1.1% from November, and a rather startling retreat. Year-on-year they are up just +5.3% and nowhere near enough to account for inflation. The Fed's dampeners are working.</p><p>On the industrial front, we are starting to see concrete signs of deflation starting to emerge. Even though <a href="https://www.bls.gov/news.release/ppi.nr0.htm" target="_blank"><strong>producer prices</strong></a> are +6.2% higher than year-ago levels, they fell at a -6% rate in December from November, which was more than anticipated.</p><p><a href="https://www.census.gov/mtis/www/data/pdf/mtis_current.pdf" target="_blank"><strong>Business inventories</strong></a> are swelling much faster now, as the slowdown makes this much harder to manage. They were a massive +15% higher than a year ago in November. To be fair however