US data imbalanced and faces a reckoning; Korea and Japan show economic gains; EU inflation expectations anchored; air cargo volumes rise, except in US; UST 10yr at 4.23%; gold rises again but oil holds; AU$1 = 65.5 USc

UPDATE: In a dramatic ruling, most of Trump’s global tariffs were declared illegal by a US appeals court that found he exceeded his authority in imposing them. He will almost certainly appeal to his Supreme Court.​

Here's our summary of key economic events overnight that affect Australia, with news the Americans think they have had a good summer, but the cracks from ignoring how economic realities are going to bite them are starting to show.

First, July data out in the US shows that disposable personal income was up +2.0% from a year ago, personal consumption expenditure was up +2.1% on the same basis. On a month-on-month basis, the income was up +0.4% and expenditure up +0.5%. These elements are not major but they do indicate a tightening in household financial budgets.

Nested deep within this release was that core PCE index rose 2.9% year-on-year in July, its largest rise since February and above the Fed’s target and comfort zone. Tariff costs are getting the blame. Financial markets noticed.

And that is the same sort of tightening indicated by the widely-watched University of Michigan sentiment survey. It's final August version fell back markedly from its initial readings, a clear indication households are finding it tougher. It is now -14% lower than a year ago. The Biden boom is now just a memory.

On the factory floor, the latest indicators are shifting down too. The August Chicago PMI headed south quite sharply to be -10% below year-ago levels.

And the US seems to be losing the tariff war it started - and Americans are paying the tariff-taxes. The latest trade data for July shows that the US merchandise trade deficit jumped to -US$104 billion in the month, exactly the same as July a year ago, and far above expectations of -US$90 bln deficit. It is their largest in four months. Imports jumped +7.1% from a month earlier, led by industrial supplies, capital goods, food, and consumer goods. Meanwhile, exports slipped -0.1%.

Certainly, American farmers are not happy. And they have a President who probably doesn't even know where Pakistan is, let alone most other simple facts.

The Americans now have a long weekend - Labor Day - to contemplate where they are and where they are going. Their summer is over and their markets will return in full on Wednesday our time. From May's Memorial Day, the S&P500 has risen +11% but the underlying American economy has staggered and become far less internationally competitive under the weight of tariff-taxes. Investors will have to account for this somehow. It is hard to see how the current sky-high price-earnings ratio can be justified facing this sort of future. But it won't be equity investors who call this imbalance out, it will be bond investors who will signal the party is ending.

In Canada, they got a sharp dose of shock in their Q2-2025 GDP result from the sharp turn on them from their southern neighbour. Their GDP fell -0.4% in the quarter and cancelling out the +0.5% gain in their first quarter. Year-on-year their GDP is still up +0.9% however.

Across the Pacific the economic data is generally much more positive. South Korea’s retail sales surged +2.5% in July from June, a big jump from a revised +0.7% increase in June and marking the fastest growth in over two years. From a year ago it is up +2.4% and that too is the most since January 2022.

South Korean industrial production grew solidly in July as well, up +5.0% from a year ago.

After a good gain in June, Japan’s industrial production fell -1.6% in July, reversing a +2.1% June gain and much more than the -1.0% decline anticipated.

Japanese retail sales only rose by +0.3% in July from a year ago, slowing sharply from a downwardly revised +1.9% gain in June and falling well short of market expectations for a +1.8% increase.

But Japanese consumer confidence actually rose in August to its best level of the year with gains across all surveyed questions.

We should also note that protests in Jakarta on Friday that turned deadly have put Indonesia on edge.

In Europe, the ECB's survey found that consumer inflation expectations were stable ("well anchored") in July at 2.6% for the year ahead.

In Australia, the value of lending rose +7.2% in July from a year ago, the fastest pace of increase since February 2023 when it was recovering from the sharp 2022 retreats during the pandemic.

Globally, air passenger demand was up +4.0% in July, driven by the Asia/Pacific +5.7% rise and held back by the North American +1.9% rise. Most of this is due to international travel. Meanwhile, air cargo traffic was even stronger in July, up +5.5% from a year ago, up +6.0% for international trade. Asia/Pacific was the strongest region here too, up +11.0% for international cargoes. But North American international cargo volumes only rose +1.5%, the weakest global region.

The UST 10yr yield is now at 4.23%, up +2 bps from yesterday at this time, but down -3 bps from a week ago. The key 2-10 yield curve is steeper at +60 bps. Their 1-5 curve is now inverted by -15 bps. And their 3 mth-10yr curve is now inverted -9 bps. The Australian 10 year bond yield starts today at 4.28% and unchanged from yesterday but down -3 bps for the week. The China 10 year bond rate is unchanged at 1.78%. 

Wall Street is softer and off its record high, down -0.6% from yesterday on the S&P500 in Friday trade to be unchanged for the week. And this is despite the US earnings season wrapping up very positive. Overnight, European markets fell fell about -0.5%. Yesterday Tokyo ended down -0.3% for a weekly -0.6% fall. Hong Kong was up +0.3% yesterday but down -2.1% for the week. Shanghai was up +0.4% on Friday allowing it to record a +0.3% weekly gain. Singapore also ended up +0.4%. The ASX200 slipped -0.1% in Friday trade for a weekly loss of -0.8%. 

The Fear & Greed index his still in the 'greed' zone same as it was last week.

The price of gold will start today at US$3,442/oz, up another +US$27 from yesterday, and close to a new record high, but basically a measure of the USD markdown. A week ago it was at US$3,371/oz so a net +US$71 gain

American oil prices are again little-changed at US$64/bbl with the international Brent price down -50 USc to just under US$67.50/bbl. A week ago these prices were US$64 and US$68/bbl respectively so little-change since then

The Australian dollar is at just on 65.5 USc and up +10 bps from yesterday at this time, up +60 bps for the week. Against the Japanese yen we are yp +10 bps at ¥96.2. Against the euro we are down -10 bps at 56 euro cents. That all means our TWI-5 starts today at just on 66.5, and up a net +10 bps from yesterday, up +20 bps for the week.

The bitcoin price starts today at US$108,434 and down a rather chunky -3.7% from this time yesterday. It is down an even chinkier -7.2% for the week. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.