China inflation reveals weaknesses building; eyes on new yuan loans; China & Taiwan exports strong; US labour market shrinks, consumer debt jumps; UST 10yr at 4.66%; gold firm; oil prices hold; AU$1 = 70.7 USc

Here's our summary of key economic events over the weekend that affect Australia, with news we are facing a new burst in inflation as commodity prices rise, oil and gold both are rising, and benchmark interest rates are stuck high waiting to see where these tea leaves settle.

Locally this week, look out for the NAB business sentiment update, but the key event will be the RBA's rate review on Tuesday even if no-change is expected or priced in. That is despite their CPI at 3.8% and running way above their target range of 2% to 3%, and showing little sign it will get back within range any time soon.

In the US, they will release their July CPI data too (expect 3.4%), their PPI (expect 5.5%) and another consumer sentiment update.

In China, we are awaiting their new yuan debt data which should come late this week and be another quite weak result (expect just +¥45 bln).

Over the weekend China released their CPI inflation data, revealing an annual inflation rate of just 0.5% in July, down from 1.0% in the previous month. Analysts had expected an 0.8% rate in July so this was their lowest level since January. Food prices dropped 1.5% year-on-year, following a 1.6% decline in the previous month and marking the fourth straight month it fell. But beef prices rose +4.5% and lamb prices by +6.2% in July from a year ago. Dairy product prices were -1.5% lower however.

Meanwhile, China’s producer prices rose +3.5% in July from a year ago, slowing from a 4.1% rise in June, and that is their steepest rise in nearly four years. The retreating pace is due to weaker commodity prices, softer domestic demand, and continued pressure from overcapacity. There is also intense price competition in some industries.

China’s exports surged almost +24% to US$398 bln in July in a better than expected result. The gains were driven by strong demand for AI-related technology products and a rush by manufacturers to ship goods to the US ahead of potential new tariffs. Outbound shipments to the US rose +17%, the EU by +16%, and to ASEAN nations by +38%.

And while China reported relatively stable foreign exchange reserves as at the end of July, they also reported that their official gold holdings rose +640,000 oz, almost +20 tonnes in one month. That is the most in a 21 month streak of gold buying.

Meanwhile Typhoon Dolphin is heading for the China coast after clipping Okinawa, due to strike south of Shanghai. It is a Cat 3 storm and over 1 mln people have been evacuated to safer ground.

Taiwanese exports stayed very high at US$75.3 bln, just off record levels, but as time rolls on with these high or record high levels, the year-on-year gains are fading. Still, they managed to report a +33% rise from a year ago, an unusually strong gain. And their trade surplus remained unusually large at +US$17.2 bln, up from +US$14.3 bln in July 2025.

Across the Pacific in the US economy, and even with Trump loyalists controlling the data agency, US non-farm payrolls were reported contracting in July, down -23,000 at the headline level when a very modest +80,000 was expected. That is their worst July result in at least a decade. And it get much worse if you look at actual data because payrolls shrank almost -1.1 mln in July from June before seasonal adjustment. This is the real number of people who lost employment in the month.

Their participation rate inched down while their jobless rate was little-changed at 4.1%.

US inflation expectations for one year ahead edged down to 3.6% in July from 3.7% in June which was the highest since September 2023. The July level is the new baseline since the US attacked Iran. Prior to that, this survey recorded about 3% for the prior two years. Earnings in the same survey are seen to rise +2.8%, so that continues to record an underwater expectation for household finances.

US consumer debt levels rose +3.3% in June with revolving credit rising +6.0% on the same basis as both credit card debt and car loans rising sharply. Student loans recorded an unusual fall.

A weakening labour market and both stubbornly high inflation and inflation expectations will complicate the discussions in Warsh's Fed meetings. Do they cut, hold or raise. There are probably votes for all three options. Markets currently price in half a chance of a +25 bps hike in September. And Trump is back trying to screw the scrum.

There was quite the contrast in Canada with them reporting their employment rose +75,100 in July from June. It will have been a very long time since they had a gain that exceeded their southern neighbour. Their jobless rate fell to 6.4% and a two year low while their participation rate inched up.

The UST 10yr yield is now just on 4.66%, up +2 bps from this time Saturday but down -8 bps for the week. The 30 year yield is at 5.21% and unchanged from Saturday. The key 2-10 yield curve is now at +45 bps (unchanged). Their 1-5 curve is now at +36 bps (+1 bp) and the 3 mth-10yr curve is at +96 bps (unchanged). The China 10 year bond rate is little-changed at 1.70%. The Japanese 10 year bond yield is now at 2.80%, up +1 bp, little-changed for the week. The Australian 10 year bond yield starts today at 4.99%, up +2 bps from Saturday and for the week. 

The price of gold has risen to US$4343/oz, up +US$6 from Saturday, up +US$293 or +7% from a week ago. Silver has held little-changed at just over US$63.50/oz. That is up +US$5.50/oz for the week or a +9.5% gain.

Oil prices are unchanged from yesterday and still just over US$78/bbl in the US, while the international Brent price is still just on US$83.50/bbl, A week ago these prices were US$84.50 and US$88/bbl respectively. Hormuz transits are still very constrained. There have been only three crude tanker and 6 cargo ship exiting over the past 24 hours (3 dark with transponders off) and eight entering for new loads (3 dark), again all Iran-linked. The Red Sea activity is still low with just 20 either way at the Yemen chokepoint.

The Australian dollar is unchanged from Saturday at just over 70.7 USc, making it unchanged for the week. Against the Japanese yen we are up +10 bps at ¥111.5. Against the euro we have held at 61.1 euro cents.

The bitcoin price starts today at US$65,151 and up +0.6% from this time Saturday, up +3.3% from last week. Volatility over the past 24 hours has been very low however at just on +/-0.3%.