Both China and the US face economic issues

<p>Kia ora,</p><p>Welcome to Friday’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 both China and the US seem to be facing economic questions at the same time.</p><p>There are mounting concerns about the giant American economy’s resilience. Inflation is at 40-year highs, home sales are weakening but their red hot labour market has yet to show any sign of weakness.</p><p>New American <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20221574.pdf" target="_blank"><strong>jobless claims</strong></a> fell marginally last week, and there are now 1.44 mln people on these benefits which is still close to an all-time low.</p><p>But <a href="https://www.bea.gov/news/2022/gross-domestic-product-second-quarter-2022-advance-estimate" target="_blank"><strong>the initial 'flash' reading</strong></a> for real economic activity fell in the June-2022 quarter by -0.9%, on top of the -1.6% recorded fall for Q1-2022. If that is confirmed over the subsequent revisions, it will show the US economy has been in a shallow recession. In nominal terms it grew at an annual rate of +1.9% in Q2 but that was less than inflation. Over the past year it grew to <a href="https://fred.stlouisfed.org/series/GDP" target="_blank"><strong>US$24.85 tln</strong></a> and up +9.3% in nominal terms, up 7.8% at an annual rate in the second quarter alone. But that was less than price increases which for the household sector was a <a href="https://www.bls.gov/cpi/" target="_blank"><strong>9.1% inflation rate</strong></a>. The second estimate of this data will come in about four weeks.</p><p>The puzzle in all of this is their labour market - growing fast with widespread labour shortages. If a recession is in fact declared for this 2022 period it will be the strangest one in memory, one with a record low jobless rate. Today, the bond markets 'believes' the recession story, but