Caution rules, over Delta's rise and China's slowing

<p>Kia ora, </p><p>Welcome to Tuesday's Economy Watch where we follow the economic events and trends that affect 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 investors are stepping back in the wake of the Afghanistan turmoil and a noticeable slowdown in China.</p><p>But in New York, the latest <a href="https://www.newyorkfed.org/medialibrary/media/survey/empire/empire2021/esms_2021_08.pdf?la=en" target="_blank"><strong>factory survey</strong></a> shows business activity continued to expand, though growth was markedly slower than last month’s record-setting pace. New order levels dipped but unfilled order levels rose as supply constraints don't show any easing. Prices paid and prices received both are expanding at record rates.</p><p>And better than expected private consumption along with better than expected capital expenditure both powered the Japanese economy to <a href="https://www.esri.cao.go.jp/en/sna/data/sokuhou/files/2021/qe212/pdf/gaiyou2121_e.pdf" target="_blank"><strong>a better than expected expansion</strong></a> in the June quarter. This growth comes after a weak Q1 when it contracted -3.7%, and dismissed the possibility Japan had slipped back into recession.</p><p>It's not all good however. Many analysts expect growth to remain modest in Q3, if at all, as state of emergency curbs re-imposed to combat a spike in pandemic infections weigh on household spending again.</p><p>There was more data released overnight confirming the slowdown in the Chinese economy. Tighter credit conditions are biting along with pandemic lockdowns in parts of their economy too. The recent flooding isn't helping either.</p><p>Chinese <a href="http://www.stats.gov.cn/tjsj/zxfb/202108/t20210816_1820567.html" target="_blank"><strong>retail sales</strong></a> in July significantly missed expectations, rising +8.5% from a pandemic affected July 2020 and only +7.2% above July 2019 which for them is quite the come-down. <a href="http://www.stats.gov.cn