More stress, but also more risk tolerance

<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 with some stress being relieved, but it building in other areas. Overall there is a recovery in risk appetites.</p><p>There were early August PMIs out everywhere overnight. These confirm that growth in developed economies is slowing from a strong pace. The renewed rise in virus numbers and staff and materials shortages also seem to be playing a role in the slowing expansions. The surveys suggest that price pressures are still strong, but they no longer seem to be intensifying.</p><p>The US <a href="https://www.markiteconomics.com/Public/Home/PressRelease/2ebf3c08ba874510879b6b2976cc98c4" target="_blank"><strong>factory PMIs</strong></a> are holding high, but their <a href="https://www.markiteconomics.com/Public/Home/PressRelease/2ebf3c08ba874510879b6b2976cc98c4" target="_blank"><strong>service PMIs</strong></a> are falling back to a much more modest expansion in August.</p><p>But for July, the widely-watched Chicago Fed's National Activity Index <a href="http://www.interest.co.nz/sites/default/files/embedded_images/cfnai-august2021-pdf.pdf" target="_blank"><strong>recorded</strong></a> a broad-based rise in economic activity in July.</p><p>In their housing market, they also <a href="https://www.nar.realtor/newsroom/existing-home-sales-climb-2-0-in-july" target="_blank"><strong>reported</strong></a> an up-tick in sales activity in July. The median price rose +18% in the year to US$359,900. They also reported that more houses are coming on to their market for sale.</p><p>In their financial markets, liquidity issues seem to be building and they weren't that good to start with. It isn't an unusual summer stress, but the ability of large institutions to trade without their activity moving markets is poorer now than a month ago, and something the Fed will be watching closely because i