All the news was focused on China this week, but we did get some of our own news…
China, on Tuesday, devalued their currency, the Yuan, and then did again on Wednesday. Then they saw it slide against currencies around the world on Thursday. So do we care? Well, we do, and so do other countries.
China devaluing their currency means the good news is buying goods from them just got cheaper. However, this will make it harder for them to buy from other countries.
It also indicates a slowing economy. China has been a buyer of materials and goods from many countries because they have been in hyper growth building out their infrastructure the last few years.
That has been slowing down by big percentages in the last couple of years. So they are not buying as much from other countries, and now it takes more of their currency to buy other countries’ (like the US’s) goods if the Chinese economy is shrinking.
They claim it’s growing at 7-8%; however, this is a communist country and they control the data , the economy, and the production so we take it for what it’s worth as far as “accuracy”. Even in a recession, this will have an impact, and possibly create a global recession. Good for rates; but for people?
On the home front, Thursday we saw retails sales for July come in stronger than expected at a rise of .6% where they had been down in June. Not good for interest rates.
Then the PPI came in weak at .2% rise which was less than expected. In addition, it is down year over years .8% which is a big contraction. A dropping Producer Price Index usually means that the cost to consumers will be less as well. A drop in consumer inflation would mean dropping rates. So this was good for interest rates.
After all this, rates remain unchanged this week.
Remember good news in the economy is bad news if you are locking in a fixed rate mortgage.