US Labor market cools but still strong enough for Fed

The US labor market was significantly influenced by the rate of hiring while workers paid unexpectedly, demonstrating a healthy yet moderating labor market that keeps the Fed on track to raise borrowing costs this month. The decline in Germany's industrial output hints that there is a sustained manufacturing weakness in Europe's largest economy. Inflation expectations remained elevated in the UK, while services activity in China grew at a slower rate. The increase in payrolls was the smallest since the end of 2020, marking the first time in 15 months that employment growth fell short of estimates. A look beneath the still-healthy headline numbers shows some cracks are beginning to form. In June, the US service industry experienced the fastest growth in three months as business activity and orders quickly increased. Industrial activity at the fastest rate in more than three years, according to the manufacturing report released earlier this week. In May, German industrial production unexpectedly dropped, casting a shadow over the recovery in Europe's largest economy from its recent recession. In contrast to a separate report this week that showed a rebound in factory orders, the output data points to signs of continued deterioration that chime with a recent litany of dire news from German businesses. UK companies are forecasting inflation to be running almost double the Bank of England's target for the next three years, a survey showed as traders ramped up bets on higher interest rates. The expansion in China's services industry slowed in June from the previous month, according to a private survey, providing more evidence that the key driver of the country's post-Covid recovery is cooling. The data will likely spur more calls for the government to ramp up measures to support growth. Japan's wages have surged by more than twice the pace expected by economists as annual pay hikes fed into monthly data, providing the central bank a signal that upward momentum may be improving in pay. The unexpectedly strong figure could strengthen the belief that the BoJ may consider policy adjustments in the near future without waiting to see the results of next year's wage negotiations. In June, Mexico's inflation slowed slightly less than expected, as Banxico's monetary policy has sought to maintain its strict stance. While inflation has been decreasing, the central bank has yet to declare victory as prices continue to rise above its target of 3% a year, plus or minus 1 percentage point. India's campaign to boost the rupee's role in cross-border payments has made little headway, underscoring the obstacles for countries trying to reduce their dependence on the dollar. Sri Lanka has cut its benchmark rate for a second consecutive meeting. Australia kept interest rates on hold but left the door open to future hikes, while Kazakhstan, Kazakhstan and Poland also kept interest rates unchanged. With assistance from Tom Rees, Anup Roy, Averbuch, Augusta Saraiva, Tom Rees, Anup Roy, reade Pickert, Augusta Saraiva, Leda Alvim, Maya Averbuch, Fran Wang, Alexander Weber and Erica Yokoyama.