Getting cooler

US producer prices slowed in July. From Reuters:

The core rate for wholesale prices unexpectedly dropped 0.3 percent last month, the first decline since last October, after rising 0.2 percent in June. Overall producer prices, including food and energy, gained only 0.1 percent, after a 0.5 percent jump in June.

But this news came with others pointing to a slowing economy.

The New York Federal Reserve Bank said its Empire State index of manufacturing activity dipped in August to 10.34 from 16.58 -- the slowest pace for manufacturing activity in the state for more than a year.

Retail sales held up last week.

Sales at major retailers last week were up 3.2 percent on a year-over-year basis, Redbook Research said. The International Council of Shopping Centers and UBS said in a joint report that chain store sales were up 2.6 percent from a year ago.

But another Reuters report suggests that retail earnings were mixed in the second quarter, and Home Depot Inc., the world's largest home improvement retailer, softened its sales and earnings growth outlook for this year.

This is understandable given the slowing housing market, with homebuilder confidence continuing to sink:

The National Association of Home Builders said its index of sentiment among homebuilders plunged 7 points to 32 -- its lowest since February 1991 -- and less than half the level of a year ago. The result was below the 38 median forecast of 30 economists polled by Reuters.

...and home prices flattening:

Home price gains slowed dramatically in most U.S. metropolitan areas in the second quarter... The national median existing single-family home price was $227,500 in the second quarter, up 3.7 percent from $219,400 a year earlier...

Slowing inflation was also evident in the UK. Again from Reuters:

The Office for National Statistics said on Tuesday that consumer prices fell 0.1 percent last month, reducing the annual inflation rate to 2.4 percent from 2.5 in June -- the joint-highest since the ruling Labour party won power in 1997.

Even Asia is showing signs of cooling.

AFX/Forbes reports that Japan's services sector weakened in June.

The tertiary index, which measures spending in the services sector, dropped for the first time in three months in June, as consumers spent less on construction consulting firms and fuel products as oil prices jumped, the Ministry of Economy, Trade and Industry (METI) said.

The index fell 0.6 pct in June from the previous month, after rising 0.7 pct month-on-month in May. The index was up 2.2 pct in June compared to a year earlier, the ministry said.

Bloomberg reports that China's industrial production slowed in July.

China's industrial production rose last month at the slowest pace since April as increasing fuel costs hurt demand for cars and the central bank reined in lending for new factories.

Output at manufacturers, mines and power plants climbed 16.7 percent from a year earlier, the statistics bureau said today. Growth slowed from June's 19.5 percent pace, which was the fastest on record, and lagged behind all forecasts in a Bloomberg News survey of 22 economists...

The report suggests record oil prices and government restrictions on investment and lending are beginning to cool the world's fastest-growing major economy. The World Bank, which raised its 2006 growth forecast for China to 10.4 percent today, said surging spending on factories threatens to leave the nation with idle capacity.

Xinhua Online reports that FDI is falling in China.

Realized foreign direct investment (FDI) to China dropped by 1.16 percent year-on-year in the first seven months to 32.7 billion U.S. dollars, the Ministry of Commerce said here on Tuesday.

The drop was a little steeper in July - realized FDI was down 5.49 percent on July last year to 4.28 billion U.S. dollars, said the ministry.

And just to make sure that the cooling is maintained, the central bank is tightening again. From Xinhua Online:

The People's Bank of China, China's central bank, raised banks' deposit reserve ratio Tuesday by 0.5 percentage points to rein in excessive bank lending.

The hike brings the reserves that most banks are required to deposit with the central bank to 8.5 percent. The central bank raised the bank deposit reserve ratio by the same margin of 0.5 percentage points in June.