Economy Watch

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the rise of the US economy and the slowdown in China that Beijing can't seem to arrest is twisting a vast cast of supporting economies and their currencies. The NZD and AUD are devaluing faster now.First up today, the giant American economy grew much more than expected as reported by their 'advance' Q2-2024 release. It was up +2.8% when +2.0% rise was expected after the Q1-2024 +1.4% expansion. This was driven by strong consumer spending which broadly confirms the weekly retail impetus that we track. Consumers are acting 'positively'. Growth of +2.8% is 'moderate' in the grand scheme of things - until you realise that it is a +US$360 bln (nominal) expansion from Q1, almost +US1.6 tln from the same period a year ago. Nowhere else has expanded like that (and more than double China's +US$784 bln equivalent expansion). The American economy had economic activity of US$28.6 tln in the past year.Prices (PCE) were up +2.6% in Q2, a lesser rise than the +3.4% rise in Q1. Getting there, but not there yet.Meanwhile, US initial jobless claims fell more than expected last week at 225,000 from the 281,000 of the prior week. These levels are nearly back to where they were a year ago. There are now 1.9 mln workers on these benefits, a tiny slice of their 364 mln workforce.But new orders for durable goods slumped -6.6% in June from May, after four consecutive monthly increases and missing market expectations of a +0.3% rise. Transportation equipment drove the decrease. From a year ago, these durable goods orders were down a startling -11%. Orders for capital goods were worse, down -27% on the year-ago basis. (However, excluding aircraft, there was little change.)The next July regional factory survey is from the Kansas City Fed, and they reported little-change from June. Basically it mirrors the national durable goods order data.Earlier today there was a well-supported UST 7yr bond auction and that brought a 4.11% median yield. That is slightly lower than the 4.22% yield at the prior equivalent event a month ago.China's central bank unexpectedly cut the rate at which it lends to financial institutions, the first such cut in nearly a year. It lowered the one-year medium-term lending facility (MLF) rate to 2.3%, from 2.5%. The bank issued ¥200 bln in loans to banks at this rate.This rate cut is part of Beijing's attempts to spur a sluggish economic growth. This was just a part of actions taken yesterday. It is also expanding a subsidy program to get more people buying cars and consumer electronics. This will cost them ¥300 bln, paid for out of their issue of ultralong special treasury bonds. The subsidies for those trading in their passenger cars for new energy vehicles will double to ¥20,000, compared to the ¥10,000 subsidy announced in April. Trade-ins for petrol vehicles will rise to ¥15,000 from ¥7,000 per vehicle.Global container shipping rates stayed very high last week, but they did slip a small -2% from the week before and are just off their peak. That makes them +268% higher than a year ago. There seems no relief in sight yet. Bulk cargo rates were little-changed last week to be +24% higher than year-ago levels.The UST 10yr yield is now at just on 4.27% and down -2 bps from this time yesterday. The price of gold will start today down a very sharp -US$60 from yesterday at US$2352/oz. That is down -2.5% on the day.Oil prices are +50 USc firmer at just over US$78/bbl in the US while the international Brent price is just on US$81.50/bbl.The Kiwi dollar starts today weaker, down another -40 bps at just under 59 USc. That is a -3.4% devaluation since the start of the month. Against the Aussie we are down -10 bps at 90 AUc. Against the euro we are down a full -½ at 54.3 euro cents. That all means our TWI-5 starts today at 68 and down -40 bps from yesterday and that is near a two year low.The bitcoin price starts today at US$64,827 and down -2.6% from this time yesterday. Volatility over the past 24 hours has been moderate, also at +/- 2.6%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news that despite good economic data, Wall Street equity prices are tanking today as it downs in investors they have been far too bullish on AI prospects.But first, there were July 'flash' PMIs released today. The American one is quite positive, especially for their service sector. There new order growth rose its fastest for the year, and that drove the overall PMI to its best result since April 2022, a 27 month high. The factory sector wasn't so positive, basically marking time. Encouragingly however, despite the rise, price pressures have waned. But there are suggestions employment has stopped growing.Retail inventories might be becoming a bit of a problem however, up +5.3% from a year ago. But because wholesale inventories are well contained (+0.2%), there is no reason to panic at this point.Meanwhile, things are so bright in their housing markets. Mortgage applications fell last week from the week before to be -15% lower than the weak week a year ago, even though mortgage interest rates retreated and are now near their lowest of the year.And new home sales came in quite low in June, well below anticipated levels. But this isn't a new situation. Overbuilding over quite some time means that they have a stunning nine months of inventory of new unsold homes at the current rates rate. The main problem area is in the North-East states.American exports rose +4.0% in June from a year ago. Imports were up +3.0% on the same basis, meaning their merchandise trade deficit shrank a little. The still-rising import levels also means the healthy demand in the US economy is still the main driver of world trade.There was another very well supported US Treasury bond auction overnight, this time for their 5 year Note. That delivered a 4.05% yield, down from 4.27% at the equivalent event a month ago. General market support for these debt issues remains impressive.In Canada their central bank cut its policy rate by -25 bps to 4.5% at its overnight meeting, a second cut in a row. Another cut in September seems a live possibility. They say the reduced rates could contribute to a slowdown in mortgage and shelter costs, which have been a large component of inflation there.Japan's July factory PMI actually slipped slightly below expansion levels to a very small contraction, an unexpected result of their Markt/S&P survey. But their services PMI went the other way with a solid expansion recorded for July.In India, new orders and business activity surged in July, driving both their services and factory PMIs to very fast expansions. And that brought their best expansion of employment in over 18 years. But because these pressures have been rising for some time, they are starting to get strong inflationary pressures from them now.India's soaring share prices, and the earnings growth by Indian companies have pushed this country to just under a fifth of the MSCI emerging markets index while China has fallen to a quarter, down from more than 40% in 2020. India this threatening China as the main emerging market.South Koreans are increasingly confident, according to a survey released by their central bank. Their composite index rose to its highest level since June 2023. Consumer sentiment regarding current living standards rose, as did their future outlook.In Europe, their flash PMIs show July sagged to a five month low. In Germany, while their service sector is still expanding a a good clip even if it is less, their factory sector is really struggling now and contracting at a rather sharp pace which will worry Berlin policymakers.In Australia, their July PMI also recorded a weaker rise in services activity and a sharper decline in manufacturing production. Persistent demand weakness led to a second consecutive monthly decrease in total new business and the fastest fall in new export orders in nearly four years.The UST 10yr yield is now at just under 4.29% and up +4 bps from this time yesterday. The price of gold will start today up another +US$9 from yesterday at US$2412/oz.Oil prices are +50 USc firmer at just on US$77.50/bbl in the US while the international Brent price is just on US$81/bbl.The Kiwi dollar starts today softish, down another -10 bps at 59.4 USc. Against the Aussie we are up +10 bps at 90.1 AUc. Against the euro we are down -10 bps at 54.8 euro cents. That all means our TWI-5 starts today at 68.4 and down -10 bps from yesterday.The bitcoin price starts today at US$66,573 and up +1.1% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.2%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news lower commodity prices spread more widely overnight and a dark mood flowed over Chinese equity markets late yesterday.But first, there was a GDT Pulse auction event overnight. Basically prices fell. The SMP price was down a bit more than expected, down -2.8% from last week's full GDT event and taking it back to levels last seen in April. The more important WMP price was down too, down -1.5% in a lesser retreat than expected. Given how commodity prices have been falling generally recently, perhaps this isn't as tough as it could have been.Meanwhile in the US, their retail sales at physical stores were up +4.9% last week from the same week a year ago, a much better gain than inflation, so consumers continue to spend, although not with quite the same impressive enthusiasm as a month ago.But they are not spending to buy a house. Existing home sales fell by -5.4% from the previous month to an annual rate of 3.89 million units in June, the sharpest monthly decline since 2022, to the fewest amount of sales since the start of the year. It was the fourth consecutive monthly decline in existing home sales as the median sales price climbed to a record high of US$426,900 (NZ$717,000). Higher-end houses are still selling but the middle of the market is now a buyer’s market. Unsold housing inventory rose by to 1.32 million units, or 4.1 months' supply at the current monthly sales pace.Also retreating was the Richmond Fed's survey of factories in the mid-Atlantic states. In fact, it contracted the most in four years. New order levels retreated although future expectations for new orders are holding up. Perhaps election-change prospects are weighing on these firms outlook?Meanwhile there was a UST 2yr bond tender earlier today, and it was again very well supported, delivering a median yield of 4.39% and that was -27 bps lower than the 4.66% at the prior equivalent event a month ago.In India, their Budget delivered a raft of changes. These included increased spending, job creation, and tax relief for the middle class. They hiked their Securities Transaction Tax, reduced taxes on short-term and long-term capital gains, and abolished the angel tax on foreign investment. They also cut import duties on gold and silver, but raised them on plastic products. Income tax thresholds were raised. In the end this is deficit spending equivalent to 4.9% of Indian GDP and continuing its fiscal stimulus. Modi's allies will be satisfied with what they got.Taiwanese retail sales improved again in June, up almost +4% from a year ago, well above inflation there. And their industrial production was up an impressive +13.5% on the same basis.EU consumer confidence improved marginally in July, although it remains low and well below its ten year average. But at least it isn't going backwards.The UST 10yr yield is now at 4.25% and little-changed from this time yesterday. Hong Kong equity prices fell -1.0% and Shanghai was down -1.7% in its Tuesday trade both in sharp late selloffs. Tech capital Shenzhen fell almost -3.0%. The price of gold will start today up +US$10 from yesterday at US$2403/oz.Oil prices are -US$1 lower at just on US$77/bbl in the US while the international Brent price is just on US$80.50/bbl.The Kiwi dollar starts today down another -¼c at 59.5 USc. Against the Aussie we are still at 90 AUc. Against the euro we are also still at 54.9 euro cents. That all means our TWI-5 starts today at 68.5 and down -30 bps from yesterday.The bitcoin price starts today at US$65,848 and down -2.3% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news it’s been a toughish night for commodity currencies as markets mark down these prospects. That has been true for both hard and soft commodities, although it is more of a sag than a significant fall.In the US, the Chicago Fed's National Activity Index rose again, although this time it was minor. But the May index was revised higher. That makes it three rises in the past six months, and is a sharpish positive change from a year ago. This is actually an important indicator but one that is usually ignored by markets.In Japan, the newt meeting of their central bank is Wednesday, July 31. It has been widely expected they would raise their policy rate and make other moves toward normalisation, largely because their long-held goal of getting moderate inflation embedded seems to have been achieved. But now they are giving unofficial signals that there may be [yet another] delay because household consumption is not improving as they want.Taiwanese export order growth eased in June, rising 3.1% year-on-year, but that missed expectations of a +12% rise. The miss is largely due to lower orders from Japan. You may recall that May orders rose 7% on this year-on-year basis.Today is Budget day in India. This one may reflect the pressures on Modi from his coalition support parties, the ones he needed to stay in power. This price may not be 'cheap' and if it does seem excessive, there could well be financial market reactions.The People's Bank of China unexpectedly cut key lending rates by -10 bps to fresh record lows. The 1-year loan prime rate (LPR), the benchmark for most corporate and household loans was cut to 3.35%. Meanwhile, the 5-year rate, a reference for property mortgages, was trimmed to 3.85%. Yesterday's decision came days after the Third Plenum meetings at the end of last week, and follows a slew of data that indicated the Chinese economy continues to lose steam. At the same time, the central bank reduced its collateral requirement for its MTF facility. What we are seeing is a skew to short-term priorities.And staying in China, they are grappling not only with a fast-aging population, but an out-of-balance retirement age. Chinese men 'retire' at age 60, women at 50 to 55. By 2035 more than 30% of the population is expected to be at that age. Even though retirement support programs are skinny, these ages will have a dramatic impact sooner than many realise. But Beijing realises. And it moved at the Third Plenum meeting to raise that age. However the messaging is subtle because it is widely expected to generate substantial pushback among those affected. Demographics is destiny, and China won't have gotten rich like Japan before these trends become very difficult to manage, so their options are closing fast.In the EU, the ECB's survey of professional analysts suggests markets expect them to make only begrudging progress against inflation, but progress none-the-less. It won't be until 2025 that inflation hits 2% these analysts suggest. They haven't changed their view on economic growth in the region with tepid +1.3% real growth in 2025. But they do see 'better' progress battling unemployment even though the levels will remain relatively high by international standards (6.4% in 2025).The CrowdStrike IT disaster is still lingering, especially in the travel industry. It has raised many questions. One is, who will pay? That now largely seems to be insurers, and that has implications for premiums and coverage in the future.The UST 10yr yield is now at 4.26% and up +2 bps from this time yesterday. The price of gold will start today down -US$6 from yesterday at US$2393/oz.Oil prices are -50 USc lower at just over US$78/bbl in the US while the international Brent price is just on US$81.50/bbl.The Kiwi dollar starts today down more than -¼c at 59.8 USc as commodity currencies take a hit. Against the Aussie we are still at 90 AUc. Against the euro we are also down more than -¼c at 54.9 euro cents. That all means our TWI-5 starts today at 68.8 but down -20 bps from yesterday.The bitcoin price starts today at US$67,370 and up +1.0% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the economies of most major powers are in good shape and their companies are prospering.But for those who follow such things, we should note that President Biden has decided not to run in the Presidential election in November, stepping aside. The race for the Democratic nomination is now open at their convention in Chicago starting on Tuesday August 20 (NZT) even though Biden endorsed Kamala Harris.Well before then and ahead this week will be some early PMIs for July released for many key economies. Although there are no major June CPI due for release, the US's important PCE inflation data is due on Saturday NZT and that will be keenly awaited. The US will also release its first estimate of Q2 GDP on Friday and markets expect real growth there to be +2% from Q1. Good recent data might well see it above that.Canada is reviewing its policy rate on Thursday, and market now expect a -25 bps cut to 4.5%China is set to announce its policy interest rate decision this week, and it should be releasing its troubled FDI update soon, both possibly later today.Over the weekend, the big overnight news was that a "faulty channel file" from CrowdStrike took down Windows computers everywhere, including in New Zealand. Outages were widespread, including for many bank services. It was a spectacular own-goal and not a malicious strike. We have more details here. And our review shows how you can recover if you were affected.. But be careful; within hours scammers had launched new domains hoping to trick users into 'response scams'. CrowdStrike made its name fixing tech problems. Now it has caused a doozy. The echoes are lingering and may do for some time yet.And the situation isn't going to do anything for tech company valuations generally. US$13 bln CrowdStrike's share price was down -11% on Friday alone, down -18% for the week.Interestingly, China seems to have escaped the issue, largely due to its self-sufficiency policies. But it has hit Hong Kong.A new research note by the New York Fed is pointing out that since the GFC, American factory productivity improvements have stalled. Tech has been no saviour to this sector. Prior to that, large firms built innovative advances. But since even the leading firms haven't got productivity gains. They call the change a 'mystery'. Even shifting low-wage production offshore didn't have the effect of raising it. Nor competition, it seems. And all this come as their employed workforce hit record highs.In Canada, their expected May retreat in retail sales after the strong April gain came in deeper than expected. If it wasn't for good car sales, it would have been much worse. June is expected to be -0.3% lower too. Now their year-on-year gain is only +1.0%, much less than their inflation of +2.7%.Canadian producer prices rose +2.8% in the year to June, the same as for the year to May.Japanese inflation stayed at 2.8% in June, well above their central bank's upper target range. It has been consistently above 2% since April 2022. Food prices rose 3.6% in June although that was lower than the May 4.1% rate. Energy prices were up 2.4% but that is somewhat artificially high because fuel subsidies ended in May. These levels are marginally lower than analyst expectations.China has ended its internal policy meetings, the Third Plenum. As suspected, little real economic reform seems to have been on their agenda. Just more of a 'security is everything' attitude, more excessive adverbs, and a seeming turn inward. Those hoping for 'reform' and 'opening up' will have been disappointed.The UST 10yr yield is now at 4.24% and unchanged from Saturday.On Wall Street, earnings season will hit a crescendo this week with over thirty companies boasting market caps exceeding US$100 bln are set to unveil their Q2 financial reports. So far, only one in seven of S&P500 companies have reported Q2 results but they have been strong. Of those most are reporting earnings growth, and more than anticipated by analysts.The price of gold will start today up just +US$3 from Saturday at US$2401/oz after Friday night's big drop.Oil prices are holding lower at just on US$78.50/bbl in the US while the international Brent price is just under US$82/bbl.The Kiwi dollar starts today little-changed at 60.1 USc but more than -1c over the past week. Against the Aussie we are still at 89.9 AUc. Against the euro we are also still at 55.2 euro cents. That all means our TWI-5 starts today at 69 but down -90 bps for the week.The bitcoin price starts today at US$66,720 and up a minor +0.3% from this time Saturday. Volatility over the past 24 hours has been low at just on +/- 0.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news policymakers are still struggling with the last-mile gains in their war on inflation.But first, the number of Americans making initial jobless claims rose last week and by slightly more than expected. That takes them back to early June levels and while not high, it does arrest the recent reduction trend. And there were less claims in the same week a year ago. It is too early to say if this is a labour market turning point, or an outlier. There are now just under 2 mln people on these benefits.The Philly Fed factory survey rose sharply to its best level in four months driven by new orders. The outlook for the next year was especially positive.Japanese exports rose to a three month high in June, a much better outcome than anticipated. While not a record, these exports are at an historically high level and only bested by two previous months in the past year. They are up more than +5% year-on-year and delivered a surprise trade surplus. That is mainly because energy costs no longer swell their import bill.India's central bank is turning its attention away from supporting breakneck economic growth, to controlling inflation. They signaled this in a Bulletin released yesterday - and a return to the policies of Raghuram Rajan, the ones he got removed by Modi for.The ECB monetary policy review overnight delivered no change to their official interest rate settings. They are holding their restrictive policies because inflation pressures remain and wage gains seem to be driving those. European companies are suffering decreased profitability because they are unable to pass on these elevated costs, they say. But they reckon the pressures will be temporary until inflation is beaten. Still they seem very unsure when rate cuts will happen again.In Australia, their employed workforce expanded by +50,100 in June to 14.4 mln. +43,300 of those new jobs were full-time, +6,800 were part-time. Their jobless rate rose marginally to 4.1% and their participation rate is still hovering around 67%. Their employment rate of their working-age population is 64.2%. Container freight rates were little-changed last week but that is of no comfort because they are staying +286% higher than year-ago levels. The usual factors remain in play although the Panama Canal water levels are recovering and back to the 5-year average. July is when levels usually start to recover. Bulk cargo rates are little-changed from a week ago, although they did rise modestly in between before retreating yesterday.And we should probably note - again - that the copper price is still retreating hard, down -7.5 in the past week alone. The reason relates to demand out of the stuttering Chinese economy. Nickel, cobalt and lithium are all suffering too, all components of the 'green transition'.The UST 10yr yield is now at 4.19% and up +5 bps from yesterday. The price of gold will start today up +US$2 from yesterday at US$2455/oz and still hovering near its all-time highs.Oil prices are up +50 USc at just on US$82/bbl in the US while the international Brent price is just over US$84.50/bbl.The Kiwi dollar starts today little-changed at 60.6 USc. Against the Aussie we are also little-changed at 90.2 AUc. Against the euro we are still at 55.6 euro cents. That all means our TWI-5 starts today at 69.4 and essentially unchanged from this time yesterday.The bitcoin price starts today at US$63.799 and down -0.9% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.4%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

New Zealand's nascent private credit industry could account for up to 5% of business lending to operating companies over time, suggests Aotea Asset Management (AAM) executive director Will Carnachan.AAM, which launched three years ago, is a corporate debt fund manager organising wholesale investorsto contribute to direct secured loans to businesses. Private credit, a form of shadow banking, has made headlines in the US, Europe and Australia over the past couple of years. The International Monetary Fund estimates the fast growing "opaque" and " highly interconnected" private credit market topped US$2.1 trillion globally last year, and over time "could become a systemic risk for the broader financial system."In a new episode of interest.co.nz's Of Interest podcast, Carnachan says in NZ the largely unregulated private credit industry's probably a decade behind where it's at in larger economies, including Australia's."I don't necessarily think this industry will, or should, become heavily regulated over time because a big part of the driver here is to move risk away from deposit taking institutions which carry systemic risk. But it is really important, I think, for the longevity of the industry that managers are being really transparent around how they're conducting themselves, how they're valuing their assets," Carnachan says."There is huge potential for this industry to grow...If you look at that business lending segment in New Zealand, it's roughly $120 billion, a lot of that's property linked. If you say half of that relates to operating companies, $60 billion, I think realistically where private credit investors like ourselves could come in to help manage some of the risk it's really between 2% to 5% of that over time. A relatively small chunk of the market, but will create options for those great kiwi businesses that are looking to grow, looking to expand, looking to acquire."In the podcast Carnachan talks about who the private credit investors and borrowers are, the interest rates they earn and pay, how the floating rate loans are priced, loan covenants and syndications involved, the fees AAM charges, the impact of high interest rates and falling interest rates on private credit, where the sub-investment grade borrowers rank in S&P Global Ratings' methodology, how AAM's portfolio currently has no credit loss issues or impairment issues, and more."In terms of the return profile that we offer, we're a floating rate product, so we provide a spread or a margin above. We use the Official Cash Rate as the benchmark because it's well understood. So what that means is we are an inflation hedge because as inflation rises or falls, typically market rates move commensurately. But we can always lock in an attractive margin over that benchmark rate," says Carnachan."And I think it's important to understand in terms of that marginal credit spread, we do a lot of work around ensuring that that is driving really good risk adjusted returns for our investors, and also taking into account the fact that these underlying investments are relatively illiquid. So it's not a product that you can trade in and out of. It's a hold to maturity product.""We are effectively a fixed income product that provides, we think, a really attractive diversifier away from bonds and yield stocks."*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news American data is improving in a steady way without deficit or labour market stresses, so conditions seem right for monetary policy 'normalisation' to be completed.First, American mortgage applications rose an unusual +3.9% last week from a week ago to be -14% lower than the same week a year ago. Pushing things along was a drop of the benchmark mortgage interest rate to under 6.9% from just over 7%.Meanwhile, US housing starts rose more than expected in June (from May) to be -4.4% lower than year ago levels. But this is still a lowish level. Completions in June were unusually strong, adding more availability.And American industrial production beat estimates too, rising +1.6% from a year ago, the biggest gain since November 2022.The US Fed's Beige Book surveys paints a picture of a modest expansion with some uneven variations across the Fed Districts. It also confirms cooling inflation - but little labour market stress yet.There was a well-supported but relatively small US Treasury 20yr bond auction earlier today and that delivered a median yield of 4.41%. That is very little different to the 4.40% median yield at the prior equivalent event a month ago. Because US deficits are actually shrinking, and quite fast, the pressure is off this fundraising.More Fed officials are signaling that they are moving closer to a rate cut, and markets are starting to price that in. They seem to have beaten inflation without crashing their labour market. 'Normalisation' can proceed now, it seems.In Japan, the Reuters/Tankan sentiment index for the factory sector jumped to +11 points in July from +6 in June. It was the first rise in 4 months. Meanwhile, the index for the service sector cooled, reflecting a patchy economic outlook. The latest survey comes two weeks before the Bank of Japan’s July policy meeting where it could raise interest rates again and announce its bond purchase tapering plans. In China, which dominates the global rare-earth minerals processing industry with its state-owned enterprises, it is finding it hard-trading as prices sink sharply and losses pile up.We should also note that China's rebar steel prices have slumped to 2017 levels, now just over half the level they were at the peak in 2021.And the World Trade Organisation says China is backsliding on key reforms and lacks transparency on subsidies. (Para 23, page 12.) They say China's secret subsidies could top US$900 bln.Homebuilding is at a low ebb in Australia - but the March results released yesterday suggest it picked up in Q1.The UST 10yr yield is now at 4.14% and down -3 bps from yesterday. The price of gold will start today down -US$9 from yesterday at US$2453/oz and now off its all-time record high.Oil prices are up +US$1 at just on US$81.50/bbl in the US while the international Brent price is just under US$84.50/bbl.The Kiwi dollar starts today recovered somewhat at 60.7 USc and and up +¼c. Against the Aussie we are up +½c at 90.3 AUc. Against the euro we are unchanged at 55.5 euro cents. That all means our TWI-5 starts today at 69.4 and up +10 bps from this time yesterday.The bitcoin price starts today at US$64,350 and virtually unchanged (-0.1%) from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the IMF seems the global economy in a "sticky spot".But first up today we can report that the overnight dairy auction defied recent trends and the futures market. Instead of another retreat, in fact it held, virtually unchanged (+0.4). But the two key powders did decline, just not as much as expected. SMP was down -1.1% (less than the -2% expected) and WMP was down -1.6% (much less than the -6% expected). The event was rescued by the +6.2% rise in Cheddar cheese and to a lesser extent the +0.8% rise in the butter price. The small +0.4% gain in USD was enhanced to +0.8% in NZD.Now all eyes will turn to the New Zealand consumers’ price index for the June quarter, which will be released at 10:45am today. Check back then because we will have full coverage of data that could well be market-moving.Overnight, American retail sales rose +2.3% in June from a year ago, not quite enough for this to be a 'real' gain, but closer than recently. There was no change between May and June, because car sales took a breather.So far in 2024, American car repossessions are up +23% compared with the same period last year, according to data from Cox Automotive. That comes after a long low period however, but they are up +14% from pre-pandemic levels.And last week, retail sales as measured by the Redbook Index for physical stores rose much less than recently, although the year-on-year gain was still an impressive +4.8%. But is was the weakest gain since late March.Slowing American retail sales growth its putting upward pressure in business inventories, although again, this is relatively minor in the grand scheme of things. In May they were +1.7% higher than a year ago, but related to current sales levels they are unchanged.In Canada, CPI inflation for June was released overnight and it eased to 2.7% from 2.9% in the prior month. This wasn't expected because markets ad assumed it would remain at the 2.9% mark. The Canadians have already started their easing cycle in their policy interest rate, even though they target a 2% midpoint in a 1-3% range.Perhaps the 'early start' is needed because they had a rather sharp drop in new housing starts in June, down by more than -20,000 or -9% from May. Vancouver fell -13%, due to sharp falls in multi-unit starts; Toronto crashed -37% for the same reason.The IMF expects the global economy to grow 3.2% in 2024, the same as in the April outlook but the 2025 growth forecast was revised higher by 0.1 percentage point to 3.3%. For 2024, they revised their forecasts for the US down to 2.6% (vs 2.7%), reflecting the slower-than-expected start to the year. In Europe, growth for the Euro Area is seen higher (0.9% vs 0.8%). In Asia, growth forecasts were also revised higher for both China (5% vs 4.6%) and India (7% vs 6.8%) while the Japanese GDP in seen expanding at a slower pace (0.7% vs 0.9%). For Australia, they marginally lowered their 2024 estimate -0.1% but left 2025 unchanged. New Zealand did not get a mention in this report. Meanwhile, they warned that services inflation is holding up progress on disinflation, which is complicating monetary policy normalisation.The UST 10yr yield is now at 4.17% and down -5 bps from yesterday. The price of gold will start today up +US$42 from yesterday at US$2464/oz and that is an all-time record high.Oil prices are down -US$1 at just on US$80.50/bbl in the US while the international Brent price is just over US$83.50/bbl.The Kiwi dollar starts today sharply lower at 60.4 USc and down nearly another -½c. Against the Aussie we are down at 89.8 AUc. Against the euro we are down at 55.5 euro cents. That all means our TWI-5 starts today at 69.3 and down -30 bps from this time yesterday.The bitcoin price starts today at US$64,426 and up +1.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.2%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news of the unavoidable reporting of a Chinese economic stumble.But first up today, we should note that Fed boss Powell was speaking and said the three American inflation readings in the June quarter do "add somewhat to confidence" that the pace of price increases is returning to the Fed's target in a sustainable fashion. They were remarks that suggest interest rate cuts may not be far off for them.In their real economy, the NY Empire State survey of factories wasn't particularly positive, although to be fair it was little-changed in June. And expectations in this survey continue to be quite positive however.Indian goods exports in June were little-changed from a year ago at a modest US$35 bln, up +2.6% from the same month in 2023. Services exports rose +8.9% however. Services exports are at about the same value as for goods, in India.China's economy faltered in Q2-2024, keeping alive expectations Beijing will need to unleash even more stimulus.Despite expectations that CCP discipline would press China's Q2 GDP result to the party's target, in fact they published a much lower than expected growth result. The Chinese economy expanded +4.7% in Q2 from the same period in Q3, missing market forecasts of +5.1% and slowing from a +5.3% growth in Q1. It was the weakest yearly advance since Q1-2023, and comes amid their persistent property downturn, weak domestic demand, a falling yuan, and trade frictions with the West. Irt also comes on the opening days of the CCP "Third Plenum", a huge set piece of Chinese policy making. Real reform is not anticipated however.Underscoring the real estate industry problems, China said new dwelling sales were -25% lower in June than a year ago. New house prices in 70 cities declined by -4.5% year-on-year in June, after a -3.9% equivalent fall in the previous month. It was the 12th straight month of retreat and the fastest pace since June 2015. Only one of those 70 cities recorded a year-on-year rise. None recorded rises for second hand home sales. Some cities are now recording -12% sales price falls.China also said June retail sales were up +2.0% from the same month a year ago, up +3.0% in you exclude car sales. At least this is better than inflation, so it records 'real' gains.And China reported that electricity production rose +2.3% in June from year-ago levels. It is crude, but this may be a better indicator of 'growth' than the official GDP data. Still, they claim industrial production rose +5.3% in June on the same basis. It seems unlikely unless they are making impressively large energy efficiency gains nationwide. (Maybe readers know how to reconcile these various data claims better than us? Please clarify for all in the comment section below.)The EU reported May industrial production levels in May, and those fell -2.5% from the same month a year ago, down -2.9% in the Euro Area..And perhaps we should note that the electrification of the world will require more copper than can be produced, according to a recent study. EV demand to meet 100% net zero by 2050 would need that. But if instead vehicle demand shifted to hybrids, there may be enough copper to achieve the goal.In Australia, all eyes seem to be on how a major union, the CFMEU, turned itself into a bikie gang complete with standover tactics. This isn't 'news' as such, just that it is now in public discussion in efforts to clean out their leadership and culture.The UST 10yr yield is now at 4.22% and up +3 bps from yesterday. The price of gold will start today up +US$12 from yesterday at US$2422/oz.Oil prices are down -50 USc at just on US$81.50/bbl in the US while the international Brent price is just under US$84.50/bbl.The Kiwi dollar starts today sharply lower at 60.8 USc and down nearly -½c. Against the Aussie we are down at 90 AUc. Against the euro we are down at 55.8 euro cents. That all means our TWI-5 starts today at 69.5 and down -40 bps from this time yesterday.The bitcoin price starts today at US$63,314 and up +5.4% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.2%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news other than the crazy American political campaign which just seems to feed conspiracy narratives. We will ignore that and just concentrate on the data.This coming week, all eyes will be on the New Zealand CPI rate for Q2-2024 which will be released on Wednesday. Preview here. Japan, Canada and the UK will all also release June CPI data. Later today we will get the China GDP result for Q2 and it is likely to confirm to the CCP designated targets. But of more interest will be their retail sales, industrial production, and electricity production data. We will also get Australia's June labour force data this week. And from the US it will be retail sales, housing starts, and industrial production. Also, Wall Street will get to see the second week of their Q2 earnings season. The first week was very positive.Over the weekend, China reported new yuan data for June and it wasn't especially strong. Chinese banks extended +¥2.1 tln in new yuan loans in June, a sharp contraction from the +¥3.1 tln in June the previous year, and slightly below market expectations of ¥2.2 tln. The slip aligned with the sharp slowdown in outstanding loan growth, dropping to +8.1% in June from +9.3% in the previous month, to mark the smallest amount of loan growth since data started being recorded in 1998. A year ago it grew at +11.3%. Total 'social financing' in June was -22% less that the same month a year ago.China's exports were expected to rise +8% in June ahead of new American tariffs. But they actually rose +8.6% to a 15 month high. Their imports fell -2.3% however when a +2.8% rise was expected. That divergence meant they reported another big surplus - which will undoubtedly spread the fear of Chinese dumping from its over-capacity situation.They reported they imported almost -16% less from New Zealand in June than in the same month a year ago. They exported +2.4% more to us. For Australia, imports were down -5.2% and exports down -4.9%. For the US, their imports from them were down -4.9% and exports to them up +1.5%. Overall trading with China is pretty muted now. The only destinations that China has good exports to were Brazil, Vietnam, Indonesia, and surprisingly Taiwan. Everyone else - Russia included - is very ho-hum. And total trade (imports and exports) is only healthy with Vietnam, Malaysia, and Brazil.Japanese industrial production rose +3.6% in May from the prior month to be up +1.1% from a year ago, solidifying the evidence of an improving Japanese economy. No doubt the recent lower yen has helped, especially at the pressure from energy prices has waned substantially.India's inflation rate rose to 5.1% in June. up a rather startling +1.3 in June alone. From a year ago, food prices were up +9.4% however within that. This rise was not expected, although their central bank is not expected to react to it because they have given themselves a very generous 2% to 6% target range for inflation. But they are now well above the 4% midpoint and the froth developing in their breakneck economic expansion will need to be dealt with soon.Industrial output in India rose +5.9% in May from a year ago, well above market expectations of a +4.9% gain and marking the highest growth rate since October 2023. Manufacturing which accounts for nearly 80% of total industrial production, expanded by +4.6% with surged growth noted in the pharmaceutical sector (+7.5%), basic metals (+7.8%), mining (+6.6%) and electricity (+13.7%).American producer prices rose +2.6% in June from a year ago (+0.3% for the month), the most since March 2023, and rising from an upwardly revised 2.4% rate in May. Markets had expected a rise of 2.3%. Under the hood, inflation pressures still lurk but remain at a much more manageable level.But despite all the vastly improved economic signals, American consumer sentiment still lags. According to the widely-watched University of Michigan survey, it fell for a fourth straight month in July to its lowest since November. Nearly half of consumers are still concerned about high prices and economic uncertainty persisting as their upcoming election looms.In Australia, the number of permanent arrivals in the country is now almost at a new record high in a very sharp rebound. +12,680 people arrived in the country in May, taking the annual level to +161,000. The record high permanent arrival level was +163,400 in February 2009.The UST 10yr yield is now at 4.19% and unchanged from Saturday. A week ago it was at 4.28% so a -9 bps net fall since then. The S&P futures, which actively trade through the weekend, suggest Wall Street will open tomorrow with a +0.9% gain.The price of gold will start today down -US$4 from Saturday at US$2410/oz. So far, no safe haven rush.Oil prices are still at just under US$81.50/bbl in the US

The Reserve Bank surprised the market on Wednesday by dropping hints it was open to cutting rates sooner than planned, due to signs the economy was getting too weak.While the tone shift was unexpected, the central bank was reacting to the same data which had caused ASB’s economics team to change their own interest rate forecast the week prior.Nick Tuffley, the retail bank’s chief economist, said economic data was sending very different signals in July than it had been prior to the RBNZ’s meeting in May.Monetary policymakers had then been facing consecutive inflation data releases which showed domestic pressure tracking well above forecasts, he said. “When we roll forward to where we are now, it's just clear that the economy is performing weaker than what they had been anticipating [in May]. We are now forecasting another mild double dip recession; that may not occur but it just highlights how weak things look”. The RBNZ had been forecasting slight economic growth from here, picking up momentum in each subsequent quarter, but fresh forecasts look like there will be further contractions. Tuffley told the Of Interest podcast that the Monetary Policy Committee would have been looking at new forecasts, even though they don’t get released to the public.“When the Reserve Bank does these monetary policy reviews, it will have re-cranked its forecasts again and will be working on an updated view,” he said. “Undoubtedly, what that view is showing is that GDP is going to be much weaker over the course of this year than they anticipated”. This would likely mean higher unemployment, slower wage growth, and disinflation happening faster than forecast as well. Tuffley expects annual inflation was 3.3% in June.“The other thing we are mindful of is that [monetary policy] is like an oil tanker going at full speed, when you put it in reverse you don’t see much impact on momentum for a while”.For a long time, the Reserve Bank has been most worried about cutting rates too soon and leaving the embers of inflation smoldering, ready to bust back into flames.Now the central bank was becoming very confident inflation was coming under control and was shifting focus to the risk that interest rates are damaging the economy unnecessarily.Since the Coalition Government removed RBNZ’s employment mandate, the policymakers are nominally not required to consider economic damage in their decisions. However, inflation may drop below 2% if they allow the economy to become too weak and the committee is tasked with avoiding “unnecessary volatility” in output and employment.Tuffley expects the Official Cash Rate to be cut in November, while the RBNZ most recently suggested it was planning to hold off until next August — although that is likely to change.Bond traders and other financial market participants have priced in a decent change of a rate cut at the RBNZ’s next meeting this August, and possibly a 50 basis point cut in November. Tuffley said this sort of gap between the central bank and the market was fairly common.“Markets tend to forecast rate cuts tomorrow, whilst the Reserve Bank might be looking at next year, and often you end up meeting a bit in the middle,” he said.

New Zealand exporters to the United States might be at greater risk of being disrupted than those exporting to China, according to one trade expert.Despite talk about the need to diversify away from China due to geopolitical differences, it may be the United States that hits Kiwi businesses with tariffs intended to shut them out.Stephen Jacobi, the executive director of the NZ International Business Forum, said a second Trump presidency was a “sword of Damocles hanging over the global economy”. Speaking on the Of Interest podcast, Jacobi said the 45th president had imposed “enormous tariffs” during his first term and plans to go further if elected for a second time in November.“This time, the big thing is the 10% tariff he keeps talking about. If a 10% tariff was imposed on New Zealand exports to the United States across the board, a lot of trade would be killed off,” he said. As part of his election campaign, Donald Trump has proposed a 10% tariff on all imports and a 60% tariff on imports from China. This would go much further than what he did after 2016. Earlier tariffs of between 10% and 15% were applied to a specific list of goods, which were largely targeted at China but also included various other countries. New Zealand was subjected to a 15% tariff on steel and aluminium, for example. This was bad enough, but a blanket tariff would hit much more important exports such as beef and dairy. Jacobi said these sectors already faced strong competition from local US producers and there was also a risk that some international competitors might be able to dodge the tariff. For example, Australia was exempted from the steel and aluminium tariffs because it had a free trade agreement with the United States — which NZ does not have.“Go figure. This is the country that won't give us a trade agreement,” Jacobi said. “I spent 10 years of my life trying to argue for an FTA with the United States and thought we had it in TPP, only to see them leave when President Trump got elected”.It was this lack of guaranteed market access that makes the United States look like a riskier bet than China, where NZ does have a free trade agreement.“Look, it's not always easy doing business with China, let's face it. But they have opened the market to us and it has transformed our economy”.Chinese consumers were often the only ones who wanted to buy Kiwi products at the volumes and prices businesses require, he said. Jacobi said he was not supportive of efforts to shift trade away from China, or join the AUKUS security agreement — which was clearly directed at China.“Well, the risk [of disruption] is greater from the United States, potentially with a change of government”.

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news inflation's pressures seem to be cooling in all the world's major economies.But first, in seasonally-adjusted terms, the number of people claiming American unemployment benefits fell last week by -17,000 from the prior week and a 5-week low, and below market expectations of 236,000. In actual terms, there was little-change. Either way, the levels are low and not indicating impending labour market stress.The all-important American consumer inflation rate fell to 3.0% in June, and lower that the expected 3.1%. Their core inflation rate fell too. Food costs rose just 2.2% and energy costs just 1.0%. Petrol prices actually fell -2.5%. Keeping it up were airfares (+9.4%) and rent (+5.2%).Clearly the conditions for a US Fed rate cut are getting closer. Financial markets however displayed mixed and muted reactions after the release. Bond yields fell, and the USD had a small move lower. And Equity markets decided they might have over-priced future rate cut effects so pulled back from its record-high pricing.The UST 30yr bond auction today was reasonably well supported at a median yield of 4.33%. This is very similar to the 4.35% at the equally well-supported prior equivalent event of a month ago.The US Federal government had a monthly deficit of -US$66 bln in June, which takes its full deficit to -$1.57 tln for the past twelve months. That makes it now equivalent to -5.5% of GDP. As large as these levels seem, they record a remarkable improvement. At the end of the Trump term, the annual deficit was running at US$2.7 tln or -9.3% of their GDP. They have clearly made progress cleaning up some of their mess. But overall levels of Federal debt to third parties is still growing, although no longer as fast as economic activity.In Japan, machinery orders fell in May from April when a small rise was anticipated. Japan's core machinery orders, which exclude those for ships and electric power companies, fell -3.2% month-on-month. This also missed market expectations for a +0.8% gain. The decrease in capital spending was driven by a sharp decline in the non-manufacturing sector, although machinery orders from manufacturers rose +1% from April to be +10.8% higher than year-ago levels. Orders including the big lumpy items rose sharply, however.By the way, the very weak Japanese yen recovered somewhat (+2%) after the June US CPI data was released. Markets think the Bank of Japan intervened to generate the rally.Meanwhile, Germany said its CPI inflation rate fell to 2.2% in JuneAustralian consumer inflation expectations barely edged lower to 4.3% in July from 4.4% in June. This is no progress because they averaged less than 4% from 2012 to 2019. They seem stuck at over 4%, well above the RBA's target range.And staying in Australia, mining giant BHP is mothballing its Western Australia nickel mines, including the country's only smelter for the key battery metal. They said the move was due to a global oversupply that has crashed nickel prices over the past year. The glut has been driven by a surge in production from Indonesia, where many operations are bankrolled by Chinese investors. Thousands of Aussie jobs are at risk.Global container freight rates may be reaching their peak. They rose just +1% last week from the prior week, staying in the stratosphere. But at least the impetus seems to have stopped. But when will they fall back to reasonable levels? Canal pressures are the key to that. Bulk cargo freight rates eased slightly.The UST 10yr yield is now at 4.19% and down -9 bps from yesterday. The price of gold will start today up +US$41 from yesterday at US$2413/oz. The last, and only, time it was over US$2400 was in mid-May. It record high is US$2,450/oz.Oil prices are still at just under US$81.50/bbl in the US while the international Brent price is up +50 USc at just on US$85/bbl.The Kiwi dollar starts today little-changed from yesterday and now at 60.9 USc. Against the Aussie we are still at 90.2 AUc. Against the euro we are marginally lower at 56.1 euro cents. That all means our TWI-5 starts today down -10 bps at 69.8.The bitcoin price starts today at US$57,888 and again, virtually unchanged from this time yesterday (+0.3%). Volatility over the past 24 hours has stayed modest at just under +/- 2.0%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news global trade distortions seem to be growing.But first, after three weeks of gains (some quite minor though), last week US mortgage application levels fell again, and are now down -13% lower than the same weak week a year ago. The push back up of benchmark mortgage rates - above 7% - is an effective barrier for many potential house buyers there.Another well supported UST 10yr bond auction brought a median yield of 4.22% and sharply lower than the 4.37% at the prior equivalent event a month ago.In the Wall Street equity markets, both the S&P500 and the Nasdaq hit new all-time record highs today. Ditto Tokyo. All this comes ahead of tomorrow's US CPI data for June when a 3.1% rate is anticipated.Meanwhile in Hong Kong, equity markets are going the other way. They peaked in 2018 and it has been downhill from there since. It's gloss has certainly faded the closer it is tied to the PRC. And Shanghai's peaks were back in 2007 and 2015. Neither are places to find equity gains recently.In China, their CPI inflation is still positive, just. It came in at 0.2% from a year ago in June. Analysts had expected it to rise +0.4% from the April and may rates of +0.3%. Beef prices are still falling hard, now down -13% from a year ago. Lamb prices are down -7% on the same basis. Milk prices are down -1.8%.China's producer prices are still deflating, down -0.8% in June from a year ago. That was as expected and less than the -1.4% annual rate in June.'Ordinary' demand and the coming on-stream of new supply, especially from Chinese-owned mines in West Africa, has the prospects for the iron ore price to slip below US$100/tonne soon. There are implications for Australia here although their high-grade product and shorter shipping distance are advantages that won't go away.Tomorrow we will get China's export data for June, expected to be strong in advance of new American tariffs. But Chinese over-capacity is causing a spreading backlash and countries from Mexico, Brazil, Chile, and the EU are racing to protect themselves from the dumping flood. And now Southeast Asian nations like Indonesia, Thailand, Vietnam and South Korea are also weighing restrictions on Chinese exports. But some countries are so closely tied to China's orbit that it will be hard to resist China's pushback. This is a trade pressure that just won't go away and may reshape the global trade landscape - again.Stubbornly high freight rates, partly in response to the over-capacity/export imbalances, aren't helping either. De-risking has a long way to go, it seems.The UST 10yr yield is now at 4.28% and down -2 bps from yesterday. The price of gold will start today up +US$21 from yesterday at US$2372/oz.Oil prices are +50 USc firmer at just under US$81.50/bbl in the US while the international Brent price is little-changed at just on US$84.50/bbl.The Kiwi dollar starts today -40 bps lower than this time yesterday and now at 60.8 USc after the RBNZ MPR. This takes it back to the level we had at the start of the month. Against the Aussie we are fallen almost -¾c to 90.2 AUc. Against the euro we are down -½c at 56.2 euro cents. That all means our TWI-5 starts today down -60 bps at 69.9.The bitcoin price starts today at US$57,692 and virtually unchanged from this time yesterday. Volatility over the past 24 hours has stayed modest at just on +/- 1.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the US Fed is setting the scene for rate cuts down the track. When remains uncertain but financial markets have priced one in fully by November. The next big piece of relevant US data is Friday's CPI release.But first up today, even though futures markets indicated WMP would hold in this week's GDP Pulse event but there would be downside risk to SMP, in fact both fell. In the event, WMP slipped -1.2% from last week's full auction, and SMP fell -1.4%. That puts both back to late April levels. The lack of gains might worry some of the analysts who forecast next season' farmgate payout levels.American retail sales are rising faster now. The weekly Redbook report on sales activity at physical stores was up an impressive +6.3% from the same week a year ago. Obviously that is a way faster rise than inflation. We haven't seen a surge since more than that since the end of 2022 when the base was very weak.And that is reflected in SME business attitudes. The NFIB Small Business Optimism Index rose in June to its highest level of the year, although to be fair it is only back to 2023 levels again, and in a longer context current levels are not high.In his semi-annual monetary policy report to Congress, Fed boss Powell told the Senate Banking committee that the central bank does not expect it will be appropriate to reduce interest rates until it has gained greater confidence that inflation is moving sustainably toward 2%. He said data in the first quarter did not support a rate cut. But he did note that the more recent inflation readings have shown some modest progress. He said reducing policy restraint too late or too little could unduly weaken economic activity and employment while doing it too soon or too much could stall or even reverse inflation progress to date. His core message was however that the US economy is no longer overheated.Today's UST 3yr bond auction was very well supported again, delivering a median yield of 4.35%. That compares with the prior equivalent event a month ago at 4.59%.Taiwan reported surging exports overnight, up more than +23% from the same month a year ago. It was their strongest growth in export demand since 2022, on the back of technology products. Analysts had expected an +11% rise which itself would have been strong. Twice that is something special.China might also be about to report a surge in exports, but that will be more about trying to get ahead of new American tariffs - after which a shadow will follow.In China, giant property developer Vanke warned that its losses grew sharply in Q2-2024, saying that investment in some projects “has been over-optimistic.”In Australia, the Westpac-Melbourne Institute Consumer Sentiment survey index fell in July from June. That leaves it broadly in line with the very low levels that started in July 2022. Pre-pandemic these levels were generally +20% higher. So far their 'stage 3' tax cuts have done little to improve sentiment. The biggest declines were among middle income earners, Victorians, and hospitality and construction workers. About 60% of those surveyed now expect the RBA to raise its policy rate, a big rise from 41% expecting that in the June survey.According to the widely-watched NAB business sentiment survey, business conditions ease further in June, but business confidence bounced up. It is surprising that business confident is now back into positive territory and at its highest level since early 2023 when conditions continue to deteriorate. What business owners see to justify that is uncertain but to be fair the rise is hardly out of the margin for error.India is about to overtake China as the top driver of global food demand over the next decade, according to recent estimates from the FAO. Southeast Asian nations are on the rise too. The fading of China, due in part to demographic shifts and an about-to-fall population, is a key global trend.Global food prices were low and stable in June, and lower than any of the past three years. Given inflation over that period, the real cost of food is back to levels it first reached in 2007. For meat it is back to levels first reached ten years ago; for dairy back to levels first reached in 2010. Food prices are no longer a global stress point. By just about any measure, farmers should be paid more.The UST 10yr yield is now at 4.30% and up +3 bps from yesterday. The price of gold will start today up a minor +US$5 from yesterday at US$2351/oz.Oil prices are -US$1 lower at just under US$81/bbl in the US while the international Brent price is down at just on US$84.50/bbl.The Kiwi dollar starts today -10 bps softer from yesterday and now at 61.2 USc. Against the Aussie we are slipped to 90.9 AUc. Against the euro we are holding at 56.7 euro cents. That all means our TWI-5 sta

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news of little global fallout from the weekend election results.First up today, we should note that American consumer inflation expectations for the year ahead slipped for a second consecutive month to now be +3%. That is 'progress' from 3.2% in May. The decline was broad-based over food, petrol, medical care, and rent. One year ahead earnings growth is expected to match that at +3%. Three year ahead inflation is expected to come in at 2.9% and five year ahead the expectation is now 2.8%. Both these are improvements.Although minor, the Fed will be pleased with the shift because that means the higher rises in April and May were aberrations.The expected rise in American consumer credit in May came through, although to be fair, even if it was more than expected its was a pretty modest +$11.4 bln rise, up at an annual rate of +2.7%.In coastal Texas, overbuilding and climate denial is catching up with them. More than 2 mln people are without power as tropical storm Beryl lashes the region. Note it is not even classified as a hurricane anymore. Beryl has been the earliest-ever named hurricane in a season that is upcoming.China isn't immune to climate stress either. To give perspective to their response to recent severe droughts in the north, and floods in the south, that have just added another ¥3.3 bln (NZ$750 mln) for disaster relief in the past three weeks.A little air seems to be going out of the rising Australian housing markets - as an indication from their lending data shows. Owner-occupier loan demand fell -2.0% in May from April to now be up +12% year-on-year. This wasn't expected - a +2% rise was expected.Overall we should note a broad-based retreat by many commodity prices today. Mineral commodities are being led by rebar steel which is down -2.8% today to be down -5.2% for the month and down -10.7% in a year. Copper and iron ore are off too today although not a sharply as construction steel. Nickel is down too, but not zinc. Aluminium is holding.On the food side, we are seeing a sharp fall in wheat prices, and soybean prices are staying down. We get another look at dairy prices tomorrow morning at the next GDT Pulse event. The futures markets indicate WMP will hold but there is downside risk to SMP.The UST 10yr yield is now at 4.27% and little-changed from yesterday.The price of gold will start today down -US$33 from yesterday at US$2356/oz.Oil prices are -US$1 lower at just under US$82/bbl in the US while the international Brent price is down a bit more at just on US$85.50/bbl.The Kiwi dollar starts today -20 bps softer from yesterday and now at 61.3 USc. Against the Aussie we are slipped to 91 AUc. Against the euro we are holding at 56.6 euro cents. That all means our TWI-5 starts today at 70.5 and down a mere -10 bps.The bitcoin price starts today at US$56,063 and down -1.6% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.5%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

that in the three elections held over the weekend, 'democracy' seems to be signaling a rejection of the hard-line and hard-right.But first in the week ahead the main event will be Wednesday's RBNZ OCR review. But there will be other important global data released as well, including the American CPI and PPI results for June. China will release its versions of inflation monitoring as well, and the data on new yuan loans. India will release its June CPI data too, plus industrial production data for May. And from Australia we will get the NAB business sentiment results for June, and the Westpac consumer sentiment survey results.First up however we should note that China's foreign exchange reserves in USD were little-changed in June from May, holding the level they have been since late 2023. But they are rising in yuan, mainly because the yuan is depreciating. Their gold reserves remained unchanged for the second straight month at 72.8 million troy ounces (2264 tonnes) and that ends a gain for 18 consecutive months,Those reserves have been put to political use. First it was Sri Lanka, now Laos has succumbed to China's 'debt trap' diplomacy. China's 'encouragement' to develop their countries - with official Chinese loans - has plunged Laos into a financially unsustainable situation, and Beijing is now promising to 'help' them out of the mess. Easy money and a drive to 'catch up' is too much of an enticement for local leaders. In the end the price is subservience. Essentially, China now owns Laos.In Japan, their huge Government Pension Investment Fund, one of the world's biggest institutional investors, booked a +NZ$462 bln gain in the past year (more than New Zealand's entire economic activity as measured by GDP). They need it however. As wages rise there and their workforce ages further, the claims on that will rise. That fund alone has reserves of almost NZ$2.5 tln.On Saturday (NZT) the closely watched non-farm payrolls report for the US was released with a headline result of +206,000 larger employment in June, slightly more than the +190,000 expected. Their unemployment rate changed little at 4.1%.But this seasonally-adjusted data masks an actual rise of +547,000 people on company payrolls, although that was lower than the +844,000 increase the prior month. It also masks some downward revisions to the prior month.There are now 161.8 mil people employed in June in the US, including the unincorporated self employed, up +433,000 from May. So all the growth is in company payrolls and people are shifting out of self-employment to the more formal workforce.And that is conformed by pay rates. Average hourly pay hit US$30 for the first time ever in June, up +4.0% from a year ago (and rising faster than inflation). Average weekly earnings (which accounts for working hours), rose +3.7% (also more than inflation which is running at 3.3%). But these gains are now easing from earlier months.Basically, this data changed their economic situation little but is has a sense of a slowing trend. US Treasury yields fell on the news, but Wall Street equities took it in its stride. The USD eased very slightly.The Fed probably liked what it saw. New York Fed boss said the US economy was doing remarkably well and there had been significant progress towards inflation goals. Fed boss Powell will be testifying in Congress this coming week.The next US Fed rate review is on August 1, 2024 NZT.In Canada, their labour market report for June wasn't as positive. In fact their employed jobs fell a trivial -1,400 when a +22,500 rise was expected. They will be disappointed in that. This data probably advanced the case for a July rate cut when their central bank meets next on July 25, NZT. Their policy rate is currently 4.75%.And staying in Canada, there was some more positive news. Their widely-watched local June PMI rebounded sharply back to April growth levels, consigning the lowish May result to outlier status. They have now had eleven consecutive month of economic growth, the second highest string since 2016 (the pandemic aftermath excepted).France is voting in the second round of its most crucial legislative elections in recent years, with the early results suggest a sharp rejection of the far-right.. Voter turnout however is being described as being unusually high - as are the stakes. In Iran, the more moderate of the two options for 'President' (a position subservient to the top cleric) won handily in a signal their population wants a less confrontational government and more focus on economic improvement. And the British election delivered an unusually large 'landslide' for its center-left Labour Party, with strong gains for its third-force LibDems as well. The hard-right Reform Party won only 5 seats, despite getting 14% of the votes. Such is FPP. In Tokyo, their first female governor secured a third term on Sunday in the capital's election. It was also a clear rejection of hard-right nationalist opponents.The UST 10yr yield is now at 4.2

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news global container freight rates are rising to ridiculous levels now, just another element that is stifling world trade.But first up, we should note that it is a public holiday in the US; Independence Day. And it is likely that many will take tomorrow off as well to make a four-day weekend. To data from the world's largest economy is absent today.But there will be the non-farm payrolls results for June released tomorrow.In the US, car buyers are back despite elevated interest rates, but the June vehicles sales level probably fell to a 15.8 mln annualised rate. That is because of an industry-wide cyberattack in June that hobbled many major dealerships. The May sales level was 15.9 mln, and a year ago it was 16.1 mln. But the effect of the cyberattack is over now and there could well be a sharp catch-up in July.We are also awaiting China vehicle sales data for June, and there are no early indications in that market - which is almost twice as large as the US one. They expect to sell more than 30 mln vehicles in the year to June, with nearly half as NEVs. But given their rush to invest in manufacturing, they still have a serious over-capacity problem even at that sales level.And the EU says it will impose tariffs of up to 37.6% from today on their imports of electric vehicles made in China. That is expected to cost NZ$6.5 bln in lower trade between the two blocs.In Germany, factory orders eased by -1.6% in May from April, missing market estimates of a +0.5% expansion. That puts them -8.6% lower than the same month a year ago. And that is not insignificant in an economy as large as Germany.Of course there are elections in two European countries over the next few days. The British have voted and results are awaited. It will be a huge surprise if the opposition left-wing party doesn't win in a landslide. In France however, the expected far-right triumph looks like it isn't going to happen.In Australia, drought in the heart of Victoria's dairy country is putting a sharp squeeze on output there. Production is down sharply, and this could not come at a worse time. Dairy farmers are facing a -15% drop in the price they get from processors too that went into effect at the start of July.In Canada, they are suffering sharply lower real estate sales as well. In Toronto, volumes were down more than -15% in June from the same month a year ago. In Vancouver, the drop is -19%.The rise in global container freight rates isn't easing, according to the latest data for this week. These rates were up another +10% from last week to be three times higher than year-ago levels. The same causes are still there, with the highest increases for freight from China to Atlantic ports. Bulk cargo rates are up a net +5% for the week although they have eased slightly in the past few days. These are rates are +90% higher than year-ago levels.The UST 10yr yield is now at 4.37% and up +1 bp. The price of gold will start today virtually unchanged from yesterday at US$2357/oz and holding its higher level.Oil prices are +50 USc firmer from this time yesterday at just over US$83.50/bbl in the US while the international Brent price is up +US$1 at US$87.50/bbl.The Kiwi dollar starts today +¼c firmer from yesterday and back up at 61.2 USc. Against the Aussie we are still softer at 91 AUc. Against the euro we are also holding at 56.6 euro cents. That all means our TWI-5 starts today at 70.4 and unchanged from yesterday.The bitcoin price starts today at US$58,246 and down -3.2% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.2%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday. Go the ABs !

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news that while the world's politics is getting messier and more partisan, the world's big economies are basically doing ok.First up today, the US Fed released the minutes of its June 13 (NZT) meeting and those show it is in no hurry to cut its policy rate. But they do seem to be on alert for signs of labour-market deterioration.US mortgage applications fell -2.5% last week from the week before to be -12% lower than last year's weak level. The benchmark 30yr fixed mortgage rate blipped up over 7% again which won't have helped. So, no signs the hibernating American housing market is waking up yet.Reports of job layoffs among major companies remained very low in June, and noted strong hiring in the month.But the pre-cursor ADP Employment Report for June said American the private sector added 'only' +150,000 new jobs in the month, less than +160,000 expected. Analysts now expect the June non-farm payrolls to have expanded by +190,000 and we get that data on Saturday (NZT).There was a minor uptick in the weekly initial jobless claims last week taking them to 238,000 and lifting the number of people on these benefits to 1.8 mln but still well below where they started the year.US exports of goods and services dipped slightly in May from April but remain +4.3% higher than for the same month a year ago. The overall trade deficit was about US$9 bln more on that basis, insignificant for an economy as large as theirs.In something of a surprise, the widely-watched local ISM services PMI reported a contraction in June when a similar expansion to May was expected. This was suddenly its worst result since 2020. This garnered headlines. But the internationally benchmarked S&P Global/Markit version did report a rising expansion and at the fastest pace in a year. Again, take your pick depending on your inbuilt bias.Their May report for new factory orders revealed a small retreat from the prior month after a similar rise in April. Year-on-year they remain almost +1% higher however.In India, their service sector is on a real spurt higher. Sharp rises in sales and business activity were the main feature in June. International orders increased at a record pace, and they had their fastest upturn in employment for 22 months.But that is in sharp contrast to China. Although its June factory PMI was stronger than the official NBS version, the Caixin services PMI was weaker, and by quite a bit. But at least it is still expanding, although the rate is at its slowest pace since October 2023.And it wasn't too different in Japan. Their service sector stalled in June, according to the latest PMI data. The volume of new business was broadly unchanged from May.In Europe, perhaps we should note that Greece is introducing a six day/48 hour working week for some industries. But it only applies to businesses which operate on a 24-hour basis and is optional for workers.Meanwhile, Australian retail sales in May rose far less than inflation, a situation they have had for a long time now - since the beginning of 2023. What improvements there are coming from 'chasing bargains'.There was a small rise in May for dwelling building permits in Australia, and a helicopter view of these trends suggests they may have passed their tough.There were two PMIs out for Australia yesterday. The internationally-benchmarked Markit version shows their service sector growth was sustained in June. New business and activity both continued to rise, albeit at slower rates. But the AiG version for their factory sector isn't flash at all, even if it 'improved' from May.The UST 10yr yield is now at 4.36% and down -7 bps. The price of gold will start today up +US$32 from yesterday at US$2356/oz, up +1.4% in a day.Oil prices are little-changed from this time yesterday at just under US$83/bbl in the US while the international Brent price is still at US$86.50/bbl. And perhaps we should note that ahead of the American summer 'driving season' petrol prices there are marginally less than a year ago at this time.The Kiwi dollar starts today +¼c firmer from yesterday and back up at 61 USc. Against the Aussie we are -20 bps softer at 91 AUc. Against the euro we are also holding at 56.6 euro cents. That all means our TWI-5 starts today at 70.4 with a +10 bps gain.The bitcoin price starts today at US$60,198 and down -2.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.2%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Dairy prices nosedive. US data quite positive. China housing woes deepen. Inflation low in South Korea & EU. RBA minutes leave rate hike on table.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the final round of Australian tax cuts have come into effect.But first, the updated factory PMIs for the giant US economy have brought another diverging set. The S&P Global/Markit one, the internationally-benchmarked version, reported a rise based on a new order expansion to describe a moderately expanding sector. But the widely-watched local version from the ISM reported the opposite - easing new order levels and a small contraction in the sector. Take your pick. The recent trends in both are opposite too. It is hard to know what to make of these competing views, and markets seem to have ignored them.In China, the private PMI survey by Caixin was much more upbeat than the official government version. This internationally-benchmarked Caixin factory PMI reported that in June business conditions improved the most in over three years. But it turns out that is not saying a lot - the improvement from May was marginal. But at least it is positive, and underpinned by rising new orders.Staying in China, regular readers will know that we have been watching the Chinese Government bond yields falling into record-low territory as investors continued to snap up these bonds amid pessimism about the domestic economy. Now their central bank has moved to halt the slide.In Japan, consumer sentiment, which has been quite low for years, improved in June but not by much and not a meaningful or trend-changing amount.The German consumer inflation rate eased in June to just 2.2%, down from 2.4% in May. On an EU harmonised basis it fell to 2.5% from 2.8%. Their core inflation rate is a bit higher at 2.9% because the rise in food prices is now very low, and energy prices continue to retreat. They will be pleased with this progress and will be hoping it will be maintained.The full EU CPI rate will be released tomorrow and that is expected to come in at 2.5% and a slight reduction from May.In Australia, CoreLogic is reporting that dwelling values rose +0.7% nationally in June from May to be up +8.0% for the year. This rise is being led by a booming Perth market (+24% annually), although Brisbane (+16%) and Adelaide (+15%) are also strong contributors. Sydney's rises are about the average, but it is Melbourne's falls that offset the big gainers.And staying in Australia, their 'Stage Three' tax cuts have come in to operation. They will benefit about 11 mln earners. The plan that has gone into effect was originally proposed by the Morrison Government, but the Albanese Government modified it so that those earning under AU$147,000 per year got more, those earning for than that level had their gains trimmed by half.The UST 10yr yield is now at 4.48% and up +9 bps to start the Wall Street week. The price of gold will start today up +US$3 from yesterday at US$2329/oz.Oil prices are up +US$2 from this time yesterday at just on US$83/bbl in the US while the international Brent price is now US$86.50/bbl.The Kiwi dollar starts today slightly softer from yesterday at just on 60.8 USc. Against the Aussie we are slightly softer too at 91.2 AUc. Against the euro we are down -30 bps at 56.6 euro cents. That all means our TWI-5 starts today -20 bps lower at 70.3.The bitcoin price starts today at US$63,241 and up +2.6% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news July starts on shaky ground everywhere although the ground is firmer in the US than China.As this is the first week of July, it will be heavy with PMI survey results everywhere (except New Zealand). But the most important release this week will be the American labour market report (their non-farms payrolls) for June on Saturday. Analysts currently expect another +180,000 gain. And before that we get their JOLTs report.In Europe, election results in France and England will shape the week. But so will CPI inflation rates. Not only do we get them for the EU and the other big EU economies, they also come for South Korea, Turkey, Indonesia, and the Philippines too.Over the weekend, Japanese industrial production data was released showing it rose +2.8% in May from April, beating market forecasts. It also recorded an unusual year-on-year gain too. This was the second increase so far this year, mainly due to strong motor vehicles output. They think June will slip back but July will be another gainer.But it was all backwards in China.The official factory PMI was steady for the second straight month as expected. The latest result marked the fourth contraction in factory activity so far this year, as Beijing was struggles to spur an economic revival amid weak demand, deflation risks, and a protracted property weakness. New orders, foreign sales, and buying levels all declined for the second month in a rowAnd their official services PMI slipped as well, now barely expanding. While it was the 18th consecutive month of expansion in June, the latest result was the softest since last December, as new orders and new export orders continues to contract.On Wednesday we may get the Caixin versions of these two PMIs. Recently they have delivered better results, although not significantly different.In the US, the inflation measure the Fed prefers, the personal consumption expenditure price index (PCE) was unchanged in May from April following a +0.3% rise in April. This was what markets were expecting. That means the annual PCE rate slipped to 2.6%, its lowest since March 2021. (The May CPI was 3.3% and we get the June CPI on June 13 (NZT).Personal spending was up +2.4% from May a year ago, personal income a bit less.US durable goods orders were unchanged in May from April but were -1.2% lower than the same month a year ago. Of more concern however will be that capital goods orders fell -10% on the same basis.Eventually that may weigh on employment, but so far it hasn't. Last week initial claims for jobless benefits fell from the prior week. Compared to the same week a year ago the number of people on these benefits was higher, but in relation to their workforce, that gain was insignificant.US pending home sales for May fell when a bounce-back was expected, reinforcing the funk the American housing market is in. In fact local sawmills have been closing on low new home demand and even that hasn't stopped wood prices from falling to post-pandemic lows. Their residential construction and home-improvement markets are buckling.The widely-watched University of Michigan consumer sentiment survey was little-changed in June, but it is up more than +6% from a year ago.The ECB said that its survey of consumer inflation expectations over the year ahead are now back to 2.8%, the same level they were at when they started this survey in early 2020. They peaked at 5.8% in October 2022. Those survey said they felt inflation ran at 5.8% over the prior 12 months. (It actually ran at 2.7% in the year to May but averaged 3.9% over the past twelve months. The June results comes later this week and is expected to be 2.5%.)In France, exit polls show that far-right candidates probably made gains in their weekend first-round elections, garnering about a third of the votes. Turnout was a 'high' 60%. But the final outcome is still uncertain. The second round will take place on July 7, 2024.The rise and rise of container freight rates continued last week, up +4% from the prior week to now be a massive 256% higher than the same week a year ago. Again the main culprit was outbound rates from China to Europe, hostage to the Yemeni Houthis and their piracy. Bulk cargo rates were up +2% for the week and are again in an uptrend. They are up +72% for the year.The UST 10yr yield is now at 4.39% and unchanged from Saturday. The price of gold will start today up +US$6 from Saturday at US$2326/oz.Oil prices are little-changed from Saturday at just on US$81/bbl in the US while the international Brent price is still under US$85/bbl.The Kiwi dollar starts today slightly softer from Saturday at just on 60.9 USc. Against the Aussie we are little-changed at 91.3 AUc. Against the euro we are also unchanged at 56.9 euro cents. That all means our TWI-5 starts

The first New Zealand and international wave of electric vehicle (EV) uptake is probably over, with cheaper cars and better public charging infrastructure required for further major growth in the uptake of these "batteries on wheels," says James Foster. In a new episode of interest.co.nz's Of Interest podcast, Foster, who runs the EVDB website, says EVs reaching price parity with internal combustion engine (petrol) vehicles, will be a very significant development. The rise of Chinese EVs should help with this."At the beginning of 2022 we didn't really have any Chinese brand vehicles [in NZ] and now 20% of those on the road are [Chinese]. It's happened in two years. And that kind of shows you, I guess, why maybe the US have freaked out and implemented protectionist policies to try and protect their own car market. The amount of momentum coming out of China is extraordinary. And the build quality, I wouldn't say is taking people by surprise. But I know historically in New Zealand when we have new brands come to market...way back with the Japanese brands or Korean brands, at first you're kind of like, 'I don't know about this.' And then eventually they become normalised. They just become another brand that's part of the story," Foster says."I keep a running tally all the time of the 10 cheapest EVs in New Zealand, and then I get an average from that and that gives me an indication of where we're at. Those are all Chinese vehicles."From a personal perspective Foster enjoys his EV being a part of energy self sufficiency, or sovereignty."That's something that I find quite profound. Since I got the solar panels on the roof I feel like I'm in science fiction...I've actually got the sun's rays going into my house's power and then into a battery in my car and I drive it. Compared to drilling oil, refining it, putting it on a ship, sending it over, driving it down..."In the podcast Foster also talks about the reasons for the dramatic drop in EV uptake in NZ this year, the popular models and brands, prices including in the secondhand market, battery range, home and public charging, insurance and repairs, other EVs beyond cars such as utes, vans and heavy transport, hybrids and hydrogen vehicles, his expectations for NZ's future vehicle fleet and how electricity supply will cope.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news food price signals belie talk of impending trouble.But first, US mortgage applications were virtually unchanged last week (+0.8%) from the week before, taking them to -13% lower than the same week a year ago. But at least it was a third week of rises, even if small. Mortgage interest rates edged lower last week.But new home sales in the US sank -11.3% in May from April, to be -16% lower than the same month a year ago as high prices and those still-high mortgage rates continued to weigh on buyers' decisions. It is the lowest reading in six months and well below what was expected. Still the April data was revised sharply higher.Slightly elevated bidding (+2.5%) for the US Treasury 5 year Note pushed the median yield down to 4.27%, compared to the 4.48% at the equivalent event a month ago.In Japan, the current focus is on the yen's falling exchange rate, especially to the USD. But while policymakers there say they are watching with concern, interventions so far have been modest and ineffective.In India, their currency is unusually stable and not something we have seen for more than 15 years.In China, the Beijing officials controlling the yuan have allowed it to sink a bit faster recently and it is almost back to its modern 'most weakest' levels of mid-2023.In Australia, their monthly inflation indicator for May edged up to 4% from 3.6% in April, boosting the chance of another RBA rate rise as underlying price pressures clearly remain entrenched. Australian government bond yields leapt almost +20 bps on the news, and to their highest in 2024. The AUD rose +50 bps. The ASX200 tumbled sharply. Markets may have reacted sharply and pulled back somewhat later but economists had a much more measured view preferring to see the relatively small month-on-month change as 'not much'. Meanwhile, an RBA boss said their policy positions are on the right track and will get inflation under control.We should perhaps note that prices for some of the world's key agricultural commodities are struggling, mainly because good growing conditions are delivering strong supply. The corn price is down to where it first was in 1996 and the bubble that started in 2020 is now all erased. Similarly for oats which are now below 1988 levels. The rice price is still highish, but below 2008 levels still. And canola is also a major-traded food export that has extinguished its recent bubble. Wheat is in the same boat, back to price levels it first hit in 1996. The world's food supply and price is currently no threat of availability or affordability issues. However, despite all this some still see "food wars" as a future risk, but that may just be a Singaporean trader talking his own book.The UST 10yr yield is now at 4.32% and up +9 bps from this time yesterday. The price of gold will start today down -US$18 from yesterday at US$2301/oz.Oil prices are little-changed from yesterday at just over US$81/bbl in the US while the international Brent price is now just under US$85/bbl.The Kiwi dollar starts today down nearly -½c from yesterday at just under 60.8 USc. Against the Aussie we are down even more at 91.4 AUc. Against the euro we are down -¼c at 56.9 euro cents. That all means our TWI-5 starts today down -30 bps at 70.5.The bitcoin price starts today at US$60,974 and down -1.0% from this time yesterday. Volatility over the past 24 hours has modest at just on +/- 1.3%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Tomorrow is a public holiday in New Zealand (Matariki). We will be publishing on our normal weekend schedule on Saturday and Sunday.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news questions remain about whether inflation's fall can be maintained.Today is another shadow day with mostly second-tier data released, but some of it is interesting all the same.First in the US, retail sales at physical stores were up +5.3% last week from the same week a year earlier, a good 'real' rise above inflation. But it was a slowing from earlier weeks and is the least rise since mid April.But things don't seem to be expanding anymore in their factory sector. More Fed district surveys are being released, the latest one from the mid-Atlantic states and that brought a slowing in June largely based on retreating new order levels.However the Chicago Fed's National Activity Index for May was less negative, turning up after two prior down months. This was on the back of expanding production levels and new order levels held their own.The Dallas Fed's services PMI for June retreated again in June, but by far less than the sharpish May level. This is a key 'red state' that is struggling.Nationally, the widely-watched Conference Board survey of consumer sentiment dipped in June from May, but not as much as expected. The 'present conditions' aspect remains buoyant, but it is the 'future expectations' component that eased a bit.Separately there was a US Treasury 2 year bond auction earlier today and it was strongly supported, delivering a median yield of 4.66%. A month ago at the equivalent event the median yield was 4.85%, so a -19 bps easing since then. More than US$192 bln was offered for the US$71 bln available.Is inflation under control in the US? A key Fed official doesn't think so yet, and said she is prepared to vote to raise rates again if the disinflation trend doesn't continue.In Canada, they got a small surprise from their May CPI data. It rose to 2.9% from its three-year low of 2.7% in April. Analysts had expected it to retreat to 2.6%. While this move is still in the Bank of Canada's expectation range of "about 3%", the halt to the disinflation trend challenged earlier bets that the central bank would continue loosening monetary policy. Bond yields fell there.In Japan, researchers have found more than 200 million tonnes of manganese nodules, rich in battery metals, in the Pacific Ocean and inside the country’s exclusive economic zone. They say that is the deposit contains 610,000 tonnes of cobalt (equivalent to 75 years of Japan’s consumption) and 740,000 tonnes of nickel (11 years).The latest South Korean consumer sentiment survey rose in June to its highest level since March. Sentiment regarding current living standards increased, while future outlook improved by the same margin. Expectations for future household income also rose.Australian consumer sentiment is mired in low territory, according the the June update of the Westpac-Melbourne Institute survey. Despite the improvement, consumer sentiment remains below its March level and still firmly in deeply pessimistic territory. The survey detail suggests positives from fiscal support measures are being negated by increased concerns about inflation and the outlook for interest rates.In Europe, Denmark is set to become the first nation to impose climate taxes on their agriculture sector. They say they are doing it in part to encourage other countries to follow. Less than 2% of Denmark's GDP comes from their rural sector, but it delivers 22% of their exports.In the UK, the sheer size of their housing crisis has been explained in a dramatic way. Since 1977, they have fallen behind other northern EU countries in building new homes, driving a severe shortage that has sent housing prices soaring and kept young Britons out of the market. A Bloomberg analysis found that the failure to keep housing production on pace has led to a massive 4.3 million missing homes - greater than the number of existing dwellings in all of London!The UST 10yr yield is now at 4.23% and down -2 bps from this time yesterday. The price of gold will start today down -US$13 from yesterday at US$2319/oz.Oil prices are down -50 USc from yesterday at US$81/bbl in the US while the international Brent price is down -US$1 at just under US$84.50/bbl.The Kiwi dollar starts today little-changed from yesterday at just under 61.2 USc. Against the Aussie we are still at 92 AUc. Against the euro we are also still at 57.1 euro cents. That all means our TWI-5 starts today little-changed at 70.8.The bitcoin price starts today at US$61,577and bouncing back a partial +2.5% from this time yesterday. Volatility over the past 24 hours has high at just on +/- 3.0%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news a quiet data week is bringing more focus to larger systemic issues.Today, in the absence of key data releases, we should note that after the GFC, regulators moved aggressively to get banks out of holding riskier assets. But that space has been filled by non-bank financial institutions. In fact more than half the world's financial assets are held in these non-bank institutions. The risks from that sector are enormous. And the irony is that these non-banks are funded in large part by ... banks. It is a systemic risk catching the attention of bank regulators. If you want to scare yourself, read the analysis from the NY Fed.That is not the only risk the Fed is watching. Now that they can see inflation returning to its policy range, a softer labour market could bring its own risks. Their labour market is not at that risk point yet they say, but they are watching.Meanwhile, the US Dallas Fed factory survey in America's oil patch was little-changed and uninspiring in their June results. But if there is a change worth noting it is that expectations regarding future manufacturing activity pushed up notably this month. The future production index jumped 10 points, and the future general business activity index surged 16 points to its highest reading since early 2022.Across the Pacific, the Chinese government plans to set up a rescue fund for struggling financial institutions, aiming to prevent a financial crisis triggered by the real estate market slump. Unlike similar funds that were created to protect customers, the purpose of the new fund is to prevent financial institutions from collapsing suddenly, given that bankruptcies of these huge enterprises could cause turmoil in their financial markets.Taiwan said its retail sales rose a modest (but better) +2.4% in May, but their industrial production was up an impressive +16% from the same month in 2023.In Europe, the Ifo Business Climate indicator for Germany unexpectedly declined in June from May, but remains higher than what it has been for most of the past year.Perhaps we should also note that the price of lithium carbonate has fallen back to levels first reached in 2018.The UST 10yr yield is now at 4.26% and unchanged from this time yesterday. The price of gold will start today up +US$12 from yesterday at US$2332/oz.Oil prices are up +$1 from yesterday at US$81.50/bbl in the US while the international Brent price is still just under US$85.50/bbl.The Kiwi dollar starts today unchanged from yesterday at 61.2 USc. Against the Aussie we are down -20 bps at 92 AUc. Against the euro we are also -20 bps lower at 57.1 euro cents. That all means our TWI-5 starts today down -10 bps at 70.8.The bitcoin price starts today at US$60,160 and down a very sharp -6.1% from this time yesterday. Volatility over the past 24 hours has high at just under +/- 3.6%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the pressure is on China to revive its fast-slowing momentum.First however, this week will bring some key American data covering durable goods orders and PCE inflation data on Friday (NZT), new and pending house sales, and the Conference Board's consumer sentiment survey result on Wednesday (NZT). The US Fed will also release its annual stress test results on Thursday (NZT). We will also get key inflation data from the EU, Canada and importantly from Australia on Wednesday. The Westpac MI consumer confidence survey will also come this week, tomorrow in fact. Finally, look out for some key Japanese data on Thursday especially on retail sales and industrial production.Over the weekend China said attracted virtually no more foreign direct investment in May than in April in an outcome that will probably alarm Beijing privately. It is still flowing in at the rate of about US$50 bln per month, but that is now holding at that level. That puts the May FDI level -28% lower than the year-ago level in a trajectory that is as tough for them as in the depths of the GFC. And it is probably going to get tougher for them, especially for important tech.And it isn't much better at home for investment. During the first six months of this year, the total value of mainland China's IPOs has plummeted -84% on the year to just 33 bln yuan (NZ$7 bln), while only 44 companies went public, down -75%. In any other market, this would called a crash.It is no surprise then that the Chinese yuan is weakening, especially against the USD.The early versions of the Japanese PMIs reported gains in their factory sector to a modest expansion, but a fall back in their services sector to a surprise (although tiny) contraction.Meanwhile, Japanese CPI inflation rose in May to 2.8%, up from 2.5% in April. Food was up +4.1%,In India, their early PMIs rose to faster expanding levels in both sectors.And the monsoon has arrived in India, taking some pressure off its heat and water stress - although not yet in parched northern India.In the US, the first of their June PMIs are in, the internationally benchmarked versions. Their factory sector PMI rose but still a modest expansion and a 3 month high. And their services PMI rose to a good expansion to a 2 year high. Both were on the back of rising new orders. Making this a bit more impressive is that cost inflation was much lower in both sectors, and business confidence in the immediate future (1 year) rose. And they report that for the first time in 3 months, companies planned to expand their workforce.In what might seem like a bit of irony, the Conference Board leading index was released over the weekend and it retreated - but it was more May and isn't reporting on the same period as the June PMIs. It's a 'leading index' that trails current data!Also for May, American existing home sales fell -0.7% in May from April to a seasonally adjusted annualised rate of 4.1 mln units, the lowest in four months. The decline comes as the median sales price climbed to a record high of US$419,300 (NZ$685,000). Meanwhile, unsold inventory sits at a 3.7 months supply at the current sales pace. Interestingly, it you match the housing sales level between the US and New Zealand on a population basis, they will sell about 64,200 houses in a year on a NZ equivalent basis. Over the past year to May we have sold 67,400. Both markets are in the doldrums.Retail sales in Canada are projected to have dropped by -0.6% in May 2024 compared to the previous month, according to a flash estimate. This would represent the steepest decline since March 2023. Such a decrease would offset the +0.7% surge in April, the largest in a year.Canadian producer prices rose +1.8% in May, their fastest increase since January 2023.In the EU, their PMIs show their recovery is slowing in June as new orders fall for first time in four months. Their huge service sector is still expanding, but their factory sector is contracting at a slightly faster rate.The UST 10yr yield is now at 4.26% and unchanged from this time Saturday. The price of gold will start today unchanged from Saturday at US$2320/oz.Oil prices are unchanged from Saturday at US$80.50/bbl in the US while the international Brent price is still just on US$84.50/bbl.The Kiwi dollar starts today unchanged from Saturday at 61.2 USc. Against the Aussie we are marginally firmer at 92.2 AUc. Against the euro we are also marginally firmer at 57.3 euro cents. That all means our TWI-5 starts today little-changed at 70.9.The bitcoin price starts today at US$64070 and up a mere +0.1% from this time Saturday. Volatility over the past 24 hours has very low at just under +/- 0.5%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news that the start of Summer in the northern hemisphere brings excessive heat and ominous food security and immigration implications.But first, initial US jobless claims slipped slightly last week after the prior week's rise. They remain low at +227,000 even if the level is its highest since February. There are now 1.734 mln people on these claims, little-changed from the prior week. No real sign of building labour market stress here yet.Meanwhile, housing starts in the US fell -5.5% to an annualised rate of under 1.3 mln in May, the lowest since July 2020. April was downwardly revised.. This unexpected decline shows that high interest rates are still weighing on their housing market. New building consents fell slightly too. This result came before the slight easing of mortgage interest rates in June.The Philly Fed's Business Outlook June survey showed general activity edged lower but remained positive, while shipments and new orders remained mildly negative. These results were slightly less than expected.We noted the extreme heat in northern India and the Middle East in yesterday's report. Well, it has extended into the eastern US as well with a major heat dome there too. It too is life threatening for some.And we have noted before that severe drought and heat waves are gripping much of China's key agricultural areas. It is not getting any better there either.China's loan prime rates remained unchanged at record lows after yesterday's China central bank review.Across the Formosa Strait, Taiwanese export orders rose +7% year-on-year in May, more than expected but slowing from the +11% growth in April. The tech powerhouse country continues to benefit from a surge in AI applications, but demand also rose for chemical products.The steady improvement in consumer sentiment in the EU was evident again in their June survey, although the improvement was slightly less than anticipated.Staying in the region, the Swiss central bank cut its key policy rate by -25 bps to 1.25% at their June meeting overnight, following a similar move in the previous meeting. This was as expected. Underlying inflationary pressure is easing and the Swiss franc is strengthening, so it is an easy decision for them.Meanwhile the English central bank also held a review and kept policy settings pat (and at a 16 year high), as expected. But they did indicate that rate cuts are coming there soon, mainly because of progress in getting inflation down.Last week, the rise in container shipping freight costs accelerated again, up +7% from the prior week to be +233% higher that year-ago levels. China to Europe rates were especially hard hit last week. Bulk freight rates were up +6% last week to be up +80% from this time last year (but that was an unusual low point, to be fair).The UST 10yr yield is now at 4.26% and up +3 bps from this time yesterday. The price of gold will start today up +US$26 at US$2355/oz.Oil prices are up +50 USc at US$81/bbl in the US while the international Brent price is now just on US$85/bbl.The Kiwi dollar starts today a little softer at just under 61.2 USc. Against the Aussie we are marginally firmer at 92 AUc. Against the euro we are unchanged at 57.1 euro cents. That all means our TWI-5 starts today unchanged at 70.7.The bitcoin price starts today at US$64,672 and down -0.6% from this time yesterday. Volatility over the past 24 hours has again been modest at just on +/- 1.5%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Ask Cameron Bagrie how to improve business and rural banking and some words reoccur in his answers. Three of them are "risk", "productivity", and "bankability."With two parliamentary select committees set to hold an inquiry into banking competition, the business and rural banking markets will feature, unlike in the Commerce Commission probe into competition in the personal banking market. In the latest episode of interest.co.nz's Of Interest podcast, Bagrie, now of Bagrie Economics and Chaperon and formerly ANZ NZ's chief economist, speaks about why banks favour housing lending over lending to the business and rural sectors, and whether it would be good to entice them to change this and how it could be done.At the top of the select committee inquiry's terms of reference ought to be balance between the pricing of risk versus the taking of risk by banks, and how that's impacting productivity, Bagrie says."I think we need to have a really good, hard debate about where the money is actually going, the composition of bank lending, whether it's short-term behaviour versus a long-term growth maximising strategy. Let's have a serious conversation about risk going forward, because risk is a big enabler. It's not open season on risk, but risk is an enabler of innovation, driving productivity. It just seems like we've screwed things far too far towards a low risk approach, and ultimately we pay the price for that over time," Bagrie says."I go back to the fundamentals of banking. The fundamentals of banking is pricing for risk and taking risk. And what we're seeing out there at the moment is that SMEs and farmers are certainly being priced for risk... Let's have a look at return on equities out of the banks by segment, not the aggregate top down number. Let's break it down into personal lending, including home lending. Let's have a look at business lending. Let's have a look at farm lending and the institutional [loan] book, and have a look at where those ROEs [returns on equity] actually sit. And I think we're going to be surprised how high those ROEs are for certain segments.""The key here is to go through each segment and look at the risk adjusted returns," he says.Figures from the International Monetary Fund show housing lending at 35% to 40% of total bank lending in some countries, whereas in NZ it's nearer 65%, having risen significantly over the past five years.Bagrie also argues that banks' regulatory capital settings encourage them towards housing lending instead of business and rural lending, when there's "more productivity bang for your buck" when you're lending into the business sector. "We need to have a look at this through the eyes of economic efficiency, economic growth, productivity, innovation. Because when you make banks a lot more safer, there's a price that you pay on the other side.""The whole process of credit intermediation is a pretty critical part of economic development. And I don't think we've got financial system settings right on a whole lot of areas," he says.Financial system settings and banking don't tend to be areas thought of when people think about what to do to make NZ a better place economically in regard to taking risk and driving productivity growth, Bagrie says."We sort of overlook what's a fundamentally essential one and that's that flow, that process of credit intermediation, [it] is absolutely essential. The Prime Minister has been talking a lot about encouraging the taking of risk...Well, yeah, in order for firms to take risk, you need the financial system to be prepared to take risk."In the podcast Bagrie also talks about NZ businesses having a bankability problem and how to rectify this, the role of the Reserve Bank's regulatory capital settings, banks' becoming more vanilla, the rise and rise of bank profits over the past 30 years or so, the low level of banks' non-performing loans, the need for better competition policy across the economy, how housing lending has grown as a percentage of total NZ bank lending over the past 20-odd years, and especially over the past five years, Australian influence at the big four banks, open banking, his thoughts on the idea of a Business Growth Fund, and more.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news of some very large global tensions starting to boil hotter.But first, mortgage applications in the US rose by +0.9% in the second week of June, extending the +16% surge from the previous week, which was the sharpest weekly increase since the start of 2023. Their monitoring of the benchmark 30 year mortgage rate showed it slipped below 7% last week, its lowest since late March.The NAHB/Wells Fargo Housing Market Index in the US fell in June from May, and to below market expectations. It was the lowest reading since December 2023, attributed to mortgage rates remaining around 7%. However it is back at about its average level since mid 2022. The industry also said home builders there are also dealing with higher rates for construction and development loans, chronic labour shortages still, and a dearth of buildable lots.In Japan, their huge agricultural bank, Norinchukin, has said it has made a massive mistake in its bond portfolio, betting that rates would stay down. They haven't and it said it would unwind its position between now and March 31. That will involve selling ¥10 tln (NZ$105 bln) of US and European sovereign bonds and take an expected ¥1.5 tln loss for the year. For perspective its total investment portfolio is NZ$585 bln.Japanese exports surged in May, up from ¥7290 bln in May 2023 to ¥8277 bln in May 2024, a +13.5% jump. The jump was expected, but it came in better than anticipated. Meanwhile Japanese imports rose too but by less than expected.We should keep an eye on the spreading impacts of excessive heat in northern India. Its inability to cool at night is life-threatening for many. The spreading heat emergency has also hit Saudi Arabia, and hundreds have reportedly died in their haj pilgrimage to Mecca.In China, their central bank signaled it will be getting more aggressive in the way it supports the economy, a tacit move that acknowledges the tough spot they are in. They are likely to start trading government bonds in the secondary market, a change of how the central bank injects money into the economy and regulate liquidity. They are also likely to shift to a single short-term rate to guide markets, like almost all other central banks.Tensions near the Philippines in waters claimed by China are getting worrisome with China's forces capturing a Philippines resupply vessel temporarily and forcing it away from a Philippine outpost. China's illegal claims based on their very doggy "nine-dashed-line" sea grab threatens a major international crisis.In Australia, the RBA has been looking at the Buy-Now-Pay-Later and doesn't like what it sees. Their key concerns are not so much on the unregulated credit side, rather on the fee side. That say BNPL fees average 3.5% of the transaction cost, compared to 0.4% for debit cards, 0.8% for credit cards. BNPL makes Visa and Mastercard look good (!). A crackdown is coming, allowing retailers to pass on those costs to customers (until now the BNPL industry has prohibited that). But the RBA needs new powers to make that change.Join us at 10:45am this morning when the Q1-2024 GDP result will be released. Markets are picking we exited recession on an overall basis, but with essentially no growth. (Of course, on a per capita basis, this result is likely to be a bit grim.)The UST 10yr yield is now at 4.23% and up +1 bp from this time yesterday. The price of gold will start today virtually unchanged, up and insignificant +US$1 at US$2329/oz.Oil prices are unchanged at US$80.50/bbl in the US while the international Brent price is now just on US$84.50/bbl.The Kiwi dollar starts today a little softer at just on 61.3 USc. Against the Aussie we are -¼c softer at 91.9 AUc. Against the euro we are marginally softer at 57.1 euro cents. That all means our TWI-5 starts today up +30 bps at just on 71.2.The bitcoin price starts today at US$65,049 and up +0.7% from this time yesterday. Volatility over the past 24 hours has again been modest at just on +/- 1.3%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news expectations for a rate cut any time soon in Australia have faded significantly after the RBA's MPS yesterday.But first, the overnight dairy auction brought slightly lower prices overall, down -0.5% although they were unchanged in NZD terms. WMP was sold in to weakish demand and ended down -2.5%. SMP fared better, rising a minor +0.7%. But the star of the show was demand for butter, up +6.2% to a new all-time record high in both USD and NZD. Volumes offered and sold at this event were quite low at 16,800 tonnes; in fact a four year low.Moving on, in the US last week's retail sales at physical stores rose to be up +5.9% from year-ago levels, a rise from the prior week. But that was overshadowed by the May official retail sales data that was only up +2.3% from a year ago, up only +0.1% from April. And if it wasn't for good car sales it would have been less.On the other hand, US industrial production rose more than expected in May, up +0.9% from April to end two months of weaker resultsUS business inventory levels were reported for April, and while they rose slightly, they actually fell in relation to current sales to remain at unconcerning levels.Today's relatively small but still well supported US Treasury 20 year bond auction brought a lower median yield, down to just under 4.40%, -19 bps lower than the prior equivalent event a month ago.In China, the wealthy are shipping out, it seems. China saw the world's biggest outflow of high-net-worth individuals last year and is expected to see a record exodus of 15,200 in 2024, dealing a further blow to its economy.And homeowners with mortgages in China are prioritising paying them off faster as values sink. Owning your own home is now perceived as a liability, not an asset.In the EU, CPI for May was confirmed at +2.7%. However, we should note that the ZEW Indicator of Economic Sentiment for the Euro Area surged in June to its highest since July 2021, and firmly above what was expected. That has built into nine consecutive months of rising EU business sentiment.Yesterday's RBA monetary policy review indicated that rate cuts are further away than anticipated. Markets no longer have any cut priced in until mod 2025 now.And the OECD says high school students in Singapore, Korea, Canada, Australia, New Zealand, Estonia and Finland were in the highest-performing education systems in the first-ever creative thinking assessment under the OECD’s Programme for International Student Assessment (PISA). Results of the global 2022 assessment, to understand the skills of 15-year-old students in 64 countries and economies worldwide, show that students in high-performing education systems are not only succeeding in standardised mathematics, reading and science tests, but also in new creative thinking tests.On the other hand we should note that New Zealand doesn't rank highly in the latest World Competitive Rankings, slipping one place in 2024 to 32nd (out of 67 in the survey).The UST 10yr yield is now at 4.22% and down -6 bps from this time yesterday. The price of gold will start today up +US$11 at US$2328/oz.Oil prices are up +US$1 at US$80.50/bbl in the US while the international Brent price is now just under US$84.50/bbl.The Kiwi dollar starts today a little firmer at just under 61.5 USc. Against the Aussie we are -¼c softer at 92.4 AUc. Against the euro we are marginally firmer at 57.2 euro cents. That all means our TWI-5 starts today essentially unchanged at just on 70.9.The bitcoin price starts today at US$64,612 and down -2.6% from this time yesterday. Volatility over the past 24 hours has again been moderate at just on +/- 2.3%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the steam seems to be going out of the Chinese economy as their property sector woes just drag on and on.But first, although it is still retreating, the June New York factory survey improved sharply from May, with firms there increasingly positive about the next six months.And Canada reported a much bigger jump in housing starts in May, far above what was expected.However, previously fast-rising Japanese machinery orders fell in April in March, but were up slightly year-on-year.China’s new home prices fell -3.9% year-on-year in May, falling further from a -3.1% drop in the previous month. It marked the 11th consecutive period of declining home prices and the steepest since mid-2015. This is all despite more property market stimulus from the government, which clearly hasn't turned the market yet. There are no major cities reporting any gains in resold houses, with some declines now well exceeding -10% from a year ago. In the new home market only 3 of 70 major cities are reporting year-on-year gains (all tiny) and the rest are all declines.Chinese retail sales eased higher in May, up +3.7% when a +3.0% rise was expected. April rose +2.3% year-on-year, so this May result is an improvement. But you have to say, in the context of recent Chinese history, this is a modest gain. And remember, Chinese official CPI is rising less than +1% year-on-year.Meanwhile, Chinese industrial production fell in May from April to be +5.6% higher than a year ago. Markets were expecting that change to be +6%. April had expanded +6.7% on that basis. Tellingly however, electricity production rose just +2.3% in May from a year ago, up only +0.7% from April, staying at the lowish levels it has for the past year. The Chinese central bank kept its one-year Medium-Term Lending Facility rate unchanged in June at 2.5%.The changed and less outlook for China can also be seen in the benchmark copper price. The February to May enthusiasm has given way to a sharpish retreat.And here's something you may not have expected; wages are rising quite fast in the EU, up +5.5% in Q1-2024 from a year ago, a spurt higher than the already quite good +4.1% rises in Q4-2023. And it may go higher. The huge IG Metal German union is seeking 7% pay rises now.In Australia, stories are swirling that NSW is about to raise its land tax rate. (Land tax is separate from property taxes, and does not apply to the family home, or farm. But it does apply to most other land.) NSW isn't the first to do this.And staying in Australia, data released by their tax authorities shows that more than 40% of their income tax paid by individuals is paid by the 5% who had taxable incomes of AU$180,000 and greater. At the other end of the scale, the 42% of taxpayers earning AU$45,000 or less paid 2.3% of their income tax.The UST 10yr yield is now at 4.28% and up +6 bps from this time yesterday. The price of gold will start today down -US$17 at US$2317/oz.Oil prices are up +US$1.50 at US$79.50/bbl in the US while the international Brent price is now just over US$83.50/bbl.The Kiwi dollar starts today little-changed at just under 61.3 USc. Against the Aussie we are softer at 92.7 AUc. Against the euro we are -¼c lower at 57.1 euro cents. That all means our TWI-5 starts today down -20 bps at just on 70.9.The bitcoin price starts today at US$66,351 and down a very minor -0.2% from this time yesterday. Volatility over the past 24 hours has again been modest at just under +/- 1.4%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

By Gareth VaughanHow seriously is the public sector taking the fight against money laundering and terrorism financing?This question comes up in a new episode of interest.co.nz's Of Interest podcast, featuring barrister and solicitor Fiona Hall and anti-money laundering auditor and consultant Martin Dilly.In a recent article the two raised concerns about impending job cuts to the team at the Department of Internal Affairs (DIA) tasked with supervising compliance with the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act). Dilly says the DIA proposal to cut 40% of AML/CFT staff "gives us concern that that's going to affect their ability to enforce and supervise this act." There's concern whether the next evaluation of New Zealand by the Financial Action Task Force (FATF), an inter-governmental body that sets international standards and is considered the global money laundering and terrorist financing watchdog, will show NZ technically compliant with FATF's recommendations, and whether we're effective in supervising the reporting entities who must comply with the law."I have heard some reporting entities clapping their hands with joy if they're supervised by the DIA, but it's not the good reporting entities. And I like to think that most businesses are good businesses that want to comply with the law. And the risk you have is, yes, sure, if there are far fewer DIA investigators, you're less likely to get a knock on your door. But the problem is, if you do get a knock on your door, you now might be being investigated by someone who really doesn't have a good handle on the legislation, let alone a good understanding of your business. And you are going to be in a much worse position," Hall says.Dilly made an Official Information Act (OIA) request to DIA in an attempt to get more information, which he says "shows a pattern of under resourcing of the AML team within the DIA." "They were essentially budgeted to have 55 staff members. That's what they had determined was necessary...The information provided shows at no point did they ever hit 55 staff. They've been consistently below that. In 2022, they only had 37 staff instead of 55... So the question becomes, why is that?""One of the other questions I specifically asked was, has any of the budget been reallocated from the AML team to other areas of the Department of Internal Affairs? And we get some government speak here. So one of the things they talk about is they don't talk about reallocation. They use the terminology 'a permanent reprioritisation of constant underspend.' And my question is, well, what does constant underspend mean? Why would you be underspending your budget in an area where you are tasked with implementing AML and educating and supervising these new entities [lawyers, accountants and real estate agents]?" Dilly asks.Other issues Hall and Dilly cite include different agendas and lack of consistency to AML/CFT Act supervision between the DIA, and NZ's two other AML/CFT Act supervisors, the Reserve Bank and Financial Markets Authority.The two are hopeful that Associate Minister of Justice Nicole McKee's proclamation that reforming the AML/CFT Act is "one of my priorities this parliamentary term," could lead to improvement. They would both like to see a shift to a single standalone supervisor."I think the results from the [DIA] OIA show that if it's within other ministries that you cannot trust them to not reallocate budget, whatever language they want to put on that. The other point I would really like to see is a move back to a more risk based approach. The act itself is risk based, which essentially means that we accept that people have limited resources and you are supposed to direct those resources towards the areas of highest risk in your business," says Dilly.Hall would like to see better supervision of the supervisors.The two also have many tales of frustration and contradiction. Hall gives the example of a client that collects school donations, arranges school lunches, the uniform shop, and sells tickets to school shows, and has been deemed high risk of money laundering."I sat with the Minister and said, 'look, how does buying two pairs of grey shorts from a school uniform shop ever get anywhere near, I mean, this is where I'm going to launder my money?' It is ridiculous."On the flip side she points out the likes of Ticketmaster, selling tickets to shows, aren't considered reporting entities None of those are considered reporting entities, and neither are travel agents who have trust accounts and manage funds."So we have this real disconnect, in my view, even about who is and isn't a reporting entity," Hall says.Meanwhile in the real estate sector, they have to do customer due diligence."Their customer is the vendor, it's not the buyer, which I always find so interesting because that's where the money is. And often a property's been bought years and years before, and suddenly, you know, the vendor's been asked to

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news of some slippage in the world's largest economies.However, in the week ahead we will get central bank rate review decisions from China, Norway, the UK, and Switzerland. Of special interest to us will be Tuesday's one in Australia. No change is expected there at 4.35%, but the signals about how they see progress to their inflation targets will be important. There will be a heavy set of data releases from both the US and China this week as well, many of which could move markets. Elsewhere Japanese inflation data, German sentiment surveys, and PMIs everywhere will feature.But first in Japan, their central bank held its new slightly positive official policy interest rate at Friday's meeting. But it did confirm it is working on ways to reduce its bond purchase program. They see Japanese inflation embedding from here, rising modestly over the rest of 2024 above 2%.However Japanese industrial production slipped in April in advance data released Friday, but that was among overall business activity that rose at a modest rate.Indian exports, which are actually modest on the world scale, rose in May to be more than +9% higher than year ago levels. (Australia's exports fell in the same month, but they are still larger than for India. You have to go back to 2018 for India's export levels to be larger than Australia's. Since, the Aussies have made far more gains than India. India may now be the world's fourth largest economy and Australia the 13th, but India is an also-ran as an exporter.)Despite a heady push from Beijing, Chinese banks extended only ¥950 bln in new loans in May, up from the low ¥730 bln in April and well short of the 'recovery' analysts expected of ¥1.3 tln.Also somewhat disappointing were May vehicle sales results in China. They were up only +1.5% from a year earlier to 2.42 million in May, slowing from a +9.3% rise in the previous month. However sales of new energy vehicles surged by a third, accounting for nearly half (47%) of all car sales and a record high share. The modest overall sales result is on the back of surging production (+25%) and the excess is being shipped to export markets, causing trade friction and distortions, and accusations of dumping.And in a massive part of important north-east China, an emergency drought response has been triggered. This will be a very big test of their food security.In Russia, as their central bank expected in its last policy review, inflation jumped to 8.3% in May from 7.8% in April, the highest since February 2023. A year ago it was running at 2.5%. War and the resulting labour market distortions are the cause.In the US, the weekend release of the preliminary University of Michigan consumer sentiment index fell slightly for a third straight month in June, the lowest since November. Overall, consumers perceive few changes in the economy from the May survey. Inflation expectations were broadly stable at just over 3%. (The final results of this survey will come in about two weeks, and these have often come out better than preliminary results.)The UST 10yr yield is now at 4.22% and unchanged from Saturday. The price of gold will start today little-changed at US$2334/oz but up +US$30 from a week ago.Oil prices are unchanged at US$78/bbl in the US while the international Brent price is still just over US$82.50/bbl.The Kiwi dollar starts today still at just under 61.4 USc. Against the Aussie we are start marginally firmer at 92.9 AUc. Against the euro we are unchanged at 57.4 euro cents. That all means our TWI-5 starts today up +10 bps at just on 71.1.The bitcoin price starts today at US$66,514 and up +1.5% from this time Saturday. But that is down -3.7% from a week ago. Volatility over the past 24 hours has again been low at just under +/- 0.7%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news some think the first signs of a labour market in the US are showing.Initial American actual jobless claims "jumped" last week to +235,000, above the expected +225,000 and to the highest level since August 2023. This may be the early signs that their labour market is softening somewhat, although there are only just over 1.7 mln people on these benefits, little-changed from a year ago and much lower than the more than 2 mln in mid-January.Meanwhile American producer prices dipped in May from April to be +2.2% higher than year ago levels. There is no inflationary pressure from this sector, and to be fair there hasn't been any since February 2023. Even a month-on-month dip has happened frequently since mid-2022There was another well supported UST 30yr bond auction earlier today with yields easing lower on the demand. The softer PPI and higher jobless claims may have influenced yields too. Today's median yield was 4.35%, and that compares with the prior equivalent event one month ago of 4.59%.Later today we should get China's bank credit data, an important indicator of investment demand and economic activity.And China is waiving entry visa requirements for New Zealand citizens, as part of the country’s drive to boost inbound tourism. That puts us on a par with Singapore, Malaysia, France and Thailand among others. Scheduled flights between the two nations are already more than before the pandemic and it turns out New Zealand is China's 15th largest source of tourists. Immigrants from China who settled here are making many trips back 'home' it seems.EU industrial production sagged rather badly in April, down -3.0%^ from a year ago in the Euro Area, down -2.0% in the wider EU. A worsening from March was expected (-1.9%), but not by this much. Generally it is southern and eastern Europe doing much better than the northern group (but Denmark is an outier, doing the best of all).Australian payrolls rose by almost +40,000 in May, more than the expected +30,000 rise. Full-time employment rose +41,700 and part-time jobs fell by -2,100. There are now 14.458 mln people in Australian jobs, 31.4% of them part-time and that is their highest level since mid-2021. (The highest ever was in October 2020.) Their actual jobless rate is now 3.9% and their participation rate 67.2%.Although they still rose, international container freight rates were up 'only' +2% last week from the week before and seem to have topped out now. But that puts them +200% higher (three times higher) than at the same week in 2023. Fortunately bulk cargo rates are still holding at their long-term average levels.The UST 10yr yield is now at 4.24% and down -6 bps from yesterday. The price of gold will start today down -US$28 from yesterday at US$2301/oz.Oil prices are unchanged at US$78/bbl in the US while the international Brent price is up +50 USc to just under US$82.50/bbl.The Kiwi dollar starts today -20 bps softer at just under 61.7 USc. Against the Aussie we are +20 bps firmer at 93 AUc. Against the euro we are little-changed at 57.4 euro cents. That all means our TWI-5 starts today little-changed at just under 71.2.The bitcoin price starts today at US$66,888 and down -3.3% from this time yesterday. Volatility over the past 24 hours has again been moderate at just on +/- 2.6%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the US expansion rolls on, pushing back the timing of when interest rate normalisation will happen.US CPI inflation came in lower than expected for May, slowing to 3.3%, the lowest in three months. In April it was 3.4% and forecasts for May were 3.4%. While this rise was lower than the past three months it is a higher rate than the October to February period. And it is above the Fed's target.Then the US Federal Reserve kept the federal funds rate unchanged at the 5.25% to 5.5% range, as expected. Still, the Fed officials projected only one interest rate cut this year and four cuts in 2025, emphasising their intention to maintain higher borrowing costs for a longer period to get inflation back into range.While all this was going on, US mortgage applications surged almost +16% in the first week of June, the sharpest weekly increase since January 2023. This is a rebound from the -5.2% drop in the last week of May and fully erases the slumps from the two prior weeks.India's industrial production rose +5.0% in April from a year ago, little-changed from recent growth levels. The heady rises of late 2023 seem to be past them now with a more orderly expansion in play. India's passenger vehicle sales had been falling over the past few months after a heady rise and were only +4.3% higher in May than a year ago.India's CPI inflation eased to 4.7% in may from 4.6% in April. But food price inflation hardly changed at 8.7%, a worrying sign for them.China's CPI rate slipped -0.1% in May from April, to be just +0.3% higher than a year ago. Observers were expecting a stronger price gain than that, although not by much more. Low demand seems to be keeping prices close to deflation again. Beef prices were particularly soft, down -3.6% in the month to be almost -13% lower than a year ago. Lamb prices were down -1.2% in May from April, down -7.5% in a year. These are far softer than overall food price changes (-1.0%) for the year). Milk prices were unchanged in May, down -1.7% for the year. Meanwhile, producer prices are still languishing in deflation, but less so. They were down -2.5% in April from a year ago, easing to -1.4% in May.Meanwhile, Japanese producer price inflation is rising, up +2.4% in May from a year ago, a nine month high.The Bank of Japan is about to consider gradually reducing its Japanese government bond holdings, taking a step toward normalising not just interest rates, but the quantitative side as well. They are in the middle of a sea-change shift in monetary policy.The EU has decided to hit EV imports from China with new anti-dumping tariffs taking them to almost 50% for some models. The concerns about the impact of Chinese "over-capacity" are spreading globally now. As you might expect, China isn't happy with this move.The UST 10yr yield is now at 4.30% and down -10 bps from yesterday. The price of gold will start today up +US$16 from yesterday at US$2329/oz.Oil prices are up +50 USc at US$78/bbl in the US while the international Brent price is just over US$82/bbl. However whether they will remain up at these levels seems uncertain. The world faces a ‘staggering’ oil glut by end of decade, the IEA warned overnight.The Kiwi dollar starts today +½c firmer at just over 61.9 USc and jerked around by the two big US forces. Against the Aussie we are slightly softer at 92.8 AUc. Against the euro we are little-changed at 57.3 euro cents. That all means our TWI-5 starts today at 71.2, and up another net +20 bps from yesterday.The bitcoin price starts today at US$69,157 and a bounce-back of +3.6% from this time yesterday. Volatility over the past 24 hours has still been moderate at just on +/- 2.4%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news that will all be overshadowed tomorrow by two key pieces of US data, their CPI and the Fed monetary policy decisions.Today, the American Redbook retail indicator came in +5.5% higher than year-ago levels, continuing its track well above inflation and showing a positive retail impulse in the world's largest economy.And the NFIB Small Business Optimism Index rose in May to its highest in five months. So again, no real stress signs there.Canadian building consent levels came in much better than anyone expected in April. The total value of building permits increased by 20% month-on-month, the most since May 2020, after a -12% decline in March. Residential permits were up by 21%. That means they are +30% higher than year-ago levels, a surprisingly strong surge.And staying in Canada, their government is proposing an effective hike in their capital gains tax (by raising the 'inclusion rate' from 50% to 66%), a move that business interests say would hurt investment. But the IMF is now saying that is probably just scaremongering. The IMF wants Canada to go further, also raising its 9% GST rate while raising a related tax credit to shield the poor.In Japan, their machine tool orders were up +4.2 in May from a year ago. While this isn't spectacular, it looks like there is a trend reversal underway from the previous twenty-one months of declines.In Hong Kong the dollar cost of China's security embrace of the once-great financial center is starting to become clear. They are coming up to five years of falling commercial real estate values as the shift out gathers pace. Bloomberg is reporting that those real-estate value losses now exceed -US$270 bln (-NZ$440 bln). Of course, no-one knows where it will settle, but the funk is deepening faster at present, not slowing down.Values are being market down over the past few days on their major stock exchanges too. Over the past month the Shanghai stock exchange has fallen -4%, the Hong Kong exchange is down -5%. Sentiment is certainly leaking away in China's investment community. And China-linked commodity prices are easing lower too, especially mineral prices. Copper, iron ore, and rebar steel are all lower, as are soybeans, for example. The imminent visit from the Chinese Premier (not President Xi) has the aura of representing a fading force in the international trading world.Meanwhile, India, despite a projected slowdown this year, will continue to be the world's fastest-growing large economy, according to the World Bank's latest Global Economic Prospects report.Australian business sentiment isn't improving either. In fact, business confidence there fell back into negative territory in May as conditions continued to gradually soften, suggesting the subdued economic activity seen in the Q1 GDP data has continued into Q2. Business conditions slipped just below average with trading conditions and profitability easing.The overnight dairy Pulse auction had prices retreating somewhat from last week's good full GDT event. But the lower levels probably aren't significant at this stage.The UST 10yr yield is now at 4.40% and down -7 bps from yesterday. The price of gold will start today back unchanged from yesterday at US$2313/oz.Oil prices are still at yesterday's level of US$77.50/bbl in the US while the international Brent price is just over US$81.50/bbl. But they have been volatile in between.The Kiwi dollar starts today at just on 61.4 USc and up about +20 bps from this time yesterday. Against the Aussie we are up more than +¼c at 93 AUc. Against the euro we are also another +¼c firmer at 57.2 euro cents. That all means our TWI-5 starts today at 71, and up +20 bps from yesterday.The bitcoin price starts today at US$66,780 and down a rather large -4.7% from this time yesterday. Volatility over the past 24 hours has still been high at just on +/- 3.0%You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the EU parliamentary election jolt has everyone's attention.But first in the US, in the four months December to March, consumer inflation expectations held steady at 3%. Then in April they rose 3.3%, and this latest NY Fed survey shows them easing somewhat to 3.2%. They were unchanged at the three-year horizon at 2.8%, and increased at the five-year horizon to 3.0% from 2.8%. So its a mixed picture where these expectations are holding higher than where they need to be.In a well supported 3 year US Treasury bond auction (US$140 bln was bid for the US$58 bln available), the median yield achieved was 4.59%, and that was marginally higher than the 4.55% at the prior equivalent event a month ago.Wall Street is in a bit of a lull at present as they await the combination of the May CPI result and the US Fed monetary policy meeting outcomes.In Canada, consumer sentiment is beginning to improve, especially after their central bank made a cut to its official interest rate last weekIn Europe, like many others, markets are recoiling at the EU parliamentary election results. And even more so, 'surprised' by the French reaction of calling a snap national election. But to understand both, you need to know that the EU parliamentary election featured low turnouts, some very low. That allowed motivated extreme parties to make some spectacular headline gains. But it wasn't all one-way traffic. Macron is gambling that a normal turnout in national elections will overwhelm the right-wing votes with more normal voting patterns as voters who sat out the EU version are 'shocked' into returning. We'll see.In Australia, major supermarket Coles has imposed limits of how many eggs customers can buy after hundreds of thousands of chickens have been destroyed after bird flu was found at five large poultry farms. Prices are likely reflect these shortages, although the normal 'don't panic' notices have been issued.The UST 10yr yield is now at 4.47% and and up +4 bps from yesterday. The price of gold will start today back up +US$20 from yesterday at US$2313/oz.Oil prices have risen +US$2.50 from yesterday and are now at just on US$77.50/bbl in the US while the international Brent price is just over US$81.50/bbl. So they are back to week-ago levels.The Kiwi dollar starts today at just on 61.2 USc and up less than +¼c since this time yesterday. Against the Aussie we are little-changed at 92.7 AUc. Against the euro we are +¼c firmer at 56.9 euro cents. That all means our TWI-5 starts today still at 70.8, and up +20 bps from yesterday.The bitcoin price starts today at US$70,043 and up +0.6% from this time yesterday. Volatility over the past 24 hours has still been low at just on +/- 0.7%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the IMF is starting to worry that the US expansion could become unsustainable unless it is matched by national productivity gains.But first we should note that it is a public holiday in Australia today.However all eyes this week will be on Thursday (NZT) when the US Fed will opine on where they think inflation is going and their expected policy rate track. This will be in their dot-plot. Earlier in the same day, the US releases its May CPI data, a crucial piece of their puzzle. US PPI data comes on Friday.But China also releases its CPI data this week, on Wednesday, followed on Thursday by their important new yuan loans data.Then Japan will weigh in on Friday with its interest rate policy update.But over the weekend in the US, markets were anticipating a 'good' rise in non-farm payroll jobs of +185,000. But in fact this headline number was up +272,000. Even more impressive, hourly pay was up +5.3% from a year ago, weekly wages up +5.6% on the same basis.But as regular listeners know, we also look at the 'actual' data. There are now +917,000 more people on employer payrolls in May than in April. Overall there are now 161.3 mln people employed, although that is little-changed from April. So all the gain is a shift from the unincorporated self-employed on to employer payrolls. That may be why the pay gains are well above inflation.Whatever way you slice it, it is a pretty good result, and markets are assuming the Fed will look at this and see pressures that are unlikely to quell inflation. The bond and FX markets reacted, but the equity market went quiet at unchanged levels (although they may argue this gain was already priced in).The March rise in American consumer debt levels was a pretty modest +US$6.3 bln from the prior month and April was expected to catch-up with a +US$11 bln but still-modest rise. But in the event, April consumer debt levels only rose +US$6.4 bln again, up just +1.5% from a year ago. There is no evidence here that Americans are stretching themselves further with additional debt obligations.Meanwhile American household net worth rose +3.3% or +US$5.1 tln to more than US$160 tln at the end of March 2024 from December 2023. The value of household equity holdings increased +US$3.8 tln, while the value of real estate held by households rose by +US$900 bln. In complete contrast, American household liabilities were up only +US$100 bln to US$20.6 tln. There is a huge amount of overall resilience here. (We are not suggesting this is evenly spread, because clearly it isn't.)Canada also released labour market data over the weekend. Their payrolls rose +27,000 and more than the +22,000 expected. But it was all part-time jobs that rose and by +62,000, and full-time jobs shrank -36,000. Their jobless rate rose to 6.2%. They are probably not happy with this outcome but at least their central bank has cut its official interest rate and that may bring some relief to employment in the rest of 2024.Perhaps proving important context to the zooming container freight rates, exports from China soared +7.6% year-on-year in May and beating market expectations of a +6% rise. It was also up from a +1.5% rise in the previous month. It's the steepest rise in outbound shipments since January, fueled by a lower base from last year and sustained overseas demand. The big export destinations were ASEAN countries (+9.7%) and South America, especially Brazil (+26%). Elsewhere little-change or decreases. China's imports were weak however, virtually unchanged from a weak May a year ago.China's foreign exchange reserves rose to US$3.23 tln in May from US$3.2 tln in April and above market forecasts. Their gold reserves were unchanged at 72.8 mln troy ounces, an unusual pause because they had risen for 18 consecutive months. But the rise in the gold price saw the value of their holdings rose to almost US$171 bln.In India, their central bank held its policy rate unchanged at 6.5% and said inflation's pressure at 4.85% is not changing much. Their policy target is a very generous 2%-6%. But food prices are rising and were up +8.7% in April from a year ago. Given their heat and water stress levels, food price pressure is an economic consequence they will struggle with.In the EU, their GDP rose its most in Q1-2024 since Q3-2022, but to be fair the annual growth from a year ago was only +0.5% for the EU, slightly less for the Euro Area (+0.4%).The IMF is pointing out that growth without sufficient productivity improvement is a problem for the world's financial stability, especially when the largest economies drag the chain on productivity. They seem to be pointing to the US on this, and that their expansions won't be sustainable without the commensurate improvements in productivity.World food prices were up onl

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news global trade is facing a tough challenge in containerised freight costs.But first, initial new US jobless claims actually fell modestly last week to +195,000 (although the seasonally adjusted level rose). There are now 1.67 mln people on these jobless benefits. All this is a tiny 1.1% of their workforce and unchanged in a year.But all eyes are now on tomorrow's non-farm payrolls report when a rise in +185,000 is expected, and a continuation of the high levels of employment.The reported level for job cuts was very similar to the very low April level, so not special signs of stress there.A strong labour market would drive demand, including for imports and that is what we are seeing. May US imports were higher than in March, although the gain was modest. And there was a modest gain in exports as well. Although the US deficit in both goods and services is running higher than 2023 levels it is far lower than 2022 levels. For calendar 2024 it will come in just over 3% of their total economic activity, a decrease from 2023.US banks are starting to raise deposit rates for savers to retain and grow their funding. But, as Bloomberg is pointing out, they are also back raising funds by collateralising their mortgage books. Readers with memories of the GFC might be surprised to know how much collateralised mortgage obligations (CMOs) have risen. These are on top of other mortgage-backed securities. One to watch.Separately, it is starting to look like the US bird flu outbreak in parts of the US will be more serious for their dairy industry that initially hoped. It is likely that milk production declines will have an international echo.Despite lingering price pressures, the ECB lowered its three key interest rates by -25 bps overnight as earlier signaled and expected, marking a shift from nine months of stable rates. Inflation has retreated by more than 2.5 percentage points since September 2023. The main refinancing operations rate was lowered to 4.25%, the deposit facility rate to 3.75%, and the marginal lending rate to 4.5%. Because it was well signaled there has been little market reaction. However they gave no clue about where their policy rates are headed from here.This came as German factory orders did not bounce back in April from the March dip, as was expected. There has been no interruption to the now long-established downtrend there.EU Parliament elections are currently underway. Results won't be known until early next week, but nationalist and far-right candidates are expected to make gains.Many countries released trade data overnight and this included Australia late yesterday. Their exports dipped in April, but their import demand unwound rather heavily especially for consumer-related products. From that, their trade surplus rose.China's April trade data will be released later today and rising levels of exports (+6%?) are expected. It is a surge that may other countries worry about because of it is driven by "excess capacity" and "dumping" arising from lower domestic demand.And staying in China, their housing industry is probably not going to drive any economic activity there for a long time. China has moved to bar housing construction in some areas in its latest attempt to shrink a mountain of unsold homes that is weighing on prices. The new restrictions stop local authorities from selling land usage rights to developers in cities with unsold housing inventories that would take three years or more to clear -- a criterion that more than 40% of major cities meet. And that in turn is going to hurt local authority revenues hard.Container freight rates rose another +12% last week from the week before in an increasing jump in the cost of global trade. These freight costs are now +180% higher than year-ago levels. Ther same culprits are at work - security, canals, and capacity. Outbound from China is the main pressure point. Inbound to China costs are falling and are just one seventh of the outbound rates. Bulk cargo rates are little-changed however, and still very low, near where they were first 30 years ago.The UST 10yr yield is now at 4.28% and down another -1 bp from yesterday. The price of gold will start today up another +US$19 from yesterday at US$2379/oz.Oil prices are up +$1.50 at just on US$75.50/bbl in the US while the international Brent price is now just under US$79/bbl and a smaller rise.The Kiwi dollar starts today marginally firmer from yesterday at just over 62 USc. Against the Aussie we are still at 93 AUc. Against the euro we are marginally firmer at 57 euro cents. That all means our TWI-5 starts today at just on 71.2, unchanged from yesterday and still its highest since late February.The bitcoin price starts today at US$71,007 and down -0.9% from this time yesterday. Volati

The Australian Government's a Future Made in Australiainitiative could attract skilled migrants and potentially investment and entrepreneurs from New Zealand, and ultimately be a catalyst for a much more sustainable future, says Kylie Walker, the CEO of the Australian Academy of Technological Sciences & Engineering.In last month's budget, Prime Minister Anthony Albanese's government unveiled a Future Made in Australia, saying this would invest A$22.7 billion over a decade to "build a stronger, more diversified and more resilient economy powered by clean energy, in a way that creates secure, well paid jobs and delivers benefits to communities across the country."Speaking in the latest episode of interest.co.nz's Of Interest podcast, Walker says a key aim of the initiative is to boost Australia's economy complexity, a measure of the knowledge in a society as expressed in the products it produces, by upskilling and moving up the value chain."Obviously, we can't do everything, but we can absolutely do more than just digging up [natural resources such as minerals] and selling them off and then buying them back again in more technologically sophisticated forms. We know that those critical minerals are absolutely necessary for the ongoing electronics revolution, as well as for the clean energy future globally. So we can, for example, process our iron ore, or it can be used in or [turned] into green iron, at least, so that it can be used in green steel. And we have the minerals to make batteries for electric vehicles, for example. We have extraordinary batteries technology. Some of our researchers and developers in that space are amongst the best in the world. And so it seems to me, putting these two kind of natural assets at either end of that development spectrum together, that there ought to be a way to move us a little bit further along the value chain," Walker says.To this end there'll be a need for skilled workers, especially in STEM (science, technology, engineering, and maths)."Around 48% of professional occupations were in shortage across Australia last year, and that's up from 39% the year before. There's a similar shortage in the technical and trades occupations in Australia. So we are both going to have to train new people domestically as a matter of priority, and in addition to that, rely on skilled migration. And, you know, I think traditionally it's probably reasonable to assume some of that skilled migration might come from New Zealand," she says.There should also be a role for private sector investment, research, development and ideas. Much of the earmarked government investment takes the form of tax incentives, but also includes a range of funding mechanisms."One of the other focus areas that we've got simultaneously with this Future Made in Australia push is, of course, building capacity in the global region. And there is a huge place, a huge part to play for New Zealand, for Pacific island nations and other near neighbours like Indonesia, in collaborating to research and commercialise those developments, particularly in the technology and engineering spaces, and to do that for mutual benefit, so that we build the capacity for the entire region," says Walker.Ultimately, Walker hopes in 20 or 30 years, a Future Made in Australia can be looked back on as a catalyst for a more sustainable future."And I mean that both in terms of economically sustainable and societal wellbeing, and in terms of environmentally sustainable. I think if we do this really well, we can build a more circular economy, we can reduce our waste as well as our emissions. We can see small scale manufacturing and pop up factories all over the place. There are some really, really interesting and pretty great technologies coming up where, for example, a micro-factory the size of a shipping container can take glass and fabric being recycled from a building site and turn it into a new material to use in a new building on the same site. I'd like to see huge and widespread adoption of renewables [energy]. And I'm hoping that when we look back, we see not only that resilient infrastructure within Australia, but a booming export market for those products as well, ranging right through from the energy and the fuels, through to those slightly value added up the chain minerals exports, green agricultural exports as well, and a range of other stuff which, frankly, you and I haven't heard of because it probably hasn't been invented yet."In the podcast Walker also talks about where a Future Made in Australia comes from, what's behind it, what needs to happen for Australia to become a renewable energy superpower, green hydrogen, mining, critical minerals, concerns about a Future Made in Australia picking winners and benefiting billionaires, its national interest framework, research and development, and how Australia can get along in a world of rising geopolitical tensions between the United States and China.*You can find all episodes of the Of I

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news some central banks have started to cut policy rates, others are contemplating long holds or even rises.But first, US mortgage applications fell a sharpish -5.2% in the last week of May from the prior week to be -13% lower than the same week a year ago, itself a weak level.And the US ADP employment report disappointed too, indicating private payrolls rose +152,000 in May, and less than the +175,000 expected and the +188,000 rise in April. This is the precursor report for this weekend's May non-farm payrolls report when a +188,000 increase is anticipated. There may be downside expectations growing now. The ADP report said pay was up +5.0% over the past year indicating American workers are staying well ahead of inflation's rise.US vehicle sales rose in May to an annual rate of 15.9 mln which is +2.5% higher than year-ago levels and that was better than expected, and higher than in April.But the news that dominated markets overnight was the unexpectedly strong rise in the US ISM services PMI. The expansion it recorded was strong (53.8) and a sharp rebound from the minor contraction they reported in April. Further, this survey was backed-up, and more, by the S&P/Markit services sector survey which came in even stronger (54.8). New order growth in both surveys drove the expansions. And these new readings completely overshadowed the ISM factory survey hiccup (which you may recall was not matched in the S&P/Markit factory survey which was actually showing a positive expansion).Markets reacted to the ISM services sector gains reported, especially Wall Street equities. They liked that the expansion is apparently broad-based.Also worth a note is that a major carmaker is now building hydrogen fuel-cell vehicles in the US, as a hybrid with an electric battery. It's only emission is water vapour. Generally Americans have been reluctant to buy fast-depreciating EVs. It will be a test now for the appetite for fuel-cell cars.Meanwhile in Canada, their services sector returned to a modest expansion and away from the prior contraction.And the Canadian central bank came through with its expected rate cut, a -25 bps reduction to 4.75%. Markets expect the ECB will make similar signals, and also a -25 bps rate cut to 4.25%. We'll see. If so, these signal a new trend of major central bank rate cuts, led by this Canadian one. But will the US move? And Japan may increase, and possibly Australia too. So the trend isn't broad yet. The US decides on June 13 (NZT) and markets expect no cut presently. Japan decides on June 14, and Australia next on June 18.Interestingly, the Canadian rate cut has not brought expectations it will revive their housing markets.The private Caixin services PMI for China came in better than expected for May and a bit better than the official services PMI. Meanwhile the Japanese services PMI has risen in its final version from its flash result. It too is a similar and good expansion.Meanwhile, Japanese pay rose +2.1% in April from a year ago, and well above the expected +1.7% gain.In India, their PMIs for May (factory, services) both revealed slowdowns in their expansions on weaker order levels. But to be fair, both are still strong expansions, just less so.And perhaps we should note that Prime Minister Modi's embrace of Indian billionaires prior to the election actually ended badly for him at the polls - and unexpectedly so. Other populist politicians who embrace billionaires should probably take note - but of course they won't.In Australia, yesterday's release of quite weak Q1 GDP growth has brought fears of stagnation there. GDP per capita has fallen by -1.6% since mid-2022. But financial market traders pushed back the timing of rate cuts to July next year after “material” revisions in GDP data indicated household finances were actually stronger than many feared.The UST 10yr yield is now at 4.29% and down another -4 bps from yesterday. The price of gold will start today up +US$23 from yesterday at US$2353/oz.Oil prices are up +50 USc at just on US$74/bbl in the US while the international Brent price is now just under US$78.50/bbl and a slightly larger rise.The Kiwi dollar starts today marginally firmer from yesterday at just under 61.9 USc. Against the Aussie we are almost another +¼c firmer at 93.1 AUc. Against the euro we are marginally firmer at 56.9 euro cents. That all means our TWI-5 starts today at just under 71.2, up more than +20 bps from yesterday and its highest since late February.The bitcoin price starts today at US$71,624 and up almost +1.4% from this time yesterday. Volatility over the past 24 hours has been modest however at just on +/- 1.2%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand f

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news of some unexpected outcomes.The overnight dairy auction belied the futures market again somewhat, delivering modest rises across the board, probably because European production is sagging a bit more than expected. Demand from China was not strong, but other regions picked up the slack. Overall prices were up another +1.7% on top of the last auction's +3.3%. SMP rise +3.0% and WMP rose +1.7%. However with the NZD on the rise at the same time, the change in local currency was negligible (+0.3%). Still, overall price levels are back to where they were in October 2023.This is all a bit of an outlier because commodity prices are generally retreating, both food and metals. The copper price is one making a rather fast reversal.In the US, their Redbook index tracking retail sales on a same-store basis was up +5.8% last week from the same week a year ago.Also up were US factory orders and by a bit more than was expected to be +3.4% more than year-ago levels in April. You may recall that the two US PMIs reported quite different tangents yesterday. Well this seems to suggest that the S&P Global/Markit version which indicated rising orders and an expanding sector is more confirmed than the negative ISM one.The more up-beat mood was bolstered by a rise in the Logistics Managers Index. It jumped in May on the back of stronger shipments activity. This indicator has now expanded in 9 of the last 10 months and for the last six months in a row.Meanwhile the April US JOLTS survey reported the number of job openings declined by -296,000 from the previous month to just under 8.1 mln, the lowest level since February 2021. So the upcoming weekend release of the US non-farms payrolls for May will have an edge to it.Unexpectedly, it seems that Modi magic has faded for Indian voters. The ruling BJP isn't getting the landslide election result exit polls suggested. They will still be able to form a government but it will be a coalition with a somewhat chastened result that saw them lose their majority.Elections are about to start in the EU next, and all eyes are on an expected swing to populists and far-right parties.The UST 10yr yield is now at 4.33% and down another -7 bps from yesterday. The price of gold will start today down -US$18 from yesterday at US$2330/oz.Oil prices are down -50 USc at just on US$73.50/bbl in the US while the international Brent price is now just over US$77.50/bbl and a new four month low.The Kiwi dollar starts today unchanged from yesterday at just under 61.8 USc. Against the Aussie we are another +¼c firmer at 92.9 AUc. Against the euro we are marginally firmer at 56.8 euro cents. That all means our TWI-5 starts today at just on 70.9, unchanged from yesterday.The bitcoin price starts today at US$70,644 and up almost +2.0% from this time yesterday. Volatility over the past 24 hours has been modest however at just on +/- 1.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

US PMIs vary, US PCE inflation holds; Canada gets modest expansion; India gets huge expansion; Japan data good; China data weak; NZ to join IPEF.

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news weaker US data has halted the bond selloff.But first, the actual number of US initial jobless claims rose marginally last week, and the number of people on these benefits was actually unchanged from the prior week at 1.7 mln although that was a small increase from year-ago levels.However, Q1-2024 GDP was revised lower to +1.3% in their second estimate, from +1.6% in the first and this was more of an adjustment than was expected. The main change was due to less consumer spending that originally estimated.Both retail and wholesale inventories rose in April, but the changes were in fact very small. And the US continues to be a magnet for imports with a larger trade deficit. However some of this will be markets reacting to impending tariff rises and may be temporary. But their trade deficit as a proportion of total economic activity is little-changed.US pending home sales fell sharply in April, down a whopping -7.7% from March in a dive that surprised analysts. It was the largest retreat since February 2021. Only a small -0.6% correction from a good march was anticipated. Getting the blame was the impact of "escalating interest rates" throughout April dampened home buying, and that left more inventory in the market.Canada said weekly earnings in March were +4.2% higher than a year ago, a slight slowing of the pace in February when they rose +4.3%.Taiwan also reported Q1-2024 GDP growth overnight and that came in much better at +6.6% higher than year-ago levels. And you will notice that is better than China's equivalent +5.3% in the same period.In Australia, there was a small rise in residential building consent levels in April from March (+1.3%) but also lower when seasonally adjusted for Easter. Markets weren't expecting that dip. Year-on-year however, these consent levels are more than +13% higher.And staying in Australia, major bank NAB is forecasting Perth residential prices to zoom almost +14% higher in 2024. That is the high outlier; Sydney is expecting a +4.5% rise, Brisbane almost +9%, but Melbourne will be the laggard at +2.5% in 2024.Already high container freight rates rose another +4% last week to push them more than +150% higher than year-ago levels. The same drivers are at play; security risks, canal disruptions, and now plus the rush to beat new US tariffs on some Chinese goods. It is outbound from China rates that are being most affected. However, bulk cargo rates are immune to these rises, unchanged again this week and still at their long-run average levels.The UST 10yr yield is now at 4.56% and down -7 bps from yesterday. The price of gold will start today unchanged from yesterday at US$2343/oz.Oil prices are down -US$2 at just on US$77.50/bbl in the US while the international Brent price is now under US$82/bbl.The Kiwi dollar starts today marginally firmer from yesterday at just under 61.3 USc. Against the Aussie we are -¼c lower at 92.2 AUc. Against the euro we are also marginally softer at 56.5 euro cents. That all means our TWI-5 starts today at just under 70.6 and little-changed.The bitcoin price starts today at US$69,480 and up +3.0% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news today is Budget Day. Join us at 2pm for full coverage of the new government's first full Budget.More broadly, US mortgage applications sank -5.7% last week from the previous week, the most since mid-February, and ending three consecutive rises. The retreat follows a fresh rise in benchmark mortgage rates, above 7% and following the rise in long-date Treasury yields.Meanwhile, American retail sales continue to expand. The Redbook index of physical locations was up +6.3% last week from the prior week, the fastest week-on-week gain of 2024, and far better than can be explained by inflation. It is actually quite impressive because a year ago these sales were also expanding.There was another US Treasury bond auction earlier today, this one for 7 year Notes was equally well supported as the previous ones. The median yield today was 4.59%, down marginally from the 4.66% at the prior equivalent event a month ago. Financing their swelling deficits isn't facing market pushback yet, and probably won't so long as their economy continues to expand at a healthy clip. (News reports of 'weak demand' just aren't in these result sheets.)But the May Beige Book survey by the US Fed regions paints a more restrained picture of their expansion.In China, the yuan is trading at a six-month low against the dollar, at 7.25, highlighting the divergent monetary policies of the world's two biggest economies. Authorities in Beijing are trying to speed things up from a weak base. In the US they are trying to slow things down from a very long expansion that just won't give in.And staying in China, the IMF revised their GDP growth outlook to 5% for 2024 and 4.5% for 2025, both 0.4 of a percentage point higher than its April projections. The upgrades reflect stronger first-quarter results and recent policy measures. In the first quarter, GDP grew 5.3%, keeping China on track to meet its growth target of "around 5%" this year.Japanese consumer confidence stumbled in May, slipping when a small improvement was expected. This will be a disappointing result for them because the stumble was across the board. But help may be on the way, with pay rises expanding everywhere.However German consumer confidence is recovering. In May consumers' economic outlook increased significantly, their income expectations rose moderately and their propensity to save decreased noticeably. However, the propensity to buy increased only minimally. But these are building trends of turnaround in consumer attitudes there.The German CPI inflation rate edged higher in May to 2.4%, a marginal increase from their 2.2% April rate. But there are no surprises here; this is what was expected and inflation rising in the low 2% range seems to be their immediate future.In April 2023, Australia's monthly inflation indicator was rising at a 6.7% rate. One year later it is down to just 3.6%. But the headlines feature its rise from March when it was at 3.5% and the three prior months at 3.4%. Insurance and foods costs are the main culprits. An up-trend is being sensed and that probably means the RBA may have to double-down on its inflation-fighting pressure. This just adds to the international sense that getting inflation back to the mid-point of the various target rates is hard, and keeping it there even harder. Don't expect central banks to throw in the towel on their core mandate.And staying in Australia, mining giant BHP has walked away from a proposed AU$75 bln takeover of Anglo-American after the British miner rejected a last-ditch request to extend talks. The key sticking point was how Anglo's South African assets were to be included.Meanwhile, South Africa has gone to the polls, ending a fractious and dangerous election campaign period. Voter turnout is high.The UST 10yr yield is now at 4.63% and up another +9 bps from yesterday. The price of gold will start today down -US$15 from yesterday at US$2343/oz.Oil prices are softish but really, little-changed at just under US$79.50/bbl in the US while the international Brent price is now under US$83.50/bbl.The Kiwi dollar starts today down more than -¼c from yesterday at just under 61.2 USc. Against the Aussie we are firmish at 92.5 AUc. Against the euro we are also marginally firmer too at 56.6 euro cents. That all means our TWI-5 starts today at 70.6 and down a mere -10 bps.The bitcoin price starts today at US$67,441 and down -0.5% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.3%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wedenesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news global markets are putting upward pressure on interest rates and that is spilling over to our local markets.In the US, and somewhat unexpectedly, consumer confidence rose in May in the latest Conference Board survey. This mirrors the University of Michigan version, although analysts were expecting this latest one to show a retreat. The rise was because those surveyed had a brighter perception of the future. But, equally significantly, consumers cited prices, especially for food and groceries, as having the greatest impact on their view of the U.S. economy. Notably, average 12-month inflation expectations ticked up from 5.3% to 5.4%. The last time actual inflation was reported, for April, it was running at 3.4% with food at 2.2%. So perception and reality are a bit disjoined at present.But the key point is, consumer perceptions of inflation are high, and markets expect the US Fed to hold the line until a more realistic view is adopted in these perception surveys. In fact, overnight an influential regional Fed boss said he wants to see ‘many more months’ of positive inflation data before a rate cut. These were comments that moved markets.In another very well supported US Treasury bond auction, this one for the five year maturity, the median yield fell to 4.48% pa from the prior event's 4.59%. It seems financial markets are persuaded that inflation is decreasing now and higher yields are not required. It is only consumers who remain to be convinced.But the US Treasury two year bond auction was considered 'soft' by market observers despite its even better support levels. Median yields were unchanged at 4.85%. It is had to understand the market sentiment on this but secondary market yields are now up to 4.98% immediately after the formal auction, so something is going on.Markets thought demand for both issues were 'weak' but if you look at the actual results, they really aren't. "Little-changed" is the best conclusion you could come to.Canadian producer prices were up a chunky level in April from March, the third consecutive month-on-month rise, and they are now up +1.4% from a year ago. That is their first year-on-year rise since September last year and the most since the beginning of 2023. Still, these rising levels remain low and are no inflationary threat there.In China, two first-tier cities are cutting home loan rates to spur housing demand. Shanghai and Shenzhen both made these moves.The overnight GDT Pulse milk powder auction brought mixed results for the 1652 tonnes of product offered by Fonterra. SMP slipped -1.1% from last week's full auction event but WMP rose +0.4%.The UST 10yr yield is now at 4.54% and up a sharp +8 bps from yesterday. The price of gold will start today up +US$4 from yesterday at US$2358/oz.Oil prices are up another +US$1 at just over US$79.50/bbl in the US while the international Brent price is now over US$83.50/bbl.The Kiwi dollar starts today little-changed from yesterday at just under 61.5 USc. Against the Aussie we are softish at 92.3 AUc. Against the euro we are also marginally softer at 56.5 euro cents. That all means our TWI-5 starts today still at 70.7.The bitcoin price starts today at US$67,809 back down -3.2% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news of mostly second-tier indicators today.And that is because it is a public holiday in the US, Memorial Day, and financial markets are closed there.Tt is probably good that business is closed there for one major commercial real estate investor. Starwood Real Estate Income Trust has had to limit the amount of money that investors can redeem in the fund (see page 6), in an attempt to fend off a cash crunch as high interest rates hurt the market for commercial properties such as office buildings. They aren't the only REIT facing a liquidity crisis. With interest rates rising again, the tide is going out on these types of investments.In Japan, yields for their 10-year government bond yield rose above 1%, its highest level in 12 years. This came as the Bank of Japan governor said they need to re-anchor inflation expectations and warned that estimating the neutral interest rate accurately is challenging. Meanwhile, a deputy said the end of the battle against deflation was in sight, adding that wages are likely to continue increasing.Despite the punishment grip imposed by China (for voting for a candidate Beijing doesn't approve), consumer sentiment in Taiwan actually rose in May and by more than is usual. However to be fair the rise is just back to 'normal' levels after their recent election.China released industrial profit data today for April, and although this came in almost +14% higher than in April 2023, it is a very low base that enhances the apparent performance. Compared with April 2022, there profits are actually down -17%.In Germany, their closely-watched Ifo Business Climate indicator was steady at 89.3 in May, the same as a downwardly revised 89.3 in April, but both were well below forecasts of 90.4.And we should probably note - again - that the local carbon price hit another new recent low yesterday, now under NZ$45/NZU. You may recall that the last Government auction price was fixed at in March at NZ$64/tonne (and that was after a series of failed official events when nothing sold).The UST 10yr yield is now at 4.46% and down -1 bp from yesterday. The price of gold will start today up +US$21 from yesterday at US$2354/oz.Oil prices are up +US$1 at just over US$78.50/bbl in the US while the international Brent price is now over US$82.50/bbl.The Kiwi dollar starts today up +¼c from yesterday at just on 61.5 USc. Against the Aussie we are unchanged at 92.4 AUc. Against the euro we are marginally firmer at 56.6 euro cents. That all means our TWI-5 starts today over 70.7, which is up +15 bps from yesterday.The bitcoin price starts today at US$70,052 and up +3.4% from this time yesterday. Volatility over the past 24 hours has been modest though at just on +/- 1.7%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news American factory orders are rising and setting up a good second half of 2024.But first we should note that the US is on holiday today and tomorrow, their Memorial Day (like our ANZAC Day but with more retail). This marks the start of their summer season when investors traditionally pull back from markets a little. But to be fair, it is less of a 'thing' now than it used to be. They return Wednesday, NZT.The week will be 'highlighted' by the first full Budget by the new government, on Thursday. In Australia, they will release CPI inflation data, and inflation data will also come out in Germany and the EU. There will be Japanese data too (retail sales and industrial production) and some important guidance from the Bank of Japan. And from the US, they will release an important PCE update, more data on their GDP growth, consumer sentiment (CB) and home sales updates. We will also get the official PMIs for China for May at the end of the week.And this is a big week in India. It is the final week in their six-weeks of staggered regional voting for 543 parliamentary seats. The ruling BJP are expected to win in what is a system with questionable vote-counting integrity. Final official results will be released some time on Tuesday, June 4, 2024In China, isolation by foreign investors is becoming quite stark. New net foreign investment grew a paltry +US$8.3 bln in April from March which looks like it is a decade low. For a country the size of China, this amount is just a 'rounding error'. In April 2023 it was only +US$14.1 bln and also considered low. In fact the total new foreign investment in the first four months of 2024 was -31% lower than in the same period a year earlier which itself was weak. The international de-risking trend is biting hard now as the nation turns inward.And Bloomberg has an interesting story about the record withdrawals from Chinese bank deposits in April. One-year term deposits at China’s largest banks pay a record-low of just 1.45% pa. There was a large -NZ$880 bln outflow in deposits from banks in April, -1.3% of all deposits, and much of it flooded into bonds and "wealth management products". The policy goal is to spur national economic impetus by making these funds work harder. But China has had significant issues with "wealth management products" in the recent past so this is a very risky strategy. There is a history of a lot of people getting hurt - and very angry.In Japan, their inflation rate fell to 2.5% in April from 2.7% in March. Their core inflation rate dropped to 2.2% from 2.6%. While these falls were not unexpected, they are the lowest levels since January.Singapore's industrial production recovered sharply in April after the big miss in March. But it still isn't back to year-ago levels.Across the Pacific, US durable goods orders rose by +0.7% in April from March, following a +0.8% increase in March and defying market expectations of a -0.8% drop. That makes them a very impressive +7.9% higher than in April a year ago and augers very well for their factory sector in coming months. It was mainly driven by strong demand for transport equipment.An updated University of Michigan consumer sentiment survey result for May was released, coming in very much better than the preliminary version which recorded a drop. Yes there is still an easing but only a minor one. And this current level is +17% higher than a year ago.After three dour and disappointing consecutive months, Canada's retail sales sparked into life in April with its best rise in a year. But it will still be only +2% higher than a year ago and less than inflation's bite.The UST 10yr yield is now at 4.47% and up +1 bp from Saturday. And that is up a net +5 bps in a week. The price of gold will start today down a minor -US$1 from Saturday at US$2333/oz, and down -US$85 from a week ago.Oil prices are down -50 USc at just over US$77.50/bbl in the US while the international Brent price is just under US$82/bbl. These levels were US$79.50 and US$83.50/bbl a week ago, so about -US$1.50 less since then.The Kiwi dollar starts today unchanged from Saturday at just over 61.2 USc but -¼c lower than this time last week. Against the Aussie we are marginally firmer at 92.4 AUc. Against the euro we are also marginally firmer at 56.5 euro cents. That all means our TWI-5 starts today just under 70.6, which is up +20 bps from a week ago.The bitcoin price starts today at US$67,735 and down -0.4% from this time Saturday. Volatility over the past 24 hours has been quite low at just on +/- 0.6%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.