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.And today we lead with news China seems to be making a play to avoided as an investment destination.But first, initial US jobless claims fell to just +192,000 last week when a small increase was anticipated. Still no labour market stress signals here. The total number of people on these benefits fell below 1.7 mln, the lowest level of the year. The insured unemployment rate remains at a very low 1.1%.The globally benchmarked S&P Global/Markit factory PMI for the US rose (to 50.9) in May from its steady state in April although it did not get its boost from new orders this time. But new order growth was a feature of their May services PMI (54.8) with an impressive display and a two year high.This May strength is yet to show up in the Chicago Fed's National activity Index which slipped slightly in April. But it is showing up in the Kansas City Fed's factory survey which recorded a good recovery.It definitely did not show up in the April new home sales data, which in the month ran at almost -8% lower than the year-ago level. The retreat has been gradual each month in that period, but relentless.Perhaps we should note that there was another case reported where bird flu in US dairy cows has jumped to a human. Officials still say the risk is low.The internationally-benchmarked May S&P Global (Markit) PMI for Japan delivered its fastest expansion in nine months. Their previously shrinking factory sector rose to a minor expansion (50.5) while their service sector expansion slipped slightly (53.6).India's PMI data continued its strong run in May, for both the factory and services sector. A feature is the growing rise in exports, presumably benefiting from the China de-risking trend.Taiwanese industrial production was up more than +14% from a year ago in April. That is partly a reflection of weakness a year ago but for the past three months the month-on-month rises have been impressive and March was notably revised higher. Their retail sales growth was more modest however although its base was more solid. All this comes before the full-court pressure the PLA is currently applying to the island nation, a crude show of force in the Russian style.Beijing's claim that they are 'prioritising business reforms' rings hollow in light of the Taiwan pressure.In Europe, their economic recovery gained momentum in May, according to provisional PMI survey data. Faster increases in business activity, new orders and employment were all recorded in the month, while business confidence hit a 27-month high. This recovery is being led by Germany. Meanwhile, rates of inflation of both input costs and output prices softened from April, but remained above pre-pandemic averages in each case.Australian inflation expectations, as monitored in a respected Melbourne Institute survey, eased to 4.1% for the year ahead, down from 4.6% last month. The last time they measured actual inflation, it came in at 3.5% in March.The internationally-benchmarked May S&P Global (Markit) PMI for Australia delivered another small contraction in the factory sector (49.6) but a good expansion in the service sector (53.1). But both levels were lower than March and April. New orders retreated in both sectors, but to be fair the reductions were slight and the least in the past three months.The tighter global security situation has seen the container freight rates leap again, up +16% in the week to their highest in at least a year. The jump is all about outbound cargoes from China which emphasises the risks of trade from there. The Taiwan situation will make it even worse next week. So far, bulk cargo rates haven't moved much in the past week.The UST 10yr yield is now at 4.48% and up +5 bps from this time yesterday. The price of gold will start today still in a sharp down-trend, down another -US$51 at US$2336/oz. That is now down -US$119 from its all-time high on May 20, 2024, a -4.8% retreat.Oil prices are down another -US$1 at US$76.50/bbl in the US while the international Brent price is down a bit less to under US$81/bbl.The Kiwi dollar starts today unchanged from yesterday at just on 61 USc. Against the Aussie we are firmer, up +¼c at 92.3 AUc and a two-month high. Against the euro we are firmish at 56.4 euro cents. That all means our TWI-5 starts today just on 70.4, and up +10 bps from yesterday.The bitcoin price starts today at US$67,776 and down -3.0% 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 on Monday.

The fund backing New Zealand's incoming depositor compensation scheme is going to be small, it's going to take a long time to reach its target level, and the lack of depositor preference in the scheme is a mistake, according to a deposit insurance expert.Geof Mortlock, an international financial regulatory consultant who does work for the International Monetary Fund and World Bank specialising in financial system stability, resolution of bank failures and deposit insurance, spoke about the depositor compensation scheme in a new episode of interest.co.nz's Of Interest podcast.The scheme, expected to be launched in mid-2025, will provide protection of up to $100,000 per eligible depositor, per licensed bank, building society, credit union and deposit taking finance company, in the event of deposit taker failure. Finance Minister Nicola Willis has decided the fund backing the scheme, to be funded through levies paid by deposit takers, will be built up over 20 years to a size equivalent to 0.8% of protected deposits, or about $1 billion.Mortlock says other countries typically have a fund size equivalent to between about 1% and 4% of protected deposits, and he recommends taking about 10 years to build the fund up to its target level.He says the NZ scheme would likely be used for the failure of a non-bank deposit taker or small bank, but wouldn't be sufficient for the failure of a medium-sized or big bank, the failure of which would require "alternative mechanisms." Nonetheless Mortlock says it is worth having the scheme."I think it's definitely worth having because there are quite a sizable number of small deposit takers out there. And at some stage, one of them is going to fail. Hopefully not for a long time. But statistically, if you look around the world, there are occasional bank failures, and most of them tend to be small.""For a small deposit taker or a medium sized one, I think having a deposit insurance scheme is really important, and I think it helps in two ways. It reduces the risk of what we call interbank contagion, where one failure can trigger multiple runs across the banking system. And secondly, it helps to reduce the risk for the taxpayer, because it means that there is a dedicated fund paid in by deposit takers and therefore [this] reduces the need for government funding," says Mortlock."But for a large bank failure, it is not going to be sufficient. And if you look around the world for a large bank failure, deposit insurance funds are not typically used anyway."An option for a larger bank failure is the Reserve Bank's Open Bank Resolution (OBR) Policy. In the podcast Mortlock explains why he thinks it would be "potentially catastrophic" for the Reserve Bank to use OBR, and he doesn't think a Finance Minister would allow them to.In the podcast he also talks about what other resolution options could be for a large bank failure, what products the scheme will cover, the impact deposit takers paying a levy may have on deposit rates, how the Reserve Bank should administer the scheme, bail-in, depositor preference and more.Under depositor preference, depositors rank ahead of other secured creditors in a liquidation. Mortlock says it helps reduce the risk of runs on banks, and facilitates bail-in whereby unsecured liabilities such as bonds may be written down or converted into equity in the event of a bank failure.At the moment, with OBR, NZ is "about the only jurisdiction I can think of outside of some dubious ones, which would apply a haircut to deposit liabilities and no depositor preference," Mortlock says."So if you're a wholesale depositor in a bank and the banking system is looking shaky, and you know that the OBR is out there and could be triggered, what are you going to do? I think you're going to do a preemptive run. And what would that do? That would almost certainly mean that the [Reserve Bank] Governor, joined by the Minister of Finance, would have to say, a, we're not doing OBR, and b, we are putting in place a temporary guarantee of all wholesale deposits. Just the opposite of what you would want to have to do. So I think it is a foolish policy, OBR, and made even more foolish by the absence of depositor preference."*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.And today we lead with news the American central bank is wondering if they have done enough yet to quash the inflation impulse.But first, US mortgage applications rose +1.9% last week from the previous week, adding to the 0.5% increase from that earlier week and taking it to an unusual third consecutive week of gains in mortgage demand and only the second time this year that has happened. But they remain -11% lower than last year's weak level. Benchmark home loan rates slipped slightly (-6 bps) to just on 7%.But the recent rise in existing home sales fell back in April, down -1.9% from a year ago and also down -1.9% from March. It would have been a larger fall, but a surge of homes selling at the high end of the market capped the weakness. These are transactions less likely to need a mortgage. And that recent trend is also raising the median price.Yesterday's RBNZ scepticism that they are seeing needed 'last mile' progress in the inflation battle has been echoed by the US Fed in the minutes released earlier today for their May meeting. Getting to their target will take longer than they thought, these notes show. Some officials are open to another rate rise if needed to get on top of the stickiness. But in the end they stuck with their faith that disinflation will get them there. The equity market slipped when this document was released.Prior to that release, the US Treasury had another very successful bond auction, for a 20 year maturity, and that delivered a median yield of 4.58%, down from 4.77% at the prior equivalent event.Japan's machinery orders rose +2.9% in March from February, slowing from the +7.7% m/m gain in February but way better than market expectations which assumed a March correction was likely of -2.2%. Year-on-year March was up +11%. Their forecasts suggest the high levels of orders will be maintained in the coming three months. Of note is that orders for very large constructions (not included above) are running very strongly at present.But in China, their excavator sales - a market canary - fell almost -10% in the first four months of 2024, with domestic sales down -3% and export sales down -17%.In the UK, their CPI inflation rate eased to 2.3% in April, its lowest level since July 2021. However that was higher than the 2.1% rate expected. But that progress was overshadowed by the announcement that that country would go into an election on July 4, 2024. That is much earlier than expected. The UK pound rose on the news. There is currently expected to be a change of government at that election.Some Australian survey data shows that most 45 year old Aussies plan to retire soon after they reach 65. That is unchanged since 2018/19. There are now 4.2 mln retirees in Australia. Given their workforce is 14.3 mln, that means there are currently 3.4 workers per retiree. The same ratio in New Zealand is 3.3.The UST 10yr yield is now at 4.43% and up +1 bp from this time yesterday. The price of gold will start today down -US$33 at US$2387/oz.Oil prices are down another -US$1 at US$77.50/bbl in the US while the international Brent price is down a bit more to US$81.50/bbl.The Kiwi dollar starts today up only a net +10 bps from yesterday at just on 61 USc. Against the Aussie we are much firmer, up more than +½c at 92 AUc. Against the euro we are firmish at 56.3 euro cents. That all means our TWI-5 starts today just on 70.3, and up +20 bps from yesterday.The bitcoin price starts today at US$69,853 and up a mere +0.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.0%.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 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 we are looking for signs inflation is actually easing and policy interest rates can be adjusted lower.But first, at the overnight GDT dairy auction, prices rose a bit more than +3.3% from the prior event two weeks ago. That takes the price level back to where it was in October 2022 with a nice up-trend developing now. Overall prices are now +13% higher than a year ago. Volumes offered however are at a four year low. The key WMP price was up +2.9%, SMP was up +3.5% and butter up +5.1%. Interestingly, mozzarella was up almost +10% indicating rising foodservice demand. China is back with good demand for WMP and butter, but it is the Middle East where the rising cheese demand is coming from. However we should note that the recently rising NZD capped the overall price increase at +1.9%.In the US Redbook retail sales indicator was up +5.5% last week from the same week a year ago, handily more than inflation so they are seeing real gains still.Not only are retail appetites high and rising, American stock ownership levels are now back to levels last seen prior to the GFC.At an event in Germany, the US Treasury Secretary Janet Yellen called out China, the UAE, and Türkey as the main evaders of the American and European sanctions on Russia over its invasion of Ukraine.In Canada, their CPI inflation rate eased to 2.7% in April from 2.9% in the earlier month, in line with market expectations, and is now the softest rate of consumer price growth since March 2021. Their core inflation rate is down to 1.6%. This shift lower is what their central bank said would happen. Easing food prices (from a year ago) led the shifts. The chance of rate cuts there next month have risen. Their policy rate is currently at 5%.In China, we are awaiting the data for April on foreign direct investment flows. It is unlikely to be very positive but it will give an updated position of where the 'de-risking' trend is at.In Australia, the expanding labour force (up +2.5% in March from the same month in 2023) is behind a +7.1% rise in total labour compensation in March from the same month in 2023. That means in April 2024, total wage and salary compensation will have pushed on up above AU$100 bln in the calendar month.Consumer sentiment in Australia, as tracked by the Westpac Melbourne Institute survey was virtually unchanged in May from April but at a low level still. It is a measure that has been in the doldrums for more than two years now; the last time it was 'positive' was in February 2022.Join us at 2pm this afternoon when we will have full coverage of today's RBNZ Monetary Policy Review. No-one is expecting any rate change, but their outlook opinions will be very important. Financial markets currently have two OCR rate cuts pencilled in for 2024 and three in 2025 and the RBNZ assessments of where they stand in the battle against inflation could well adjust that pricing - and that in turn may have echoes in current wholesale money markets.The UST 10yr yield is now at 4.42% and down -2 bps from this time yesterday. The price of gold will start today down -US$14 at US$2420/oz.Oil prices are down another -50 USc at US$78.50/bbl in the US while the international Brent price is still just under US$83/bbl.The Kiwi dollar starts today down another -20 bps from yesterday at just over 60.9 USc. Against the Aussie we are marginally softer at 91.4 AUc. Against the euro we are also softish at 56.2 euro cents. That all means our TWI-5 starts today just on 70.1, and down -10 bps from yesterday.The bitcoin price starts today at US$69,683 and up +1.9% from this time yesterday. Volatility over the past 24 hours has been moderate again at +/- 2.7%.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 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 China seems to be struggling to find its way through the wreckage of its property crisis.The Chinese central bank left both its 1- and 5-year rates unchanged in their monthly review today, still at 3.45% and 3.95% respectively. The one year benchmark has been unchanged for nine consecutive months now, the five year benchmark for three. These 'holds' come amid a flurry of other loosening activity last week, targeted at reviving their property markets and saving the remaining large property developers.Analysts are forming the view that the actions China has taken to reinvigorate its property sector won't be enough to achieve that. Bets that much more stimulus will be required are juicing up some commodity markets. Copper, for example, has now risen to US$11,250/tonne, up +7.5% in a week, up double that in a month. Zinc has taken off too, up +10% in a month.Meanwhile that are chalking up some global success in other areas. The number of new shipbuilding orders in China rose almost +60% in Q1-2024 from the same period a year ago. This accounted for about 70% of global orders for ships. Almost 40% of those orders were for bulk cargo ships, 12% for container ships. But there was a notable surge in orders for oil tankers, accounting for 35% on Q1 orders. Normally they account for less than 10%.We should get the Chinese foreign direct investment data for April later today and markets are braced for another quite weak result as the two superpower blocks disentangle.And we should note that the southern province of the Guangxi (at the border with Vietnam) is suffering unusually heavy rainfall currently with widespread flooding. Both hourly and daily rainfall records have been broken.Meanwhile Taiwanese export orders came in in April at the same level as March, a very good result because that is almost +11% higher than April 2023 and well above the expected +4.5% gain.And we should also perhaps note that the New Zealand carbon price is falling away quite quickly now, with the NZU down to just $46/tonne. (You will recall it at over $80/tonne more than a year ago.) That is now miles below the NZ$132/tonne EU carbon price, which is languishing but not really falling.The UST 10yr yield is now at 4.44% and up +2 bps from this time yesterday. The price of gold will start today up +US$19 at US$2434/oz. Oil prices are down -50 USc at US$79/bbl in the US while the international Brent price is still just on US$83.50/bbl.The Kiwi dollar starts today down -20 bps from yesterday at just over 61.1 USc. Against the Aussie we are still up at 91.6 AUc. Against the euro we are softish at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2, and down -20 bps from yesterday.The bitcoin price starts today at US$68,332 and up +2.4% from this time yesterday. Volatility over the past 24 hours has been moderate however at +/- 2.1%.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.

Renting in New Zealand today is more difficult than a decade ago, with fewer properties available, rents continuing to increase, and the quality of rental properties not much better, Shamubeel Eaqub says. However, the economist and co-author of the 2015 book Generation Rent, rethinking New Zealand's priorities, says it's not all bad news.Speaking in the latest episode of interest.co.nz's Of Interest podcast, Eaqub says the "lived reality of renting" has got harder over the past decade, but the regulatory settings are slowly improving."We need to ensure there's sufficient renters' rights ... because in New Zealand renting is so insecure and is such a problematic thing for so many people."One area giving Eaqub optimism is the rise of build to rent, where landlords must offer 10-year rental tenancy agreements."I've been a long time fan of institutional landlords rather than accidental landlords. When you are in the business of land lording, you want to have as little turnover as possible, whereas if you're an accidental landlord, you are much more interested in having quick turnover and being able to sell it off and all those other bits and pieces. The tenant is kind of incidental to the story and a bit of an annoyance, really."Eaqub says build to rent offers two types of security; tenure security and financial security."Because more often than not [build to rent] will come with contracts that will have a known level of [rental] increase for the next, say three years, so you can plan your finances. Whereas in a normal tenancy you have only certainty for 12 months and then you don't know what will happen next."Build to rent is adding new housing supply targeted for one particular use, which he says is unusual in NZ."If you look at what happens in New Zealand, or how it has generally happened in New Zealand in the past, it's the idea of filtering, right? You build houses which are for new homes and for rich people, and then the older homes that are secondhand, that kind of gets recycled into the rental market.""So I'm very encouraged to see this new supply that's coming in, that's very much targeted towards renting specifically. Because if you think about the pressures that we see in terms of emergency housing, social housing and all those kinds of things, that's happening because people are falling out of the rental market, because the rental market is short supplied and is very expensive. And so the more we can do to get more supply directly and retained in the rental market, the better it is," Eaqub says.He also talks about his disappointment at the fracturing of the Labour-National consensus on medium density residential standards (MDRS)."[The consensus] showed me for the first time the grown-up-ness of the way that our politicians can respond to structural problems, that we can put aside our political differences and just do something because it's the right thing to do, not because you're on one side of the House or the other. But that grown up moment of politics lasted very, very briefly, and we threw it away at the first chance when the election campaign started," Eaqub says.In the podcast Eaqub also talks about NIMBYS, the construction sector, what's driving rents, problems with local government, his views on rent controls, the accommodation supplement, emergency housing, what the rental market may be like for his kids' generation, and more.*You can find all episodes of the Of Interest podcast here.

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 metals prices eye a boost from the Chinese housing rescue.But first in the week ahead, it will be one dominated by the RBNZ's Wednesday Monetary Policy Statement, one that itself comes about a week before the new Government's first full Budget - and that too is likely to have a key influence on monetary conditions. No-one is expecting any change to the OCR, but signals for when it will be cut will be keenly awaited.In the US we will get advance PMIs for May, durable goods orders, and new and existing home sales for April. China (today), South Korea and Turkey also have rate decisions dues this week. And inflation rates will be released for Canada, the UK, and Japan. Sentiment surveys will be released in Australia and the EU, along with retail sales data in Canada.Wall Street has just booked a strong set of earnings reports. Most S&P500 companies have reported now (93%), and they have reported a +5.7% rise in profit growth, matching the outsized gains in Q2-2022 that was off the back of the prior pandemic weaknesses. Almost 80% of these companies came in with better than expected earnings-per-share, and 60% better than expected revenues. These sort of outcomes help explain why both the Dow and the S&P500 are at record highs. And why many investors don't think these equity markets are over-valued. But we should note that PE ratios ae higher than long-term averages now.In China, industrial production growth recovered in April after a disappointing March to be back yo the expansion level in the prior three months. But this is the only 'good news' in yesterday's data dump from the Middle Kingdom.Their retail sales rose by only +2.3% year-on-year in April, down from +3.1% in March and missing market forecasts of +3.8%. That is quite a miss.Electricity production slipped in April from March to be up only +3.1% in the year. That is a long way lower than the +8% rise in the year to December. If 3.1% is a proxy for GDP, they are not on track to achieve Beijing's growth targets.Prices for new dwellings fell their most since July 2015. Prices for resales fell even more. The depth of their property sector retreat is laid in the official information. It is no wonder they are considered a wholesale state intervention in the sector.To clear away the drag that their property market has created, Beijing has taken some 'drastic moves'. The central bank has removed its lower limit banks can charge for home loan rates, nationally. It has cut interest rate benchmarks for housing-related lending by -25 bps.And it has allocated ¥300 bln (NZ$42 bln) for lending aimed at buying by local authorities for unsold housing for "social purposes". They said the ¥300 bln of central bank cash will translate into an estimated ¥500 bln of credit overall.And we should keep an eye on what is happening to China's Agriculture minister. He was in charge of their food security program, and has suddenly fallen out of favour, receiving the standardised accusation of 'corruption' from Beijing authorities.More generally. the UN says India’s growth will rise in 2024 to +6.9%, from the 6.2% they estimated in January, driven by strong public spending and growing private consumption. The other big mover is Brazil, up to an expected +2.1% in 2025 from a January estimate of +1.6%. The US is still expected to expand +2.3%, Japan by +1.2%, China by +4.8% and the EU by +1.0%. Australia is +1.6%. New Zealand is ignored by this UN review.The EU released its final April CPI rate which came in at 2.6% for the bloc, 2.4% for the Euro Area. Both were little-changed from March but sharply lower than a year ago. In April 2023 the EU rate was 8.1%, the Euro Area was 7.0%. Getting rid of dependence on Russian oil and gas has not been at the cost of higher inflation. But we should observe that the range is wide across the bloc between countries. Denmark recorded at 0.5% annual inflation rate in April, whereas Belgium 4.9% and they are less than 700 kms apart.We should note that the social tensions in New Caledonia are echoing in the nickel market because there is an important mine there. It is the world's third largest producer, and may help explain why France isn't taking any backward steps. Global nickel prices have risen more than US$2000/tonne, up +11.3% over the past week over supply fears. It is a key ingredient for making stainless steel.The UST 10yr yield is now at 4.42% and unchanged from Saturday but down -8 bps from this time last week. The price of gold will start today down -US$4 from Saturday at US$2415/oz. That is up US$45 for the week and just off it's all-time high. Silver has shot up too, up +12% over the past week.Oil prices are still up at US$79.50/bbl in the US while the international Brent price is still just on US$83.50/bbl. Both

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 the ECB is warning investors aren't taking geopolitical risks into account nearly enough.But first in China, we are getting reports that Beijing is developing a plan to save their housing markets and SOE developers by having the state buy huge numbers of unsold properties to boost demand. It is a sign of desperation. What wouldn't go wrong? Millions of properties partly occupied are surely likely to give an enhanced sense of rot in the sector, while enriching the developers. The future for such a policy looks bleak indeed.Under the proposal, local state-owned enterprises would be asked to help purchase inventory from distressed developers at steep discounts using loans provided by state banks, Bloomberg reported on yesterday. Hong Kong shares of developers who will benefit from the "market clearing" zoomed again yesterday.In the US, housing starts rose in April from March but are still lower than year-ago levels, and that year-ago standard is not high. Previously we have seen stronger residential building consent levels but they are falling on a prior month- and prior year-basis too. The new home construction sector is falling back into line with the general real estate resale market with tepid demand at best.But that weakness is not reflected in their labour market. The actual number of jobless claims fell last week to 197,000 which was a slightly smaller fall than expected. It is interesting how expectations for rising labour pressure seemed to have turned around.And the real state of retailing in the US can be tracked by the activity of their largest retailers - and the largest is Walmart. They said Q1-2024 sales levels were strong, growing far more than inflation.Most serious analysts see the US economy expanding by +2% in 2024. But the AtlantaFed's GDPNow model reckons it is expanding nearly twice as fast as that, currently running at a 3.6% expansion, real.In one region, the US Philly Fed factory survey turned from a minor positive to a minor negative in May, basically because of a pullback in new orders. But also intriguing is the holding high of survey perceptions of business conditions. They seem confident about the future, very confident.Industrial production in the US was little changed in April, taking seven of the past twelve months as expansions, five as contractions. But most of the expansions, as small as they have been, are in the more recent half. And that has eaten into the year-on-year deficit, so it is now only -0.4%.In its latest Financial Stability Review, the ECB says investors are likely to be jolted by negative election surprises in 2024 that will weigh on financial stability. They reckon investors are blind to the sudden shifts in sentiment that geopolitical tensions can drive. And the extra spending they are having to do on the security from is likely to put future strain on European public finances they noted.In Australia, the April labour force data saw the jobless rate rise to 4.1% from 3.9% in March. (NZ was 4.3% in March.) That means 593,000 of their 14.9 mln labour force are without work. Full-time employment fell by -6100, part-time employment rose by +44,600. It was tougher in NSW where full-time employment fell -16,300 and part-time employment only rose +13,100.We have previously noted that financial markets had started pricing in a chance of interest rate rises from the RBA. A lowish chance, admittedly. But now we can note that they seem to have abandoned those bets - even though the consensus seem to be that the short-term Aussie Budget won't be especially inflation-friendly.More globally, the copper price has breached US$11,000 and an all-time high and now we are into the crazy world where short sellers are being squeezed, and having to buy their way out of the frenzy which bids up the price further.You may recall we reported a sharp rise in bulk cargo freight rates last week. Well, it was temporary and they have now fallen back to the prior week's level now. But containerised cargo rates are still rising as fast as they did last week, up another +11% this week and are now double year-ago levels. All this is driven by outbound-from-China rates roiled by the persistent Canal and security problems.The UST 10yr yield is now at 4.38% and up +2 bps from this time yesterday. The price of gold will start today down -US$10 from yesterday at US$2379/oz.Oil prices are up +US$1 today to just under US$79/bbl in the US while the international Brent price is up +50 USc, now just on US$83/bbl.The Kiwi dollar starts today with a slight easing from yesterday at just on 61.2 USc. Against the Aussie we are up at 91.6 AUc and a new one month high. Against the euro we are unchanged at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2 and little-chan

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 financial markets are in a risk on mood today.First, the April US inflation rate brought no surprises, coming in as expected at 3.4%, a dip albeit a small one, from March's 3.5%. But it still qualifies as 'sticky' - there have been nine lower readings in the past twelve. Their 'core' rate fell to 3.6%, also as expected. Airfares and rent remain the key components keeping inflation up in the US. Petrol prices rose a very minor +1.2% over the year. (The other measure we use has them up +2.0%. Either way, petrol is not pushing up inflation there.)The apparent slowing of inflation is bring debate and market bets on when the Fed will cut its policy interest rates. The Fed itself of tempering expectations, but markets aren't waiting. Yields on US benchmark bonds are falling in secondary markets, equity prices are rising in anticipation (and to record highs), and the US dollar is weakening as a risk-on mood envelopes markets today.Meanwhile, the official data for US retail sales were up +4.0% in April from a year ago on an 'actual' basis, and now showing 'real' gains above inflation. (But when you seasonally adjust this data and correct for varying holiday periods, the gain isn't that high.) Meanwhile, American business inventories are not rising, in fact posted a small dip in March. They don't currently have an excess inventory problem.US mortgage applications were little-changed last week from the prior week, to be -14% lower than the same week a year ago. Benchmark mortgage interest rates fell -bps to 7.08%, mortgage brokers report.China left its 1-yr Medium Term Lending Facility rate unchanged at 2.5% yesterday.Indian exports fell sharply in April from March, and were only +0.8% higher than a year ago. Presently, India is not a powerhouse exporter or participant in global trade. April merchandise trade exports of US$35 bln in the month is barely more than Australia's.The EU delivered some better economic results overnight with March quarter economic activity expanding (GDP was +0.4% higher in the quarter than the same quarter a year ago, 'real'.) Although they may seem low to us, they are 'good' for them in the current circumstances.Their Spring forecasts out overnight see a "gradual expansion amid high geopolitical risks", anticipating growth rising to +1.0% this year and +1.6% next. Industrial production is rising recently, cutting into the prior declines. But they are making hard work of it getting this key indicator to rise on a year-on-year basis.And staying in Europe, we should note an assassination attempt on the newly-elected nationalist firebrand Slovak prime minister. He has been a pro-Russian, anti- democracy lightning-rod, the subject of large street demonstrations since his election. It is the king of spark that in the past has kindled wider, broader consequences.Argentina's central bank cut its benchmark interest rate -1000 bps to 40% from 50%, marking the sixth adjustment since December due to a slowing inflation rate, bringing the rates to the lowest since June 2022. The monthly inflation rate slowed for the fourth straight month to 8.8% in April from 11% in the previous month and below market forecasts of a 9% gain.In Australia, the rate of gain in their wage pay slipped to 4.1% in the March quarter. That is the first time that gain rate has fallen since Q4-2020 and it may suggest labour market pressures are starting to ease there.Standard & Poor's has been looking at the 2024 Aussie budget. They are concerned about 'structural spending pressures' that won't ease in futute. They are also worried about the broader issue of weak productivity and “how effective spending programs such as Future Made in Australia are in allocating resources”.The UST 10yr yield is now at 4.36% and down -9 bps from this time yesterday. The price of gold will start today up another +US$34 from yesterday at US$2389/oz, a move essentially driven by the falling greenback.That same move has boosted oil prices today which are up +50 USc to just on US$78/bbl in the US while the international Brent price is now just on US$82.50/bbl.The Kiwi dollar starts today with a broad-based, across-the-board rise, up almost a full +1c from yesterday at just on 61.3 USc and its highest level in eleven weeks. Against the Aussie we are up at 91.5 AUc and a one month high. Against the euro we are +½c higher at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2 and up +60 bps from yesterday, and its highest since mid March.The bitcoin price starts today at US$65,097 and up a spectacular +6.3% 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 N

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 about the latest and pre-election Aussie Budget delivered overnight.But first, the American retail Redbook Index rose +6.3% last week from the same week a year ago, suggesting buoyant trading in physical stores, gains well ahead of inflation. It is not only the strongest gain of 2024, you need to remember that it is on the back of a rising 2023 which itself was rising strongly in 2022.Their SME sentiment index rose in April, slightly recovering from a 12-year low in March and better than the forecasts which assumed it would slip again.Meanwhile, factory prices rose more than expected in April, up +2.4% from the same month in 2023. But this is about average over the 15 year history of this data tracking (excepting the pandemic distortions, of course). But if there is a cloud it is that the month-on-month rise seems slightly elevated.American household debt rose +3.8% in Q1-2024, just marginally more than the CPI inflation rate over the same period of +3.5%. And this excess brought a small, but noted, rise in delinquencies. As you might expect, mortgage debt rose less than inflation (+3.3%) given their hibernating residential property markets. Car loan balances rose at inflation's level. Student loan balances fell, the only sector to recede. But credit card balances zoomed higher, up a concerning +13% over the year and the basis of the rise in delinquencies. Total consumer debt (including mortgages) is now US$17.7 tln. That is about 65% of US GDP and near the lowest share since these records started in 2005. Back before the GFC it was over 100%.The American CPI inflation rate gets updated tomorrow and financial markets seem parked up until this data is known. Markets currently expect a very minor improvement, down to 3.4%. Variations from that or the "core rate" expectation could well be market-moving.US Fed boss Powell was speaking overnight in The Netherlands, but he had the same message again - that inflation is stickier than the central bank wants to see and that rate cuts from them are some way off. But he also repeated that it is very unlikely that their next move will be a hike.In China there are some signs elements of stress are spreading to insurers now. Several insurance companies have chosen to pay higher interest rates on their capital bonds rather than exercise an option to redeem them early, a sign they are facing solvency problems. Policymakers are focusing on the wider stress points, but still basically about their troubled property markets.In Germany, their widely-watched ZEW Indicator of Economic Sentiment rose more than expected in May to its highest since February 2022. Improving economic conditions in the EU and China have contributed to a better outlook, analysts say. Expectations for domestic consumption, as well as the construction and machinery sectors, have brought substantial improvements in sentiment.But today it is all about the Australian Budget, delivered overnight. With the Australian economy the weakest it has been in 23 years, their Treasurer has handed down his third Federal Budget delivering its second consecutive surplus, and setting the Government’s agenda as they head into an election cycle. That election is due in May 2025, so this Budget has to be seen as the last major policy setting before then, that could deliver results before polling. Initiatives such as the "Future Made in Australia" program were at the forefront. Not only is this Budget 'political' (including "tax cuts for all" and a $300 rebate for household power bills), the reviewing media assessments are highly politicised as well.The surplus announced of +AU$9.3 bln this year is off the back of generous company tax receipts – a pleasant surprise after the -AU$1.1 bln deficit forecasted in the Mid-Year Economic and Fiscal Outlook in December. However, this will swing into a -AU$28 bln deficit in 2024-25 (-1.4% of GDP), with larger deficits in the years following than previously forecasted.And following up yesterday's note, the copper price is now officially up at an all-time high, US$10,977/tonne.The UST 10yr yield is now at 4.45% and down -4 bps from this time yesterday. The price of gold will start today back up +US$20 from yesterday at US$2355/oz.Oil prices have fallen -UA$1 to just on US$77.50/bbl in the US while the international Brent price is now just on US$82/bbl.The Kiwi dollar starts today marginally firmer than yesterday at just over 60.3 USc. Against the Aussie we are also a tad firmer at 91.2 AUc. Against the euro we are little-changed at 55.8 euro cents. That all means our TWI-5 starts today just on 69.6 and up +10 bps from yesterday, partly on a weaker yen.The bitcoin price starts today at US$61,251 and down -2.4% from this time yesterday. Volatility over the past 24 h

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 China seems to be on the cusp of bringing back its traditional stimulus play to bolster its misfiring economy.But first up today there is more evidence US inflation isn't cooling as the Fed would want. A respected survey by the NY Fed shows that consumer inflation expectations for the year ahead increased to 3.3% in April, the highest since November, from 3% in each of the previous four months. These year-ahead price expectations rose across the board.Canadian residential building consent levels were expected to fall in March after an unusually strong start to the year. A -4.5% pullback was expected. But in the end the retreat was much larger, down -11.7% from the February level and down almost -15% from the same month a year ago.Indian inflation seems to be stable, but it is running high at 4.8%.In China, we are getting new promises of "opening up". Sadly for them this is just a replay of a tired meme and is unlikely to bring the benefits promised like of the many earlier "opening up" promises made of the past decade (which got them to the current funk).They need to something necessarily big. And something big seems to be coming. They are readying a ¥1 tln sale of very long bonds (NZ$230 bln) to fund a stimulus program. It may not be the only bond issue for that purpose.Australia's closely-watched NAB business confidence index stood at +1 in April, holding steady for the second straight month while staying below its long-run average. Weak sentiment in retail, wholesale, and mining offset improvements in recreation, personal services, construction, and manufacturing. But the main feature is the lackluster current conditions.All eyes will be on the Australian Federal Budget to be released later today, but actually not until about 9:30 pm (NZT). The expectation is that it will report a +AU$9 bln surplus.We should note that the copper price rose sharply again overnight, now back up to US$10,500/tonne and the peak and all-time high last reached last in February 2022. (It is likely to spike copper theft again. Be warned.) There is no evidence this bull-run is anywhere near over yet. As is usual, it will attract speculators because of the confluence of bullish demand (especially from China) and tightening supply. The sky-high regulatory costs of starting new projects has discouraged miners for years who turned to consolidation until that pressure eases.The UST 10yr yield is now at 4.49% and down -1 bp from this time yesterday. The price of gold will start today down -US$25 from yesterday at US$2335/oz.Oil prices have risen slightly to just over US$78.50/bbl in the US while the international Brent price is now just on US$83/bbl. Both are minor net +50 USc/bbl gains.The Kiwi dollar starts today little-changed from yesterday at just under 60.2 USc. Against the Aussie we are also unchanged at 91.1 AUc. Against the euro we are little-changed at 55.8 euro cents. That all means our TWI-5 starts today just on 69.5 little-changed from yesterday.The bitcoin price starts today at US$62,739 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.

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 of generally modest and uninspiring economic data.We start today with updates from China.Their April CPI came in +0.3% higher than a year ago, low but not as low as expected and not deflation yet (which they had from October to January). In the circumstances they will be ok with this. But both been and lamb prices fell and quite sharply, not only from a year ago, but from March as well. Milk prices fell as well although by lesser amounts.Meanwhile, Chinese producer prices fell and at a slightly faster rate than the -2.3% expected, down -2.5% from a year ago.Also much lower than expected is new bank lending. This activity was far less than in March and far less than what was expected. To be fair, there is usually a retreat in April from March, but just barely achieving the April 2023 level will have been quite a disappointment, especially as Beijing is on record encouraging lending (especially to property developers). The analysts expected lenders to heed the signals, but it seems they ignored them. Overall credit came in with a rare contraction. And the April new yuan loan level is near the trough of levels we have seen since late 2017.Foreign direct investment fell a sharp -56% on the year in the first quarter of 2024, according to official Chinese data. It rose +US$12.5 bln in March from February 2024, much lower than the +US19.7 bln rise in the same period in 2023, and the +US$21.5 bln in the year prior. Global business are still reluctant to invest in an economy grappling with weak internal demand, and veering into Party controls of business operations. Foreign companies made just US$10.3 bln in net direct investments lower than during the same period last year. It is a falling trend that started by Shanghai's COVID lockdown.China's vehicle sales grew by +9.3% in April from the prior year to 2.36 million. This follows a +9.9% March increase. Sales of new energy vehicles jumped by 33.5%. But we can also see this current overall sales level is only at the April 2018 level, so the 'growth' only underscores how weak it has been recently. But for car sales, they don't have this on their own.The coming week will bring updates on China's industrial production, retail sales, fixed asset investments, the house price index, and the unemployment rate for April. None of these are expected to show anything but modest changes or real improvements.In Japan, household spending there dropped in real terms by -1.2% in the year to March, compared with market forecasts of a -2.4% fall, after a -0.5% decline in the prior month. It was the 13th straight month of declining personal expenditure, dragged by weak spending on housing, fuel, electricity & water charges. In contrast, expenditure for food, transport & communication, and education all rose.Across the Pacific in the US, the widely-watched consumer sentiment survey by the University of Michigan fell in May and by more than expected. The driver was the expectation that future inflation will rise again and that unemployment and interest rates may all be moving in an unfavourable direction in the year ahead. But we should also note that May often delivers pessimist results in this survey and the current level is +14% higher than a year ago. Since June 2022 the trend has been rising and the latest result is not out of trend.Global wheat prices rose to their best level since August after the important May USDA updated production and demand estimates. Rising production in the US, China, Australia and Canada is offset by falling output in the huge Russian regions, Ukraine, and the EU. Global corn and rice output is expected to rise. American beef production is expected to be lower as herds are rebuilt in 2024/25. And they have raised their forecast milk price.Canada delivered its best jobs report in April since the start of 2023 with an increase of +90,400 new jobs in the month with a broad-based rise. But full-time positions increased by +40,100 while part-time jobs rose by +50,300. There are now 20.5 mln people employed in their workforce with a jobless rate of 6.1%.Indian industrial production rose +4.9% in March, which was less than the expected +5.1% rise and lower than the February +5.6% rise. The Australian federal budget will be released tomorrow (Tuesday) May 14 and more "pre-budget announcements" are being released. A big one over the weekend was that they will spend more than AU$11 bln on social housing initiatives to try and get on top of their housing crisis for low income people.The UST 10yr yield is now at 4.50% and unchanged from Saturday. The price of gold will start today down -US$8 from Saturday at US$2360/oz. It is on the rise again, mainly on Chinese demand, and heading back toward its mid-April all-time high. For reference it was US

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 that there is a surprise renewed jump in global shipping freight rates underway again.But first, new US jobless claims rose last week. The headline seasonally adjusted rate "surged" to +231,000 and up from +209,000 the prior week. But the actual number of new claims was only 209,000. It rose too, but it is too soon to conclude this is a new trend. There are 1.75 mln people on these benefits, which is a decrease from lasrt week. But it is up from 1.66 mln a year ago. The current level is tiny compared to their employed workforce of 161 mln people.But the headline "surge" has had echoes in currency and bond markets today.There was a UST 30yr bond auction earlier today successfully raising US$25 bln (so much smaller than yesterday's 10 year event). It was heavily supported with median yields slipping to 4.59% from 4.61% at the prior equivalent event a month ago. We are no longer reporting rising yields.China's exports rose to a three month high in April, but basically only back to the general monthly level of the past year. The rise looks good only in the perspective of the past two months. Overall their exports rose +1.5% from the same month a year ago. But this masks some quite big moves. Exports to the US fell -1.0%, to the EU they were down -4.8%. To Japan down -9.2%. to New Zealand they were down -2.0% and Australia down -7.7%. But they rose +21% to Brazil, +20% to Vietnam, +7% to Malaysia although to be fair the dollar values of these increases were not high. Interestingly Chinese exports to Russia slipped -1.9%, and to India were little-changed.Overnight, the Bank of England maintained its key bank rate at 5.25%, as expected. However, two committee members preferred to reduce the rate by -25 bps, compared to only one member in the prior meeting. Further, officials revised down their inflation forecast and raised the growth outlook. Those projections foresee a decline in their policy rate to 3.75% over the next three years.There was an unexpected rise in global freight rates for containerised cargoes last week, up +16% in the week, principally on outbound rates from China. These rates are now a massive +80% higher than the same week a year ago. The rise will affect other trade routes globally. Meanwhile, bulk cargo rates rose +30% last week as well although they are "only" 57% higher than year ago levels. It is not clear why rates have jumped in the past week so suddenly but it may relate to renewal of time charter rates after the first flush of increases after the Panama and Suez Canal stresses that just are not easing.It is cold nationwide this morning. After yesterday's Transpower warning, we should note that as we write this, electricity prices are only marginally elevated indicating a normal situation so far, and not the extreme stress we saw two days ago.The UST 10yr yield is now at 4.46% and down -3 bps from yesterday. The price of gold will start today up +US$19 from yesterday at US$2333/oz.Oil prices have risen +50 USc at just under US$79/bbl in the US while the international Brent price is unchanged, now just under US$83.50/bbl.The Kiwi dollar starts today up +¼c from yesterday at just under 60.3 USc. Against the Aussie we are softish at 91.1 AUc. Against the euro we are little-changed at 55.9 euro cents. That all means our TWI-5 starts today just under 69.6 and again marginally firmer from yesterday.The bitcoin price starts today at US$61,901 and down -1.1% 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 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 market-moving data is scarce today but investors should be reading the latest US CBO update.First, there was only a modest rise in consumer debt in March, up a mere +1.5% and substantially less than the rise analysts were expecting. Stepping back for a longer term trend view, Americans have been growing their consumer debt appetite at slowing rates since 2012. This is quite different to the assumption many jump to.US mortgage applications actually rose +2.6% last week from the prior week, recovering from the -2.3% decline in that earlier week. But they remain -17% lower than year-ago levels. Maybe one reason last week's level was higher was because benchmark interest rates actually fell, the first reversal in more than a month.In yet another very well supported US Treasury bond auction, this one for their 10 year Note, the median yield came in at 4.42%, and actually lower than the 4.47% at the prior equivalent event a month ago.New estimates from the US Congress Budget Office make clear the cost of extending the Trump 2017 tax cuts will likely exceed US$5.8 tln and are the single largest contributor to the swelling American federal deficits. (It is seven times more than their annual defence budget, more than three times their Health & Human Services budget.)Across the Pacific, Taiwanese exports rose in April by a modest +4.3% amount, the sixth consecutive monthly rise, but far less than the stellar rise in March. There was disappointment all the same because they were expecting another +15% rise.German industrial production fell as expected in March following the surprisingly good February result. But it is still -3.3% lower than a year ago in real terms. But continuing its comeback was their construction sector.In Sweden, their central bank cut its policy rate to 3.75%, which involved the -25 bps reduction analysts were expecting. They say inflation is now approaching the target while economic activity is weak. It is their first cut since 2016, following the tightening campaign that started two years ago. They said that if the outlook for inflation stays lower, their policy rate will be cut two more times during the second half of 2024.Perhaps we should note that Elon Musk's X-Prize competition, the largest ever science competition with US$50 mln to the overall winner, has shortlisted 20 finalists in the carbon removal category, one of whom has a New Zealand connection.The UST 10yr yield is now at 4.49% and unchanged from yesterday. The price of gold will start today down a minor -US$2 from yesterday at US$2314/oz.Oil prices have changed little at just under US$78.50/bbl in the US while the international Brent price is now just under US$83.50/bbl.The Kiwi dollar starts today little-changed from yesterday at just on 60 USc. Against the Aussie we are +¼c firmer at 91.3 AUc. Against the euro we are little-changed at 55.9 euro cents. That all means our TWI-5 starts today just under 69.5 and again marginally firmer from yesterday.The bitcoin price starts today at US$62,573 and down -1.2% from this time yesterday. Volatility over the past 24 hours has been 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 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 the positive global economic news rolls on, despite the best efforts of some regional forces to risk everything with crazy adventures.First, today's dairy auction brought a welcome, if small, rise. And it is maybe more than it looks given the signals from the derivatives market and the recent GDT Pulse events all pointed to softness. Recent global tensions may have played a part. Turkey suspended all trade with Israel and that included their regionally important dairy trade. Middle East buyers were prominent overnight. Overall prices rose +1.8% from the prior event in USD terms but were little-changed in NZD terms. The important WMP price rose +2.4%, butter was up +2.1% and cheddar cheese impressed with a big +8.0% gain. Perhaps we need to see these shifts as part of the global rise in overall commodity prices recently as the world's major economies build some upward momentum.In the US, one measure of American economic optimism among investors declined sharply in May, but there seems to be big disconnect between 'opinions' (everyone has one), and behaviour. For example, retail spending at bricks & mortar stores was up +6.0% last week from the same week a year ago, a trend that has built to its highest level since the end of 2022. Equity prices are rising still.And the US logistics industry is on the rise with a solid April expansion.Meanwhile the latest UST 3 year bond tender was very well supported, and a feature today was that yields rose much less from the prior even that we have seen in a while. Today's event brought a 4.55% median yield, not too different to the 4.49% we saw in the prior equivalent event a month ago. This is only one tender, but perhaps the rising demand is finally suppressing the upward yield trend. They have a lot of funds to raise but investors are showing they have an even faster-growing appetite for this paper.Across the border there was also a positive surprise. Their closely-watched Ivey PMI jumped to its highest level in two year, recording an expansion only currently matched by India.Japan is on a roll. Their services PMI for April has come in at a strong level (54.3), outpacing the US (51.3), China (52.5), and the EU (53.3). Only India (60) tops them among the world's largest economies.In Europe they also surprised on the upside. Retail sales surged (for them) in March to be up +2.0% in volume (real) terms from the same month a year ago, and far better than what was anticipated.In Australia, or more importantly Western Australia, their state government has launched a AU$5,000 incentive to vacant property owners to bring them onto the long-term rental market for Western Australians to lease.Overall in Australia, retail sales are disappointing. In the March quarter they fell, making this the fifth of the past six quarters of retreat in retail volumes.Yesterday, the Reserve Bank of Australia held its monetary policy positions and rate, and issued guidance that you could take any way. The most you can say is that they remain vigilant to the risks of higher inflation. Pretty lame really. More here.For those of you anxious about coffee prices (the main media is just picking up on the April rise), be assured current prices are retreating as fast as they rose with good supplies re-entering markets from Brazil and Vietnam.The UST 10yr yield is now at 4.46% and down -3 bps from yesterday. The price of gold will start today down -US$9 from yesterday at US$2316/oz.Oil prices have risen a minor +50 USc to just under US$78.50/bbl in the US while the international Brent price is now just under US$83.50/bbl.The Kiwi dollar starts today little-changed from yesterday at just under 60.1 USc. Against the Aussie we are firmer at 91 AUc. Against the euro we are unchanged at 55.8 euro cents. That all means our TWI-5 starts today just under 69.4 and marginally firmer from yesterday.The bitcoin price starts today at US63,355 and up +0.4% 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 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 global service sector is in reasonable shape, helping generate new impetus to the world's economy. Equity markets are rising the wave.In China, their private Caixin services PMI brought some good solid news. It was little-changed in April from the expansion in March, but now the 16th straight month of expansion of services their services sector. This private survey reports a faster expansion than the official version. Of special note is that new business grew the most in nearly a year and the fastest since May 2023. Foreign sales rising the most in ten months.According to the combined factory and services PMIs, the Eurozone expanded its fastest in a year in April. In fact their services expansion was faster than either China, Japan or the US. Their new business volumes rose for a second successive month and at the quickest pace since May last year.Only India is expanding faster among the major global economies.In Australia, the Melbourne Institute monthly inflation monitor for April found an increase in monthly inflation, although annual inflation continues to decline. Annual changes in the cost of living also fell for most household types.And Aussie job ads rose in April somewhat unexpectedly and halting a longish retreat. In fact they were almost +3% higher in the month from March. Better, the rise was broad-based, except for healthcare. However these levels are still -6.6% lower than a year ago, and as good as the recent rise was, in fact it is trending at a flat level.All eyes will be on the RBA at 4:30pm today (NZT) and their monetary policy review. They have a history of occasionally acting differently to what markets expect so there is some market pricing tension about what they will come up with. The main 'risk' is that they will be more hawkish than expected, given their sticky inflation levels.It is very noticeable that some key mineral prices are on the rise again. That includes zinc, nickel, tin, lead, aluminium, and copper. A rise in global demand is behind the broad recent increases. There are some tighter supply points too, as is usual in the transition.The UST 10yr yield is now at 4.49% and down -2 bps from yesterday. The price of gold will start today up +US$24 from yesterday at US$2325/oz.Oil prices have stayed down at just under US$78/bbl in the US while the international Brent price is now just under US$83/bbl.The Kiwi dollar starts today unchanged from yesterday at just over 60.1 USc. Against the Aussie we are softer at 90.7 AUc. Against the euro we are little-changed at 55.8 euro cents. That all means our TWI-5 starts today just on 69.3 and and unchanged from yesterday.The bitcoin price starts today at US$63,094 and down -1.8% 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.And today we lead with news the American labour market data for April seemed to have something for everyone.But first, in the coming week it will be relatively quiet, especially on the US data front. But the Q1 earnings season is in its final weeks and still includes some major reporting. Elsewhere we will get set-piece central bank announcements from Sweden, England, Brazil and Malaysia, and of course from Australia tomorrow. China's CPI and PPI will also be released, but not until Saturday.New analysis shows that American labour productivity is rising and at its quickest rate since the the 1990s, and in 2023 that was its highest pace in half a century. It is too soon to credit AI, so this could be a new and important trend. Rising productivity is an essential precursor for rising standards of living.But over the weekend, the US reported that their economy added only +175,000 jobs in April, on the headline, seasonally adjusted basis, the least since October and a deceleration compared to the upwardly revised +315,000 jobs added in March. It fell short of market expectations for a +243,000 increase. This data underscores a significant slowdown from the brisk pace observed in the first quarter and trails behind the average monthly gain of +242,000 jobs over the preceding 12 months. But between the two months combined the 'slowdown' is quite small.But in fact, on an 'actual' basis employer payrolls rose +803,000 to 158.0 mln and a record high. On a household basis, including the unincorporated self-employed, they rose +234,000 to 161.6 mln and showing the continuing shift from self-employment to company payrolls that we have observed in prior 2024 months. Either way, there are actually significantly more people employed that the headline levels suggest. Full time jobs rose, part time job levels shifted lower.But the American labour force is growing slightly faster than these employed levels show so the jobless rate ticked up, very slightly admittedly, to 3.9% and although that is similar to last month it is at the upper range of what they have had since August 2023. (The New Zealand jobless rate was 4.3% in March 2024.)Average weekly earnings rose +3.9% in April from a year ago, lower than the March level of 4.1%, so there are signs of less labour market pressure. (US CPI is 3.5%.)And we should not forget that labour market data is a lagging indicator.A leading indicator is a metric like the PMIs. And the ISM services PMI for April turned negative, dropping sharply to a contracting 49.4 in April from an expanding 51.4 in March. This is their first contraction in the services sector activity since December 2022, and it surprised markets who had expected a continuing expansion. But before we get too carried away, we should note that the new order component remained expansionary, so this overall drop might be just a blip.The internationally-benchmarked US Markit services PMI is still showing an expansion, albeit a slower one.So despite the headlines of a labour market and service sector undershoot, the markets liked the implications. Risk appetites returned with the S&P500 rising, bond yields falling, and the USD easing. Basically markets now feel US rate hikes are less likely as inflation pressures are easing - just as the US Fed itself seemed have suggested. The expectations of one 2024 rate cut late in the year are creeping back.American vehicle sales came in slightly higher in April and the highest monthly sales rate since December, now at 15.7 mln, up +0.5% from the rate in the same month a year ago. For perspective, it reached an all time high of 21.7 mln units in October 2001 and a record low of 8.5 mln in April 2020.In China, their publicly traded companies took a net profit hit for the first time in five years in 2023, as the protracted property sector slump bled into other industries. The roughly 5,200 non-finance companies listed in mainland China logged a combined net profit of NZ$655 bln last year, according to DZH data. This amounts to a -3% or -NZ$20 bln overall retreat. In Q1-2024 the decline swelled to -5% on that basis.China returns from its "Labor Day" week of holiday, today. And there are no real signs their property market has bottomed out, as some claim. In fact, banks' mortgage books are now shrinking, undermining claims the market is stabilising.Global real estate services provider CBRE first-quarter profit beat analysts' estimates for Q1-2024, helped by higher leasing demand at a time when commercial property sales remain under pressure from elevated interest rates. Their revenue rose +7%.In Australia, eyes are turning to tomorrow's rate review by their central bank. No change is expected, but it will be closely followed for signals of the recently talked about rate rise possibility.The UST 10

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 the OECD sees a world economy in recovery and about to expand at an increased rate, despite the many challenges. It is a perspective of resilience.But first in the US, jobless claims held at a two month low ahead of tomorrow's April non-farm labour market report. There were +189,000 new claimants last week taking the total to 1.76 mln and that is it’s lowest since October.The very low levels of job cuts reported in April fell from the prior month.Markets expect non-farm payrolls to have expanded +243,000 in April when they are released tomorrow.Although they fell in March from February's record high, American exports are essentially holding at a high level and were unchanged from a year ago on goods and services basis.The American March factory order data was released overnight and that showed another increase, a second consecutive one and up +1.6% from the prior month which was itself up +1.2% on that basis. However these levels are still running -0.9% lower than a year ago.China remains on holiday. One feature of this year's extended Labour Day break is the return of Chinese making international trips. Japan is the focus this week, but that will spread as Chinese travellers regain their appetite for seeing the world.Meanwhile, their real estate sector is making no progress toward recovery. It remained very weak in April with major developers’ sales tumbling -45% year on year and holding new very low month-on-month levels.In Argentina they can sniff real progress in their battle against endemic inflation. So their central bank slashed its benchmark interest rate overnight by -10% to 50%, the fifth change since December and the third in the past three weeks. They see a notable slowdown in monthly inflation and a "rapid adjustment" of inflation expectations. In March, Argentina's monthly inflation slowed more than expected for the third consecutive time, with consumer prices rising by 11% from February to March, below economists' forecast of 12.1%. The new administration has prioritised stringent spending cuts since December to combat inflation, and they now expect monthly inflation to decrease to 3.8% by September. That would take the current inflation rate of 288% down to under 50%.On Monday, the OECD will release an updated assessment of the New Zealand economy and prospects. Today, its global Economic Outlook update sees an "unfolding recovery" and it has raised its global growth forecast to +3.2% for 2025 from 3.1% this year. They see New Zealand rising from a modest +0.8% in 2024 to +1.9% in 2025. For Australia it is a rise from +1.5% to +2.2%. For Japan, from +0.5% to +1.1%. For the US it is a retreat from +2.6% this year to +1.8% next. For China, they see a slip there too from +4.9% to +4.5%. They expect global inflation to ease but unemployment to rise modestly. For a world with wars and severe security stresses, it is a remarkably sanguine outlook. But that inflation outlook, even if it does ease, points to higher-than-wanted sticky levels.Global container freight rates dipped a minor -1% last week to take them to +55% higher than year ago levels. The same drivers of high rates (war diversions, Suez security, and Panama drought) are all still there so immediate relief seems unlikely. Bulk cargo rates however slipped -5% for the week and are down -12% for the year.The UST 10yr yield is now at 4.58% and down -3 bps from yesterday. Oil prices are down another -50 USc from yesterday at just over US$78.50/bbl in the US while the international Brent price is unchanged at just on US$83.50/bbl.The Kiwi dollar starts today up +½c from yesterday at just over 59.5 USc. Against the Aussie we are holding at 90.8 AUc. Against the euro we are firmish at 55.5 euro cents. That all means our TWI-5 starts today just on 68.9 and up a mere +10 bps from yesterday.The bitcoin price starts today at US$59,164 and up +2.5% from this time yesterday. Volatility over the past 24 hours has moderate at just on +/- 2.5%.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.

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's Fed positioning is less hawkish that markets had expected.The US Fed policy announcement today brought no change in their rate targets at 5.25-5.50%. They did note that ongoing inflationary pressures and a tight labour market has stalled progress toward bringing inflation back down to its 2% target in 2024, and they won't shift their rate signals until they actually see progress.In addition they said they will slow their quantitative tightening activities starting from June 1, 2024. That means they will reduce their balance sheet by only US$25 bln per month from the previous US$60 bln per month.In remarks after the policy announcement, Fed boss Powell said their next move is unlikely to be a rate hike. Equity markets like that, yields fell, and the greenback eased. But part of the lack of action could be its desire not to make large policy moves in an election year.Meanwhile the widely-watched ISM factory PMI slipped back into contraction in April, just marginally weaker than the Markit version. The ISM version is usually lower than the Markit one, but both generally move in the same direction. Currently that is a softening.That came as the US JOLTS job openings report declined by 325,000 from the previous month to 8.488 million in March, so really only a very small change. But markets noticed the slowdown.But the ADP Employment Report beat estimates adding +192,000 workers to their payrolls in April, more that the expected +175,000 increase but less than the March gain of +208,000. Hiring was broad-based, they found.All this comes ahead of Saturday's (NZT) US non-farm payrolls report which is expected to record a solid employed labour force gain of +243,000.Because of the widespread May Day holidays around the world yesterday, there is little other international data released overnight.In Australia, their statistics agency released "employee living cost indexes" (LCI) separate from the consumers’ price index (CPI). In March, their CPI came in at 3.6%. But the employee LCI came in at 6.5%, mainly because of the sharp rise in their variable mortgage rates which pass through there very quickly. It was notable that the other groups, especially retirees, did not suffer much of a variation from the CPI in their own LCIs.The UST 10yr yield is now at 4.61% and down -7 bps from yesterday. Wall Street has risen +1.0% the S&P500 after the Fed announcement. The price of gold will start today up +US$9 from this time yesterday at US$2303/oz.Oil prices are down another -US$2 from yesterday at just under US$79/bbl in the US while the international Brent price is now just on US$83.50/bbl and down even more.The Kiwi dollar starts today unchanged from yesterday at just over 59 USc. Against the Aussie we are holding at 90.9 AUc. Against the euro we are also holding at 55.3 euro cents. That all means our TWI-5 starts today just on 68.8 and down -10 bps from yesterday.The bitcoin price starts today at US$57,694 and another -4.3% lower that this time yesterday. And this is a new two month low. Volatility over the past 24 hours has remained very high at just on +/- 3.9%.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 as we await our local labour market report, the global economy is expanding modestly, but inflation isn't killed off yet.First in the US labour costs rose +4.2% in the year to March, up +1.2% from the prior quarter. This is the highest rate of increase since mid-2022 and is more indication that inflation's pressures remain at a stick level - not excessively high, but not tracking down as their central banks needs.American retail sales at physical stores were up +5.5% last week from the same week a year ago, another indicator that consumers are still spending those higher payroll increases, and keeping inflationary pressures on.But the Conference Board survey of consumer sentiment retreated in April. What American consumers say and what they do are diverting again. This time it isn't about present conditions which they think are ok, rather about future conditions which they are more worried about. But there are some interesting differences. Those on modest incomes are more confident than those on higher incomes. Those under 35 are more confident than those older.In Japan, it is becoming clearer that their central bank did in fact intervene in currency markets to support the yen yesterday.In China, the private Caixin factory PMI survey was more bullish that the official version. The modest Caixin expansion held in April, and in fact the sixth straight month of growth in factory activity recorded by this survey (which is concentrated in smaller private sector firms) and even though low, the fastest pace since February 2023.On the other hand, the official factory PMI survey, which is more focused on large State-owned enterprises was less positive even if it was their second straight month of (low) expansion in factory activity. Basically it is just holding.More positive is the official services PMI, but that was less positive in April than March and it came in well below what analysts were expecting, and the softest pace since January, as new orders shrank at a steeper rate. But it is positive still and that streak is now out to 16 consecutive months.In an earnings call comment, the Yili boss said Chinese milk supply has been higher than demand which isn't growing as it once did. But he was optimistic that the back end of 2024 would improve for the Chinese dairy industry.In Europe they said their April inflation was stable at 2.4% (Euro Area), and that their overall economy grew by +0.5% in the year to March (whole EU), which was a bit better than expected. Interestingly, it was led by Spain, Portugal, France and Greece, and held back by Germany.In Australia, retail sales were softer than expected in March, dropping by -0.4% from February and missing market estimates of a +0.2% growth. February was also downwardly revised. It was the first decline since last December as turnover fell in all retail sectors.Locally, we will get our March quarter labour market data later this morning. We will have a full update then (at 10:45am).And the RBNZ releases its important Financial Stability Report prior to that (at 9am) and will have full coverage on that too.And we should note that as speculators unwound long positions, the cocoa price is falling as rapidly as it rose.The UST 10yr yield is now at 4.68% and up +6 bps from yesterday. The price of gold will start today much lower, down -US$46 from this time yesterday at US$2294/oz.Oil prices are down another -US$1 from yesterday at just under US$81.50/bbl in the US while the international Brent price is now just on US$86/bbl.The Kiwi dollar starts today down -¾c at just over 59 USc. Against the Aussie we are holding at 91 AUc. Against the euro we are -½c lower at 55.3 euro cents. That all means our TWI-5 starts today just under 68.9 and down -40 bps from yesterday.The bitcoin price starts today at US$60,270 and -4.4% lower that this time yesterday. And this is a two month low. Volatility over the past 24 hours has remained very high at just on +/- 3.9%.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 that today we are in the quiet period before some big news coming up in the rest of the week, starting with our own labour market data out tomorrow, and the US Fed rate review on Thursday (NZT).In the meantime in the US, the pressure from rising petrol prices seems to have completely evaporated. Pump prices reported are just +1.2% higher today than a year ago, and virtually unchanged from a month ago. But we shouldn't overstate the importance of this. Retail fuel prices account for just 4% of their CPI basket. "Shelter" (rent) accounts for more than 30%, and rent inflation is running at 5.6% pa (even though it is far below its recent 8.2% peak a year ago). House insurance has risen by +8.6% in the past year. CPI pressures are shiftingPreviously we have pointed out Tesla's share price slide in 2024, down more than -40%. But in the past few days there has been a sudden recovery, up +35% on the news that the under-fire company has apparently won approval for its "full self-driving" technology in China. It has struggled to get those approvals in the US due to the perceived poor safety record of those systems. But China made a political decision to approve after a visit to Beijing from Musk, side-lining regulators.In Europe, energy ministers from the Group of Seven (G7) major democracies reached a deal to shut down their coal-fired power plants in the first half of the 2030s, in a significant step towards the transition away from fossil fuels.Germany's consumer price inflation came in at 2.2% in April. This retains its lowest level since May 2021 and was slightly below analyst forecasts of 2.3%. A slowdown in services inflation was offset by a small rise in food prices. A year ago, German inflation was running at 7.2% so this is significant progress since then, and achieved while the separation from Russian energy source reliance was achieved. In hindsight it is an impressive achievement.EU sentiment was largely unchanged in April, but it is still running at a low level. But at least it has recovered from the sag in the middle of 2023 and held that improvement.Yesterday's sudden yen devaluation past 160 to the USD has been reversed today just as quickly, now bank to 155 yen to the USD. That has some wondering whether Tokyo authorities intervened although there is nothing more than suspicion at this point. But the Bank of Japan has a reputation of being unyielding in the face of market and trader pressure so perhaps some of those reversed themselves unable to hold their short positions. It is unclear at this point what drove the pullback.The UST 10yr yield is now at 4.62% and down -4 bps from yesterday. The price of gold will start today a little firmer, back up +US$3 from this time yesterday at US$2340/oz.Oil prices are down -US$1 from yesterday at just under US$82.50/bbl in the US while the international Brent price is now just on US$87/bbl. Gaza ceasefire hopes might be behind this shift.The Kiwi dollar starts today up nearly +½c at just over 59.8 USc. Against the Aussie we are firmish at 91 AUc. Against the euro we are firm at 55.8 euro cents. That all means our TWI-5 starts today just over 69.3 and up a minor +10 bps from yesterday.The bitcoin price starts today at US$63,031 and down -1.1% from this time yesterday. Volatility over the past 24 hours has remained modest at just on +/- 1.1%.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 that jobs will be in focus this week.In the week ahead, all eyes will be on the US Fed's interest rate decision on Wednesday, followed closely by their April labour market report on Saturday (NZT). And that comes after our own local labour market report for March on Wednesday.The US ISM PMI will come out this week (recalling the internationally benchmarked one has already showed a slowdown). And similar PMIs will come for China, Canada, and South Korea among others. The US JOLTs job openings data, foreign trade figures, factory orders, and Conference Board consumer confidence index are also due this week and any one could be market-moving if it steps out of range. And the US Q1 earnings reporting season reaches its peak this week.Finally, we will get inflation updated for the EU, South Korea, Switzerland, Indonesia, and Turkey.But first, a weekend data release showed profits earned by China's industrial firms rose by +4.3% in the first three months of 2024, much slower than a +10.2% jump in the prior period. But they actually fell in the month of March from the same month a year ago, down -3.5% suggesting their economy’s stronger-than-expected growth early this year might be tough to maintain. The latest result underlined that the government has struggled to get a recovery momentum amid a prolonged property downturn, persistently weak domestic demand, and lingering deflation risks. Profits in state-owned companies fell while those in the private sector sharply slowed on the three-month basis they like to use. But it is masking building near-term weakness.And it is not only the Japanese who have a 'currency problem'. The recent volatility of the yuan, depressed profits and unexpected shifts in external demand are combining to make some Chinese exporters less sure about their business prospects – and more likely to park their cash assets in anything but the yuan. The yuan's value has recovered somewhat since October but exports haven't, and business holders of the CNY are sensing a potential official depreciation is imminent.Markets are also sensing a new official rate cut is imminent in China, and Chinese government 10 year bond yields dropped sharply on Friday - before recovering just as sharply as officials stepped in.And staying in China, there are reports that property market sentiment is improving, and that has property-based equities rose sharply on the Hong Kong stock exchange - on Friday, but oddly, not yet on the Shanghai exchange. One to watch.And in a new stimulatory action, China is offering trade-in subsidies for new car buyers. ICE car owners can get a ¥10,000 subsidy (NZ$2325) to buy a new NEV, or they can get ¥7000 (NZ$1625) for a new ICE car with engines of 2 liters and smaller. The world's largest car market is about to get larger and have its profitability problems 'solved'. But this is bringing louder international calls for action to push back on "Chinese overcapacity'. This issue worries the EU and Japan a lot.The Bank of Japan kept its policy unchanged on Friday, as expectations mount for central bank action to deter further selling of the embattled yen. From the no-change position the yen has continued to fall, primarily against the USD but even against the NZD. At Friday's 93.8 Yen to the NZD, that is now it's 'lowest' since May 1986, thirty-eight years ago. Against the USD, the yen has sunk to 158 to the USD, its 'lowest' since March 1986. Markets are betting that Tokyo is going to have to intervene very soon. While Japanese exports are suddenly much more competitive, a depreciation like this (-15% in the past year) could bring an inflationary shock with it.Across the Pacific, the American PCE inflation index came in at 2.7% for the year to March, back to levels they last had in November. It has now risen, modest as it might seem to us, for the past three months. Their 'core' rate has held at 2.8%. The financial market takeaway is that American inflation is uncomfortably sticky and that the Federal Reserve is right to be cautious about signaling a cut in its benchmark policy rates. (Again, it seems the Fed has called this correctly, and market analysts got ahead of themselves.)The same data shows American consumers spending normally with personal consumption spending +2.7% higher than a year ago while disposable personal incomes were only up +1.4%.The UST 10yr yield is now at 4.66% and down -1 bp from Saturday. The price of gold will start today a little softer, down -US$3 from this time Saturday at US$2337/oz.Oil prices are little-changed from Saturday at just on US$83.50/bbl in the US while the international Brent price is now just on US$88/bbl.The Kiwi dollar starts today marginally softer at just under 59.4 USc. But for last week it rose +½c. Against the Au

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 all about American GDP and reactions to the first quarter results.US economic activity expanded an annualised +1.6% in Q1-2024, compared to +3.4% in the previous quarter and below forecasts of +2.5%. It was the lowest growth since the contractions in the first half of 2022, the advance estimate showed, although there are two more revisions due (an in the Q4-2023 set, they rose with each revision). The result was held back by a decrease in inventories and a rise in imports. However, disposable personal income rose an impressive +4.5% according to today's release.However, the PCE data released with this shows inflationary pressures unabated. So the US 10-year Treasury note yield rose to above 4.7%, the highest since early November, as traders to scale back their expectations regarding the timing of a Fed rate reduction, with the the first cut now not priced in fully until December.We should note that lower growth with still-high inflation equals stagflation, a gnarly public policy problem, as history shows.Further, today's US Treasury 10 year bond auction reveals median yields rise to 4.47% in yet another well-supported offer. That was +37 bps higher that the prior equivalent event a month ago. (But it does seem curious that the secondary market prices these at 4.7% however, especially when demand is so strong in the primary market.)Meanwhile the number of initial US jobless claims fell to just 201,000, a bigger than expected retreat and the second-lowest weekly level in the past 13 weeks. That means there are now 1.82 mln people on these benefits the lowest since mid-December.US mortgage applications fell rather sharply last week, down -2.7% from the week prior and are now -15% lower than the same week a year ago. So it will be a surprise to know that March pending home sales rose +3.4% from February although they are virtually unchanged from a year ago.New orders for durable goods surged by +2.6% in March from February, following a downwardly revised +0.7% growth in February. The March rise was more than expected, but the year-on-year change is still a negative -2.2%. It was the largest monthly advance in durable goods orders since last November, primarily propelled by robust demand for transport equipment. Orders for non-defence capital goods rose too.Canada released retail sales data for February, and in real, inflation-adjusted terms, they fell -0.3%.All eyes are now turning to the Bank of Japan which is meeting today. They have important policies to balance regarding rising inflation, an expanding economy, but a currency that the being depreciated in USD terms, the one relationship that motivates them. But then, many countries are struggling with the rising USD at present.In China, the Shanghai prime office vacancy rate has hit a 20 year high - at over 20% vacant. That is a lot of spare capacity and it will worry policymakers that it is continuing to swell.In Australia, Warren Hogan, who was ranked 2023’s most accurate economic forecaster, predicts their rising economy will force the RBA to lift rates to 5.1% this year. He is an outlier, but part of a growing cohort of analysts who don't see inflation beaten yet and the economic expansion rolls on in many of the world's major countries with its pressures.Better income expectations, economic prospects and a rising 'propensity-to-buy' among consumers has shifted the German GfK Consumer Climate Indicator to it's 'highest reading' in two years (well actually its least negative reading in two years). But they will take the progress.We should note that copper prices have surged recently and now top US$10,000/tonne and that is its highest since April 2022. (It is now only 6% below the all-time high, also in 2022)Global container freight rates were unchanged last week on average, making them +55% higher than year ago levels. Bulk cargo rates fell -4.9% in the past week, but they remain little-change from long-run averages.The UST 10yr yield is now at 4.70% and up +10 bps from this time Wednesday, and that is its highest level since late October 2023. The price of gold will start today a little firmer, up +US$7 from this time Wednesday at US$2333/oz.Oil prices are little-changed from Wednesday to just under US$83.50/bbl in the US while the international Brent price is still at just over US$87.50/bbl. In between however it has been volatile.The Kiwi dollar starts today little-changed at just under 59.5 USc. Against the Aussie we are -¼c softer at 91.3 AUc. Against the euro we are little-changed at 55.4 euro cents. That all means our TWI-5 starts today just on 69.1 and little-changed from Wednesday.The bitcoin price starts today virtually at US$64,762 and down -3.0% from this time Wednesday. Volatility over the past 24 hours has been modest h

With economic growth no longer producing benefits seen in the past such as raising living standards for the middle class, and human activity having exceeded some planetary boundaries, it's time to embrace degrowth, argues Jennifer Wilkins.Wilkins is a researcher and advocate on sustainability in business with a focus on degrowth. In a new episode of interest.co.nz's Of Interest podcast, she discusses the degrowth movement."Degrowth is normally described or defined as an equitable downscaling of production and consumption. Other people add in other parts of that definition, which is about reorganising the market for a new role in provisioning. So I think about degrowth as being a transition. Starting from the economy that we have now, which is very much about trickle down wealth and extracting from nature, to a future economy which is more about universal wellbeing in an economy within ecology and nature. And degrowth is really the transition from one to the other," Wilkins says."So I don't think about it as being a very rapid change or a very smooth change. I think about it as being a hybrid of emergence and receding ideas, quite a lot of tension and a lot of mutation in the economy. So it's quite a complex thing, degrowth."She traces degrowth's origins to the 1970s, and Romanian mathematician, statistician, economist and author of The Entropy Law, Nicholas Georgescu-Roegen, "the father of ecological economics."The push for net zero greenhouse gas emissions is needed but not enough, Wilkins says. With a degrowth economy requiring more of a collective than individual approach, Wilkins says "the jury's out on the role of capitalism." And does advocating for a reduction in production and consumption mean people would be expected to accept a lower standard of living?"I think degrowth is definitely looking to raise standards of living for the majority of people around the world. I think standards of living are actually decreasing at the moment. I think around the world, middle class lifestyles are decreasing in quality. And so there's this myth, if you like, that raising growth improves wellbeing. But the evidence shows that there's actually a bliss point. Economic growth improves wellbeing up to a certain GDP per capita, and beyond that, it either doesn't make a difference and/or eventually it begins to reduce wellbeing," says Wilkins."The bliss point is actually quite a lot lower than New Zealand's GDP per capita. So we have theoretically enough wealth already. We just need to redistribute it. I think people who are very well off will not see a reduction in their wellbeing or their living standards through a redistribution, but I think people who are less well off will see a great improvement in their wellbeing through a redistribution."Wilkins believes degrowth will become public policy, saying politicians who want to run on a degrowth platform have lots of positive things they can say."It's about redefining what we see as value. I mean, at the moment we think about wealth as value and prosperity, but prosperity is really about things like having more leisure time, having a healthier natural environment around us, having more community health and more community cohesion, having more access to services and assets, and having an increase in our democratic participation. And those are all things that degrowth wishes to grow," Wilkins says."I think it [degrowth] will become public policy. I think parties will run on it as a platform. It's hard to say when that would happen, but I think in the not too distant future. And I think the thing is that growth as an idea is so embedded as a common sense that it never has to explain itself. And so there's a bit of an unfair playing field in terms of degrowth will have to explain itself to become credible. Whereas growth gets a free pass.""Growth is not producing the effects that we have experienced in the past, like the raising the living standards of the middle class. That ship has sailed. We're in a different world now. There isn't room for growth to create those kinds of benefits anymore. We need to create benefits in a different way. So growth will fail to evidence itself as a wellbeing, a process for wellbeing in future. And there'll be a confluence of factors. There'll be, you know, this failure of neoliberalism, which I think we're already experiencing," says Wilkins.There's more from Wilkins in the podcast itself, including what degrowth would mean for individuals, businesses and communities, and what it would mean for agriculture, manufacturing and tourism.*You can find all episodes of the Of Interest podcast here.

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 the world's factories are getting busier, especially in India.But first, the strong run of American retail sales is continuing. Sales at bricks & mortar stores on a same-store basis were +5.3% higher last week than the same week a year ago. This extends the +5% expansion to four consecutive weeks, and the above-inflation streak to eight consecutive weeks.There were American PMI's out for April, the internationally-benchmarked set, but they revealed growth slowing amid signs of demand weakness. The factory PMI slipped to a minor contraction, and the services expansion slowed marginally.However, sales of new-built houses soared +8.8% in March from February, the highest level in six months, and rebounding from a -5.1% drop in February. Demand seems to be returning despite elevated mortgage rates. Meanwhile, building consents and housing starts eased back in the month. This will have the effect of tightening inventories of unsold new-builds.The latest US Treasury bond tender brough rising support, and rising yields. But the push higher seems to be rising. Almost US$184 bln was bid for the US$69 bln on offer. The median yield on these two year Notes was 4.85%, up +31 bps from the prior equivalent event. A year ago the equivalent auction went for 3.92%.In fact investors are now starting to price in the chance of a US Fed rate hike, rather than a cut, in 2024.In Japan, their factory PMI made big gains in April, meaning the sector is now stabilised and no longer contracting. Their services PMI rose at a good rate too, expanding faster. Both are now at 11 month highs.Taiwan industrial production rose +4.0% in March from the same month a year ago, confirming the strong recent export order data we have previously reported. But the retail sales growth impetus is slowing, up only +0.7% in the month.The severe flooding in the Pearl River basin in southern China continues and is predicted to get worse before it eases.Led by its factory sector, Indian PMIs revealed economic growth continued to strengthen in April. Positive demand trends fuelled new order intakes and output. In both cases, rates of expansion were the fastest in close to 14 years. India is in a significant expansion. In fact, it is now enough to topple Japan from being the fourth largest economy globally on a gross basis sooner than expected (although nowhere near on a per capita basis of course). That switch is expected to happen in 2025, a year earlier than previously forecast.The Eurozone recovery is building momentum in April according to the overnight release of their PMIs, but price pressures are also revived.In Australia, their 'flash' PMI rose at a good clip too, expanding for a third consecutive month and at the quickest pace since April 2022. Although most of the rise was from the services sector, like Japan, their factory sector improved sharply too to a 'stable' level.The UST 10yr yield is now at 4.60% and down -2 bps from this time yesterday. The price of gold will start today marginally lower, down -US$4 from this time yesterday at US$2326/oz.Oil prices have risen +US$2 to just under US$83.50/bbl in the US while the international Brent price is up a bit less at just over US$87.50/bbl.The Kiwi dollar starts today up nearly +¼c at just over 59.4 USc. Against the Aussie we are softer at 91.6 AUc. Against the euro we are unchanged at 55.5 euro cents. That all means our TWI-5 starts today just on 69.1 and little-changed from yesterday.The bitcoin price starts today virtually unchanged at US$66,766. Volatility over the past 24 hours has been modest at just on +/- 1.0%.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 Friday because tomorrow is a public holiday in New Zealand.

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 markets are waiting for some big earnings reports, especially from Big Tech in the US. They are waiting in a positive mood.But first in the US, the Chicago Fed's National Activity Index rose for a second consecutive month March, the first time that has happened since mid-2022. The result was more than expected and is the highest reading since last November, build primarily on employment gains. When this index is positive it indicates activity is expanding faster than its long-term average.Canadian producer prices fell -0.5% in March from the same month a year ago, notable because this the smallest fall since February 2023. Raw material prices rose, only the second year-on-year rise in the same timeframe.The People's Bank of China left benchmark lending rates unchanged at the April fixing, in line with market expectations. The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, was maintained at 3.45%. Meanwhile, the five-year rate, a reference for mortgages, was retained at 3.95% for the second straight month. The strong USD limits their ability to cut rates to provide local economic stimulation because doing so would sharply weaken the yuan.Following a weak February, Taiwanese exports jumped in March to their highest level since July 2022 in an impressive performance. They also got a strong rise in export orders in March, although only at the upper end of what they have been getting over the past year.Although it is in a minor improving trend, EU consumer sentiment in April has remained deeply negative, well below its long-term average.Cocoa prices leapt up through an all-time record US$5000/tonne in early February. Three weeks later they hit US$6000/tonne. Two weeks after that it was US$7000/tonne. US$8000/tonne came just a few days later. Then an accelerated surge began in earnest, hitting US$10,000 at the end of the first week of April. Today? Well this price has reached US$12,218/tonne. Where to from here? As hard as it is on chocolate consumers, I hope the West African farmers are getting some long-delayed rewards.The UST 10yr yield is now at 4.63% and up a minor +1 bp from this time yesterday. Wall Street is roaring today with the S&P500 up +1.3% on expectations of strong earnings reports and future guidance that is positive, especially from Big Tech companies. Tesla is likely to star in these releases for all the wrong reasons, however. Overnight European markets all rose, led by London's +1.6% and trailed by Paris's +0.2%. Yesterday, Tokyo ended its Monday session up +1.0%. Hong Kong ended up +1.8%. But Shanghai fell -0.7%, a real outlier in yesterday's trade. Singapore ended up +1.5%. The ASX200 finished up +1.1% and the NZX50 closed up +0.5%.The price of gold will start today sharply lower, down -US$61 from this time yesterday at US$2330/oz.Oil prices have slipped -50 USc again, to just on US$81.50/bbl in the US while the international Brent price is down -US$1 at just under US$86/bbl.The Kiwi dollar starts today up +¼c at just under 59.2 USc. Against the Aussie we are still at 91.8 AUc. Against the euro we are a +¼c firmer too at 55.5 euro cents. That all means our TWI-5 starts today just on 69.1 and up +30 bps from yesterday.The bitcoin price starts today sharply higher at US$66,788 and almost a +3% gain from yesterday. Volatility over the past 24 hours has been modest however at just on +/- 1.9%.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 ongoing rise in the world economy is shifting some key metals prices into a bull-run.But first a look ahead. The American data to be updated this week will be their advance Q1-2024 GDP which is currently expected to come in at +2.5%. That will follow key updates to durable goods orders and new home sales - and advance April PMIs. It will be peak reporting for their earnings season this week too. April PMIs will also come for Australia, Japan and the EU, as will CPI updates in Australia. And there will be key central bank policy decisions for Japan, China, and Turkey this weekIn the dominant global economy, their central bank reported that sticky inflation and sticky high interest rates were cited as the key risks to financial stability in its survey of key contacts, with geopolitical troubles and the upcoming American presidential election also getting a strong mention. These heightened risks were reported in the US Fed's half-yearly Financial Stability Report.The Fed itself is worried about a steady decline in the liquidity of life insurers’ assets and their use of non-traditional liabilities and other novel funding which would be hard to control in a crisis. They were less worried about American households. Vulnerabilities from household debt were judged as only moderate. Inflation and uncertainty surrounding the direction of federal policy on trade, and government spending are banks' own top financial stability concerns.Meanwhile in the financial world, yet another key voting Fed member is out dampening down prospects of rate cuts. The Atlanta Fed boss said US inflation is only coming down "very, very slowly" and "let's not be in a hurry" on interest rate cuts.In China, and in all of March in all of the country, their incoming foreign direct investment was only +NZ$20.7 bln in March. But that was far better than the tiny +NZ$3 bln in March a year ago. Still the total for the first three months of the year was down a startling -26% compared to Q4-2023, up just +3.9% from the same quarter a year ago which was unusually weak. From Q1, 2022 the current levels are -28% lower. It will worry Beijing policymakers that these levels are bedding in so low.China will review its two Loan Prime rates later this afternoon (NZT). No change is expected this month.And we should note that the large southern Pearl River system is flooding, some of it severe.Over in Germany, March data shows that their producer price deflationary impulse is easing. Their PPI was down -2.9% from the same month a year ago, but that was far less than the February equivalent of -4.1%. And those March producer prices actually rose +0.2% from the prior month and that was better than the no-change expected.It is worth noting that the IMF and the World Bank have been having their annual talkfest Spring Meetings this past weekend.In the real world, we should also note that it is not only the aluminium price that is rising at present (which is up +20% since the end of February), but the copper price is on the move higher too, up +16% in the same timeframe and actually approaching its all-time high set a year ago.Other base metals like nickel, tin, and zinc, have all been rising sharply recently too. But not iron ore, lead, titanium or lithium - or the carbon price. (Even locally, here.)The UST 10yr yield is now at 4.62% and down -3 bps from Saturday but up +10 bps over the past week. The price of gold will start today down -US$3 from this time Saturday at US$2391/oz.Despite continuing Middle East tensions and uncertainties, oil prices have slipped lower to just over US$82/bbl in the US while the international Brent price is up slightly at just under US$87/bbl. Over the past week these prices have fallen -US$2.50 respectively.The Kiwi dollar starts today little-changed at just under 58.9 USc. But that is down nearly -½c in a week. Against the Aussie we are up +10 bps at 91.8 AUc. Against the euro we are still at 55.3 euro cents. That all means our TWI-5 starts today just on 68.8 and unchanged from Saturday, -30 bps lower for the week.The bitcoin price starts today firmer at US$64,854 and a minor +0.8% gain from Saturday. A week ago this price was US$67,601 so a -4.8% retreat from then. Volatility over the past 24 hours has been modest at just on +/- 1.1%.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.

For open banking to really grab people's attention the focus needs to be on the services it can enable, rather than the technology behind it, says Andrew Dentice.In the latest episode of interest.co.nz's Of Interest podcast, Dentice, a technology lawyer and partner at HudsonGavinMartin, discusses the data sharing that enables open banking, what open banking actually is, why progress towards it has been slow in New Zealand, what's going on with open banking overseas, the threat and opportunity of open banking for banks, the benefits of it for consumers, and more.One of the points he makes is consumers need to be put at the heart of it."If you're talking about APIs [application programming interfaces] and bank account information, it's not exactly the most sexy conversation to be having," Dentice says. "We have to put the consumer front and centre, have a look at some of these really amazing use cases that are starting to come out, and get people excited about it. And then that drives the [banking] industry to do more as well." "I think you've almost got to separate the open banking technology itself from the stuff that it enables," says Dentice."That technology itself is actually not that exciting as a consumer. APIs have been around for years. As a consumer, I don't really see that. What I see is the cool new app, the Sharesies, the Monzo, the Wise in market, that when I go and use it gives me a really fantastic, brand new experience.""We're never going to get people excited with the underlying tech around open banking. We're going to get them excited around the use cases that it's driving. So it's kind of an enablement layer rather than new technology in itself," Dentice says.Asked what the banking experience might look like for consumers in five to 10 years time if open banking really takes off in NZ, Dentice says better, more competitive, more interesting product offerings would be a great outcome."I would hope that there's a range of new, great, innovative New Zealand fintechs that are able to drive their business models off the back of this. I'd also hope that the great companies from overseas see New Zealand as a market that they want to enter. There's some larger [overseas] fintechs like Revolut and others coming into the market. I think if we have that open banking framework all up and running, then it makes New Zealand a much more likely place [where] the big players will come in and offer more competition."He also thinks service from incumbent banks could be better and more competitive."I saw recently HSBC basically launched a competitor to Wise in that FX [foreign exchange] space. So there's the fintechs kind of coming in cutting [banks'] lunch, and then the banks' trying to cut the lunch back.""And then I think digital first financial services means that people just have a better understanding of their money, their financial position. Financial literacy is really important. There's some great fintechs who are doing things with kids in that space, like SquareOne and Banqer.""So there's a societal benefit to it, as well as a pure kind of competition and innovation benefit as well," Dentice says.*You can find all episodes of the Of Interest podcast here.

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 that while we weren't watching a few people are making financial bets so large they could hurt us all.In its latest global financial stability report, the IMF says near-term risks have receded as disinflation (that is, the lowering of the positive inflation rate) is entering its "last mile" zone. But they warn that medium-term vulnerabilities are mounting. One of those comes from the hedge fund sector. The IMF says that a small group of very large firms in this sector has built up an enormous short bet on global stability, one so large that if (as seems likely) those bets are wrong that could be a problem for all of us. “Some of these funds may have become systemically important to the [US] Treasury and repo markets, and stresses they face could affect the broader financial system,” they warn (on page 37).Meanwhile in the US, the number of new claims for jobless benefits in the US was was marginally less than in the prior week at 208,500 and this was less than analysts’ expectations. And that means continuing claims were broadly unchanged at 1.865 mln, also less than market expectations. Those waiting for early signs of US labour market stress are still waiting. It has now been a full 2½ years of weekly reports saying broadly the same thing and there are few signs this will change any time soon.One reason the wait may be longer is that the powerhouse Pennsylvanian/New Jersey rust belt manufacturing region seems to be on an upswing. The Philly Fed factory survey for April delivered positive new order and activity activity levels, in fact the best from that region in two years.But there is no sign that the American housing market is improving. US existing homes sales in March were -3.7% lower than a year ago at an annualised rate of 4.19 mln units. They actually fell at a faster -4.3% rate from February.Later today, all eyes will be on the Japanese CPI inflation rate. You may recall it came in at 2.8% in February and it is expected to be at a similar level (2.7%) when the March data is released this afternoon. If that is the case, the Bank of Japan will likely be emboldened to widen its moves to get off its very long-running QE programs.Australia's jobless rate ticked higher to 3.8% in March from February’s five-month low of 3.7% but below analysts’ expectations of 3.9%. The number of unemployed individuals increased by +20,600 to 569,900 while total employment fell -6,600 to 14.3 mln. There are now 9.9 mln people in full-time work, up +27,900, and 4.4 mln people in part-time work, down -34,500. Part-time roles make up 31.1% of their employed workforce. Their participation rate slipped to 66.6%. (The updated New Zealand jobless rate for March will be released on May 1. As at December it was 4.0%.)Global container freight rates fell another -3% last week, making them +53% higher than year-ago levels. Outbound rate from China fell again, but there was some movement up in rates to China even though they remain at very low levels. Bulk cargo rates rose +10% in the past week although they are still only essentially at long-run levels.The UST 10yr yield is now at 4.65% and up +6 bps from yesterday. The price of gold will start today up by +US$11 from this time yesterday at US$2383/oz.Despite continuing Middle East tensions and uncertainties, oil prices have stayed lower at just under US$82.50/bbl in the US while the international Brent price is down -50 USc at US$86.50/bbl.The Kiwi dollar starts today at just on 59 USc and a minor -10 bps softer from yesterday. Against the Aussie we are unchanged at 91.9 AUc. Against the euro we are also marginally softer at 55.4 euro cents. That all means our TWI-5 starts today just on 69 and actually little-changed.The bitcoin price starts today back up at US$63,221 and a +3.1% gain from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.9%.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 our meat exports to China face tough conditions, and not just from competition from excess Aussie lamb supply.But first, US mortgage applications rose +3.3% last week even as benchmark mortgage interest rates rose to 7.13% plus points and a four month high. (A month ago it was at 6.84%.) But to be fair, the recent shift higher in application levels is still -10% lower than the same weak week a year ago,so last week's rise is hardly significant.Today's UST 20yr bond auction was another success with the usual excess demand. But just like the mortgage market, the median yield rose again to 4.77%, up from the prior equivalent event a month ago at 4.50%. It seems investors are prepared to accept a lesser rise than they want from home loan rates.Despite these rising interest rate levels, the Fed's Beige Book survey paints a picture of a moderate and broad expansion in recent activity in the country, consistent with other recent data. They said overall economic activity expanded slightly since late February. Ten out of twelve Districts experienced either slight or modest economic growth, up from eight in the previous report, while the other two reported no changes in activity. They still found an expanding labour market, and the economic outlook among contacts was cautiously optimistic, they reported.While most blue-chip professional economists think the US economy is expanding at about a +2% rate, the Atlanta Fed's GDPNow model ingesting current rate thinks it is much faster than that, near +3%. It is an expansion that is driving the global economy, including that of its rivals like China.And Japan, which is on a roll, despite their currency issue angst (in USD terms). Their exports rose by +7.3% in March, following a +7.8% rise in February. It was the fourth straight month of increase for them.In China, meat prices - especially pork prices - are in an extended slump. Pork accounts for almost two thirds of Chinese meat sales and you will recall prices hit a peak in October 2022. But it has been all downhill since, dropping -40% and putting producers at increased bankruptcy risk. It is a crisis that has national attention, even international attention because feed grain imports are falling. Soybean prices are down -23% from a year ago. It is tough for beef and sheepmeats to compete with pork in China at present.The British released their March inflation rate overnight and it eased to 3.2% from 3.4% in February. But remained slightly above the market expectation of 3.1%. It was their lowest rate since September 2021, primarily driven by a slowdown in food prices.The UST 10yr yield is now at 4.59% and down -7 bps from yesterday. The price of gold will start today lower by -US$22 from this time yesterday at US$2372/oz.Despite continuing Middle East tensions and uncertainties, oil prices have dropped a sharpish -US$2.50 to just on US$82.50/bbl in the US while the international Brent price is down at US$87/bbl. Rising US crude stocks as their economy gains energy efficiency is behind the shift lower for oil.The Kiwi dollar starts today at just over 59.1 USc and back up +30 bps from yesterday. Against the Aussie we are firmish at 91.9 AUc. Against the euro we are also firmish at 55.5 euro cents. That all means our TWI-5 starts today just on 69 and back up +20 bps.The bitcoin price starts today lower at US$61,348 and down -1.6% from this time yesterday. Volatility over the past 24 hours has been very high at just under +/- 4.0%.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 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 the US Fed is telling markets rate cuts from them are not coming soon.First up today, the overnight dairy auction confirmed the recent rises, but didn't add to them in a subdued event. In USD terms overall prices were up +0.1 and in NZD terms up +1.5%. Volumes were seasonally small however. Perhaps of some concern in this data was that foodservice components like butter, cheddar, and mozzarella all fell, by -1.4%, -8.5%, and -3.8% respectively. However, given the overall 'hold', it is unlikely any farmgate payout forecasts will be changed by today's outcomes.US housing starts and new building consents are in the doldrums as this sector continues to fade. March brought steep drops, almost -15% below February levels for new housing starts, -4.3% lower than year-ago levels. The situation isn't going to get much better because residential building consents also fell, down -4.3% from February although marginally up on March a year ago.US retail sales rose +4.9% last week in their Redbook tracker, the tenth week in the past 13 that the rise has bested inflation. The retail expansion is embedded now.US industrial production rose +0.4% from the previous month in March, in line with expectations and following an upwardly revised +0.4% increase in February. A rise in vehicle production was a notable component of the recent up-trend.Meanwhile, Fed boss Powell was out speaking indicating their policy rate will stay elevated for some time yet. They see no pressing need to cut, or in fact make any changes. Meanwhile there was some important Canadian data released overnight. They said consumer inflation rose 2.9% in the year to March with their core rate rising just 2.0%And Canadian housing starts eased slightly in March from February although they were +13.5% higher than year-ago levels.In China, electricity production rose just +2.8% on March from a year ago, a huge retreat from the +8.0% rise in December. This is an important background data that should be reflected in China's economic activity (GDP). But Beijing reported Q1-2024 GDP rose +5.3% (up from 5.2% in Q4-2023) and this was despite retail sales only rising +3.1% and national real estate investment falling -9.5% in official data. They say industry expanded +4.5% (and down from the +6.8% rate in December). While we have raised our eyebrows at how they can deliver a credible GDP result just 16 days after the quarter end (no-one else can), few of the major components show expansions at the level of the claimed overall growth, and readers can draw their own judgements on the credibility of the rising 5.3% growth in Q1. Certainly ex-Premier Li Keqiang did.Meanwhile, China's new home prices dropped by -2.2% in the year to March, faster than the -1.4% fall in February. It was the ninth straight month of decline and the steepest pace since August 2015, despite multiple support measures. For second-hand dwellings none of the 70 largest cities reported any rises, and the average fall over this set is now -5.9% year-on-year.China continues to struggle with youth unemployment. You will recall they withdrew data that reflected badly on them last year and replaced it with 'better data'. But now an official confirms that even this data, the next update yet to be released, shows a situation that "requires a high degree of attention".In Europe, the ECB said that they will likely cut rates soon. She was speaking at the IMF's release of their 2024 growth forecast update, and those revealed that despite gloomy predictions, "the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose". They say: "growth this year and next will hold steady at 3.2%, with median headline inflation declining from 2.8% at the end of 2024 to 2.4% at the end of 2025. Most indicators continue to point to a soft landing."Join us at 10:30am this morning to find out what New Zealand's CPI inflation level came in at in Q1-2024..Ratings agency Moody's said overnight that New Zealand's sovereign credit rating stays at its current maximum Aaa grade. The outlook is Stable. They are the only ratings agency to assign a triple A to New Zealand. The UST 10yr yield is now at 4.66% and up +3 bps from yesterday. The price of gold will start today higher by +US$31 from this time yesterday at US$2394/oz.Despite continuing Middle East tensions and uncertainties, oil prices have changed little at just under US$85/bbl in the US while the international Brent price is also unchanged at US$89.50/bbl.The Kiwi dollar starts today at just over 58.8 USc and down -30 bps from yesterday and a new five month low. Against the Aussie we are firmish at 91.8 AUc. Against the euro we are down another -20 bps to 55.4 euro cents. That all means our TWI-5 start

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 that bullish American consumers are likely pushing back the likelihood the US Fed will cut its policy rate any time soon.Financial markets now price in only two cuts this year, one in September and one in December and far less than the four priced in at the start of the year. And the conviction for these scaled back indications is easing rather fast. The latest pricing suggest the September one might still happen but there in more of a chance the December one will be skipped.And that is because American retail sales posted impressive results in March, and February's results were revised sharply higher. Those revisions means they were up +2.1% in February from a year ago, up 4.0% in March on the same basis. Consumer spending belies consumer sentiment. What they do is way more positive than what they say.Meanwhile, overall February business inventories remain in good control, holding their relative level to sales. There is no buildup of tensions on this front.On this data, the USD rose yet again, bond yields jumped - again - and equity prices packed a sad that they are unlikely to get the rate cuts they were banking on.It is not all positive however. The New York Fed's local factory survey reported that both new orders and shipments fell significantly in March and unfilled orders continued to shrink. Optimism among these businesses is subdued.And we should note that carmaker Tesla is cutting 10% of its global workforce, or -14,000 jobs, on stuttering sales and profitability issues. Its shar price fell another -5% in today's trading to be down -35% so far this year, down -59% from its peak on November 5, 2021.Canada reported manufacturing gains in February from January, and even small gains from year-ago levels. Those gains, tiny as they are, also came out when inflation-adjusted.In China, a new industry report from a corner of their economy details just how tough it has become to make deals there. Pay at China’s private equity and venture capital firms plunged as much as -40% year-on-year in 2023 as the industry’s downturn showed no signs of abating.Just for the record, the People's Bank of China had its monthly review of its benchmark One-Year Medium-Term Lending Facility Rate, which is the main rate at which the central bank lends to big commercial banks, and it held it unchanged at 2.5%.In Japan, machinery orders jumped +7.7% in February from January, reversing the -0.7% fall in January and far exceeding market expectations for just a +0.8% gain. That put them a healthy +9.4% higher than year-ago levels.In the EU, industrial production rose again in February, making it the third rise in the past four months. Analysts were expecting this type of improvement. But despite this month-on-month rise, they still have some way to go to convert that into year-on-year gains.We should also note that the rise and rise of the aluminium price over the past eight weeks too a sharp turn higher yesterday, taking it back to June 2022 levels. This shift is largely due to sanctions biting on Russian supplies.In Australia, employers and unions are close to a national agreement that will allow workers to take double their holiday time off at half their pay. There are still details to be agreed, but the principle for this flexibility is being set.The UST 10yr yield is now at 4.63% and up +11 bps from yesterday. The price of gold will start today higher by +US$20 from this time yesterday at US$2363/oz.Despite continuing Middle East tensions and uncertainties, oil prices have slipped -50 USc overnight to US$84.50/bbl in the US while the international Brent price is unchanged at US$89.50/bbl.The Kiwi dollar starts today at just over 59.1 USc and down -20 bps from yesterday and a five month low. Against the Aussie we are also down -20 bps at 91.7 AUc. Against the euro we are down -20 bps too to 55.6 euro cents. That all means our TWI-5 starts today just under 69 and down its own -20 bps but that is only a ten day low.The bitcoin price starts today marginally firmer at US$64,004 up +0.3% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.8%.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 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 of an export setback in China that may signal a tougher path for them in the rest of 2024.But first, this week will kick off the US earnings season which will run for a few weeks until the Q1-2024 results are all in. Bank profits will be early in this set, many key ones coming this week. The Americans will also release retail sales results, and some housing updates.Retail sales updates will also come from China, along with their Q1-2024 GDP outcome, tomorrow. It is "impressive" they can report that, well before any other major economy. Eyes will be on their foreign direct investment data too, along with housing market activity results for March.Australia will release its labour market data this week, and CPI inflation data will some from Japan, Canada, and of course New Zealand (on Wednesday).Over the weekend, China reported its new bank lending levels and they picked up in March from February but the results still disappointed. March is usually a strong month for borrowing because banks tend to extend more credit at the end of each quarter to meet lending targets. But the ¥3.1 tln in new March lending was less than the ¥3.6 tln expected and the ¥3.9 tln in March 2023.Meanwhile, China's exports tumbled in March. They dropped -7.5% from a year ago, reversing sharply from a +5.6% growth in the earlier month. This was very much worse than market forecasts, highlighting the Middle Kingdom's uneven recovery and perhaps suggesting global demand won't drive growth there. It may also be a sign that de-risking from China because of its terrible recent signals to investors is biting harder and earlier than anticipated.It is not all difficult news in China. A survey shows that for the first time since the end of 2021, wage growth rates there are picking up again.India's industrial production rose by +5.7% in February from a year ago, the latest data released over the weekend, but that missed analyst forecasts of +6% growth; however it was a faster expansion than in each of the prior three months. A year ago this expansion was running at 5.8%, so little change on that comparison.It is only about 200 days until the November US presidential election and nervousness about that outcome is starting to show up in sentiment surveys. Consumers are apprehensive that the golden run could be crashed by the vote, or that things could destabilise ahead of it. The University of Michigan consumer sentiment poll is now reflecting some of that apprehension. However it is only off a 33 month high so we shouldn't make too much of this April dip and it remains more than +20% higher than year-ago levels. Still, the shift was noticed by financial markets. Wall Street dipped in their Friday session, bond yields slipped slightly, and the USD surged against all-comers on the risk-off mood.The UST 10yr yield is now at 4.52% and unchanged from Saturday's close. A week ago this rate was 4.39%. The price of gold will start today lower by -US$6 from this time Saturday at US$2343/oz. We should note that this price hit its all-time high of US$2432 at about 4am Saturday morning. But it has been sharply down after that.Despite extreme Middle East tensions, oil prices have been surprisingly stable over the weekend and still just on US$85/bbl in the US while the international Brent price is -50 USc lower at US$89.50/bbl. Both levels are about -US$2 less than a week ago. Interestingly, the head of the IEA strongly criticised European energy policy for "two monumental mistakes" - relying on Russian energy, and shifting away from nuclear power.The Kiwi dollar starts today at just over 59.3 USc and down -10 bps from Saturday. Against the Aussie we are unchanged at 91.9 AUc. Against the euro we are little-changed as well at 55.8 euro cents. That all means our TWI-5 starts today just on 69.2 and similar to Saturday and this time last week.The bitcoin price starts today sharply lower at US$63,785 and down -5.6% from this time Saturday. At one point it got as low as US$60,908. Volatility over the past 24 hours has also been extreme at just on +/- 5.2%.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.

Finance spokesperson Barbara Edmonds says a re-elected Labour Government would have been willing to expand its planned public sector cuts to protect key programmes. The tax lawyer turned MP spoke on Interest.co.nz’s Of Interest podcast about the Coalition’s fiscal policy and her role in rebuilding the Labour Party after its election defeat. Part of that project will be rehabilitating the party’s economic credibility after presiding over a massive cost of living crisis. Ipsos’ February issues poll showed inflation, or the cost of living, was the number one issue facing New Zealand voters and only 23% saw Labour as being best able to deal with it. Only 22% thought it was the best party at “managing the economy” down from 31% a year ago and well below the National Party which has climbed from 42% to 47%.The parties which have formed the Coalition Government campaigned on bringing down spending and therefore inflation, as well as cutting taxes for some groups. Edmonds agreed there was a need to consolidate spending—which had got ahead of revenue during the past three years—but tax cuts were a bad investment. Labour’s fiscal plan asked for up to 2% reductions in public sector budgets, while the Coalition Government is asking for up to 7.5%.She admits her party would have had to make further cuts, given new Treasury forecasts showing tax revenue falling below pre-election forecasts. “If we had to make more cuts, or look at different savings, in order to ensure that lunches in schools kept going … we would have had to make those decisions,” she said. “I wouldn't apologize for making those types of choices. But what I wouldn't have done is promised really unaffordable tax cuts”.Edmonds said the limited money available was better invested in infrastructure, schools, healthcare, public and private transport, and climate action.Which tax? Edmonds said she was out meeting with key sector leaders and listening to new ideas she can carry back to Labour's policy council. Her role was to guide her colleagues through the process of developing a manifesto for 2026 and informing them about the costs and tradeoffs involved. “If I need to say no, I’ll say no. I’m a mum of eight, I know how to say no,” she said. “Ultimately, if I believe that it's going to put Labour into a difficult fiscal position going into the next election, I will make those views very clearly known”.Labour recently voted against a bill put forward by Te Pāti Māori, which would have removed the GST from all food, on the basis that it was too expensive.But the big policy question is about tax. Political opposition to taxes on capital has been the unslayable dragon of New Zealand politics.Tax reform is back on the table but Edmonds won’t be drawn on exactly what kind.She said it was necessary to first ask what the party was trying to achieve and then design a tax model that supported those outcomes.The country will be facing some serious fiscal challenges by 2060 when superannuation could cost 10% of GDP and healthcare could absorb another 7%.“2060 looks like ages away, but that’s the next generation. That’s my kids. So, we need to ask, what is the society that we want to leave this generation and how does tax help us get there?” The Treasury and the International Monetary Fund have both made recommendations about possible reforms, but Labour would be starting from scratch based on its long-term vision for New Zealand. Edmonds said political parties don’t win elections based on tax policy, anyway. “You win on committing to a better health system, better education, making sure the vulnerable are supported, and that our businesses are able to grow,” she said.You can find all episodes of the Of Interest podcast here.

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 today's data releases in the shadow of yesterday's highish US CPI release, and there is some talk of rate cuts elsewhere.First up in the US, the number of new jobless claims fell last week, consigning the prior week's jump to the 'anomaly' basket. There are now 1.9 mln people still on these benefits, virtually unchanged from the prior week level.The rise in American producer prices was also less than expected in March, coming in just +2.1% higher than a year ago. A year ago they were rising at a +2.7% rate. Producer price rises are not a major factor in their consumer price inflation.The USDA lowered its price estimates for most key agricultural commodities, especially grains, as good harvests worldwide more than cover global food demand. Global food prices were already running at 3 year lows. Specifically, the Americans are expected to import more beef and produce less milk.China's consumer prices edged up a mere +0.1% in March from a year ago and much less that the market forecasts of +0.4%, and after an annual +0.7% rise in February. The extended flirting with deflation is dangerous and highlights the economic challenges they face. Demand is actually quite weak - and this data all comes from the officially approved series.Meanwhile, China's producer prices shrank by -2.8% in March from the same month a year ago. This was the expected drop and compares to February's drop of -2.7%. It was the 18th straight month of contraction in factory gate prices and the steepest decrease since last November, highlighting the persistence of deflationary forces in their economy. In Japan, a lack of intervention in support of the yen after it weakened beyond 152 to the US dollar for the first time since 1990 has financial markets wondering when or even if the Japanese authorities will step in as has been widely expected. There are many market bets that this would have happened by now. But perhaps Tokyo senses that it is more about the rising USD rather than a weak yen. It certainly isn't that weak against most other currencies.The ECB held its policy interest rates at record-high levels for a fifth consecutive time during its April meeting overnight, at 4.5% (and their deposit rate at 4%), both at 22 year highs. However they did signal that a rate cut could come there soon, perhaps in June.Last week global container shipping rates eased only marginally, staying +64% higher than year-ago levels. Bulk cargo rates fell -7.5% in the week however and are now back at long run averages.The UST 10yr yield is now at 4.57% and up a minor +1 bp from yesterday as things settle in at the new higher level. The price of gold will start today higher by +US$20 from this time yesterday at US$2355/oz and off its all-time high.Oil prices have fallen -US$1 to just on US$84.50/bbl in the US while the international Brent price is down a bit less to just on US$89/bbl.The Kiwi dollar starts today at just over 59.9 USc and little-changed from yesterday. Against the Aussie we are softer at 91.7 AUc. Against the euro we are firmer at 55.9 euro cents. That all means our TWI-5 starts today just on 69.4 and up a minor net +10 bps.The bitcoin price starts today firmer at US$70,258 and up +1.3% from this time yesterday. Volatility over the past 24 hours has also been modest at just on +/- 1.6%.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.And today we lead with news it is all about American inflation today, and the consequences of missing expectations.The American annual inflation rate picked up slightly for a second straight month, to 3.5% in March, its highest rate highest six months, and well above the 3.2% rate in February. And also higher than the analyst forecasts of a 3.4% rate. Of some concern is that the month-on-month rate stayed up at +0.4% (and almost a 5% annualised rate). Their core rate (sans food and energy) however, stayed down at 3.8% and unchanged, but a dip was expected here.All up, this shows American inflation is far from beaten. Perhaps the Fed was expecting this because the minutes of its March meeting released today shows them wanting to see progress on the inflation front before they reduce their 5.25% policy rate. They are clearly not there yet as they suspected.The USD rose sharply on the news, as did benchmark bond yields. The S&P500 fell as rate cut hopes for 2024 fade.It may be all about the inflation miss today but there were other indicators out as well.US mortgage applications were barely changed last week from the week prior, holding low to be -23% lower than the year-ago level. No rebound in the American housing markets. Their benchmark fixed 30 year home loan rate moved back up over 7% plus points, a one month high.There was a rise in American wholesale inventories in February, but to be fair these overall levels in relation to sales activity are entirely 'normal' from an historic perspective.As expected, the Bank of Canada rate left its policy rate unchanged at 5% in its overnight review. It says it is confident inflation's trend is easing there.Japanese producer prices rose +0.8% in the year to March, in line with forecasts and marginally higher than in February.Taiwanese exports surged in March, more than making up for the February hesitation. In fact they delivered their best month since July 2022 and their second best March month ever.In the South Korean parliamentary elections, the conservative alliance is suffering a big defeat with the Democratic Party alliance heading for a parliamentary majority.In China, ratings agency Fitch has affirmed their sovereign credit rating as A+, but has shifted its Outlook from Stable to Negative. It cited the growing risks of China's public finance situation as fiscal buffers have eroded, especially from overstretched Local Government Financing Vehicles while Beijing deals with its stuttering property development sector. (Fitch rates New Zealand AA+, Stable. You can see how the various ratings agency codes compare here.)And staying in China, vehicle sales rose a very impressive +9.9% in March from year-ago levels to almost 2.7 mln units in the month, following a -19.9% slump the month before. Consumption recovered following the Lunar New Year holidays and many carmakers slashed prices which has been effective from a sales perspective. China's EV exports, particularly to Europe, continue apace, but there are growing questions about whether these shipments will find buyers. The flood to there is overwhelming local manufacturers and they are not happy.The UST 10yr yield is now at 4.56% and up a sharp +19 bps from yesterday on the US CPI result. The price of gold will start today lower by -US$13 from this time yesterday at US$2335/oz and off its all-time high.Oil prices have risen +US$1 to just on US$85.50/bbl in the US while the international Brent price is up a bit less to just on US$89.50/bbl.The Kiwi dollar starts today at just under 59.8 USc and down -¾c from yesterday all on the USD moves. Against the Aussie we are also +½c firmer at 91.9 AUc. Against the euro we are little-changed at 55.6 euro cents. That all means our TWI-5 starts today just on 69.3 and down -20 bps.The bitcoin price starts today softer at US$69,348 and up almost +1% 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.

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 business owners are having difficulty matching their sentiment with the conditions around them.And financial markets are in a bit of a pre-dawn shadow as they await the US CPI data tomorrow. Headline CPI is expected to tick up, core inflation tick lower. Both levels will be well above the US Fed's target.American retail sales, as measured by the weekly Redbook index for bricks & mortar stores, rose +5.4% last week from the same week a year ago, far better than inflation. Despite that, SMEs reported slipping sentiment and interestingly, labour shortages were still a key concern. So despite record job creation and high migration, small business still can't get enough people for the roles they need to fill. Twenty-five percent of owners reported few qualified applicants for their open positions and 26% reported none.Investors on the other hand stayed much more optimistic and above average levels over the past 2+ years.There was a US$59 bln UST 3yr bond auction earlier today and that brought slightly higher yields. Today's median yield was 4.49% and that was up from 4.21% a month ago at the last equivalent event. Investors support for this fund-raising remains very strong with offers 2½ times availability. Today almost US$87 bln in bids were unsatisfied.Japan is said to be pondering where-to for their inflation. Wage gains have been strong this year. Since their central bank raised rates for the first time in 17 years last month and ended its massive monetary easing program, market players have been focusing on hints for the timing of the next rate hikes. They may get 2.4% inflation this year, 2% next year. These are much higher levels than they have had for the long period since the GFC.One country making progress on inflation reduction (but not battling deflation) is Taiwan. Their CPI inflation slowed to 2.1% in March from 3.1% in the previous month and coming less than market forecasts of 2.5%.It is election day in South Korea and the main issues are domestic ones. It is hard to predict the outcome because the electorate is split 30/40/30 conservative/moderate/liberal and few know how the moderate voters will swing this time. Anything's possible.In Australia, business confident was little-changed in March according to the widely-respected NAB survey. Both business conditions and confidence were little changed in the month, continuing the trend of above-average activity indicators alongside below-average confidence that has defined this survey for much of the past year.The Westpac-Melbourne Institute Consumer Sentiment index in Australia fell -2.4% to 82.4 points in April, sliding for the second consecutive month as persistent inflation and high interest rates continued to weigh on Australian households. The index has also held below 100 for over two years, the longest since the early-1990s recession.The overnight GDT Pulse dairy auction results for both WMP and SMP basically confirmed the uptick in prices that we first saw in the full GDT event a week ago.The UST 10yr yield is now at 4.37% and down -5 bps from yesterday. The price of gold will start today a little higher by +US$13 from this time yesterday at US$2348/oz and yet another all-time high.Oil prices have slipped another -US$1 to just on US$84.50/bbl in the US while the international Brent price is now down to just on US$89/bbl.The Kiwi dollar starts today at just over 60.5 USc and up another +20 bps from yesterday. Against the Aussie we are also a bit firmer at 91.4 AUc. Against the euro we are firmer too at 55.8 euro cents. That all means our TWI-5 starts today just on 69.5 and up +20 bps.The bitcoin price starts today softer at US$68,790 and down -4.1% from this time yesterday. Volatility over the past 24 hours has been moderate however at just on +/- 2.8%.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.And join us at 2pm today when we will have full coverage of the RBNZ’s monetary policy review.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 IMF reckons the way the Aussie home loan market is structured accentuates mortgage rate pain.But first in the US, consumer inflation expectations for the year ahead remained steady at 3% for a third consecutive month in March, holding at three-year lows. For three years ahead they rose marginally to 2.9% whereas for five years ahead they slipped to 2.6%. None of these are 'bad' levels but they are not quite where the US Fed would like them to be.The actual current March US CPI inflation level will be revealed on Thursday, NZTNoticeable improvements recently in German industrial production, the US ISM PMI, and the Caixin factory PMI have combined to shift the expectations for the copper price sharply higher. It is now back to levels we last saw in May 2022, and first saw in November 2010. It is an upswing that has been unexpected.But the same is not true for steel prices. Excess Chinese production and export dumping has driven the cost of rebar down to 2017 levels. Their stuttering domestic construction industry is having world-wide impacts in this important corner of the steel industry. Iron ore prices are now at yearly lows too.In Hong Kong, a winding up order is being sought by its major lender for Shimao Group Holdings, just another Chinese property developer that has hit the debt wall. What is interesting about this is that the lender is China Construction Bank, one of China's four pillar banks and state-owned of course. Shimano has projects across much of China, but only one in Hong Kong. When Beijing turns against you, you are toast.In Australia, February new lending data shows that the number of loans issued for the purchase or construction of a new home over the past year is holding at its lowest level in more than 20 years. Values are up of course, but the number isn't.The IMF has released an analysis that shows Australian households are more sensitive to changes in interest rates than virtually any other consumers globally because of the combination of the dominance of variable-rate mortgages, high levels of household debt and lax lending rules. New Zealand is up there too, but not because of high variable-rate lendingThe UST 10yr yield is now at 4.42% and up +2 bps from yesterday. The price of gold will start today a little higher by +US$6 from this time yesterday at US$2335/oz and yet another all-time high.Oil prices have slipped -US$1 to just on US$85.50/bbl in the US while the international Brent price is now down a bit less at just under US$90/bbl.The Kiwi dollar starts today at just over 60.3 USc and up +20 bps from yesterday. Against the Aussie we are softer at 91.3 AUc. Against the euro we are fractionally firmer at 55.6 euro cents. That all means our TWI-5 starts today just on 69.3 and up slightly.The bitcoin price starts today firmer at US$71,715 and up +2.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.7%.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 investors are much less sure rate cuts will come in 2024.This week, given that American jobs growth remained strong in March, all eyes will now turn to their inflation data with CPI due out on Thursday. That is expected to show inflation rising there slightly to 3.5%, but core inflation easing slightly to 3.7%. And variations will likely colour market responses. The Americans will also release PPI data this week, along with consumer sentiment survey results for April.Of course this week our own RBNZ reviews its OCR. And they will be joined by Canada and the EU. Australia will release its NAB business sentiment survey results, along with the Westpac consumer sentiments survey results, both tomorrow (Tuesday).China will release its CPI and PPI data along with new lending data for March, also both on Thursday.Over the weekend China released its March FX reserves level and it was little-changed as it has been over the prior three months.In the US, their economy added many more jobs than expected. Analysts were thinking the expansion would be +200,000 in March from February, but in the end the headline seasonally adjusted gain was +303,000. On an actual, unadjusted basis the gain on employer payrolls was +659,000. The wider household survey saw an even larger rise of more than +1.04 mln in the month to 161.4 mln people employed both on employer payrolls and the self-employed. Adding more than +1 mln paid jobs in a month is very expansionary. Guessing here, but strong immigration (both legal and illegal) is helping fuel the expansion.Average weekly pay rose +4.1%, bolstering this strength although that was slightly lower than the +4.3% rise to February. In any case it is more than inflation and it shows that even after absorbing the migrant flow it remains 'real'.Today investors are looking past the fact that the Fed may delay rate cuts, realising the American economy is in much better shape than they have assumed, and equity prices are rising, even though bond yields are rising too.The US$5 tln US consumer debt market has been expanding marginally recently although it did show a faster than usual rise in January. The February data out today shows a slower rise and one less than expected. This market indebtedness level runs at 17.8% of US GDP, very much higher than the New Zealand equivalent which is only 3.7% of our GDP.Unfortunately, Canada's labour market isn't showing the same robust expansion in March as the US has, essentially marking time with little change after February's good gains.Australian retail sales are rising but slower than their inflation rate. They were up +1.6% in February from a year ago. But in that same time their inflation indicator rose 3.4%. Any way you look at it, that is a volume drop.The Australian goods trade surplus halved in February from the same month a year ago. It came in at a +AU$6.5 bln surplus, down from +AU$12.9 bln in February 2023. The reasons is the combination of falling exports (-2.4%), and import growth staying high (+17.1%). Of particular note is that both rural and non-rural exports fell more than -3%, but that gold exports were up +25% on that basis.An updated KPMG/University of Sydney report shows that China is sharply reducing its investments in Australia in favour of other Belt & Road states - in fact investing in B&R partners so it can wind down exposure to Australia. A prime example is in nickel mining where China has invested in cheaper (and 'dirtier') nickel mining and processing. Overall in 2023 Chinese investment in Australia fell to AU$1.4 bln, and its lowest level in seventeen years (pandemic excepted).The UST 10yr yield is now at 4.40% and up +1 bps from Saturday, up +20 bps in a week. This is its highest since late November, so a strong bond market signal. The price of gold will start today a little higher by +US$3 from this time Saturday at US$2329/oz and yet another all-time high.Oil prices have slipped a minor -50 USc to just on US$86.50/bbl in the US while the international Brent price is now down a bit more at just over US$90.50/bbl.The Kiwi dollar starts today at just on 60.1 USc and unchanged from Saturday. Against the Aussie we are firmer at 91.5 AUc. Against the euro we are unchanged at 55.5 euro cents. That all means our TWI-5 starts today just on 69.2 and unchanged.The bitcoin price starts today firmer at US$69,783 and up +2.9% from this time Saturday. Volatility over the past 24 hours has 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 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.And today we lead with news markets don't seem to be worrying about coming 'bad news' ahead of tomorrow's US March labour markets report.US initial jobless claims recorded a minor +2000 rise last week from the week before taking the total to 1.94 mln. But that was a big -74,000 decrease as more benefits expired than new ones were added. A year ago there was almost the same number of initial claims as last week.Updated American job cut data remains incredibly low even if it is rising. US-based employers announced plans to cut 90,300 jobs in March, the most since January 2023, compared to 84,600 in February.Tomorrow we get the March non-farm payrolls data and markets expect employer payroll jobs growth to rise +200,000. You will recall they rose +275,000 in February.Meanwhile US exports of both goods and services were +2.1% higher in February than in January. Imports were +2.2% higher on the same basis so the overall trade balance grew fractionally in the month, although year-to-date, the goods and services deficit decreased -2.8% and remains about -2.7% of US GDP. (New Zealand's current account deficit is -6.9% of GDP.)Canada also reported trade data for February but only for goods trade and their exports rose +5.8% to a new all-time high. Imports rose +4.6%, so their merchandise trade surplus rose to +C$1.4 bln in February.It is a public holiday in China, Ching Ming Festival, although Hong Kong financial markets will reopen today.Global container freight rates continued their retreat from their late January peak. They are now down -28% since then, down -3% in the past week alone. But that leaves them still +65% higher than year-ago levels. The slowness of the recent easing points out that the twin problems in both the Panama Canal (drought) and Suez Canal (security) are not going away; the decreases are because the global logistics system is adapting. Bulk cargo rates eased -7% in the past week, and are in fact now back to long-run average levels.Steel and iron ore prices are back falling, both near their lowest in the past year, probably an early signal markets don't believe Chinese demand will recover any time soon.And speaking of commodities, a new report says the world's population is shifting in very significant ways in an historical turning point. Also, it is not simply a matter of a static or a declining world population – the nature of that population will also change. It will be much older. The report estimates there will be twice as many people over 80 as under five – nearly 900 million over-80s worldwide by 2100. A period of unprecedented demographic and economic adaption awaits our grandchildren. There seems little doubt that small countries will have many more options than large ones, but that the pressures from 'outside' will be enormous.And speaking of natural stresses, keep an eye on Sydney weather this weekend. They seem to be facing a rather extreme meeting of two wild and wet weather fronts.The UST 10yr yield is now at 4.35% and little-changed from this time yesterday. The price of gold will start today softer by -US$5 from this time yesterday at US$2288/oz. But in between it hit a new all-time high of US$2305/oz.Oil prices have fallen -US$1 to just under US$84.50/bbl in the US while the international Brent price is now up at just under US$89/bbl.The Kiwi dollar starts today at just on 60.4 USc and +¼c firmer than this time yesterday. Against the Aussie we are softer at 91.3 AUc. Against the euro we are firmer at 55.6 euro cents. That all means our TWI-5 starts today just on 69.4 and up +20 bps from this time yesterday.The bitcoin price starts today firmer at US$68,048 and up +2.7% from this time yesterday. Volatility over the past 24 hours has 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 on Monday.

The departing Chief Executive of the Insurance Council of New Zealand says if Wellington is hit with an earthquake on a similar scale to the Canterbury quakes, it would “raise some questions” on whether NZ insurers would be able to continue to purchase reinsurance at an affordable cost.“I think reinsurers would still be there. But the ability to purchase reinsurance at a good rate and the degree of capacity that would be available, particularly for property in Wellington, could be really challenging,” he says in a new episode of interest.co.nz’s Of Interest podcast.“Ensuring how we manage that risk is really critical because we're very dependent on offshore capital and reinsurance to help support our insurance programs in New Zealand.”The Insurance Council says to date, private insurers have incurred over $21 billion in expenses due to the Canterbury Earthquakes.Toka Tū Ake EQC has contributed an additional $10 billion, resulting in a total insured cost surpassing $31 billion for the event. The Insurance Council estimates the overall economic losses for the entire sequence are estimated to exceed $40 billion.This week marks the conclusion of Grafton's nearly 12-year tenure as CEO of the Insurance Council and he reflected on his time in the role on the podcast.He says lessons were learnt from the 2010 and 2011 Canterbury Earthquakes, which were then applied to responses to the Kaikōura earthquake in 2016 and the Auckland floods and Cyclone Gabrielle last year as well.“When that [Kaikōura] earthquake struck, which was just a little bit after midnight, I think, on the 14th November, a lot of people were thrown out of bed almost by the earthquake in Wellington. And after the shaking stopped, I rang my counterpart at EQC Ian Simpson [EQC’s Chief Executive at the time] and said, ‘we’ve got to do better than Canterbury and can we meet in a few hours and work out where we go from here’,” he says.“So, within four weeks, we had the foundations of an agreement which enabled insurers to manage and settle claims on behalf of EQC. And that meant that for the customer, there was one point of accountability and responsibility for their claims, their insurer. And so it didn't matter whether it was an EQC claim or an insurer claim, they didn't get bounced around between the two.”“So from that, we then developed a more formal and longer lasting agreement with EQC to be their agents. And I think also the experience of those events from Canterbury through to Kaikōura, meant that when the Auckland anniversary floods and Cyclone Gabrielle came along, we were well seasoned in dealing with these kinds of situations.”Kris Faafoi will be the Insurance Council’s new Chief Executive from next week. Faafoi held a number of portfolios during the Sixth Labour Government before he quit politics in 2022, including Commerce and Consumer Affairs, Broadcasting and Media, Immigration and Civil Defence.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.And today we lead with news progress toward lower inflation is underway but the road is bumpy.But first up today we should note that American mortgage application levels decreased again last week. Their mortgage rates moved lower last week, but that did little to ignite overall mortgage application activity which is now -13% lower that the weak year-ago levels. Their overall economy may be in a broad-based and resilient expansion but this does not include their housing market.American employments levels are rising. Private businesses in the US hired an extra +184,000 workers in March following an upwardly revised +155,000 in February, and beating forecasts of +148,000. This is the biggest increase in hiring in eight months, with employment especially strong in services. In this survey, pay was up +5.1%. The US non-farm payrolls are out on Saturday NZ time for March and they are expected to show a +200,000 increase.So it might have been a surprise to see that the ISM services PMI for March ease off a little (even if new order levels expanded strongly). Then again, that was not reflected in the S&P Global (ex-Markit) US services PMI which noted further rises in output and new orders, but rates of growth did ease. They found the pace of job creation moderated and selling price inflation rose to an eight-month high. Nothing here signals imminent recession, but clearly inflation is not beaten.Fed boss Powell spoke earlier today, but kept to his recent script saying a rate cut may come later this year, but they are watching the recent firmer inflation data even if they expect it will ease back soon. A colleague suggested the first cut there won't come until Q4.American vehicle sales were expected to rise in March but they disappointed, coming in at an annualised pace of 15.5 mln. Still, this is about the same pace we have seen since April 2023 so it is holding its rise from the depressed period two years earlier than that.In China, new order levels boosted its Caixin services PMI in March. The expansion isn't swift but it is better than a contraction. It was the 15th straight month of growth in services activity, with new business rising to the fastest pace in the year so far.The Qingming Festival 3 day holiday in China will mean data releases there will be light until next week. Equity markets will be closed. They may be glad of the break; a survey of local economists cast growing doubt that the "about 5%" growth target will be reached this year, and it will be progressively harder in years to come.In Europe, inflation levels fell more than expected, getting closer to the ECB target. It declined to 2.4% in March 2024, matching November's 28-month low and that was lower that market expectations of 2.6%.The UST 10yr yield is now at 4.36% and unchanged from this time yesterday. The price of gold will start today firmer by +US$34 from yesterday at US$2293/oz, and a new all-time high.Oil prices have risen +US$1 to just under US$85.50/bbl in the US while the international Brent price is now up at just under US$89.50/bbl. These are new five month highs.The Kiwi dollar starts today at just on 60.1 USc and +½c firmer than this time yesterday. Against the Aussie we are little-changed at 91.5 AUc. Against the euro we are holding at 55.4 euro cents. That all means our TWI-5 starts today just on 69.2 and up +20 bps from this time yesterday.The bitcoin price starts today firmer at US$66,285 and up +1.2% 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 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 yields are climbing as markets recognise the Fed is serious about wanting to see sustained inflation at 2%, and the US economy just keeps on powering ahead. And that is hurting equity valuations.But first, the overnight dairy auction brought higher prices. In USD terms they were up +2.75% and nearly making back the drop at the prior event. However in NZD terms the gain was +4.2%, so risks to farm gate payout forecasts have faded for now. The rises were pretty much across the board and were led by cheddar cheese, WMP and butter.In the US, the February JOLTS report delivered a little-changed set of results, far better than the expected labour market retreats. Job openings actually rose slightly.Meanwhile US factory orders came in higher than expected. New orders rose by +1.4% from the previous month in February. This was above market expectations of a +1% increase to point to further resilience of the US economy. Year-on-year they rose +3.6%.Adding to the bullish theme, the US Redbook index of retail sales rose +5.2% last week compared to year-ago levels.There's more. The Logistics Manager’s Index rose to its highest reading in four months in March amid broad-based expansions in all metrics and continued progress in the transportation sector and a build-up of inventories upstream at the manufacturing and wholesale levels.But it is not all good news; Tesla missed its delivery targets in Q1-2024 by almost -15%, their least since 2022. Their stock dived -4.8% today.. But to be fair it has been on a slide since its peak in July 2023 and has since shed more than -40%.In China, all the news is about Country Garden's current sales failures. But we have heard that all before.German inflation has eased to 2.2% in March from 2.5% the previous month. This was their lowest rate since May 2021, moving closer to the ECB's target of 2.0%.In March, Australian house prices barely moved in both Sydney and Melbourne from the prior month according to CoreLogic analysis. But they zoomed higher in most other major centers. Brisbane, Adelaide and Perth all booked big gains, and year-on-year, Perth is up almost +20%.The UST 10yr yield is now at 4.36% and up another +3 bps from this time yesterday. The price of gold will start today firmer by +US$19 from yesterday at US$2259/oz, and only -US$7 below its new all-time high reached intra-day yesterday.Oil prices have risen +50 USc to just on US$84.50/bbl in the US while the international Brent price is now up at US$88.50/bbl. These are five month highs.The Kiwi dollar starts today at just on 59.6 USc and +20 bps firmer than this time yesterday. Against the Aussie we are unchanged at 91.6 AUc. Against the euro we are holding at 55.4 euro cents. That all means our TWI-5 starts today just on 69 and actually unchanged from this time yesterday.The bitcoin price starts today softer at US$65,516 and down another sharpish -4.6% from this time yesterday. Volatility over the past 24 hours has been very high at just on +/- 4.1%.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 that global manufacturing indicators have turned quite positive.First in China, their official March PMIs have set a bullish tone to start the week. Their official factory PMI rose to 50.8 from 49.1 a month earlier and export orders also recovered. The official services PMI rose to its highest since June. These were followed by the private Caixin factory PMI and that broadly confirmed to improved outlook and new expansion, actually a 13 month high.This apparent recovery energised the Shanghai stock exchange yesterday.In Japan, industrial production fell and their jobless rate rose, both not expected. But that data was for February. For March, their central bank sentiment survey of mostly large businesses remained broadly positive.And in South Korea, industrial production rose and by more than expected.Back in China, the slow motion real estate sector crash rolls on with more troubles at both Vanke and Country Garden. It is more than them of course. And banks that responded earlier to Beijing's call for them to support the sector are trapped in growing bad loans. Asset quality pressure is "immense" said one major bank.In India, we should note a new ILO report that shows the jobless rate for Indian graduates at home was a massive 29%, almost nine times higher than the 3.4% for those who can’t read or write. The unemployment rate for young people with secondary or higher education was six times higher at 18.4%. This data reinforces David Hargreaves point that even if New Zealand's local labour market struggles, it will still look attractive to Indian immigrants. It isn't our attractiveness that draws them, it is the job pressure at home that pushes them out.In the US, the widely-watched ISM factory PMI has been shifted into expansion mode on the strength of new order levels. It joins the internationally-benchmarked S&P Global (ex-Markit) one which already moved to expansion the previous month. But it was the size of the ISM shift that got market attention, enough that the view formed it will keep the Fed from cutting any time soon. Both showed prices are no longer falling.It is not all good news in the US. 'Extend & Pretend' is back, especially in US commercial office markets and particularly for office buildings. The US Fed is on watch for financial stability risks although they claim it is an issue for small and mid-sized banks, not the systemically important big banks.And staying in the US, Fed Chair Powell said that PCE inflation data for February was along the lines of what the Fed wants to see and broadly expected. However, the latest readings aren’t as good as what policymakers saw last year and the Fed can wait to become more confident before cutting interest rates. In fact, he said policymakers don't need to be in a hurry to reduce borrowing costs. The Fed's base case is for inflation to come down but if the base case doesn't happen the Fed would hold rates where they are for longer, he said. Today's PMI's reinforce that position.But he was responding to PCE inflation data for February which rose +2.5% and that was following a January 2.4% rate and a December 2.6% rate. Core PCE inflation rose 2.8% after being 2.9% in the prior two months. Powell and his colleagues won't be unhappy with these levels but they aren't seeing downward progress either.Meanwhile American personal incomes were +1.7% higher than a year ago and personal consumption is +2.4% higher on the same basis. This is the first time income growth trailed spending growth in a long time. It is too soon to know whether this is a turning point, or just a data blip.So perhaps it will be a surprise to know that the University of Michigan sentiment index rose more than expected to its highest level since July 2021.In Australia, inflation expectations, which had been suck at 4.5% since December, actually slipped in March to 4.3%. While this may be its lowest since October 2021, it does emphasise just how sticky Aussie CPI inflation has become.Meanwhile, China has dropped its tariffs on Australian wine after years of sanctions that crippled the billion-dollar export industry.The UST 10yr yield is now at 4.33% and up +14 bps from the end of trading last week. The price of gold will start today firmer by +US$7 from yesterday at US$2240/oz, but -US$26 below its new all-time high reached over the past 24 hours.Oil prices have risen +US$1 to just on US$84/bbl in the US while the international Brent price is now just over US$87.50/bbl.The Kiwi dollar starts today at just on 59.4 USc and -35 bps lower than this time yesterday. Against the Aussie we are unchanged at 91.6 AUc. Against the euro we are holding at 55.4 euro cents. That all means our TWI-5 starts today just on 69 and down -20 bps from this time yesterday.The bitcoin pri

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 natural events will likely have an increasing say in how the international economy operates.But first in the US, mortgage applications were lower last week again, and the good rises in the first two weeks of the month are fading. Even essentially unchanged mortgage interest rates isn't stimulating new loan applications. The talk of an American housing market recovery might be a mirage.There was another UST 7yr bond auction earlier today and that brought rising demand. Today's event delivered a median yield of 4.14% which was lower than the 4.27% at the prior equivalent event a month ago. It is only marginal, but the interest rate load on the US Federal government borrowing is easing.China's industrial profits bounced-back in February, rising by +10.2% from the same month a year ago. They are cheering the 'strong rise'. But we must recall they were especially weak last year. Compared with 2022, the February 2024 result is down -21.2%. And it is -17.7% lower than 2021's result. So they shouldn't be too satisfied. There was almost no recovery in State-owned enterprises - all the current 'recovery' came from the private sector.The central bank of Sweden likes what it sees locally in the track of inflation. It is currently running at 4.5% and has been sticky. But they expect it will fall soon to near 2%. That view encouraged them to signal that their current policy interest rate of 4% will be trimmed soon, starting in May or June.In Australia, their Monthly Inflation Indicator was at 3.4% in February. This is the same rate they reported in December and January. Their core rate fell to 3.9% in February, down from 4.1% in January. Like everyone, they are finding it hard to wring out the last elements of excessive inflation. New Zealand's March quarter CPI rate will be released on Wednesday, April 17, 2024. In Q4-2023 it ran at 4.7%.You know about the West African crisis hitting cocoa production and prices. Now you should know that a cyclone in Madagascar will roil the market for vanilla beans. Vanilla is a main source of foreign currency for the country.And back in the US, warnings are starting to appear that their hurricane season this year could be their biggest and most damaging.Further, we should note that a giant of psychology and a huge contributor to behavioural economics, Daniel Kahneman has died earlier today. He was a Nobel Laureate, and if you haven't read his hugely influential book Thinking, Fast and Slow, which summarises much of his research, you should take the time to do so. The UST 10yr yield will today at 4.19% and down -5 bps from this time yesterday. The price of gold will start today firmer by +US$14 from yesterday at US$2191/oz.Oil prices have fallen -US$1 to just under US$81/bbl in the US while the international Brent price is now at US$85/bbl. American crude oil stocks are running much higher than anticipated.The Kiwi dollar starts today at just on 60 USc and marginally softer than this time yesterday. Against the Aussie we are unchanged at 91.9 AUc. Against the euro we have softened slightly to 55.4 euro cents. That all means our TWI-5 starts today just under 69.3 and again little-changed.The bitcoin price starts today softer at US$68,998 and a full -1.0% dip since this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.4%.Over the Easter holiday break, we will have normal weekend service, and will return with these daily briefings on Tuesday, April 2, 2024.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 Tuesday.

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 is increasingly positive in the world's largest economy.First up today, the retail signals in the US are quite positive. Their Redbook survey of bricks-and-mortar store shows sales rose +3.9% last week from the same week a year ago, handily besting inflation again.A bounce back in orders for transport equipment, including aircraft, gave a more-than-expected push to their February durable goods order levels. They came in +8.9% higher than year-ago levels. The capital goods orders came in +11.8% higher on the same basis. Certainly board rooms are giving bullish signals about the future.Meanwhile, February house sales volumes rose in February. They were up a strong +9.5% from January on a seasonally-adjusted basis, but that still left these transaction volumes -3.3% lower than year ago levels. House prices rose marginally, ending a long string of month-on-month retreats that started in July 2023. It's a shift higher that others have noted too.Given this set of positives, it maybe a surprise that consumer sentiment didn't improve in the March Conference Board survey. But it didn't slip either, holding its recent levels. The current mood improved but anxiety about the future did too.The latest US Treasury 5yr note auction was very well supported, delivering a median yield of 4.19% and slightly lower than the 4.25% at the prior equivalent event a month ago. These public debt auctions are not showing any of the expected stress the doomsters anticipated by now. The lower yields are probably driven by normal market expectations of upcoming rate cuts by the Fed. Of course that doesn't mean the outlook is any better - it isn't if no action is taken by Congress to address the deficits.In Canada a measure of their wholesale trade activity rose more than expected in February.In Singapore, they reported a better-than-expected rise in manufacturing production. It grew +3.8% in February from a year ago, easily beating market expectations of a +0.5% rise. The upturn was mainly boosted by a sharp rebound in biomedical manufacturing.The UST 10yr yield will today at 4.24% and down -2 bps from this time yesterday. The price of gold will start today marginally firmer by +US$2 from yesterday at US$2177/oz.Oil prices have risen +50 USc to just under US$82/bbl in the US while the international Brent price is unchanged at US$86/bbl.The Kiwi dollar starts today at just on 60.1 USc and marginally firmer than this time yesterday. Against the Aussie we are also marginally firmer at just over at 91.9 AUc. Against the euro we have firmed slightly to 55.5 euro cents. That all means our TWI-5 starts today over 69.3 and again little-changed.The bitcoin price starts today softer at US$69,695 and a -0.8% slip since this time yesterday. Volatility over the past 24 hours has been modest 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. 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 American economic juggernaut rolls on, dominating global markets.American new home sales levels in February missed estimates, but ~7% mortgage interest rates basically explain that. They eased by a minor -0.3% from January to an annualised rate of 662,000, and below market expectations of a 675,000 rate.Although the Dallas Fed factory survey eased back a bit in March, it is still at levels better than for most of the past two years. A contracting oil patch doesn't really qualify as 'news' any more.Nationally, the US Chicago Fed's National Activity Index expanded in February and pushing past the January retreat. But to be fair it is in a bit of a yo-yo pattern and has been since the end of the pandemic.Recent estimates of American economic activity generally agree its economy is expanding at about a +2% (real) clip in Q1-2024. For an economy as large as their, this represents the bulk of the global economic expansion, adding more than +US$1 tln in nominal economic activity at an annualised pace. Nowhere else comes close.Interestingly, today's UST 2yr bond auction has brought slightly lower yields. It ended with a median 4.54% yield today, compared with the equivalent event a month ago at 4.64%. Investors are not demanding higher yields from these benchmark bonds despite the rise in issuance. The doomsters are still waiting for their moment – it’s been a very long time for them.In China, the IMF has noted that China needs to take a different path to recovery. It's "fork in the road" comments challenge China's standard paybook to stimulus. Presently they are using their considerable reserves to support the yuan against market challenges.In Taiwan, retail sales grew an eye-catching +9.3% in February from the same month a year ago, a sharp rise from January on the same basis. This was their sharpest growth in retail activity since June 2023. Clothing and food drove the expansion.But things aren't so bullish for Taiwanese industrial production which fell -1% from year-ago levels in February darta released overnight.We have noted the rise and rise in cocoa prices before, but they reached new extreme levels overnight, based on recent poor harvest results in West Africa. US$10,000/tonne (NZ$17/kg) beckons.The UST 10yr yield will today at 4.26% and up +6 bps from this time yesterday. The price of gold will start today firmer by +US$10 from yesterday at US$2175/oz.Oil prices have risen +US$1 to US$81.50/bbl in the US while the international Brent price is now up at US$86/bbl.The Kiwi dollar starts today at just on 60 USc and marginally firmer that this time yesterday. Against the Aussie we are -¼c lower at just over at 91.8 AUc. Against the euro we are still just on 55.4 euro cents. That all means our TWI-5 starts today under 69.3 and little-changed.The bitcoin price starts today up strongly at US$70,247 and a +7.4% rise since this time yesterday. Volatility over the past 24 hours has been very high at just on +/- 4.3%.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 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 all eyes are on China to see if they pull the trigger on their old stimulus playbook again.But first this week, the focal point in the United States will revolve around the PCE price indexes, and data on personal income and spending. Other key data include durable goods orders, their final Q4 GDP growth reading, a key consumer confidence survey, and housing market indicators such as new and pending home sales.It will be a busy week in Japan with BoJ minutes, and data on their unemployment rate, industrial production, retail sales, and housing starts. It will be a quieter week for Chinese economic releases but it will include data on industrial profits. And markets will pay close attention to potential stimulus announcements and how authorities will let the yuan’s price shift. In Australia, February’s inflation rate is expected on Wednesday and a rise is expected, inflation expectation survey data may come in before that, while markets also await the Westpac consumer confidence survey results.And staying in Australia, there is plenty of evidence their housing market is back on a roll with an active auction market this past weekend and sales volumes high.Prices seem to be rising. Behind it all is a shortage of housing as their inward migration levels rise fast.Meanwhile the Australian central bank released its half-yearly Financial Stability Report on Friday and it concluded that while conditions will remain challenging for many households and businesses there this year, "strong conditions in the labour market, the large savings buffers accumulated by many borrowers during the pandemic and rising housing prices are helping households to adapt." The Australian financial system has a high level of resilience and is well positioned to continue to support the economy, they say.In China, incoming foreign direct investment fell more than -19% in February from a year ago, the largest fall since the GFC and far more than in the early stages of the pandemic. Recent 'legal' changes and the rise of the MSS in the Middle Kingdom is making it too tough to operate there. The trade disengagement underway isn't ending. Only US$14.3 bln arrived as investment in February about half the stunted levels on one and two years ago.Meanwhile, China is making a concerted effort to qualify for the CPTPP trade group with new 'negative list for cross-border trade in services' management. "We have proactively aligned our policies and legislation with the CPTPP rules in relevant areas and are well-prepared for market access offers in goods trade, trade in services and investment," a spokesperson said over the weekend.The recent visits by Chinese foreign minister Wang Yi to both New Zealand and Australia in an unusual 'charm offensive' by the usually prickly Wolf Warrior needs to be seen in the light of this CPTPP push.In Japan, inflation is finally embedding there. It's been a long slog to get out of deflation. Their inflation rate climbed to 2.8% in February from 2.2% in the prior month, the highest figure since last November. It has been over 2% since March 2022.Across the Pacific, although they eased in January Canadian retail sales rose in February according to an early estimate. But both shifts are minor. Hesitating car sales are behind the lackluster results.Across the Atlantic, German companies are gaining confidence, and rather quicker now. Sentiment for Europe's largest economy reached its highest point since June 2023, fuelled by anticipations of potential interest rate cuts by the European Central Bank and a gradual easing of inflationary pressures. But German consumer sentiment remains stick at low levels, generally unchanged since May 2022.The UST 10yr yield will today at 4.20% and down -2 bps from this time Saturday, and -11 bps from a week ago. The price of gold will start today firmer by +US$6 from Saturday at US$2165/oz. But that is little different to week-ago levels.Oil prices have stayed at US$80.50/bbl in the US while the international Brent price is still at US$85/bbl. These levels are also unchanged in a week.The Kiwi dollar starts today at just under 59.9 USc and marginally lower that this time Saturday. A week ago it was at 60.9 USc so a -1c fall since then. And it is the first time in four months since we have been below 60 USc. Against the Aussie we are marginally firmer at just over at 92.1 AUc. Against the euro we are still just on 55.5 euro cents. That all means our TWI-5 starts today at 69.3 and down -60 bps in a week.The bitcoin price starts today at US$65,430 and up +2.9% from this time Saturday. A week ago this price was US$68,378 so a -4.3% fall since then, 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

In five years' time we would see things we can't imagine today if the Government adopts the Commerce Commission's recommendations to boost competition for personal banking services, Commission Chairman John Small says.Speaking about the Commission's draft report from its banking market study in the latest episode of interest.co.nz's Of Interest podcast, Small says he'll be interested to see what sort of response the Commission gets from the big four banks, ANZ, ASB, BNZ and Westpac, who it says are an oligopoly who don't face strong competition."We haven't accused them of doing anything nefarious. They're responding to the incentives that are in front of them. And we think that they've settled into a particular pattern of conduct that we think should be disrupted. But we don't blame them for that," Small says."I'll be really interested to see what they do have to say about it."The Commission makes 16 recommendations in its draft report, and says they should be considered as a whole. He's optimistic about what the market for personal banking services could look like five years from now if the Government was to adopt them all. "We would see things that we just can't imagine today. So if open banking is operational within a couple of years, if Kiwibank has already been disruptive, then I think we've set the industry up for a really healthy, competitive future that will be greatly beneficial to New Zealanders throughout their economy. And that [interest] rates will be sharper, and the range of services will be much wider and the choice between providers, trusted providers, will be much wider as well. So I would see it as being really positive five years from now," says Small.In the podcast Small also discloses which three of the Commission's 16 recommendations he believes are most important. With the Commission recommending the Reserve Bank review its bank regulatory capital settings, he also discusses dialogue with the Reserve Bank about this, and wanting them to "think really carefully about the competitive aspects of their decisions."He also talks about why the big four banks don't face strong competition, what could be done to make Kiwibank a disruptive competitor, how the banking industry hasn't disrupted itself via open banking, customers moving between banks, the competitive landscape for home loans versus deposits, his take on the idea of a windfall profits tax on banks, and what a parliamentary select committee bank inquiry could probe. *You can find all episodes of the Of Interest podcast here.

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 that is full of unexpected data and outcomes.US jobless claims fell last week to 190,000 and this was lower than expected. The number of people still on this unemployment insurance is lower too, at just over 2 mln. Neither signals growing labour market stress.The Philly Fed's factory survey was expected to retreat in March following a good rise in February. But it surprised with another good expansion. And these heartland rust-belt manufacturers are looking ahead with surprisingly strong optimism.Existing home sales jumped and by more than expected in February, up +9.5% from January on a seasonally-adjusted basis. But year-on-year, sales declined in all regions.Meanwhile the US economic expansion kicks along. The latest internationally-benchmarked PMIs show their service sector activity growth eased to a three-month low amid reports that price pressures that had restricted customers' ability to commit to new projects, while manufacturing production expanded the most since May 2022. Overall, new orders increased but at a slower pace, while the rate of job creation ticked higher, marking the fastest in 2024 so far.We should also note that a California referendum to raise property taxes to finance 11,000 treatment beds and housing units with health care and social services for homeless people suffering from mental illnesses and addiction, has passed. This is somewhat unexpected given the range of opponents and their well-funded opposition.In Japan, March is delivering their strongest rise in private sector activity in seven months. Their factory PMI 'rose' to a smaller contraction in March while their services PMI expanded much faster. New orders featured as the driver.In India, their March PMIs showed a surging manufacturing sector, but it was still overshadowed by even faster expansion in their services sector. India is on a fast-track.The March 'flash' EU PMI is being held up to a stable level by its services sector which is still expanding and covering a continuing contraction in its manufacturing sector. Things are similar in the UK although their factory sector seems to be in better shape.And there were a set of European central bank decisions out overnight. First Turkey sharply raised its rate unexpectedly, up +500 bps to 50%! (I kid you not.) And Switzerland unexpectedly cut its key policy rate by 25 bps to 1.5%, making it the first major central bank to cut. And in between, the English reviewed and did nothing, holding their rate at its historically high 5.25%.In Australia, their labour market report for February has delivered a big surprise. Analysts were expecting a very good +40,000 rise in the employed workforce, but actually they got an extra +78,000 full time jobs in the month, plus an additional +38,000 part-time roles. Their jobless rate slipped to 3.7%. While this is 'good', we should remember that 31% of their 14.3 mln workers are still part-time, an unusually large proportion. (In New Zealand, that level is less than 20%.)Still, the jobs surge probably means any rate cuts in Australia are now further away.Australia's population is probably now touching 27 mln. It was at 26.8 mln people in September according to official data, and is growing at a record pace, fuelled by immigration and a longer life expectancy among boomers.Global container freight rates eased another -5% last week but remain unusually high because the reasons for the January surge have not gone away - drought in Panama and pirate activity in the Red Sea. Interestingly, trans-Atlantic rates are now rising while the largest falls are Chine-to-Europe. Bulk cargo rates are staying elevated.The UST 10yr yield started today at 4.28% and unchanged from this time yesterday. The price of gold will start today higher by +US$21 from yesterday at US$2157/oz but in between they surged to well over US$2200 and then fell back quickly too.Oil prices are lower today by -50 USc at just on US$80.50/bbl in the US while the international Brent price is now just on at US$85/bbl.The Kiwi dollar starts today at just under 60.5 USc and little-changed from yesterday at this time. Against the Aussie we are down nearly -½c at 92 AUc following their strong labour market news. Against the euro we are still just under 55.7 euro cents. That all means our TWI-5 starts today at just on 69.6 and essentially unchanged.The bitcoin price starts today at US$66,649 and up +3.1% from this time yesterday. Volatility over the past 24 hours has been very high at just on +/- 4.2%.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.