Economy Watch

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the last few days of the northern summer holiday period that is quiet but basically positive.First, American retail sales at physical stores were up +5.0% last week from the same week in 2023, another pointer that the consumer side of the American economy hasn't stumbled yet.But there are of course pockets of regional variation. The Richmond Fed's factory survey wasn't so flash in its August survey with a tenth straight contraction. The service sector in the region was stable however.But the Texas Dallas Fed service sector survey is contracting just as we reported yesterday its manufacturing sector was.But these regional business sentiment pockets might be outliers. As we noted for the Redbook retail survey, consumers seem upbeat. And that is reinforced by the latest Conference Board survey of consumer sentiment. The rise in optimism on a national level contrasts with a few pockets of business pessimism.A very well supported US Treasury 2yr bond auction brought a median yield of 3.83% overnight, down more than -50 bps from 4.39% at the prior equivalent event a month ago. It's a bond rally directly related to the Fed signals at Jackson Hole.Across the Pacific, China said profits at its largest industrial firms (mostly SOEs) rose +3.6% in the first seven months of 2024. This was little-changed from June. They were up +4.1% in July from the same month a year ago. That they are still profitable overall is a good sign, and they are not getting worse.As China returns from its summer holidays, one thing may be missing - childcare. The sharp demographic shifts are moving faster now and a nationwide causality is childcare centers. Businesses providing these services closed for summer and a rather large number of them aren't re-opening. Enrolments are diving reflecting the swift shift in attitudes from the 'last generation'. (Of course, China doesn't have this problem on its own, but it is particularly fierce there.)Taiwan however has reported a continuing rise in consumer sentiment there. In fact, these levels are now back at levels last seen in March 2020 before the pandemic hit the island nation. From June this year, you may even call the rise a surge.The UST 10yr yield is now at just under 3.84% and up +3 bps from yesterday. The price of gold will start today up +US$1 from yesterday at US$2519/oz, another record high.Oil prices are down -US$1.50 at US$75.50/bbl in the US while the international Brent price is now just over US$78.50/bbl.The Kiwi dollar starts today up nearly +40 bps from yesterday at 62.5 USc. Against the Aussie we are up about the same to 92 AUc. Against the euro we are up +30 bps to 55.9 euro cents. That all means our TWI-5 starts today at 70.1 and also up +40 bps.The bitcoin price starts today at US$61,804 and down -3.2% 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.

With US Federal Reserve Chairman Jerome Powell signalling interest rate cuts ahead, the US dollar's likely to weaken with the Kiwi dollar rising against it, Imre Speizer, Head of NZ Markets Strategy at Westpac Institutional Bank, says.Speaking in a new episode of the Of Interest podcast, Speizer says although the expected central bank interest rate trajectory is very similar in NZ and the US over the next 12 months, financial markets will focus much more on the US."If the two racehorses go neck and neck, that should probably be neutral for the Kiwi dollar. [But] I don't think it will be, because the market will put a lot more importance on the US side of things. So even though the yield spread between New Zealand rates and US rates might not move too much, just the fact that the Fed is cutting aggressively will actually weigh on the broader US dollar," Speizer says."So you'll get the market selling the US dollar against all of the major G10 currencies and that will have a ripple effect into the Kiwi-US exchange rate... And therefore, if we see that US dollar weakening, which is our view over the next few quarters, you should see the Kiwi-US, all things equal, rising a bit."Speizer also expects local swap rates, already down significantly over the last couple of months, to continue falling."The swap rates are going to fall a bit further over the next few quarters, and that's simply mechanical. So even if views around the economy don't change, the markets have already priced in this whole easing cycle. So think of it as they're priced in, they know the Official Cash Rate is 5.25% today. They believe it'll be below 5% by the end of the year. And in a year's time, into the threes [3% range], that's already priced in," Speizer says."So as you move forward in time, those high OCRs drop out of the calculation of a swap rate and you just mechanically end up with a lower rate. So even if nothing in the world changed, you would see, for example, that two year swap rate moving from its current rate of about 3.85% down towards somewhere in the lower threes over time. So that's just time and the mathematics doing its work. It's not really the market moving as such.""Swap rates are very important in the New Zealand financial markets. They're arguably the most important interest rate instrument. Whatever swap rates do, other interest rates will follow. So, for example, if your two year swap rate went up by 100 basis points, you would find mortgage rates following suit, other business lending rates, bond yields, pretty much anything. They are the foundation of all interest rates in New Zealand. And the swap rates themselves are constructed by expectations of the OCR mostly," says Speizer.In the podcast audio he also talks about what in Powell's Jackson Hole comments surprised financial markets, what to watch ahead of September's Federal Open Markets Committee meeting, OCR market expectations, what the yield curve is telling us at the moment, how commodities might start to exert more influence on exchange rates, the NZ government bond market following the issuing last week of a $6 billion bond that attracted record interest of $22.7 billion, the yen carry trade, Australia, China, geopolitical risk, and where he sees the NZ dollar at year's end.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news it seems the global soft landing has been achieved.But first, the week ahead will feature some chunky economic data from the world's largest economies but no first-tier data. This seems befitting of the final week of the summer break in the northern hemisphere when end the week with long weekends in the US and Canada (Labor Day). Then after a northern summer of fickle markets, it will be back to normal market trading. That often sets the tone for the rest of the year.In the US it will be headlined with durable goods orders, another Q2 GDP estimate which is expected to show an improvement, and some sentiment indexes. In China, it is industrial profits data and August PMIs at the end of the week India chimes in with Q2 GDP. And Australia with its monthly inflation indicator.Japanese CPI inflation was at 2.8% in July from a year ago, holding steady for the third straight month while remaining at its highest level since February. Electricity prices jumped, and other fuel costs rose too after the full end of energy subsidies in May. However costs fell for education and communication. Meanwhile, their core inflation rate hit a five-month high of 2.7% in July. Monthly, the CPI rose by +0.2% in July, the least in three months, after a +0.3% gain in June.In his testimony to the Japanese Parliament, the central bank boss kept future rate hikes in play this year by turning a potentially messy parliamentary hearing into a relatively straightforward reiteration of policy. These were his first public remarks following recent high volatility on equity markets. Since, things have settled nicely in his favour.Taiwanese retail sales rose +3.4% in July from a year ago, a slight slowing of the pace of increase from June. Meanwhile their industrial production rose a very strong +12.3% in July on the sale basis, much of it due to strong international demand. This is a big turnaround because you might recall that a year ago it was contracting under election uncertainty and PRC pressure.In China, they have suddenly closed its process for approving new steel plants. That comes after widespread negative global reactions to dumped steel products after a deep slump in local demand. In the past required Beijing authorities required the elimination of existing capacity before approving new plants. Those rules no longer apply. No new steel capacity will be approved.China's economic stumbles are having no global impact.In the US in his widely anticipated Jackson Hole speech, Powell gave the financial markets clear signals, and they reacted accordingly. He indicated the central bank will cut its interest rate in the September 19 meeting (NZT) noting that the US labour market is cooling quickly following the softer jobs report in July and the downward revision to payrolls this week. He also said the FOMC has gained further confidence that inflation is slowing to their 2% target, warranting a clear view that it is time to adjust monetary policy to less restrictive conditions.The USD sank, equities rose, and bond yields eased a bit more than was already priced in.This week's upcoming PCE inflation gauge (expect 2.6%, down from 3.4%) is widely expected to confirm the Fed's expectation that inflation is tracking as they need it.Meanwhile American new home sales surged +10.6% in July from the previous month to an annualised rate of 739,000, well above market expectations of a +1% increase. It was the sharpest increase in sales since August of 2022 and the highest number of homes since May 2023 and the July level is +5.6% higher than the same month in 2023.In commercial property markets things are getting decidedly tough in the US. A big-money-backed commercial property fund has suffered another fierce ratings downgrade, by Moody's, in fact to the lowest junk rating possible, 'C', a fast downgrade from an earlier August re-rating.Canada's rail lockout has ended quickly with an Ottawa central government intervention to block the employer action. But just as they did the union filed notices of strike action on their part, to start Monday (Canadian time).Meanwhile after two months of dips in May and June, Canadian retail sales rose in July in a +0.6% month-on-month jump, but to be only +0.2% higher than a year ago.Canadian manufacturing sales also rose in June, better than expected.In Australia, their "right to disconnect" law comes into effect today. Employees can ignore contact from the boss outside business hours, except where that is unreasonable. The problem is, the law is silent on what is "unreasonable". So its going to be messy until that is clarified, and that will probably require expensive litigation.The UST 10yr yield is still at just on 3.80% and unchanged from Saturday. The price of gold will start today up +US$2 from

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news financial markets in the US have the jitters ahead of a key speech by Fed boss Powell tomorrow at the Jackson Hole central bank shindig. Equities fell, bond yields rose, and the USD firmed and expectations grew Powell will make the case for only a gradual pace of rate cuts.Meanwhile, US jobless claims actually fell last week and by about what was expected. But the seasonally-adjusted level rose and that wasn't expected and that grabbed the headlines in the absence of any other major economic news. There are now 1.86 mln people on these benefits, also a fall.The 'flash' US PMIs from S&P/Markit shows their factory sector contracting slightly but their services sector expanding faster. New order levels are problem for their manufacturing sector. But service sector activity grew at a solid and increased rate in August, and because that sector is far larger than the factory sector, that points to robust GDP growth in excess of 2% annualised in the third quarter, which should help allay near-term recession fears.The Chicago Fed's National Activity Index for July basically confirmed the manufacturing slowdown.But the Kansas City Fed factory survey held on with an improvement in August, showing there are some regions still improving in their manufacturing sector.Also improving were the July existing home sales which rose modestly at about the expected level and that ended a four month retreat. But despite that, the sales volume levels essentially remained at the low levels they have had since early 2023. And on a broader perspective, sales volumes at this level were first achieved in the mid-1970s, and were the levels in the GFC. So July's rise is a very low bar.In Canada (and the US), all eyes are on a stoppage in their key rail network due to industrial action. It is a lockout, and it will have many spillover impacts in both countries.In India, the expansion rolls on for both their factory and services sectors in an impressive way, with them shrugging off capacity issues in their factory sector with a notable rise in job creation. 'Growth' is creating many more employment opportunities.In Japan, although it rose, its August factory PMI is still contracting, slightly. On the other had Japan's service sector is expanding at a good rate. That is the seventh consecutive expansion in their services sector.In China, Reuters is reporting that regulators there will likely impose a six-month business suspension on a big part of PwC's auditing unit in the mainland as a penalty for its work on troubled property developer Evergrande.In Europe, business activity rose at faster pace in August, but the rate of new order intake continued to ease. The uptick in business activity is largely due to the Paris Olympics however, so that probably won't last.In Australia, their August PMI's sort of mirrors Japan but at a slightly lower level. The factory PMI is up but still contracting. Their services PMI is expanding although only at a modest rate.Global container freight rates slipped another -2% is a continuation of the minor moves down from the extreme July heights, with the basic pressures unresolved. These rates are still almost three times higher than pre-pandemic and pre-canal-pressure levels. There is no real sign of a proper normalising. Bulk freight rates rose slightly last week.The UST 10yr yield is now at just on 3.86% and up +8 bps from this time yesterday.The price of gold will start today down -US$27 from yesterday at US$2482/oz.Oil prices are recovered yesterday's US$1.50 drop, now back at US$73/bbl in the US while the international Brent price is now just under US$77/bbl.The Kiwi dollar starts today down -30 bps from yesterday at 61.3 USc. Against the Aussie we are up +10 bps too at 91.5 AUc. Against the euro we are still at 55.3 euro cents. That all means our TWI-5 starts today at 69.4 and little-changed.The bitcoin price starts today at US$60,305 and up +0.7% from this time yesterday in its recent yoyo pattern. Volatility over the past 24 hours has been modest at just under +/- 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.

US jobs growth not as strong as first reported. Fed minutes confirm likely September cut. China threatens the EU on dairy trade.

The process of growth will be the main benefit from a scaled up Kiwibank, while public acclaim will be a key measure of open banking's success, Commerce Commission Chairman John Small says.Small spoke to interest.co.nz for the latest episode of the Of Interest podcast, which will be published later on Wednesday. The interview came after the Commission released the final report from its market study into personal banking services. The Government says it'll act on all 14 recommendations from the report.Speaking in a previous Of Interest podcast episode, after the Commission's interim report was issued in March, Small said the most important of that report's 16 recommendations was; "The Reserve Bank should review its prudential capital settings to ensure they are competitively neutral and smaller players are better able to compete."So why is that recommendation gone from the final report?"We still feel that there's aspects of the regulatory regime that could be improved to promote competition. We've just, I suppose, got a bit more refined about how we're suggesting that that happens. And we've keyed in, particularly to a number of programmes of work that the Reserve Bank already has underway. So we've made a fairly broad overall suggestion about how the bank thinks about competition, which is essentially that we would like them to put a bit more focus on barriers to entry and expansion, so that it's more easily able for small players to get into the market, particularly the kind of players that we expect to be able to disrupt this industry who don't look like the traditional banks," Small says."Another one that applies more to the traditional banks is to think about the way that risk weights are calculated for reasonably standardised loans and make that more granular...so there's less averaging involved. It's a better, it's a more accurate, representation of risk and it gives them the ability to price loans differently depending on just how risky they are."A helping hand for community housingThe Commission's also calling for the Reserve Bank to reduce the risk rating of lending to housing co-operatives and community housing providers to lower, and more accurate, levels. This is currently treated as commercial lending rather than housing lending.Risk weightings are used to link the minimum amount of capital banks must hold, with the risk profile of the bank's lending activities."The work around mortgage advisors is also more nuanced, I should say, [is] probably the way to put it. We found out quite a bit about the mortgage advisor sector after the draft report and we had some of them around at our consultation conference... We [also] took some soundings in Australia about how their mortgage advisor sector works," Small says.'The process of growth'On the recommendation to scale up Kiwibank by getting it access to more capital, Small says the main competitive benefit "is about the process of growth rather than what happens once they're big.""So we want them to be taking chunks of market share out of the big four on their way up, and for that to provoke a competitive reaction from the larger banks.""What will really matter will be them [ANZ, ASB, BNZ and Westpac] perceiving a real threat of losing share, because that is what will stimulate them to fight back," Small says.'Interesting stuff' from Westpac NZ's CEOThe Commission also calls for the acceleration and co-ordination of progress on open banking. In the podcast Small talks about lessons from the United Kingdom and hearing "some real interesting stuff" from Westpac NZ CEO Catherine McGrath. Prior to taking the Westpac job McGrath worked for Barclays and was involved in a Competition and Markets Authority open banking committee in the UK."We're just copying what we can, ruthlessly copying what we can," Small says. "So, you know, I absolutely grant you that in terms of overall open banking as distinct from payments, it hasn't been a roaring success in either of those places [Australia or the UK]. I think we can learn from both of them and do it a lot better."Better bank switching desiredThe Commission also says the bank switching service, operated through the bank-owned Payments NZ, needs investment and improvement."We were a bit surprised, to be honest, when we visited the headquarters of the big banks and asked them about this service and asked them in particular, 'if I was to come in off the street as a customer of someone else's bank and was interested in converting to you, would you recommend that I use this service?' And generally speaking no, they wouldn't.""And they don't ask their staff to recommend that. So that tells me that it's obviously not being promoted. I think it could be improved, the actual functionality could be improved, it needs to be more visible and known and also they need to report on its usage, its success rates, what people think about it, and just that sort of basic transparency hygiene system would be very helpful indeed," says S

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the northern summer is delivering positive economic vibes.But first up today, the expected rise in dairy prices at today's full dairy auction actually came in slightly better than expected. In USD prices were up +5.5% with the key WMP price rising +7.2% and SMP up +4.0%. Volumes sold were elevated. But in NZD the gains were not as strong, up +2.3% as the Kiwi dollar has been strengthening lately.. Today's result could keep that going. China and other north Asian buyers were prominent bidders, making this the biggest rise since March 2021. But having said that, overall prices are still only back to June 2024 levels so really it is only a short-term recovery.In the US, retail sales at physical stores were up +4.9% last week from the same week a year ago, reinforcing the rise in retail confidence.In Canada, CPI inflation fell to 2.5% and a three year low. Actually there is no surprise here because that was what their central bank predicted for H2-2024 when they trimmed rates at the end of last month.Taiwanese export orders rose a very healthy +4.8% in July from a year ago, up from a +3.1% increase in the previous month and exceeding market forecasts of a +2.6% rise. The increase was driven by continued strong demand for AI chips but elsewhere demand was also quite broad. There has been a good turnaround in 2024 because a year ago these export orders were retreating.China held its Loan Prime Rates unchanged in August, as expected, after the cuts in July. The 1-year loan prime rate (LPR) is still at 3.45% while the 5-year rate was retained at 3.85%. Both rates are at record lows following unexpected rate moves down in July.And China has approved a record increase to their nuclear power plant expansion, signing off on eleven new facilities to be built. Each one costs NZ$4.5 bln. This adds to the 55 nuclear power plants already active, not including the ten approved in 2023 and not yet commissioned. They see this as a central element of their drive for "clean and stable energy sources".Turkey held its official interest rate at 50% in their overnight review. You may recall a year ago they had been battling ~70% inflation using an odd Erdogan-inspired approach. But that clearly wasn't working so a more conventional policy was adopted raising their policy rate from 6.5%. It is now bringing results with inflation easing from 75% in May to 62% in July in a notable drop.German producer prices are still deflating, although 'only' at -0.8% from a year ago, half the July rate of decline. Lower energy costs are the key driver here so actually they will like this result.Sweden cut its official interest rate by -25 bps to 3.50%, and signaled two or three more similar cuts this year are likely should inflation develop in line with the central bank’s outlook. It was the second rate cut of the cycle, easing further from the 4% interest rate first reached in September 2023.The RBA released the minutes of its August 6 meeting (what takes them so long?) and those warned of upside risks to inflation and therefore monetary policy. The risk of inflation not returning to target within a reasonable timeframe had increased, those minutes showed. The situation came amid the slow pace of disinflation, signs that the gap between aggregate demand and supply was larger than previously anticipated, and the upward revision to the forecast for final demand. Markets didn't react immediately to the 'warning'.The UST 10yr yield is now at just on 3.83% and down -4 bps from this time yesterday. The price of gold will start today up +US$9 from yesterday at US$2511/oz.Oil prices are down -50 USc at just on US$73/bbl in the US while the international Brent price is now just under US$77/bbl.The Kiwi dollar starts today up almost another +½c from yesterday at 61.4 USc. Against the Aussie we are up +½c too at 91.2 AUc. Against the euro we are up +20 bps at 55.3 euro cents. That all means our TWI-5 starts today at 69.3 and up +30 bps from yesterday.The bitcoin price starts today at US$58,833 and down -0.7% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.3%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news that US dollar has fallen to a seven-month low as American disinflation extends in their economy and that is raising expectations of rate cuts in each of the Fed's remaining three reviews this year.US equity markets are rising on the same expectation, with the S&P500 moving back to again challenge its mid-July all-time high. They seem to be voting with their money that the US Fed has in fact engineered a soft-landing, or better, and that the trajectory from here is 'up' on the back of an aggressive easing cycle from the Fed.However, the US Conference Board's leading indicators slipped a bit more than expected in July, but they also said the six-month trend no longer indicates a recession ahead.Meanwhile, the Atlanta Fed's GDP Now tracker still sees good +2% growth in Q3-2024 for the US economy, better than the 'blue chip' analysts that they benchmark against.Japan said core machinery orders, which exclude those for ships and electric power companies, rose by +2.1% in June from May, better than expected. It was on the back of an upturn in orders for the service sector. In JPY, these orders were up +2.6% from the same month a year ago.Later today, China will release its latest review of its Loan Price Rates but no changes are expected. These rates are already at all-time lows.The lackluster Chinese economy has sharp consequences for Australia. Australia shipped AU$138 bln of iron ore in the year to June. A Canberra report projected that to fall to AU$114 bln in the next 12 months and AU$102 bln in the following as prices continue to fall. That could leave a AU$3 bln hole from royalties in the Australian Federal results. The wider Australian economy will have downside risks from this too.The UST 10yr yield is now at just on 3.87% and down -1 bps from this time yesterday. The price of gold will start today down -US$6 from yesterday at US$2502/oz.Oil prices are down -US$2 at just on US$73.50/bbl in the US while the international Brent price is now just on US$77.50/bbl.The Kiwi dollar starts today up +½c from yesterday at 61 USc. Against the Aussie we are a tad softer at 90.7 AUc. Against the euro we are up +20 bps at 55.1 euro cents. That all means our TWI-5 starts today at 69 and up +20 bps from yesterday.The bitcoin price starts today at US$59,252 and down -0.5% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news we are now in the final two weeks of the northern holiday season, and that is anchored by the central bank shindig at Jackson Hole, WY starting at the end of the week.This week, China will review its Loan Price Rates later tomorrow. No change is expected. Canada will report July CPI inflation. And there is a dairy auction on Wednesday. So it will be a light data calendar.But first up today, more evidence that foreign direct investment has stalled into China. We marveled at the stall in both May and June and it has extended into July although it was now a positive ¥40.6 bln (NZ$9.3 bln) in the month. The net inflows are still very small for a country the size of China. In July 2023 the inflow was ¥140 bln so in July 2024 it is down -70% from then. China has been masking the stall by only referring to the 'year-to-date' results rather than the monthly outcome. But even that approach will catch up with them soon. Now YTD 2024 is down -50% on YTD 2023. That is massive.And it is not just FDI. Beijing stops reporting equity flows starting today, a key sentiment indicator to track their NZ$14 tln equity market. The data to Friday showed the year-to-date flows turning negative. So the rush seems to be on to get out. From here on, we just won't know how fast it develops. Concerned about the negativity, China told fund houses to stop displaying real-time mutual fund products’ net value. The last time it was available it wasn't good. But if it does turn positive, Beijing will be the first to tell us.And the Middle Kingdom has had its weather/climate challenges this year too, more so than other large countries. The impact of floods, while common in China in summer, has grown more pronounced this year, affecting over 7 million people nationwide in July, when Beijing was struck by the worst rains in 140 years, after the capital's hottest June on record. The dramatic swings between extreme heat and intense rainfall have stressed China’s power grids and shut factories, while risking the country’s water security and causing widespread crop damage. Nationally, direct economic losses from natural disasters surged in July to almost NZ$10 bln in that one month, more than in January to June combined. There will be food security consequences.Meanwhile, Taiwan reported its Q2-2024 GDP expansion at +5.1%. But that was down from +6.6% on Q1-2024 even if it was up from +1.4% in the same quarter a year ago. Beijing is probably looking on in jealousy.In Japan, profits topped analyst forecasts for 70% of surveyed Japanese companies in the April-June quarter, led by the vehicle and artificial intelligence fields. Many are benefiting from the tailwind of the weak yen.In India, 19 or their 38 states are running 3%-to-GDP deficits or more in their bids to shine economically. That is raising the national public debt sharply. Delhi is concerned and tightening up what is permissible. And the central government is having to restrain itself to cover aggressive state deficit spending. The catchup of their infrastructure deficit is essentially driving the pressure.In the US the University of Michigan consumer sentiment survey index rose more than expected with its first increase in five months. The expectations index improved (the highest in four months) while both the year-ahead and the five-year inflation expectations were unchanged at 2.9% and 3%, respectively.But that rising sentiment doesn't include their housing market. Housing starts fell sharply in July to their lowest level since July 2019 (pandemic excepted). Residential building consents also fell and back to 2022 levels. The US economy is expanding at pace without the support of their housing markets.But it is very much better north of the border where Canada reported a surge in housing starts, up +10% in July from the same month a year ago.And tensions are rising in Canada over the railway/union bargaining that is going down to the wire. If there aren't strikes, they will likely be lockouts.The EU said its trade surplus is rising. But that is because imports are falling faster (-8.6%) than their exports (-6.3%).The UST 10yr yield is now at just on 3.88% and down -1 bps from Saturday and down -5 bps from a week ago. The price of gold will start today up +US$1 from Saturday at US$2508/oz and a new all-time record high. A week ago this price was US$2427 so a +3.3% rise since then.Oil prices are unchanged at just on US$75.50/bbl in the US while the international Brent price is now just on US$79/bbl and unchanged in a week.The Kiwi dollar starts today unchanged from Saturday, still at 60.5 USc. A week ago (pre the OCR cut) it was at 60 USc so a +½c gain from then. Against the Aussie we are still at 90.8 AUc. Against the euro we are still at 54.9 euro cents. That all means

Deputy Governor Christian Hawkesby says the Reserve Bank's (RBNZ) Monetary Policy Committee might have taken a different stance in May if the economic activity forecasts had been more accurate.In May, forecasts had anticipated 1% GDP growth for the calendar year. But by August, that had been revised to a 0.4% contraction, with a deep decline in the June quarter.The RBNZ chose to cut the Official Cash Rate from 5.50% to 5.25% last Wednesday partly in response to these lower economic activity forecasts.Another key factor was that businesses have been adjusting their wage and price-setting behaviour more quickly than anticipated in response to the low inflation environment.Speaking in the latest episode of interest.co.nz's Of Interest podcast, Hawkesby said the committee would not have adopted such a hawkish stance if these data points had been available during the May meeting.“The uncertainty was around the speed and intensity that [tight policy] would be felt in the economy … Since then we've had a whole heap of evidence on the downside playing out”. UncertainHe said the OCR projection, published in that Monetary Policy Statement, was “flat with a slight upward bias” but with “big uncertainties” that were outlined in the record of meeting.Weaker than forecast GDP was not cited as a risk in the May meeting record, and uncertainty about price-setting behaviour was described as an upside risk. The committee agreed that interest rates need to “remain at a restrictive level for a sustained period.”The chapter on economic projections included a disclaimer that said there was “significant uncertainty” about the assumptions used in the baseline forecasts. But the possibility of easing rates in the near future was not mentioned in the 60-page document.This shift led some economists to describe the August decision as a 'U-turn.' However, there was consensus that it was the correct move, given the clear signs of a weakening economy.Stay off the trackHawkesby also said there had been a “misconception” that the central bank was going to keep the OCR at 5.50% until it saw inflation below 3%. “You need to work on the basis that monetary policy is going to work. You don’t have to wait until the number is within the band, you just have to have confidence it will settle there.” However, the May monetary policy statement projected the OCR would remain above 5.50% until September 2025, by which time inflation would have been below 3% for a full year.This was true in the February 2024 and November 2023 monetary policy statements as well. Hawkesby said the OCR track that published in each statement often gets overanalyzed, without enough recognition that it is based on a set of assumptions.“There's something quite peculiar that happens when someone sees a line on a chart, or they see a number in a table, it has this sense of being real and factual,” he said.“My advice to people would be to focus more on the record of the meeting than the OCR projection."

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the gloomsters are going to have to wait even longer for a US slowdown and 'recession'. Markets are reducing the chance of a Fed rate cut in mid-September.First up in the US, initial jobless claims came in less than last week, a surprise because an increase was expected. But to be fair the actual shift wasn't large.But markets took more notice of the surprisingly strong +1% rise in retail sales in July, far more than expected. Americans are still spending big - on cars, appliances and furniture - in a surprise burst of activity that’s propelling their economy and helping shake off fears of an impending downturn. This was the largest jump in more than two years. Car sales were particularly strong. But there were gains across the board at restaurants and bars, as well in groceries, electronics, furniture and health goods. Year on year, American retail sales were up +4.0%, delivering real, inflation-adjusted gains.Helping was that business inventory growth was minimal, so their inventory-to-sales ratio stayed quite healthy.But spoiling the party somewhat was a small drop in industrial production in July and one that was more than expected from June but only easing -0.2% from a year ago.However, the New York State factory survey improved more than expected, although the Philly Fed's similar survey turned lower. Both are positive about the future however.In Canada, despite central bank rate cuts there, home sales fell in July. A looming rail strike there may not help future sales.In Japan, they released their Q2-2024 GDP result late yesterday and it expanded a very strong +3.1%, way more than the +2.1% expected, and far better than the -2.3% fall in Q1-2024.In India, their July passenger vehicle sales fell almost -2% in July from the same month a year ago. This was not expected, but to be fair these are settling into a higher level than has been seen in over the past 20 years, just not as high as you might expect given their booming economy. But two-wheeler growth was a very strong +12.5%.In China, the data out yesterday reinforced their tough economic conditions are extending there. Retail sales were up just +2.7% from a year ago, industrial production rose less than expected at +5.1% but electricity production (a better metric?) rose only +2.5%, and prices for new houses dropped -4.9% and the most since 2015. For second-hand houses, who knows? No cities reported year-on-year gains, the first time that has happened.In Australia, their July labour force rose with now 14.47 mln employed (+58,000). Their participation rate rose again (to 67.1%), and their jobless rate ticked up to 4.2%, or by +23,900 to 637,000. Full-time adult average weekly total earnings were up +4.6% to AU$1994 (NZ$2200).And staying in Australia, consumer inflation expectations are high and not easing. They rose to 4.5% in August from 4.3% in July, the highest level since April and similar to what they were in April 2023. The RBA will be unhappy about the stickiness.And we should probably note that UBS said it will sell-off the US$2 bln real estate fund it acquired when it bought Credit Suisse. It joins many other professional investors selling out of troubled commercial property markets, especially office buildings.Global container freight rates eased ever-so-slightly again last week but they are still +280% higher than year-ago levels. The core pressures are unchanged. Bulk cargo rates are little-changed this week, but are still more than +50% higher than year-ago levels.And we should probably note that iron ore prices have slipped below US$100/tonne now in a move down that started at the end of 2023, now back to levels first seen a decade ago. The 2021 peaks are long gone and the general trend will stay negative until China recovers. Even India can't arrest this slip.The UST 10yr yield is now at just on 3.93% and up +10 bps from yesterday in reaction to the strong US retail sales data. The price of gold will start today up +US$13 from yesterday at US$2454/oz.Oil prices are +50 USc firmer at just under US$77.50/bbl in the US while the international Brent price is up +US$1, now just on US$80.50/bbl.The Kiwi dollar starts today little-changed from this time yesterday, still just on 60 USc. A week ago (pre the OCR cut) it was at exactly the same level. Against the Aussie we are down -30 bps from yesterday at 90.6 AUc. Against the euro we are up +10 bps at 54.6 euro cents. That all means our TWI-5 starts today at 68.5 and unchanged.The bitcoin price starts today at US$59,326 and up a mere +0.3% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news inflation data in both the US and UK keeps rate cuts in play.The widely-anticipated July American inflation rate came in largely as expected, dipping slightly to 2.9% from 3% in June. That is its lowest level since March 2021. The "core" rate dipped to 3.2%. Rents were up +5.1% in the year but petrol was down -2.2%. Financial markets saw little to worry about in this data and seem to feel comfortable that it won't deter the Fed from the rate cuts in the rest of 2024 they have priced in.More falls may be due in August; American petrol prices are now down more than -10% from a year ago in a respected national survey.Meanwhile US mortgage applications leaped more than +16% last week from the prior week, the biggest one-week rise since an outlier in early 2003, and before that, pre-pandemic. Triggering this was a sharp pullback in mortgage costs from the prior week as the rate on benchmark contracts fell nearly -30 bps since the start of the month, now 6.54%, and tracking the sharp decline in yields of long-dated Treasury notes and bonds due to the increasingly dovish expectations for the Fed.There seems little reason for the US Fed to delay the market rate cuts priced in by financial markets, although those markets do seem to be doing that for them. They next meet on September 19 (NZT).I know we have pointed this out before, but there are still two weeks to go in the US summer holiday season, one that end with their Labor Day on September 3 (NZT). It is after that that financial markets 'normalise'. In the meantime, central bankers will be getting ready for their annual retreat to Jackson Hole, WY, August 23-25 (NZT), which has become a bit of an economic obsession.It is not only the holiday season in the US, it is also a national holiday in India today, their Independence Day.In China, their leaders are at their summer retreat at the seaside resort enclave at Beidaihe.But in Japan, Prime Minister Fumio Kishida has resigned after nearly three years in the role.In Europe, there was CPI inflation data out for England. That remained low at 2.2% in July, but up from 2% in both May and June. They got higher rents (+8.6%) and their core inflation is running at 3.3% and kept down by lower petrol costs.And we should note that both steel rebar and soybean prices are still moving sharply lower, both in response to tough conditions in China. They are not the only falls, but are the commodities leading the retreat.Locally, the CBA profit result release heralds the start of the local earnings season reporting, one that is sure to colour where both the ASX and NZX goes from here.The UST 10yr yield is now at just on 3.83% and down -3 bps from yesterday. The price of gold will start today down -US$24 from yesterday at US$2441/oz.Oil prices are -US$1.50 softer at just over US$76/bbl in the US while the international Brent price is now just on US$79.50/bbl.The Kiwi dollar starts today down -¾c from this time yesterday at just on 60 USc following the OCR cut. But to be fair it is only back to where it was last week. Against the Aussie we are down -70 bps from yesterday at 90.9 AUc. Against the euro we are down -80 bps at 54.5 euro cents. That all means our TWI-5 starts today at 68.5 and down -70 bps.The bitcoin price starts today at US$59,138 and down -3.7% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.4%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the downturn in China is something that could quickly spread regionally.But first up today, the rise in retail sales at physical stores in the US was +4.7% last week, off the pace of the prior week's +5.1% gain, but still a healthy economic sign, and still well above inflation's level.Speaking in inflation, American producer prices rose less than expected in July from June to be +2.2% higher than year-ago levels. These muted increases raised bets of a softer CPI result tomorrow, backing expectations of a Fed rate cut next month. Equity markets responded like this.And the NFIB Small Business Optimism Index in the US jumped in July from June to its highest since February of 2022. It is recovering fast from quite low levels earlier in 2024, and is now +2% higher than year-ago levels.Japanese machine tool orders rose +8.4% year-on-year in July 2024, slowing from a +9.7% growth in the previous month. This was built on the almost +18% jump in orders from export customers.In China, their official media is talking up a story that says Beijing should provide additional direct support to consumers worth at least ¥1 tln (NZ$230 bln) either in cash or as vouchers for the rest of 2024 to "effectively address the pressing challenge of lackluster domestic demand".And overnight China released its July new yuan loan data and it was especially weak. Bank customers are wary of borrowing in their stunted market, despite top-down pressure on banks to push out loans. Chinese banks extended just ¥260 bln (NZ$60 bln) in new yuan loans in July, the least since October of 2009. For a country the size of China, that is an amazingly low level.We don't often report on South Africa, but today we probably should note that their unemployment rate rose to 33.5% in Q2-2024, the highest in two years, up from 32.9% in the prior period. That was a surprise deterioration because analysts had expected it to ease to 32.3%. The number of workers jobless rose by +158,000, reaching 8.4 mln, marking the highest figure since comparable records began in 2008. They are in a tough spot.In Europe there was a sharp and unexpected fall in overall economic sentiment in August according to the widely-watched ZEW survey. But that is off a recent surge, taking it back to 2021 levels.In Australia, the Westpac-Melbourne Institute Consumer Sentiment index rose by +2.8% from the prior month to a six-month high of 85.0 in August, although this is still quite a low level. Views on family finances bounced back from last month but remain weak. But there were some clearer signs of support from tax cuts and fiscal measures. Consumers seem less worried about further interest rate increases than last month, and Australians are still untroubled by jobs outlook. However, home-buyer sentiment sank to new lows as price expectations cooled noticeably.Australian business sentiment is still positive even if it did ease in July and June's positive reading was revised down a bit.The UST 10yr yield is now at just on 3.86% and down -5 bps from yesterday. The price of gold will start today down a minor -US$3 from yesterday at US$2465/oz.Oil prices are -US$1 softer at just under US$77.50/bbl in the US while the international Brent price is now just on US$80.50/bbl. This pullback comes after the IEA warned of a looming crude oil surplus.The Kiwi dollar starts today up +½c from this time yesterday at just on 60.7 USc. Against the Aussie we are up +20 bps from yesterday at 91.6 AUc. Against the euro we are up +20 bps at 55.3 euro cents. That all means our TWI-5 starts today at 69.2 and up +30 bps.The bitcoin price starts today at US$61,392 and up +3.5% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.6%.Join us at 2pm today for our coverage of the RBNZ's Monetary Policy Statement and the latest on the Official Cash Rate.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news that is second tier today ahead of a string of key data releases. But there are many interesting bits today all the same.First in the US, a national NY Fed survey of consumer expectations in July showed medium term inflation expectations are falling. The three-year-ahead inflation expectations fell by 0.6 percentage point to 2.3%, hitting a new series low since the survey’s inception in June 2013. Median one- and five-year-ahead inflation expectations were unchanged at 3.0% and 2.8% respectively. The labour market expectations were essentially unchanged too with consumers not expecting any significant rise in unemployment.USDA's August WASDE revealed that they will have record output and yields for both soybean and corn this season although wheat production there will be down marginally. But they expect world wheat production to be up. Climate stress is not reflected in this global assessment of food production, yet anyway, even if global rice production is seen easing, but only by -0.1%. Lower Vietnam production is the reason.US beef production will be lower they say, made up by imports. US milk production is easing off slightly but they still expect to be active in butter and cheese exports and they think those will rise.In Canada, building consents were expected to rise more than +5% in June from May after a sharpish -12.7% fall in May from April. But that did not happen. In fact the June fall was down almost -17% from a year ago. It is rather a grim set of data for this sector.In China, and although never far from the surface of Beijing concerns, demographic forces have moved them to act on the long awaited raising of their retirement age. The average life expectancy is now 78 years, but local males can claim their 'pension' at 60. For women it depends on their job, but it is as low as 55 years for them. Fast-shifting demographics mean the working aged population is down to 68% and falling. Ten years ago to was near 75%. (NZ is 59% currently.) Details are awaited but they may implement a +3 or +4 month-per-year rise in their retirement age, which would be quite a fast change.And although they are not reported locally, it appears strikes and labour unrest is on the rise in China. Raising the retirement age when there are growing labour stresses isn't going to help sentiment.Indian consumer inflation fell rather sharply in July and by a bit more than expected. It came in at 3.5%, down from 5.1% in June. (A year ago it was running at 11.5%.) This latest level is now below their central bank's mid-point in its target range of 4%, the first time it has undershot in almost five years. The reason for the fall is essentially because of food prices, and the reason foods prices fell to 5.5% from 9.4% in June is essentially because of year-ago base effects. So this easing of inflation will probably not last.Meanwhile, the Indian industrial production expansion eased off rather sharply in the June data released overnight. It was up 4.2% from a year ago, sharply lower than May's +5.9% rise. +4.2% is still exceptional but clearly the rapid expansion is reverting to a more sustainable pace. Pharma product growth actually shrank.The UST 10yr yield is now at just on 3.91% and down -3 bps from yesterday. The price of gold will start today up +US$38 from yesterday at US$2468/oz which is closing in on its record high.Oil prices are +US$2 firmer at just over US$78/bbl in the US while the international Brent price is now just on US$81.50/bbl. We should keep an eye on the Straits of Hormuz. Iran seems to have seized a Malaysian ship travelling through there in what could a portend flashpoint.The Kiwi dollar starts today up +20 bps from this time yesterday at just on 60.2 USc. Against the Aussie we are also up +20 bps from yesterday at 91.4 AUc. Against the euro we are up +10 bps at 55.1 euro cents. That all means our TWI-5 starts today at 68.9 and up +20 bps.The bitcoin price starts today at US$59,340 and down -1.6% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 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 tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news China is struggling to revive consumer interest in spending and consumption.But first, this coming week the key focus will be on the RBNZ Monetary Policy Review on Wednesday. A feature of the past month has been the volatility in the financial market pricing of this upcoming rate decision. Financial markets have had little conviction, shifting their pricing from 'zero change' to -50 bps cut. Currently they are guessing a -25 bps cut. But it is only a guess. We must remember, the new Government stripped jobs their mandate, leaving only inflation as they goal. And as we all know, inflation isn't beat yet. What we will all be looking for is whether the RBNZ committee thinks it is beaten on a semi-permanent basis. Two sleeps to know.Also this week we will get the US July inflation results, both CPI and PPI. Analysts expect a 2.9% CPI and a 2.6% PPI there. Retail sales data along with industrial production data will also be released for the world's largest economy.China will report new yuan loans for July later today, expected to be weakish, along with retail sales, house prices, and labour market data. In Australia, we will get the NAB business confidence report and a Westpac consumer sentiment survey, both probably tomorrow. And that will be followed later in the week by their July labour market data, expected to show only modest gains.In China, their consumer inflation picked up from an ultra-low +0.2% in June to +0.5% in July. But food prices are still showing some deflationary effects. Although overall those food prices are up a tiny +0.2% year-on-year, that is only because of a +20% rise in pork prices (from very low levels a year ago). Beef prices are down almost -13% in the year, lamb prices down more than -6%. Milk prices are down -1.9% on the same basis. If you take out the base effect from some key items like pork, the deflationary threat in China is still very much alive.And still in China, producer prices are still deflating, down -0.8% in July from the same month a year ago. That is the same fall recorded in June.And Chinese July vehicle sales fell to just under 2.5 mln units or -2.4% lower than in June but +4.1% higher than the same month a year ago. China is the world's largest vehicle market. But those sales figures include exports. Domestic sales fared far worse, falling -10.1% on the year to just under 1.8 million units for a steeper drop than the -7.4% decline recorded in June. Wider than cars, others are reporting that consumer demand is weak in their categories too. The pall of 'value losses' from their housing 'investments' is weighing heavily on consumer sentiment there. It must be bad because their official consumer sentiment survey hasn't been updated since May, after it recorded a big drop from April.In the US we should note that the US Fed is not shrinking its balance sheet as fast as it planned, with only a tiny -US$49 bln reduction in the past month. That takes it back to the level it first rose to at the outset of the pandemic four years ago. From its peak in April 2022, it is down -US$1.8 tln or -20% however. Progress now is slowing however.In Canada, their labour market is marking time. Employment fell by -2,800 in July to 20.5 mln, a surprise because analysts expected a +22,500 rise. Still, the number of unemployed fell by -8,600. They also had a -0.3 percentage-point drop in their labour force participation rate, and that takes it to a two-year low of 65%, the lowest since 1998 if you exclude the pandemic.In Russia, they are suffering the opposite through fast-rising inflation. In July it rose to 9.1% from 8.6% in June. Everything is rising faster there, especially food prices.The UST 10yr yield is now at just on 3.94% and unchanged from Saturday. The price of gold will start today up +US$4 from yesterday at US$2431/oz.Oil prices are marginally firmer at just under US$76/bbl in the US while the international Brent price is now just on US$79.50/bbl.The Kiwi dollar starts today little-changed from this time Saturday at just on 60 USc. Against the Aussie we are down -10 bps from yesterday at 91.2 AUc. Against the euro we are up +10 bps at 55 euro cents. That all means our TWI-5 starts today at 68.7 and up +10 bps.The bitcoin price starts today at US$60,318 and up a minor +0.2% from where we left it Saturday. Volatility over the past 24 hours has been low at just under +/- 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 Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news Monday's equity dump is now a fading memory.First up, the latest signals from the US labour market are that there is no rising stress. Initial jobless claims came in less than expected at 203,000 and there are now 1.9 mln people on these benefits. Both are lower than last week and -10% lower than the same week a year ago.This was data financial markets noticed today. Along with confirmation that mortgage interest rates are falling.It is the summer driving season in the US, so petrol prices are important there too. And they are lowish, for them, down almost -10% from year-ago levels. In some places they are under US$3/gal (NZ$1.32/L) at the pump.US wholesale inventories were up marginally (+0.1%) in June from a year ago. However the steady rises recently have ticked up the inventory-to-sales ratio recently, although it is still lower than year-ago levels.And there was a well-supported UST 30yr bond auction earlier today and that delivered a median yield of 4.23%, lower than the 4.33% yield at the equivalent event a month ago.In India and as expected, their central bank's monetary policy review brought no change to their 6.5% policy rate. It has been held at that level since February 2023.Taiwanese exports held steady at about +US$40 bln in July. But that was 'only' +3.1% higher than the same month a year ago. However it comes on top of a steady expansion since November 2023.Later today, China will release its July CPI inflation data and it is expected to remain very low (+0.3% year-on-year). Their PPI is again expected to report deflation.Global shipping freight rates for containerised cargoes slipped marginally again last week, down -3% from the prior week. But they remain three times higher than year-ago levels. Bulk cargo freight rates were unchanged from the prior week, up +50% from the same week a year ago (although that year-ago level was a bit of a low point).We have noted low steel prices recently. But we should also note than both wheat and soybean prices are also low, now down near five year lows. If there is food stress it is not because the cost of basics are high.The UST 10yr yield is now at just on 4.00% and up another +3 bps from yesterday. The price of gold will start today virtually up +UAS$31 from yesterday at US$2423/oz.Oil prices are +US$1 USc firmer at just over US$75.50/bbl in the US while the international Brent price is just on US$79/bbl.The Kiwi dollar starts today little-changed from this time yesterday at just over 60 USc. Against the Aussie we are back down almost -¾c at 91.1 AUc. Against the euro we are up +10 bps at 55 euro cents. That all means our TWI-5 starts today at 68.7 and down -20 bps.The bitcoin price starts today at US$59,562 and up +6.5% from where we left it yesterday. Volatility over the past 24 hours has been very high at +/- 4.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news of a day of mostly restrained gains in economic metrics.First in the US, mortgage applications rose nearly +7% last week from the week before, driven by a sharpish -27 bps retreat in mortgage interest rates. Despite the gain, they are still -11% lower than the same week a year ago, itself quite weak.American consumer debt only rose a very modest +US$8.9 bln in June from May, less than the +US$10 bln expected and the +$11 bln gain the prior month. These levels are up just +1.8% in a year. Clearly, Americans are not being profligate in taking on new consumer debt.The latest US Treasury bond auction was again well supported, this one their 10 year. It delivered bidders a median yield of 3.89%, sharply lower than the 4.22% at the prior equivalent event a month ago.Across the Pacific, China released its July trade data late yesterday. Their exports were up less than expected, a three month growth low. An export-led recovery doesn't seem to be happening. Their imports rose more than expected and their strongest rise since April. That meant their trade surplus shrank in July.The Chinese dairy industry is going through a tough time at present with a number of listed companies in the sector delivering operating losses and warning of tepid demand.China's FX reserves rose to US$3.26 tln, an eight year high even if the monthly gain was relatively minor. But it is still somewhat short of their all-time US$3.98 tln high reached in May 2014.In Europe, German industrial production rose by +1.4% in June from May, better than expected on strong new order growth and making back about half the prior month's retreat. However both metrics remain deeply negative on a year-on-year basis.Australia released its five Living Cost Indexes for Q2-2024 today, supplemental to their CPI. For 'pensioners & beneficiaries' they were up +4.1% for the year. For 'aged pensioners' up +3.7%. For 'self-funded retirees, up +3.6%. For other benefit recipients, up +4.6%. For 'employees', living costs were up +6.4%. The overall CPI was up 3.8% in the same period.The UST 10yr yield is now at just on 3.97% and up another +9 bps from yesterday. The price of gold will start today virtually unchanged from yesterday at US$2392/oz.Oil prices are +US$1.50 USc firmer at just on US$74.50/bbl in the US while the international Brent price is just over US$78/bbl.The Kiwi dollar starts today up almost +½c from this time yesterday at just on 60.1 USc. Against the Aussie we are up almost +¾c at 91.8 AUc. Against the euro we are up +40 bps at 54.9 euro cents. That all means our TWI-5 starts today at 68.9 and up +70 bps.The bitcoin price starts today at US$55,912 and down -1.4% from where we left it yesterday. Volatility over the past 24 hours has been moderate, at +/- 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 Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news global equity markets have essentially bounced back, consigning the Monday ructions to just a 'summer wobble'.But first up, there was another full dairy auction earlier today. It was a much larger event with more than 35,000 tonnes sold. Overall prices rose +0.5% from the prior full event three weeks ago. More than a quarter of the volumes were for SMP which fell -2.7%. More than a half were for WMP which rose +2.4%. The rest of the products offered brought variable results too. Although the result was little-changed in USD, the much lower NZD brought a +1.9% rise in local currency.Globally, world food prices are low and little-changed. If any category is changing, it is a slight uptick in meat prices.In the US, the data released overnight was largely positive, assisting the financial market recoveries. The US Redbook index of retail sales at physical stores was up +5.1% last week from a year ago, rising from the prior week.Their Logistics Managers Index (LMI) rose more than expected showing their logistics industry expanding more than expected in July and at a good clip.The RCM/TIPP Economic Optimism Index for investors rose in August to its highest in seven months.And US exports for both goods and services rose more in June than imports, allowing their trade deficit to ease back slightly. Those exports are now +5.9% higher than year-ago levels. As we have noted before, this deficit is just a rounding error for the giant US economy, even if it is a political football.While none of these overnight data releases on their own are terrible important, the combination supported the sharp mood change. The earlier suggestion of imminent recession in the US may only have been from summer keyboard warriors.Canadian exports also rose notably in June to be +10.6% higher than a year ago.I know we have mentioned this before, along with the reasons, but the Chinese steel rebar price is turning into a bit of a rout, with extended sharp dives. It is now down almost -23% lower than year-ago levels. The copper price is wavering too.In fact, aggressive price discounting in many Chinese sectors has become the norm there casting a pall over general business conditions. It probably can't go on like that without widespread enterprise failures.Elsewhere EU retail sales volumes fell in June after the small rise in May. Most countries in the bloc struggled, but Spain, Portugal and Denmark were among the few that bucked the trend.Yesterday the RBA left its policy rate unchanged at 4.35%. But its accompanying commentary was direct and specific; they haven't beaten inflation yet and the progress they may have made isn't sufficient. It was a hawkish hold. Markets bid up yields on benchmark bonds following the statement. The AUD rose. (And that pushed the NZD down.) It seems there will be no rate cuts in Australia in 2024. What will now be of interest is whether financial markets take the RBA guidance on board in its pricing.Later this morning StatsNZ will release the June labour market report. Our unemployment rate is expected to come in at 4.7%, a rise from 4.3% in Q1. That would be an increase of +10,000 more people without jobs in the quarter. But it could be more than that. The rise of those on JobSeeker benefits was +8,450 in the same period but not everyone who is jobless claims for those benefits. But a notable rise above a 4.7% rate would probably be influential in the next week's RBNZ considerations (even if there is no longer a jobs mandate).The UST 10yr yield is now at just on 3.88% and up +11 bps from yesterday. The price of gold will start today down -US$12 from yesterday at US$2391/oz.Oil prices are +50 USc firmer at just under US$73/bbl in the US while the international Brent price is just over US$76.50/bbl.The Kiwi dollar starts today up +¼c from this time yesterday at just on 59.6 USc. Against the Aussie we are down -20 bps at 91.1 AUc. Against the euro we are up +30 bps at 54.5 euro cents. That all means our TWI-5 starts today at 68.2 and up +20 bps.The bitcoin price starts today at US$56,690 and up +3.9% from where we left it yesterday continuing the recent volatility. In fact, the volatility over the past 24 hours has been very high, at +/- 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 tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news equity markets are under severe pressure today, in 'extreme fear' mode. And that is despite the current economic activity signals being relatively sanguine.First in the US, the widely watched ISM service sector PMI bounced back to expansion in July with a better reading than was expected. The new order component expanded. The companion S&P/Markit services PMI told a similar story featuring rising output.The US Fed's Loan Officers Survey for July noted that while credit standards were little-changed for consumers, demand was weaker especially for real estate loans. For businesses, banks tightened credit standards overall but demand for loans was holding positive and little-changed. This survey is not picking up any special sign of credit stress, for either borrowers or banks.The Caixin services PMI suggests the Chinese service sector picked up the pace of its tepid expansion, coming in better than expected and better than the official measure.In Japan it was the same. Japan's service economy returned to growth during July, following the slight dip recorded in June. Gains in both total activity and new business were solid amid improved customer numbers and demand conditionsIn India, business confidence rose in their services sector and it maintained its rapid expansion. But inflation pressures from this high demand are now showing through and a warning flag that they may not be able to keep up the pace.And in other big economies, like Brazil, their service sectors are also expanding at a positive clip. There are others like this, but you get the picture.But in Australia, their services sector is easing back, no longer expanding. New order levels fell. And of course it will be a sharp contraction in New Zealand when we get the July services PMIs.Later this afternoon the RBA will release the results of its monetary policy meeting today. A rate hike, talked about until recently, seems to be off the table now. A cut also seems unlikely as well. In fact markets aren't actually pricing in a rate cut there until November. That is in contrast to New Zealand where a full -25 bps cut is priced in for next week's RBNZ MPS - and another three cuts by the end of this year. That is a sharp repricing by markets in just one day.The UST 10yr yield is now at just on 3.77% and down -2 bps from yesterday. Wall Street has started its week with the S&P500 down -3.2%. Overnight European markets were down about -1.8%, bookended by London's -2.0% drop and Paris' -1.4% fall. Yesterday Tokyo fell and amazing -12.4%. Hong Kong was down -1.5%, Shanghai down the same but Singapore fell -4.1%. The ASX200 fell its own very sharp -3.7% and its worst day since the pandemic, but the NZX50 got away relatively lightly with 'only' a -1.5% retreat in Monday trade.We do need to remember it is 'silly season' in most markets with relatively light summer trading. Changes get magnified when volumes are light and many people are 'at the beach'. However, the sharp rise in fear has drawn in unusually heavy trading volumes now.The price of gold will start today down -US$39 from yesterday at US$2404/oz.Oil prices are -US$1 lower at just over US$72.50/bbl in the US while the international Brent price is just under US$76.50/bbl.The Kiwi dollar starts today down -10 bps from this time yesterday at just on 59.3 USc. Against the Aussie we are down -20 bps at 91.3 AUc. Against the euro we are down -80 bps at 54.2 euro cents. That all means our TWI-5 starts today at 68 and down -60 bps. A sharply rising Yen had influence on this too.The bitcoin price starts today at US$54,584 and down another extreme -6.2% from where we left it yesterday. That is a -US$3,600 drop in a day. Volatility over the past 24 hours has been ultra-extreme, at +/- 10.4%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

The balance of power in the labour market sits firmly with employers, with a big rise in job applicants over the past year chasing a significantly diminished number of jobs, says Frog Recruitment Managing Director Shannon Barlow."For our recruitment agency, we're probably experiencing around three to four times the volume of applications compared with last year. And that's across the board, across different industries and job types," Barlow says in the latest episode of interest.co.nz's Of Interest podcast."At the extremes, it can be even more than that. So for some business support [roles], other industries like supply chain or operational roles where we were happy to get, say, 30 applications, we'd be celebrating last year. Now those can reach up to nearly 300 applications and that's within a week. So you have to pull the ad so that you've got the time to get through all those applications.""I'd say with the higher volumes of applications as well, I think the biggest factor isn't actually about there being more people looking for work...the big factor is there are less jobs available. So there's less than half the number of job postings in the market today compared with 2022," says Barlow.Her comments come ahead of the June quarter labour market data from Statistics NZ, due out of Wednesday, August 7 and expected to show an increase in unemployment.Barlow previously appeared on the Of Interest podcast in August 2022 at a time when the border had just fully reopened following its closure due to Covid-19, and the balance of power in the labour market was firmly in favour of job seekers, or workers.Since then there has been a massive surge of inward migration, which hit a record high for a calendar year of 126,000 in 2023, according to Statistics NZ. Despite this Barlow says it hasn't solved skill shortages."The problem is that quantity doesn't always equal quality. There've been problems with the new accredited employer programme and the new government is still working through changes to those immigration settings. So we haven't got it quite right yet. So although we've refilled the talent pool, we haven't necessarily attracted the right people to be able to cover our areas of skill shortages;" says Barlow."Plus we might have had record migration, but we've also had record numbers of Kiwis leaving New Zealand this year."Statistics NZ's latest figures show a net loss of 2,000 people due to migration during May.In the podcast audio Barlow also talks about the regions were job seekers are really feeling the pinch, and regions where job listings are actually increasing, how and why some workers are having to take pay cuts, how the labour market has got harder for graduate or entry level roles, what the biggest challenge is for employers now, lingering effects of Covid-19 including attitudes and expectations for working from home, whether she thinks the jobs market has bottomed out yet, 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.Today we lead with news investors globally are having a re-think about the valuation rises that have gotten embedded since the pandemic. Warren Buffett is now cashed up.But before that, although it will be a relatively quiet week for international economic data releases, it is a big week at home. The important Q2-2024 labour market report gets released on Wednesday and there will be more real estate market data early in the week. Plus there is a full dairy auction on Wednesday morning.There will be living cost data released in Australia. And before that we will get the RBA's rate review decision late tomorrow. And inflation expectations survey results will be released this week across the ditch. China will update its CPI and PPI. Plus there will be slew of services PMIs out everywhere too. Wall Street will start to wrap up its Q2 earnings season reports with some big later reports. By the way, Warren Buffet's Berkshire Hathaway reported its Q2-2024 position late last week - and it has about US$270 bln/NZ$450 bln in cash (or cash equivalents) on hand. See page 3 here. That is actually more than the NZ$409 bln NZ GDP over the past year.But basically it is the Northern Hemisphere holiday season, so financial market activity will be relatively light for the rest of the month. (In fact, it is a public holiday in Canada today.) This tends to accentuate any changes more than they would otherwise be.In China, their central bank said it will be pushing commercial banks to "do more" for the "real economy". It wants to shift the financial sector’s focus to "benefiting people’s livelihoods and boosting consumption" over the coming months. This change in emphasis follows pressure from the CCP Third Plenum meeting chaired by President Xi earlier in the week. The practical impact? Perhaps more debt issued for projects that have immediate effects but little long-term gains.There are calls for monetary authorities to allow higher inflation as some sort of spur to 'growth'. Meanwhile, commodity prices keep on sinking as the overall stall extends. None of this is coming at a good time for China and they take their summer break. That tends to be when the leaders 'relax' at their seaside compound. If they don't return with better plans and actions, there will be some grumpy countrymen.One initiative underway is to boost its urban living. In 2012, a bit over half of China's population lived in cities. In 2023 that had risen to two-thirds. Their new goal is to get it to 70% by 2029 thereby generating a surge in new economic activity. But there will be issues from this drive, not the least of which is food security.Meanwhile, flooding pressures are not easing. And that too has implications for food security and agricultural output, especially for gains.Singapore's widely-watched local PMI was modestly positive in July, but far less positive than the internationally-benchmarked version.The US economy added only +114,000 jobs in July, well below a downwardly revised +179,000 in June and forecasts of 175,000. It is also the lowest level in three months, below the average monthly gain of 215,000 over the prior 12 months, signaling that their labour market is in fact cooling off. But most of the weakness was in the tech sector with almost all other sectors holding their own.Pressure on wages is easing too, with weekly earnings up only +3.3%, again driven by their tech sector.Their jobless rate rose marginally to 4.3%, up from 4.1% in June. (s.a.) There are now 162.0 mln people employed, a record high, in a 169.7 mln labour force. (not s.a.)This weakish American report actually had little impact on global markets because they were mostly sharply lower before this release and there was no added change after. You can claim it was 'priced in' and perhaps it was. But there is a broader re-ranking going on with a settling back in risk appetites. We shouldn't be surprised - markets never go up forever. The US Q2 earnings season reporting has been strong, but it is the less-than-stellar outlooks that are influencing investors.Meanwhile, US factory orders, which were expected to show a dip in June, did just that but the dip was larger at -3.3% than the -2.9% correction anticipated. The June fall comes after four consecutive rises however.But American new vehicle sales rose more than expected in July to an annual rate of 15.8 mln, a good bounce back from the 15.2 mln vehicle sales rate in June.We should also note that the UN-based International Seabed Authority has just elected a Brazilian scientist to lead it, it first scientists Secretary-General. This is expected to sharply slow seabed-mining activity everywhere.The UST 10yr yield is now at just on 3.79% and unchanged from Saturday. The price of gold will start today up +US$9 from Saturday at US$24

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the global bond market is rallying (prices up, yields down) with traders now pricing in three US Fed rate cuts before the end of the year. There is a sudden risk-off mood appearing today.We should remind ourselves that the Northern Hemisphere is well into its summer vacation season. Markets are relatively thin, and this is when changes can get amplified. "Silly season" news is usual fare (food scares, catastrophes, etc.) although this year it is rather dominated by the Olympics.First up today, we should note that American initial jobless claims came in slightly higher than expected, +249,000 on a seasonally adjusted basis. This 'rise' attracted the headlines. But on an actual basis they were in fact lower at 215,000 and a decrease of -10,000 from the prior week. There are now 1.94 mln people on these benefits.Their July job cut tally was unusually low at just over 25,000. However the same report suggested new hiring activity was low too.Tomorrow's July non-farm payrolls report is still expected to reveal a +175,000 expansion.Also low was the widely-watched ISM factory PMI for July. The extent of the retreat was more than expected, the sharpest contraction since November 2023. Shrinking new order levels was a key cause. Falling new orders were also a feature of the internationally-benchmarked S&P/Market PMI version although they do not see the American factory sector contracting. Both versions reported lower inflation pressures.These reports have pushed Wall Street sharply lower today.Globally, there were a number of factory PMIs released today. In Europe, the contraction was unchanged. In Japan, their marginal expansion slipped back into a marginal contraction in July. In India, their strong expansion continues but now features very frothy inflation.South Korea they are holding a good expansion.In Taiwan they are getting a good, sustained expansion. In China, it is back to [minor] contraction as new orders fall away.And the fierceness of the housing falls in China was on full display again in July. The value of new homes sold by the top 100 developers fell -20% in July from a year ago. Sales fell -16% in June on the same basis. The declines in prior months were in the order of -30% to -40%.In Europe, the English central bank cut its policy rate by -25 bps to 5%, as expected.In Australia, some heat seems to be going out of some residential real estate markets. July prices actually fell in Melbourne, Hobart and Darwin, and were no-change in Canberra from June. That only leaves Perth Adelaide and Brisbane with rising prices. Sydney rose too but only a minor +0.3%.And perhaps we should note that ANZ's purchase of Suncorp Bank, now finalised, has shifted ANZ ahead of NAB in market share of mortgages in Australia, no longer 'fourth'. It is a ray of 'good news' in the shadow of the bank's bond market manipulation scandal there.Heat is also going out of the Australian factory sector with a spreading contraction in July. Output, new orders and employment are all retreating faster now.However, the Aussie merchandise trade surplus rose in June to AU$5.5 bln. No surprises there. But interestingly there are stresses beneath the hood. They are seeing the falling global steel price hit some reasonably significant aspects of their terms of trade. Iron ores prices fell -9%, coal prices are down -13%. Gas prices are down -8%. Shipping more helped cushion the overall impact. And they were 'lucky' - the price of gold rose +12% offsetting some of the other falls.Global container shipping freight rates eased an insignificant -1% last week, holding very high. The same causes are still in play. That is extending sailing time - and fattening shipping company profits. Bulk cargo rates fell -9% last week however.The UST 10yr yield is now at just on 3.98% and down a sharp -12 bps from yesterday.The price of gold will start today up another +US$9 from yesterday at US$2435/oz.Oil prices are -US$1.50 lower at just over US$76/bbl in the US while the international Brent price is just over US$79.50/bbl.The Kiwi dollar starts today another +10 bps firmer at just on 59.5 USc. Against the Aussie we are +40 bps higher at 91.5 AUc. Against the euro we are up another +20 bps at 55.2 euro cents. That all means our TWI-5 starts today at 68.7 and up +20 bps from yesterday.The bitcoin price starts today at US$62,304 and down a very hard -6.4% from this time yesterday. Volatility over the past 24 hours has been high, at +/- 3.6%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

The Government's push to have more apartments, including shoebox apartments, built should be welcomed over time by a range of buyers including first home buyers, property investors and retirees, suggests John Bolton, founder of mortgage broker, lender and savings product provider Squirrel.Speaking in a new episode of interest.co.nz's Of Interest podcast, Bolton, also a former banker who has dabbled in property development, says apartments, including small ones, offer people who otherwise couldn't afford to buy in Auckland the opportunity to do so. He gives the example of a recent client who wanted an Auckland CBD shoebox apartment."He was actually just over 50 and a first home buyer. He had about $150,000 in savings and an income of about 120,000 and he was just keen to get something. Now, the interesting thing for him is that we worked it out and he could pay it off before retirement and that was his goal. So he was looking to pay it off in about 15 years and the only way he was gonna be able to do that was with a shoebox apartment. He was really happy with that...He'd be a classic example, I guess, of the target market for someone that otherwise couldn't buy."Investors will always look at it on a yield basis, Bolton notes."The numbers have to stack up. The attraction for investors historically with the shoebox apartments has been purely yield, straight yield play. They [can] get much better yields on them than a standard apartment."Bolton also says there's a growing number of retirees struggling to find places to live."When we talk about shoebox apartments or just small living spaces, it could be some single level brick and tile units in the suburbs. It doesn't have to be a traditional high rise apartment with shoeboxes in it, you know, just little living spaces out in the suburbs, all on one level, which gives them easy access.""It's a really important market, and I think it's a market that is going to come with a whole lot of issues in the future because rents are so high. Retirees on the pension simply cannot afford to rent houses or even townhouses. And multi level townhouses are not the right product for them. And so I think getting affordable solutions that cater to our growing retiree market, of whom an increasing proportion of them don't own property, or if they do, they need to downsize because they're taking mortgage debt into retirement. I think there's a real market there, and I think it's not the inner city shoebox that we're talking about. What we're starting to talk about is how do you cater to those communities, and then how do you build a property that's appropriate for them, that's affordable? And I can see that being out in the suburbs, I can see that being in the provinces. So I think there's an opportunity here to reshape the way that parts of our market are operating," says Bolton.Last month Housing Minister Chris Bishop gave a speech outlining the Government’s plans for housing.Included in Bishop’s speech was a pledge to remove the ability for councils to set rules or guidelines requiring balconies, or floor areas of apartments to be of a minimum size. This, Bishop says, will increase housing supply by enabling more homes to be built at cheaper prices.Auckland Council's rules currently set the minimum net floor size for an apartments at 30 square metres, or 35 in the city centre. The latter can be reduced by five square metres if there's outdoor living space, a balcony, ground floor terrace or roof terrace. The smallest apartment allowed by Wellington City Council is 35 metres squared, and the city centre also has requirements for outdoor living space area with the smallest a minimum area of five metres squared and a minimum dimension of 1.8 metres.In the podcast audio Bolton also talks about the size of deposits needed to get bank loans to buy different sorts of apartments, banks' apartment lending appetites and why they can be reluctant to lend for smaller apartments, apartment developers and pre-sales, construction costs for apartments and financing of new builds, locations for apartments and more.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news two big central banks have been active in their signaling over the past 24 hours.First up today, as many expected the US Fed sent a clear signal that they are more open to a September rate cut. That first came from changed wording in their no-change statement that was more balanced between the two aspects of their mandate: inflation and jobs. Powell then confirmed a potential September rate cut at his press conference.Because this was largely what was assumed in advance, there has been no major financial market reaction, but the reactions there were, were 'positive'.The US dollar slipped marginally on the news, the S&P500 rose after already being up sharply. The benchmark UST 10yr fell -3 bps.The US ADP jobs report came in lower than the expected +150,000 gain. It reported a gain of just +122,000 in July. This is the precursor report to the official non-farm payrolls report which is expected to show a +175,000 gain when it is reported on Saturday (NZT). The ADP Report slowing is consistent with the Fed's expectation that the labour market is not pushing undue labour market pressure on the US economy.The Chicago PMI also came in very much as expected, also not putting upward pressure on inflation from the heartland factory sector.And neither are American pending home sales. They may have risen in June from May, but they are still lower year-on-year.However, mortgage applications are still shrinking, despite mortgage interest rates staying well below 7%.The Bank of Japan actually has raised its official policy rate, and from 0.1% to 0.25% with a +15 bps hike late yesterday. They also said they will cut their bond buying activity. This has been seen as an aggressive move that signals the central bank's growing confidence in the recovery of the domestic economy and its concern about the sharply weaker yen.The yen appreciated significantly. Equities rose. Their benchmark bond yields rose.Taiwan's GDP expanded +5.1% real in Q2-2024, high, but less than the very high +6.6% rate in Q1-2024. Both were the best results since the pandemic recovery, and back to their long golden economic expansion between 1994 and 2008.China's official July factory PMI fell slightly into a further contraction. Their official services PMI fell to a very minor expansion. Both were about what was expected, but neither is very promising.In Europe, their Euro Area inflation rate unexpectedly edged up to 2.6% in July from 2.5% in June, when forecasts expected it would slow to 2.4%. The larger economies kept it elevated, the smaller ones generally reported lower rates.In contrast, Russian inflation hit 8.6% and well higher than the +6.3% rise in retail sales. War inflation is eating them up, which is why their central bank recently raised its policy interest rate to 18%. And it is not going to help that Russia is having to double its 'bonuses' for fighting in their invasion army.The Q2-2024 CPI in Australia rose to 3.8%, exactly as analysts expected. Their June month inflation indicator came in at the same 3.8%. Markets seem to have focused on the 'trimmed mean' quarter-on-quarter rate of +0.8% which was lower than expected - and concluded the RBA is likely to hold rates unchanged next week.The UST 10yr yield is now at just on 4.10% and down another -4 bps from yesterday. The price of gold will start today up another +US$20 from yesterday at US$2426/oz.Oil prices are +US$3 higher at just over US$77.50/bbl in the US while the international Brent price is just over US$80.50/bbl. Rising Middle-East tensions are behind the move.The Kiwi dollar starts today another +40 bps firmer at just on 59.4 USc. Against the Aussie we are almost +1c higher at 91.1 AUc. Against the euro we are up another +40 bps at 55 euro cents. That all means our TWI-5 starts today at 68.5 and up +40 bps from yesterday.The bitcoin price starts today at US$66,595 and up +1.1% from this time yesterday. Volatility over the past 24 hours has been modest, at +/- 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 Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the Bank of Japan will grab the headlines later today.But first up, there was another dairy auction event overnight, the shorter Pulse event of SMP and WMP only. This one delivered results very little-changed from the prior event last week, essentially locking in those earlier price dips.In the US retail sales at physical stores rose +4.5% last week from a year ago, the smallest rise since late March. But at least it is still well better than inflation.Meanwhile, job openings in June were little-changed from the prior month - but that is better than it sounds because May was revised higher. Both levels are better than analysts had expected. And their quit rate fell to its lowest since November 2020.Remember, we get the July non-farm payrolls data on Saturday (NZT) this week and markets now expect a +175,000 gain. There is nothing in the JOLTS data to suggest this is at risk - if anything perhaps an upside chance.Perhaps supporting that is that the widely-watched Conference Board survey of consumer sentiment rose in July and by more than expected. However, this survey shows that consumers are less upbeat about the present than they are about the future. Election jitters are at play now. (But despite the overall gains, the levels in this survey are still quite low.)And there was a follow-up from the US oil patch. The Dallas Fed services sector survey came in much less negative in July than June, and much less negative than their factory survey.Later today we will get the Bank of Japan monetary policy decisions. Most analysts see them holding with a +0.1% policy rate. But a growing cohort see a rise to +0.25% today as wages and inflation rise there. Also of interest is what they do with their bond buying program. It would not be a surprise if they signal they will be reducing it from about NZ$65 bln per month to about half that.And now we can report the June foreign direct investment data for China. And no wonder they held it back. It was terrible. They attracted only a net +¥1.6 mln in the June month from May. That is their worst level almost ever. In June 2023 it was a worryingly low +¥13.6 bln. In June 2022 it was ¥24.2 bln. In NZD the June inflow was virtually nothing - NZ$350,000 ! Even for New Zealand that would be very low. For the second largest economy in the world, it is a stunningly negative result. Beijing will be worried that these flows have dried up. Now their worry is that a net outflow by foreign investors beckons.We have noted this recently, but it is worth updating again. The fall in Chinese steel rebar prices is turning into a rout with sharp daily drops now. They are now at eight-year lows. It is hard to know where tis will end.In Europe, their Q2-2024 GDP expansion came in low again, but a +0.7% gain from the same period a year ago, similar to Q1-2024 but slightly better than expected. Expansions in Spain and France drove this result, but it was lagging in Germany.Meanwhile German CPI inflation rose a very modest 2.3% in July (2.6% on an EU harmonised basis). This was little-changed from June.In Australia, they are waiting for the Q2-2024 CPI data to be released later today (1:30 pm NZT). Markets expect that to come in at 3.8% and up from 3.6% in Q1. And they will release the June month inflation indicator at the same time where a 3.8% rate is expected, down from 4.0% in May. This data will go a long way to setting the RBA stance expectations for their Tuesday, August 6 MPS review.Meanwhile, Australian building consent levels for June came in weak, led by low apartment and townhouse construction intentions. In fact, the levels for these dwellings that are not stand-alone houses are now down at levels last seen in 2011. Over the past 12 months, there have been a total of 162,892 dwellings approved, compared to 177,936 in the 12 months prior, representing a -8.5% decrease. This is the lowest number of dwellings approved on a June year basis since 2011/12.The UST 10yr yield is now at just on 4.14% and down another -3 bps from yesterday. The price of gold will start today up +US$28 from yesterday at US$2406/oz.Oil prices are almost -US$1 lower at just over US$74.50/bbl in the US while the international Brent price is just under US$78.50/bbl.The Kiwi dollar starts today is +20 bps firmer at just on 59 USc. Against the Aussie we are +40 bps higher at 90.2 AUc. Against the euro we are up +30 bps at 54.6 euro cents. That all means our TWI-5 starts today at 68.1 and up +30 bps from yesterday.The bitcoin price starts today at US$65,882 and down -US$1046 or -1.6% from this time yesterday. Volatility over the past 24 hours has been modest, at +/- 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 fr

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news in the growing shadow of upcoming central bank decisions.Financial markets are having a toughish time reading the tea-leaves on what the US Fed will do at this week's meeting. The PCE result for June left open every interpretation and the prior presumption of a September rate cut is in question. Will it give the Fed members enough confidence to hold off until after the election in November? their usual non-change stance around elections. Or will they still feel the need to go now to prevent a monetary policy mistake?And then there are even bigger questions about what the Bank of Japan will do this week. They have now got the moderate inflation they have been seeking for decades, but seem uncomfortable with the consequences.Meanwhile, manufacturing in the US oil patch is going backwards. The last time it was positive was April 2022. Since then it has been steadily contracting according to the Dallas Fed's factory survey. The July survey showed little reason to expect that trend to change. It will be touch-n-go whether tomorrow's services survey improves from its narrower negative position.Another corner of the US economy that isn't doing so great is commercial real estate. According to MSCI, lenders foreclosed on more than $20 bln of loans in this sector in Q2-2024, a +13% jump from Q1-2024 and the most in any quarter in almost a decade.Across the Pacific, positives are much easier to find in Taiwan where consumer sentiment rose in July to its best result in three years. It was sentiment driven by significantly improved family financial situations, employment prospects, and general feelings of prosperity.In contrast, we should note there is still no sign of China's June foreign direct investment report. This might be a part of a wider pattern to keep tough news from markets to prevent them "over-reacting". Their equity exchanges have agreed to stop publishing daily data that gives investors the ability to calculate net flows at the end of each trading day.And their weak equity markets have many piling in to Chinese government bonds, pushing prices up to record levels and yields down to record levels in a sharp risk-aversion mood. Some analysts expect Beijing to intervene by borrowing and selling bonds to reverse the moves. It's a bond bubble built out of fears for China's immediate economic prospects.The UST 10yr yield is now at just on 4.17% and down -3 bps from yesterday. The China 10 year bond rate is just under 2.14% and a very sharp -6 bps lower and easily a record low. The price of gold will start today with a small -US$8 move down from yesterday at US$2378/oz.Oil prices are another -50 USc softer at just over US$75.50/bbl in the US while the international Brent price is just under US$79/bbl.The Kiwi dollar starts today marginally softer again at just under 58.8 USc. Against the Aussie we are marginally softer too at 89.8 AUc. Against the euro we are little-changed at 54.3 euro cents. That all means our TWI-5 starts today at 67.8 and down another -10 bps from yesterday.The bitcoin price starts today at US$66,928 and down -1.3% from this time yesterday. Volatility over the past 24 hours has been moderate, at +/- 2.6%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news we may now be much closer to rate cuts in some major economies.But first, this week we are looking at some big set-piece data and policy items from the US, mainly at the end of the week. The week will end with their non-farm payrolls and another +185,000 gain is expected there. Before that, Thursday's (NZT) US Fed decision will no doubt give some greater clarity as to when their rate cut is coming. Inflation and labour-market developments should allow them to signal that a cut is very possible at their following meeting, in September. And the upcoming third week of their Q2 earnings season will be full of majors reporting.Elsewhere there will be important data coming too. Japan, Brazil and England will deliver central bank rate reviews. CPI data will come from Australia, the EU and South Korea. And Q2-GDP will come from the EU. And there will be a wider set of PMIs for July released, including from China.And over the weekend, China said profits earned by their industrial firms rose by +5.6% in June from the same month a year ago. But that was a weak base. From June 2022 they were actually down -8.4%. These latest figures came amid a fragile economic recovery in the face of sluggish domestic demand, deflation risks, and a persistent property weakness. Profits in state-owned enterprises rose a mere +0.3% while those in private sector continued to rise, up +6.8%.Although we should note that steel rebar prices have sunk to their lowest level in over seven years, amid poor demand and ample supply in China, we also need to know that the Chinese government mandated fresh quality standards for steel rebar to start in late September, driving mills and traders to flood their market with old stockpiles before the new standards for the metal are applied. Export rebar will also be unusually cheap at present. All this is coming while their general economy is weak.Staying in China, they have some other rather serious flooding problems. We haven't made a big deal about this because it happens every year. But this year is extreme even for them, and it has come earlier. Beijing is worried and had a special meeting about these risks. Also unusual is that they issued a statement after the meeting. “China's climate conditions are abnormal, with frequent and prolonged heavy rainfall, early and rapid development of river floods, and some areas repeatedly hit by heavy rains, making the flood control situation severe and complex” they said.And this is a guess on our part, but the Chinese data on foreign direct investment is unusually late for June. Perhaps it doesn't look good?In the US, their annual PCE inflation rate released over the weekend eased to 2.5% in June from 2.6% in May, in line with market forecasts. The month-on-month change was minor. The core PCE rates are marginally higher than the overall rates, but trending lower. Markets are assuming the US Fed will like this data, and reacted accordingly.Inflation expectations In the Euro Area remained unchanged at 2.8% in June. (A year ago, these inflation expectations were running at 3.5%.) Inflation Expectations in the Euro area have averaged 3.4% from 2020 until 2024, reaching an all time high of 5.8% in October 2022 - and a record low of 1.9% in October 2020.The Russian central bank hiked its policy rate +200 bps to 18%. This was not unexpected however. They are seeing domestic demand outstripping the limited supply capacity that the Russian economy is able to offer, triggering aggressive inflationary pressures and warranting higher borrowing costs. Besides the pressure on supply capacity from Western sanctions, they also noted that labour shortages are building fast in the fallout from the military mobilisation and the resulting sharp diaspora of working-age men.The UST 10yr yield is now at just on 4.20% and unchanged from Saturday. Week two of the Wall Street earnings season shows that more companies are delivering earnings results above analyst estimates, but investors are rewarding that out-performance less than they usually do.The price of gold will start today with a small +US$3 shift up from Saturday at US$2386/oz.Oil prices are 50 USc softer at just over US$76/bbl in the US while the international Brent price is just over US$79.50/bbl. These are the lowest levels since early June.The Kiwi dollar starts today marginally softer at just under 58.9 USc. A week ago it was at 60.1 USc so -1¼c lower since. That is a -3.4% devaluation since the start of the month. Against the Aussie we are holding at 89.9 AUc. Against the euro we are softish at 54.2 euro cents. That all means our TWI-5 starts today at 67.9 and unchanged from Saturday and near a two year low. This is down -110 bps from the start of last week.The bitcoin price starts today at US$67,772 and

Mainstream economics courses teach students money is a scarce resource and nature has boundless capacity to be exploited when in fact it's the other way around, argues Modern Monetary Theory (MMT) economist Steven Hail.Advocates say you don't do MMT, rather it's a description of how the monetary system works. And countries like New Zealand, where the Government - via the Reserve Bank - is the monopoly issuer of a fiat currency, are monetary sovereigns and thus can't run out of money. "We think the monetary system is central to the way modern economies work. And so it's really important to base a discussion of macroeconomics and public finance on having a proper description of the monetary system," Hail says in the latest episode of interest.co.nz's Of Interest podcast."When the Government has plans to invest in healthcare, transportation, climate change, housing, anything else that they're going to be spending on, when people say where are you going to get the money, that's the wrong question to ask. The question that we need to ask about national government spending is always where are the productive resources coming from? Where are the people? Where are the materials where's the technology? Where's the institutional capacity, which businesses have spare capacity to meet the Government's demand for what it wants to do? And that transforms your discussion about government economic policy," Hail says.I first interviewed Hail in 2020 as Covid-19 swept the globe as one of a series of interviews trying to make sense of what was going on and what it all meant. A recurring theme in these interviews, as governments spent lots more money than they had in decades, was MMT. Hail was then a lecturer at the University of Adelaide School of Economics. He now runs Modern Money Lab, a not-for-profit, in partnership with Torrens University.Looking back now, to what extent does he think the massive government spending contributed to the subsequent global inflation surge?"Well, the first thing to say is that we've just been through about three of the four horses of the apocalypse. So if the worst problem we're going to have in terms of reacting to that is a temporary increase in the inflation rate in New Zealand to just over 7% per annum, we've done pretty well...The second thing to say is what was the alternative to supporting businesses and supporting people during the pandemic and during lockdowns?" Hail asks."Did the spending contribute to inflation? Well, to an extent. But every major central bank in the world that's researched the drivers of inflation following the pandemic said that most of it was to do with the supply side. That's not surprising, is it? A, we built a global economy with very fragile, incredibly complex supply chains, and they just collapsed during the pandemic. And subsequently, of course, once we got over the worst of that, we then had the Russia-Ukraine war driving energy prices up and food prices, too.""You can argue that some of the government spending was not as effective or efficient as it might otherwise have been. But we're talking about what immediately before would have seemed almost an unimaginable catastrophe that governments were having to react to overnight," says Hail.And what about the role of quantitative easing (QE), through which the Reserve Bank spent $53 billion buying government and local government bonds on the secondary market from banks during 2020-21? Used for the first time in NZ during the pandemic, QE had been used by central banks in other countries such as Japan, the United States, Europe and Britain for years before that."Now, in all those other countries where quantitative easing was used to a very large extent over many years prior to the pandemic, it caused a significant increase in inflation, or it caused an uncontroversial so that everybody accepts it significant increase in total spending in the economy, on precisely no occasions. And there's a good reason for this, which is that quantitative easing is not really the creation of new money," says Hail."It's certainly not giving money away. It's an asset swap, and it's actually an asset swap of two very similar assets these days. Because, after all, central banks pay interest on the reserves private banks hold at central banks, and most central banks are part of the broadly defined government sector. So those reserves are an interest bearing financial liability of the government, really. And when central banks buy treasury bonds from private banks, what are they buying? While, those treasury bonds. What are they? Interest bearing liabilities of the government sector.""So when you practise quantitative easing, you're really swapping apples for very similar apples. You are not adding to the net financial assets of the private sector. What you are doing is putting a little bit of downward pressure on long-term interest rates."Still Adelaide-based, Hail is visiting New Zealand during August to run an interactive semina

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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