Economy Watch

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the Fed has held its policy rate unchanged at 5.5% but given strong signals cuts are coming - but later than markets were expecting. However they still see three cuts in 2024.The UST 10yr yield fell slightly on the news. The US dollar fell slightly too. Wall Street moved higher.Meanwhile, American mortgage interest rates rose back to just on 7% last week for their benchmark 30 year fixed rate following the prior week's surprise drop. That came as mortgage applications ticked lower again last week and are now -14% lower than the same week a year ago.China held its prime loan rates unchanged at record lows in its review yesterday. You will recall they cut its 5 year prime rate (the reference for mortgage lending) by an outsized -25% bps last month.Taiwanese export orders slumped more than -10% in February, a surprise because markets had expected a +1.3% rise following a +1.9% gain in January. But it was not to be. Orders for heavy equipment fell, especially from the EU, Japan and China, and these falls overwhelmed their rising AI chip exports.The EU sentiment rose to be less negative in its March survey. It is now at its least-weak level since February 2022, amid a gradual slowdown in inflation and optimism surrounding potential interest rate cuts by the ECB later in the year.Britain's inflation rate dropped to 3.4% in February, down from 4% recorded in both January and December and slightly below market expectation of 3.5%. It was their lowest rate since September 2021.In Australia, a recent swell in business failures in construction, hospitality and retail has pushed up the number of monthly insolvencies to the highest in almost a decade. The absolute levels aren't high, but the trend will worry officials.New Zealand has slipped one place in the World Happiness Report rankings, and now sits just outside the top ten (at #11) in 2024. Australia moved up from 12th last year to 10th this year.The UST 10yr yield started today at 4.28% and down -2 bps from yesterday. After the Fed's decision it fell to 4.25%. The price of gold will start today little-changed from yesterday at US$2157/oz.Oil prices are lower today at just on US$81/bbl in the US while the international Brent price is now just on at US$85/bbl. Both are -US$1.50 lower than this time yesterday.The Kiwi dollar starts today at just on 60.4 USc and a small -10 bps dip from yesterday. After the Fed news, it rose to 60.6 USc. Against the Aussie we are still at 92.4 AUc. Against the euro we are still at 55.6 euro cents. That all means our TWI-5 starts today at just on 69.6 and marginally firmer.The bitcoin price starts today at US$64,620 and up +1.6% since this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.8%. There seems to be an outflow rush underway from some key ETFs.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 tomorrow.

With a United States presidential election looming in November, Patrick Watson, Senior Economic Analyst at Mauldin Economics, says it's difficult to say what the key economic battleground will be because many voters are "living in their own realities."Speaking in a new episode of interest.co.nz's Of Interest podcast, Watson says there's not a great deal of agreement on whether the US economy is even in good or bad shape."If you ask Democrats, they mostly say the economy is fantastic. If you ask Republicans, they say the economy is terrible. I think it's somewhere in between. I think that's what the data actually shows," Watson says.The election is expected to be a rematch between incumbent Democrat Joe Biden, and his Republican predecessor Donald Trump."On the Trump side, they have not really announced a great deal of specific policy. So that's kind of a mystery. We know what the Biden administration has done and says they will do. People can like it or not like it, but they at least know. So what we do know from the Republican Trump side is he wants to further restrict immigration. He will probably resume the various trade war and tariff measures that he was doing last time and possibly more aggressively," Watson says."But again, the difficulty is people aren't operating from reality. People are operating from their own predispositions, what they think is happening. So that makes it hard to predict."Asked whether the average American is feeling as if they're doing well at the moment, Watson says this is a really interesting question."The survey data that's out there is really confusing, because when they ask people, how is your situation, how are you doing financially in your own family and household? Most people, pretty solid majorities, over 60% are saying, 'I'm great, I'm in a good spot.' But then if you ask them how do you think the economy is doing overall for everyone else, they become very bearish. They think it's terrible. So it's hard to see how both of those are true at the same time," says Watson.In the podcast Watson also talks about this week's Federal Open Market Committee (FOMC) monetary policy review and the outlook for interest rate cuts, the US inflation picture including housing's role in its stickiness, what's going on in US share markets, regional economic performance in the US, challenges in the US labour market, and the influence of the Inflation Reduction Act.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news of a week of big policy announcements with some potentially very big implications.First all eyes will be on Japan's rate review (tomorrow, Tuesday). Strong wage gains in Japan, and by much more than expected, are fueling speculation that that Bank of Japan won't wait any longer and will shift out of its negative policy rate when they meet.And the US Fed meets Thursday NZT with a review that includes economic forecasts and the so-called 'dot plot' interest rate projections. Also, in the US indicators such as Manufacturing and Services PMIs, along with building permits, housing starts, and sales of existing homes will be under review. Australia, Brazil, Turkey, Switzerland, The UK and Norway will all also be be reviewing that monetary policy positions and official interest rates. And this week we get inflation data from Canada, the UK, and Japan. Services PMIs from Australia, Japan, India, the EU are coming too this week. In China, they are scheduled to release data on industrial production, retail sales, their labour market, fixed asset investment. And their loan prime rate (LPR) reviews are on the docket as well.Chinese banks extended ¥1.45 tln in new loans in February, down from the record ¥4.9 tln in January. (January is usually a seasonal high.) The February level was basically as expected. But authorities would be disappointed it is not higher because they had taken action to encourage lending. The central bank had announced its largest-ever reduction in a key mortgage reference rate. And they signaled recently there was still room for cutting banks' reserve ratios, following a 50-basis point cut in January. Banks are finding to tougher to identify lending opportunities.China's house prices are falling, and a bit faster now according to official data. New house prices were down -1.4% from a year ago. In January the decline was -0.7%. Only seven of the 70 largest cities recorded any rise, all tiny, from a month ago. From a year ago only 13 showed rises. For resales, only two of those same 70 cities recorded a rise in February from January, none on a year-ago basis. But prices are -6.3% lower than year-ago levels and the largest fall since these records started in 2011.China's one-year medium-term lending facility (MLF) rate was unchanged at 2.5% in Friday's update.China’s national emissions trading scheme is set to expand to cover their aluminium sector as the compulsory carbon market pushes ahead to expand beyond the power sector and include more heavy emitters.Across the Pacific, American consumer sentiment is holding its recent highs in March, essentially the same as the past three months and back at levels prevailing in mid-2021. And at these current levels it is up a sharp +23% in a year.American industrial production rose (slightly) in February from January following a previous month retreat. Most of the gains were in construction activity. But it is still marginally lower (in real terms) than year ago levels.But March won't be helped by activity in the New York region. They reported a sharpish decline in their latest survey.In Canada, housing starts jumped by +14% in February from January, to 253,500 units and well above market expectations of 230,000 units, according to official data. It was the highest reading in four months.We perhaps should note that the current El Niño weather pattern is changing. The experts are saying La Niña is on its way with its cooler-than-average seawater in the central and eastern Pacific Ocean. In the past La Niña typically delivers northeasterly wind trends, bringing moist, rainy conditions to northeastern areas of the North Island and reduced rainfall to the lower and western South Island. Warmer than average air and sea temperatures can occur around New Zealand during La Niña. In Australia, rural areas typically benefit from more rainfall. But as global temperatures are elevated, maybe 'typical' reactions this time will be different. They were with the current El Niño.The UST 10yr yield starts today at 4.31% and unchanged from Saturday but it is up a sharp +29 bps for the week. The price of gold will start today -US$1 lower than Saturday at US$2156/oz and -US$30 lower than a week ago.Oil prices are little-changed at just on US$80.50/bbl in the US while the international Brent price is now just under at US$85/bbl. That is nearly +4% higher in a week however.The Kiwi dollar starts today at just on 60.8 USc and unchanged from Saturday. But that is a full -1c lower than a week ago. Against the Aussie we are still at 92.8 AUc. Against the euro we are still at 55.9 euro cents. That all means our TWI-5 starts today at just on 69.9 and unchanged as well but -40 bps lower in a week.The bitcoin price starts today at US$67,946 and a mere -0.6% slip

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news American data supports the Fed's cautious approach to its monetary policy management - pushing away imminent rate cuts. Benchmark rates have risen sharply.US new jobless claims came in less than expected when a rise was anticipated. There were less than 200,000 new actual claims last week, and that takes the number of people on these benefits to under 2.1 mln. At the risk of sounding like a broken record, there is still no sign here of a wavering American labour marketBut American retail sales were up +0.6% in February from January, following an upwardly revised -1.1% fall in January and below market forecasts of a +0.8% gain. The relatively modest increase, combined with a larger decline in January, suggests a potential slowdown in consumer spending. But the February level is in fact +5.5% higher than year ago levels, pointing out the longer-term above-inflation expansion of consumer activity.Also rising are producer prices. They rose by +0.6% in February from January, marking the largest increase since last August and surpassing market expectations of a +0.3% rise. Goods prices rose by +1.2%, the most in six months, primarily driven by a surge in energy and food prices. These are not signals the Fed will likeAlthough they are definitely not at concerning levels and remain at long term average levels, American inventories are rising which will bring increased management attention at firms.We should point out that the official release on China new yuan loans seems to be delayed. Markets had expected a modest rise, but maybe it isn't like that.Meanwhile data is coming to light that the 2023 level of commercial property sales in China were unusually light, and marked by distressed sales. More than 20% of all sales were because of seller stress. And it may be more. Some non-distressed deals were made by stressed developers in need of liquidity. Nearly half of the distressed deals in 2023 were in the industrial sector. It seems the office sector's pain is yet to come.Distressed deals also have make up a high proportion of commercial real estate sales this year. In the first two months of 2024 more than 30% were distressed, and these were dominated by smaller deals.In India, Bloomberg is pointing out a rather sharp fall in their listed small-cap equities. So far in March, they have fallen -7.5% even if yesterday there was a small recovery. More than NZ$100 bln has been 'lost' in this retreat. It does point out that this market has gotten rather over-valued.Container freight rates fell another -4% last week although they remain 77% higher than year ago levels. Trans-Atlantic rates rose, but all others fell. Bulk cargo rates basically held over the past week, with the recent sharp rises ending.The UST 10yr yield starts today at 4.30% and up +11 bps from this time yesterday. We should note that the Tesla share price has fallen a very sharp +3.7% so far today. Over the past week that has compounded to a -10% drop. It is actually down more than a third so far this year.The price of gold will start today -US$15 lower than yesterday at US$2158/oz.Oil prices have risen another +US$1.50 to just over US$81.50/bbl in the US while the international Brent price is now just over US$85/bbl.The Kiwi dollar starts today at just under 61.4 USc and -20 bps softer than this time yesterday. Against the Aussie we are firm at 93.2 AUc. Against the euro we are holding at 56.4 euro cents. That all means our TWI-5 starts today at just on 70.3 and unchanged from yesterday. In fact we have been within a tight range around this level for more than two weeks now.The bitcoin price starts today at US$71,337 and down -2.5% 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 on Monday.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news China's inward turn is gathering pace as it fears foreign influence.But first, US mortgage applications rose strongly last week from the week before, up more than +6%. and that was because mortgage interest rates fell rather sharply, down nearly -20 bps in a week to go under 7% for the benchmark 30 year home loan rate for the first time in a month. Still, mortgage applications are running -11% lower than year-ago levels - and they were very weak then too.Today's US Treasury 30yr bond auction was well supported and delivered slightly lower yields than the equivalent auction a month ago, but only fractionally lower. Today's event delivered a median yield of 4.28% whereas the month-ago result was 4.31%.In China, a Beijing-directed rescue of property giant China Vanke is apparently underway. We should all hope it works. But even if it does it will take a tough toll on the Chinese economy, Shenzhen in particular.And more developers there are falling.The downstream impacts are also pretty significant. Excavator sales are down -40% from year ago levels, as an example.China's Ministry of State Security (MSS) is now increasingly focused on "food security". They are banning foreigners traveling the countryside. The MSS says “In recent years, national security agencies have cracked down various espionage activities related to food security, cutting off the "black hands" of foreign espionage targeting China's germplasm resources, preventing and addressing the risks of food security leaks, and ensuring the smooth implementation of the national food security strategy”. That will put paid to the normal global method of sending analysts into the field to assess upcoming grain and crop harvest (something necessary because satellite photos can't yet assess yield prospects - you need to be in the field.) Without that sort of crop intelligence from a major producer (China), global seasonal food planning is going to be far less accurate.EU industrial production plunged -2.1% in January from December, marking a stark reversal from the downwardly revised -1.6% retreat recorded in December and faring much worse than market projections of a -1.5% decline. It was the sharpest contraction in activity since March 2023. Worse, it is now down -5.7% in a year. Anywhere that would be a lot. In an economic bloc as large as the EU, that is enormous. In fact, Ireland recorded an eye-popping -34% decline.Media reports say that PwC Australia is cutting another 5% of its staff and partners, a culling of more than -300 jobs as a result of the tax scandal that engulfed the firm in early 2023. The job cuts come on top of 338 announced in November. And after they hived off its advisory business. About 1,400 PwC Australia staff moved over to the new firm which was renamed Scyne Advisory.And staying in Australia, prudential regulator APRA has cleared NAB (BNZ's parent) of having to hold extra capital due to inadequate governance issues. But is is strangely silent on both Westpac and ANZ who are also facing this capital penalty. CBA (ASB's parent) was never on the APRA radar.China has proposed easing the punitive tariffs on Australian wine, imposed as part of their displeasure at the Morrison government’s foreign policies. But that pullback does not apply to Australian beef - not yet anyway.The UST 10yr yield starts today at 4.19% and up +3 bps from this time yesterday. The price of gold will start today +US$8 firmer than yesterday at US$2173/oz.Oil prices have risen +US$1.50 to just under US$79.50/bbl in the US while the international Brent price is now just over US$83.50/bbl.The Kiwi dollar starts today at just on 61.6 USc and marginally firmer than this time yesterday. Against the Aussie we are soft at 93 AUc. Against the euro we are holding at 56.3 euro cents. That all means our TWI-5 starts today at just on 70.3 and unchanged from yesterday.The bitcoin price starts today at US$73,189 and up +3.7% from this time yesterday. Volatility over the past 24 hours has been high at just under +/- 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.

The "cheer squad" make it hard to have a proper debate on housing, especially when looking to address the question of what we want from the housing market from a public policy perspective.So says Cameron Murray, Chief Economist at Fresh Economic Thinking, a new Australian think-tank. In the latest episode of interest.co.nz's Of Interest podcastMurray talks about housing and his new book The Great Housing Hijack. He describes the housing markets and attitudes to housing in Australia and New Zealand as "culturally very similar in terms of the attitude to housing."Murray, who has been a real estate agent, property investor and worked for FKP Property Group, says his book title essentially describes the state of the public debate in housing."There are so many vested interests, so many different groups and hobby horses that have lobbied, professionally or not for many decades, that it is very hard to have a straight conversation about housing in a public forum. So that is the housing hijack," he says."The housing hijack is all about what I call in the book the cheer squad, these noisy people on the sideline distracting us from the game of housing and, rather than understanding the plays and the strategy of the game, we're getting distracted by the noise of the cheer squad."In the podcast Murray talks about why we should acknowledge the post-World War II to mid-1970s period was an unusual golden age in housing, what he sees as the five housing market equilibria, why he doesn't believe simply freeing up land and loosening zoning rules to enable housing supply is the silver bullet, KiwiBuild and the politics of housing.Murray proposes HouseMate, a parallel public homeownership system alongside purchase and rental in the private property market. It would offer non-property owner citizens the option to buy a home from a public provider at a cheap price."The reason to propose this is simply that I couldn't find any examples anywhere in history or anywhere in the world where we'd sold housing for that group, that 10% or 15% of people who are renters, who are getting squeezed every time the market adjusts and people's incomes are rising. I couldn't find any examples where those people's housing had been improved without a public option of some sort. Whether that's regulated rental, like Vienna, where there's massive council housing and it's somewhat universal, anyone can access it. Or whether it's public housing home ownership, which is more of a Singapore type approach. Europeans have long term rental, but I think culturally, the Australians and the Kiwis would go for a home ownership type approach," he says."At the end of the day, we have to accept the economics that there is a subsidy exactly equal to the difference between the market price and what you get people into that home at. There is no sneaking around this economically.""If I could find a way to just change zoning regulations and taxes and make housing cheap for those people, I would do it. Like, who wouldn't? It would be so easy. But I've spent decades looking around trying to understand housing, and in the last four years looking for examples around the world, and I just can't find them. I'm sorry. So we have to do it the hard way," says Murray.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the never-ending car crash that is China's residential property development sector, took another bump today.But first in the US, their inflation rate unexpectedly edged up to 3.2% in February, compared to 3.1% in January and above forecasts of 3.1%. The closely-watched core inflation rate slipped to 3.8% when it was expected to come in at 3.7%. And it will not have escaped the market's notice that the +0.4% monthly rise from January was the same as the prior month and the highest since April 2023. That means the recent pressure is building again.These misses bolster the Fed's view that they need to be patient to get conditions where consumer inflation actually will fall into its target range before they start cutting rates.The Redbook index of retail rates in the US rose +3.0% last week from the same week a year ago, and not quite enough to cover inflation..There was a well-supported US Treasury 10yr bond auction today which saw a median yield achieved of 4.10% and that was actually not too different to the same auction a month ago where the median yield was 4.04% pa.India's January industrial production came in lower than expected, rising +3.8% from a year ago when a 4.1% rise was expected , and down from +4.2% in December. The heady growth they reported most months to October now seems to have been exhausted, although expansions at the current lower level will still be looked on with envy by others. India's CPI inflation remained stuck at 5.1% in February.India's car sales rose +9.5% in February from a year ago, also an easing from the +14% rise in January. Over the past year, 3.6 mln passenger vehicles were sold, a far smaller market than the US (18 mln) or China (22 mln).China's property sector has taken another blow. State-backed property development giant Vanke had its investment-grade rating stripped by Moody's overnight who warned of potential further cuts, predicting credit metrics and liquidity will weaken because of falling home sales and funding uncertainties. Immediately, Vanke went into talks with banks (State-owned banks) on a debt swap that should help them stave off it’s first-ever bond default. Earlier this week they felt compelled to announce that they had made the most recent bond repayment. But the obligations ahead look daunting.As expected, the German inflation rate eased to 2.5% in February, down from 2.9% in January and 3.7% in December. Inflation-control progress is coming fast in Europe's largest economy, even if it is at the expense of demand.Not expected was a fall in British employment in January and a rise in their jobless rate.In Australia, the NAB business sentiment survey reported that business conditions rose in February, signalling their economy has remained resilient in the new year but inflation is still a challenge despite slowing growth. Business confidence fell slightly however, as firms struggled to deal with the combination.Russia's invasion of Ukraine caused wheat prices to spike. But that is over now with prices falling to a four year low and back to levels we had in the 2015-2020 period. Buyers rule. And now China is cancelling purchase contracts from the US - and at a rate faster than usual. This is because it can buy supplies cheaper elsewhere.The UST 10yr yield starts today at 4.16% and up +6 bps from this time yesterday in a rising market. The price of gold will start today -US$13 lower than yesterday at US$2165/oz.Oil prices have firmed less than +50 USc just under US$78/bbl in the US while the international Brent price is now just over US$82/bbl. These minimal changes come even after Russia suffers broad strikes on its oil refineries by Ukraine, as Ukraine tries to balance its resources deficit compared to the invader.The Kiwi dollar starts today at just on 61.5 USc and nearly -¼c lower than this time yesterday. Against the Aussie we are soft as well at 93.2 AUc. Against the euro we have slipped to 56.3 euro cents and -20 bps lower. That all means our TWI-5 starts today at just on 70.3 and also -20 bos lower.The bitcoin price starts today at US$70,562 and down -2.6% from this time yesterday. Volatility over the past 24 hours has been moderate 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 tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news about how hard it is to get the 'last mile' of above-policy inflation accomplished.American consumer inflation expectations for the year ahead remained stuck and sticky at 3% in February, the same as in the previous two months, and holding at three-year lows. But is it enough for the Fed? Of some concern is that inflation expectations for 3 and 5 years ahead are rising, but only toward that same 3% mark. Clearly there is work to do to quell these expectations. The next big watch is on the actual February inflation and that comes tomorrow. Markets expect 3.1% with a core at 3.7% - in other words, no progress lower.There was a UST 3yr bond auction today and that was very well supported. The median yield came in at 4.15% and only marginally higher than the 4.09% at the equivalent auction a month ago. There seems no sign investors are either pulling back, or demanding sharply higher yields. Demand remains high, yields are as you would expect.The earlier official reports that Japan had slipped in to recession have proven incorrect. Their revised and updated data shows in fact it expanded at a healthy rate, driven by strong capital expenditure in the business sector. Private consumption, which accounts for more than half of Japan's GDP, remained weak at -1.0%, slightly worse than the preliminary -0.9% decline.All eyes are now turning to the next Bank of Japan meeting this time next week. Markets are increasingly expecting them to signal the end of their ultra-low (negative) interest rate policy, one they have had in place for eight years now.China's vehicle sales slumped in February, down -20% from the same month a year ago. But that comes after an exceptionally strong January. Combining the two months, overall vehicle sales in the world's largest market rose +11% to 4 mln units when you look at them both, with the NEV segment rising +29%.Indian vehicle sales for February are now awaited. They too come off very strong gains in January (+14%).In Australia, the peak body representing financial regulators, The Council of Financial Regulators, (The RBA, APRA, ASIC and the Australian Treasury) released the points they are talking about in a quarterly statement. The main issue seems to be the rise of hardship among borrowers, and the increase in the share of households who had fallen behind on loan payments (although from historically low levels).And since the start of 2024, the iron ore price has fallen almost -20% - largely because of falling expectations China will deploy its traditional infrastructure stimulus as a way to reinvigorate its stuttering economy. It's new focus on "high quality development" won't be minerals-intense.The UST 10yr yield starts today at 4.10% and up +2 bps from this time yesterday. The price of gold will start today little-changed from yesterday at US$2178/oz.Oil prices have stayed at just over US$77.50/bbl in the US while the international Brent price is now just under US$82/bbl.The Kiwi dollar starts today at just on 61.7 USc and little-changed from this time yesterday. Against the Aussie we are firmish at 93.4 AUc. Against the euro we have held at 56.5 euro cents. That all means our TWI-5 starts today at just on 70.5 and now unchanged over the past five days.The bitcoin price starts today at US$72,448 and up +4.0% from this time yesterday. Volatility over the past 24 hours has been very high at just under +/- 4.0%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news China seems to have managed to arrest its deflationary mood with solid consumer spending in their Lunar New Year holiday.But first, in the week ahead, we get the important US CPI inflation rate on Wednesday, along with retail sales, producer inflation, the Michigan consumer sentiment index, and industrial production data this week.In Japan we will get a Q4-2023 GDPO update and it will likely be more positive than the shrinking first estimate. In Australia, the NAB business confidence index will also come this week. Also, the inflation rate for India is due along with its industrial production data.From China, the focus this week will be on monetary indicators including new yuan loans, car sales, and the house price index. They will also review their one-year medium-term lending facility rate.In China over the weekend they reported February consumer prices and they rose by +0.7% from the same month a year ago, above market forecasts of an expected +0.3% rise and a turnaround from the sharpest drop in over 14 years of -0.8% in January. Seven of their past twelve months have reported zero inflation or deflation. The latest result was the first positive consumer inflation since last August, hitting its highest level in 11 months. This was due to better Lunar New Year holiday spending. Food prices declined the least in eight months. Beef prices fell but lamb prices turned up from the prior month. Milk prices are still falling however.Meanwhile they still have producer price deflation. This sector is wallowing in -2.7% deflation, marginally more in February than January. A year ago their PPI ran at -1.4%.Another large property developer is showing signs of struggle. And they aren't the only one. The issue is spreading into signs of stress in the local government bond market now.Separately China's Ministry of Finance data shows that interest on debt obligations are rising fast for the Chinese government - in fact a jump of +7.8% in interest payments this year is a bigger relative rise than for their defense spending (+7.2%). If, as some expect, Beijing suffers a ratings downgrade this year from "A1", that cost will only grow.Taiwanese exports are still expanding on a year-on-year basis, although not as fast in February as they recorded in January. After a longish run of decreases, this is the fifth month in the past six where exports have risen.Japanese household spending fell more sharply than expected and continuing a run of retreats, this one the largest in six months. Japanese policy makers might be a bit worried about this latest data trend.Across the Pacific and at the headline level, the American economy added +275,000 jobs in February, beating forecasts of +200,000 and higher than a downwardly revised +229,000 in January. But their unemployment rate ticked up as more people joined their labour force, and wage growth slowed.Behind the headline numbers (and looking at actual rather than seasonally adjusted numbers), employer payrolls rose by +1.1 mln to 156.5 mln people now employed. That is +2.7 mln more than a year ago. The household survey, which includes self-employed people, rose +665,000 from the prior month to 160.3 mln, and up +602,000 from a year ago. The shift from self-employment to payroll employment continues.American consumer debt rose by nearly +US$20 bln in January, following a +US$1.6 bln rise in the previous month and way above market expectation of a +US$9 bln rise. Revolving credit, like credit cards, increased by +7.6% on an annualised basis from the previous month. Non-revolving credit, typically auto and student loans, rose by +3.6% on the same basis).According to the USDA's March World Agricultural Supply and Demand Estimates, the Chinese might be back buying soybean in larger volumes, suggesting the Chinese are struggling with expanding their local output. The same report reveals American beef imports are rising. And that American milk production is slowing.Canada also released labour force data over the weekend. They added +40,700 jobs in February, following a +37,300 rise in January. This was double the forecasted +20,000 increase. February brought a notable bounce back (and more) of full-time positions, up + 70,600, while part-time jobs decreased by -29,900..German industrial production rose +1.0% in January (in 'real' terms) from December but that still leaves it -5.5% lower than the same month a year ago.The UST 10yr yield starts today at 4.08% and down -1 bp from Saturday. The price of gold will start today down -US$7 from Saturday at US$2179/oz and just off its record high. But that is a +4.9% rise for the week. Why is the gold price rising just now? Some think it is new demand out of China as investors there start to fret that the economic management by

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news we seem to be "not far" from getting interest rate cuts from the central banks in the US and Europe - and perhaps an unusual hike from Japan.Tomorrow we get the important February US non-farm payrolls report, and today there are more precursor updates.The number of people claiming unemployment benefits for the first time in the US was 213,000 last week, slightly more than in the previous week. That is down from 238,000 new claims in the same week a year ago. All up, there are now just over 2.1 mln people claiming these benefits, a minor increase from a week ago and a year ago.US-based employers announced plans to cut 84,638 jobs in February, the most in eleven months, compared to 82,307 in January, and 77,770 a year earlier. It is also the highest February total for the month since 2009. But it is still just a rounding error in the perspective of a 161.2 mln employed labour force.American export values were little-changed in January, marginally more than in December but marginally less than in January 2023. Their goods and services deficit rose slightly in the month, but over the past year is a massive -17% lower than in the prior year. It has fallen from a manageable -3.5% of GDP to a much better -2.8% of GDP now. (The New Zealand goods and services trade deficit is -4.1% of our GDP.)There was more Powell testimony to the US Congress today, this time to a Senate committee.In the US, Google may have had its key AI code stolen and passed to China. And sadly, this case will reinforce nationality stereotyping that is growing in the US-vs-China rivalry.In Japan, worker earnings rose by 2.0% in January from the same month a year ago, rising from a +1.0% gain in December and posting the highest reading in seven months. That is triggering talk that a central bank rate hike may be in the offing. It did that last seventeen years ago.China's exports surged higher in the January-February period they report at the start of the year. This is not only good news for them, but it also indicates global demand is rising, and probably by more than we might otherwise have assumed. But we should probably also note it is off a quite low base in the same period in 2023. New Zealand received +7.7% more exports from them, but they bought -14.9% less from us in the period.One consequence? China's FX reserves inched higher.The Malaysian central bank kept its overnight policy rate at 3% in its latest monetary policy review.As expected, the ECB kept its main policy rate unchanged at 4.5%, at its overnight review. And it is keeping up its quantitative tightening program at the same pace. But they lowered their inflation forecast, and their growth forecasts, and signaled that they might cut rates in July.Meanwhile, German reported that factory orders fell worryingly sharply in January to be -12% lower than the same month a year ago.In Australia, lending for housing fell more than expected in January, trimming their year-on-year rise to +8.5%. For owner-occupiers, the monthly drop was -4.6% taking the year-ago change to just +3.4%.Global container freight rates fell another -6% last week but remain +82% higher than year ago levels. The pressures remain even if an easing trend is building. Freight rates for bulk cargoes are still rising however and are now +70% higher than year-ago levels.The UST 10yr yield starts today at 4.12% and up +3 bps from yesterday. The price of gold will start today up another +US$11/oz at US$2156/oz and another new record high.Oil prices are down -US$1 at just over US$78.50/bbl in the US while the international Brent price is now just over US$82.50/bbl.The Kiwi dollar starts today at just on 61.7 USc and another overnight gain of +¼c. Against the Aussie we are still at 93.3 AUc. Against the euro we have firmed slightly to 56.4 euro cents. That all means our TWI-5 starts today at just on 70.5 and up about +10 bps.The bitcoin price starts today at US$67,389 and up +1.0% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the US Fed says it needs to see more progress on inflation before it considers a rate cut. But they hinted that a cut could be coming later this year. That was enough to see markets worldwide start pricing that in. Benchmark interest rates retreated everywhere.But first in the US, there was actually quite a jump in mortgage applications last week after the prior week's unusual fall. And this latest week more than made up for that prior retreat. That came despite the benchmark 30 year mortgage interest rate staying up above 7%.In its precursor reports, ADP said private businesses in the US hired an extra +140,000 workers in February, following an upwardly revised +111,000 in January, but slightly below forecasts of +150,000. Services companies were responsible for +110,000 of those extra jobs, while goods producers added +30,000.Meanwhile, the number of job openings went down by -26,000 from the previous month to 8.863 mln in January, the lowest in three months and below the market consensus of 8.9 mln. Still, this data lags current conditions in a way the jobs reports don't.These American labour market updates came ahead of Saturday's (NZT) February non-farm payrolls report which is currently expected to deliver a +200,000 increase on top of the very strong +353,000 January rise.It would be appropriate to start reducing the Fed funds rate at some point this year, but only when there is greater confidence that inflation is sustainably moving towards the 2% target, Federal Reserve boss Powell said in his semiannual Monetary Policy Report to Congress. “Reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy to get inflation back to 2%,” he noted. But markets moved past that caution almost instantly, with benchmark rates falling, equity prices rising, and the US dollar easing.The Fed releases its February Beige Book survey results at 8am NZT and if there is anything notable in that we will update this item.North of the border, the Bank of Canada delivered the expected no-change rate decision, holding its policy rate at 5% and saying it is in no hurry to cut.We should perhaps note that the South Korean inflation rate ticked up above 3% again in February. They are having "last mile" problems too.China has appointed a known hard-man to head its Securities Regulatory Commission who is determined to stamp out unwanted behaviours. Traders are going to have to be very careful they adopt the Party narrative in their trading actions. Only 'up' is now likely to be tolerated.India says it is looking at a growth rate this year of about +8%.Perhaps surprising some, the volume (ie real) of retail sales in the EU rose in January from December. But they are still lower than year-ago levels.Readers of this column will recall us suggesting the the good Australian current account data was likely enough to ensure a good Q4-2023 growth outcome for economic activity (GDP) in Australia. Well that was a misplaced reading. The GDP data today disappointed many, with real economic activity up just +0.2% in the quarter, up +1.5% over the year. Clearly, the contribution from households was lower than expected amid budget and rate pain. And without that strong current account data they may have had to book a contraction.The global airline industry is claiming that the passenger travel market was nearly fully recovered from the 2020 pandemic in January with 'resilient' growth in both domestic and especially international travel volumes.The UST 10yr yield starts today at 4.09% and down -6 bps from yesterday. The price of gold will start today up +US$19/oz at US$2145/oz and another new record high.Oil prices are up +US$1.50 at just on US$79.50/bbl in the US while the international Brent price is now just under US$83.50/bbl.The Kiwi dollar starts today at just on 61.4 USc and an overnight gain of +½c. Against the Aussie we are down -¼c at 93.3 AUc as the Aussie rose more. Against the euro we have risen to 56.3 euro cents. That all means our TWI-5 starts today at just on 70.4 and up +20 bps.The bitcoin price starts today at US$66,709 and up almost +2.0% from this time yesterday. Volatility over the past 24 hours has been extreme at +/- 6.6%.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 Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news that with a few notable exceptions, commodity prices are soft across the board.The overnight dairy auction brought a -2.3% retreat, principally because the powder prices fell. WMP was down -2.8% and SMP was down -5.2%. However cheese was up +4.0%, that only ingredient to show a gain. The overall decline was the first in the first of the year and the only significant one in the past 15 events. Last week's GDT Pulse event's retreat signaled that this correction was on the cards. One retreat in 15 isn't significant however at this point and it is unlikely it will cause any analyst to change their forecast payout levels.Last week's retail sales in the US rose +3.0% from the same week a year ago, on a same-store basis, just enough to stay ahead of inflation. The American middle class is still creating the core consumer demand that essentially powers the global economy.But the same was not true for factory orders in January, which were down -1.6% on that same basis. From December they fell at a sharper pace.However, the American services sector was still expanding in February, even if it was marginally back off the fast pace in January. And this expansion was confirmed in a separate internationally-benchmarked services survey.And their logistics industry is expanding faster too, indicative of rising commercial demand in February.Encouragingly, American vehicle sales rose to a 15.8 mln annualised rate in February, an almost +6% gain on January's rate. And that puts them above the recent long run average.A major set-piece meeting of the People Congress in Beijing has seen them set an "about +5%" growth target for 2024. But even the Premier who delivered the target acknowledged it will be a reach. But analysts see it as a "target without a Plan". Without such a plan, there is unlikely to be any support for global commodity prices. The sharp retreat of foreign investment is drawing calls for 'action' to reverse the slide.Lower energy costs (and energy intensity) are still driving down EU producer prices. Industrial producer prices in the Euro Area decreased by -8.6% year-on-year in January, but that was a moderation from a revised -10.7% drop recorded in the preceding month.Australia delivered a bumper current account surplus in Q4-2023 or +AU$11.8 bln, much more than was expected. This was their best 2023 quarter, taking the annual current account surplus to +AU$31.9 bln. That probably means their Q4-2023 GDP activity will be positive too, helped by a slump in imports and less Aussies making overseas trips. Australian Q4 GDP results will be released later today.And staying in Australia, their competition authorities have decided not to appeal their loss in the case that overturned their block on the ANZ-Suncorp banking acquisition.January air cargo data was released overnight and it pointed to rising demand and a strong start to 2024. International cargo demand was +20% higher than year ago levels, even better in the Asia/Pacific region.The UST 10yr yield starts today at 4.15% and down -8 bps from yesterday. The price of gold will start today up +US$9/oz at US$2126/oz. That is another new record high.Oil prices are down -50 USc at just over US$78/bbl in the US while the international Brent price is now just over US$82/bbl.The Kiwi dollar starts today at just on 60.9 USc again, marginally softer. Against the Aussie we are holding at 93.6 AUc. Against the euro we have eased fractionally to 56.1 euro cents. That all means our TWI-5 starts today at just on 70.2 and down another -10 bps.The bitcoin price starts today at US$65,430 and down -2.8% from this time yesterday. At one point it did hit a record high in the past 24 hours but has backed off since. Volatility over the past 24 hours has been high at +/- 3.4%.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 Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news that non-China Asia seems to be on the rebound, and it is not just India driving it.Japanese corporate spending on plant and equipment in Q4-2023 jumped an unprecedented (and surprising) +16.4% from the same period a year earlier. It was very much more than was expected and will ease some concerns about weak domestic demand. Companies are clearly looking ahead with optimism. It is not as though it is off a low base; a year ago they reported a very creditable +8% rise. This latest gain is the largest since this data series started in 2009.In South Korea, their PMI factory survey shows conditions continued to improve during February. They have a sustained expansion in both output and new orders amid the launch and manufacture of new products, while also seeing a boost in confidence. Payrolls are rising too.In Australia, they got some disappointing building consent data for January, particularly for building new houses. Apartments seem ok. Levels were weaker than expected, recording a -1% decline vs expectations of a +4% rise from the prior month. These consent levels were coming off a sharp fall in December which was revised sharply lower. The absence of a rebound and the approvals detail suggest there has been an underlying weakening, although we should to be careful with housing data over the summer holiday period.The IEA released its 2023 Global Emissions Report overnight. Emissions increased by +410 million tonnes, or 1.1%, in 2023 – compared with a rise of +490 million tonnes the year before – taking them to a record level of 37.4 billion tonnes. An exceptional shortfall in hydropower due to extreme droughts – in China, the United States and several other economies – resulted in over 40% of the rise in emissions in 2023 as countries turned largely to fossil fuel alternatives to plug the gap. Had it not been for the unusually low hydropower output, global CO2 emissions from electricity generation would have declined last year, making the overall rise in energy-related emissions significantly smaller.Total advanced economy GDP grew +1.7% but emissions fell -4½%, a record decline outside of a recessionary period. Having fallen by -520 Mt in 2023, emissions are now back to their level of fifty years ago in these advanced economies. Total CO2 emissions from energy combustion in the United States declined by -4.1% (-190 Mt) despite its drought and hydro hesitations, while the economy grew by +2.5%. Two-thirds of the emissions reduction came from the electricity sector. More from the IEA here.The UST 10yr yield starts today at 4.23% and up +4 bps from yesterday. The price of gold will start today up +US$35/oz at US$2117/oz. That is a new record high, eclipsing the previous all-time high of US$2,087 at the end of 2023 by +1.5%.Oil prices are down -US$1 at just over US$78.50/bbl in the US while the international Brent price is now just over US$82.50/bbl.The Kiwi dollar starts today at just on 61 USc again, little-changed. Against the Aussie we are holding at 93.6 AUc. Against the euro we have eased to 56.2 euro cents. That all means our TWI-5 starts today at just on 70.3 and down about -10 bps overnight.The bitcoin price starts today at US$67,311 and up +7.2% from just yesterday. That is another big gain and puts it just about its all-time high in November 2021. Volatility over the past 24 hours has been very high at +/- 4.0%. (It is very volatile as we record this, so it has likely changed again since.)You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the world's factories are signaling quite varied status indications. But overall February saw global manufacturing show signs of renewed vigour. Output expanded for the second successive month, supported by the first increase in new order intakes since June 2022. The outlook remained broadly positive overall, with optimism regarding the year ahead staying close to January's nine-month high.But first this week, all eyes will be on the US non-farm payrolls report but not until Saturday NZT. Markets currently expect it to expand by another +200,000. Prior to this other American labour market indicators will be release like the JOLTS report and the layoff survey. The US will also deliver factory order data and Fed speakers will be out in force while the Fed itself reports to Congress on monetary policy.Separately the Bank of Canada and the ECB will deliver rate reviews. Others will report trade, inflation and PMI data. Locally there is not much big data released although the Tuesday release of 2023 household expenditure survey results will be interesting, both for what they say, and what they don't.In China there were two PMI surveys out. The official factor one wasn't very optimistic but the private Caixin version reports improving and expanding factory conditions. It is more understandable in China why the two might vary. The official one focuses on large state organisations, the Caixin one more on private businesses. Still, the results are opposite to what you might have expected. The official version also covered their services sector and that part reported an improving expansion.In China, it now seems it is news that a large property developer actually is able to make payments on their bonds. Also in their news is that you can get arrested for asking local government authorities to pay their debts.It will be no surprise, the Indian PMI rose in February, complementing its economic expansion.But the Japanese PMI reported 'deteriorating' factory conditions.After a sharp +18% jump in January, South Korean exports were expected to rise only modestly (less than +2%) in February on that same basis. But they rose almost +5% on the year-on-year basis pointing to resilience in export demand for them. Much lower imports (due to lower oil prices) enabled them to book a sharp rise in their trade surplus.With an unexpected fall in new order levels, the widely watched American ISM PMI dipped deeper in contraction in February. The companion internationally benchmarked Markit PMI (now called the S&P Global PMI) told a very different story however in the same market, swinging up sharply to an expansion, and one this survey hasn't had since mid-2022. The driver? Well, it was a surge in new orders. The two surveys could not have been more different this month, an unusual set of views.The widely-watched University of Michigan consumer sentiment survey for February is clearly upbeat however. Although consumer sentiment moved sideways in the month, slipping just two index points below January, it is holding the gains seen over the past three months. Expected business conditions remained substantially higher than six months ago. And long run expectations are much higher too.EU (Euro Area) inflation fell in February but not by as much as expected. It is now at 2.6% pa on falling energy costs. Like everyone, they are finding the "last mile" hard to achieve. Meanwhile the Euro Area jobless rate fell to a record low 6.2%. But these days, governments get little credit for keeping employment high even when economic activity wavers. But in the sweep of economic history, it is a remarkable factor.However, the Eurozone PMI does not make for happy reading.The UST 10yr yield starts today at 4.19% and up a marginal +1 bp from Saturday but down -6 bps from a week ago. In fact that is near a three week low. The price of gold will start today at Saturday's higher level of US$2082/oz. And that is also up from US$2038/oz a week ago.Oil prices are little-changed at just over US$79.50/bbl in the US while the international Brent price is now just under US$83.50/bbl. Both are +US$3 higher than a week ago. In a bid to try and raise the price, OPEC has extended its production cuts.The Kiwi dollar starts today at just on 61 USc and little-changed from this time Saturday. But that is -1c lower than this time last week. Against the Aussie we are holding at 93.6 AUc. Against the euro we have firmed slightly to 56.4 euro cents. That all means our TWI-5 starts today at just on 70.4 and little-changed from Saturday, but down about -100 bps in a week.The bitcoin price starts today at US$62,810 and up +1.3% from this time yesterday. But it is up more than +US$10,000 in a week or +25%. Volatility over the past 24 hours has been modest at +/

China's economy remains mired in a post-Covid hangover like much of the rest of the world, but the technology, catering and tourism sectors are encouraging, according to David Mahon.Mahon, the Beijing-based Managing Director of Mahon China Investment Management, spoke to interest.co.nz in the latest episode of our Of Interest podcast.The relative weakness of the Chinese economy, compared to its rapid expansion of recent decades, amid ongoing concerns about the property market and deflation, has been making international headlines. Mahon says some of what's going on isn't dissimilar to elsewhere in the world."We're going through a period of the post-Covid hangover that the whole world is still going through. We talk about China in isolation. Look at global consumption, look at New Zealand growth rates. They're not great. This is normal. The pandemic was huge. Even the Second World War didn't touch every human being on the planet with the same hand of fear, with the same uncertainty. So I think we need to be patient with ourselves, we need to be patient with the global economy and therefore a little bit with the Chinese economy," Mahon said."The isolation, the closure of China for three years had a huge impact. And there are losses and there are contradictions in the system that have been highlighted that really are a challenge to the Government."Nonetheless he suggests the technology sector is a good engine for the Chinese economy."And also given the fact that China is being isolated on technology, there is a strategic reason why China will push that further. So I can see some strong engines. The other one is catering and tourism. Catering is very good for New Zealand because it means that Fonterra will be selling its products to the food services sector," said Mahon.I also asked Mahon about New Zealand's new government flirting with joining AUKUS, the Australia-United States-United Kingdom security partnership, and what sort of impact this could have on NZ's relationship with China including our trade relationship. This issue gathered momentum after Foreign Affairs Minister Winston Peters and Defence Minister Judith Collins met with their Australian counterparts in early February."If New Zealand were to join AUKUS in any form, whether it was phase one or two, it would have an impact, definitely, and it would be a major sign of a change in [NZ] policy of perhaps two generations. So I think we have to wait to see what [Prime Minister] Christopher Luxon says rather than what Winston Peters and Judith Collins say," said Mahon. In the podcast Mahon talks further about the NZ-China relationship, the China-US relationship, the Chinese economy, tensions over Taiwan, the Xinjiang region and the Uyghurs, President Xi Jinping's power, Chinese consumers, the middle class, the potential for more monetary and/or fiscal stimulus in China and more.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news India is the world's bright economic star at the moment.But first in the US, the actual number of people claiming jobless benefits fell last week, but by less than expected to 194,000. Continuing jobless claims were unchanged at 2.1 mln, still the highest since November. It was a mixed picture. Seasonally these levels are higher than was expected.American PCE inflation for January came in at the expected 2.4% which was a dip from the December 2.6%. Core PCE dipped slightly too. Personal income jumped an outsized +1.0% in January from December which puts it +2.1% higher than a year ago (real), while personal spending rose +0.3% on the same basis, also +2.1% higher than a year ago (also real).The Chicago PMI fell again, its third straight fall. But there was a sharp recovery in the Kansas City Fed factory survey although new order growth was flat.American pending home sales in January dropped -4.9% as the residential sector stays in the doldrums. The Northeast and West posted monthly gains in transactions while the Midwest and South recorded losses. All four U.S. regions registered year-over-year decreases.Canada data for Q4-2023 GDP shows them returning to growth.Japanese industrial production disappointed in January, coming in -1.5% lower than a year ago. Meanwhile, retail sales in Japan rose +2.3% year-on-year in January, slowing slightly from an upwardly revised +2.4% gain in December.Meanwhile, Taiwanese retail sales grew just +0.3% year-on-year in January, the lowest expansion since February 2022. But Taiwanese industrial production surged in January, up +16% from a year ago.India released its Q4 GDP results beating both forecasts and the strong Q3 expansion, to be +8.4% larger than the same quarter a year ago. The Indian economic performance is a strong global highlight. It is impressive given how large it is, a famously difficult place to generate change. (But we probably should be a bit sceptical on this data. The Modi Government has a tight control over their stats, and an election is looming. Just saying ...)But there are never any contested elections in China. China's per capita gross national income declined in US dollar terms for the first time in 29 years in 2023, data released yesterday shows, pulling it further from the World Bank's threshold for a high-income country. The comparison with India will be causing some concern in Beijing now. China's solution to their woes? More state planning and directed SOE activity. They seem a bit lost at the moment.The -1.4% decline in real German retail sales continued in January. But that seems to be the price they are prepared to pay to get inflation back to where they need it. In February it fell to +2.5%, its lowest since mid 2021. In between it peaked at almost +9%.In Australia, the January retail sales brought a modest bounce, but not to a level that satisfied anyone.Container freight rates eased again last week, but remain very high for the usual climate (Panama) and security (Suez) restriction reasons. They are still almost +90% higher than year ago levels. Bulk cargo rates are rising now too, up a sharp +24% in the past week alone.The UST 10yr yield starts today at 4.25% and down -4 bps from this time yesterday. The price of gold will start today up +US$13/oz from yesterday at US$2045/oz.Oil prices are up +US$1 at just under US$79/bbl in the US while the international Brent price is now just over US$82.50/bbl.The Kiwi dollar starts today at just on 60.9 USc and little-changed from this time yesterday. Against the Aussie we are down marginally at 93.7 AUc. Against the euro we have firmed slightly to 56.4 euro cents. That all means our TWI-5 starts today at just over 70.3 and little-changedThe bitcoin price starts today at US$62,275 and up +0.82% from this time yesterday. Volatility over the past 24 hours has been high at +/- 3.9%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the New Zealand currency and interest rates have fallen after the RBNZ dovish no-change Monetary Policy Statement as markets removed the factors that had priced in some risk for a rise.Firstly in the US, mortgage applications fell again last week and are now -12% below year-ago levels. Their benchmark 30 year loan interest rate is still over 7% which keeps this market quiet.The American merchandise trade balance in January was little-changed at about -US$90 bln for the month. It is always less when services are included.The second estimate of Q4 US GDP confirmed the early estimate, adjusted an insignificant tick lower. The +3.2% expansion in Q4 came after the +4.9% Q3 expansion and +2.4% expansion for the year prior to that. By any measure that is a very good two year track record. They ended 2023 with an economy generating US$28 tln in economic activity, +US$1.5 tln more than at the same time a year earlier. (For perspective, that rise is about the same as the whole Australian economy for a year. And it is double the expansion of the Chinese economy.)US inventories seem to be in reasonable shape too, overall. But retail inventories crept up solely due to rising unsold car stocks and we should keep an eye on thatIn Hong Kong, a creditor of giant Chinese property developer Country Garden has petitioned a court for a winding up order. Country Garden's fall would be as big an earthquake as that of Evergrande. The implosion of the property development sector in the Middle Kingdom is not done yet.Authorities are working to encourage buyers back into the sector. Success seems far away at present, but a key enticement are historic low mortgage interest rates.EU sentiment was broadly stable in February even if both consumer and industry sentiment is still running below their long term averages. However retail, construction and the services sector are all running at about their long term average levels.In Australia, their monthly CPI indicator in Australia stood at 3.4% in the year to January, unchanged from the previous month and less than market forecasts of 3.6%. Still, the latest reading pointed to the lowest since November 2021.The UST 10yr yield starts today at 4.29% and little-changed from this time yesterday. The NZ Government 10 year bond rate is down a sharpish -9 bps at 4.82% on the changed OCR view.The NZX50 ended its Wednesday trade up +0.6% with a good afternoon session, bolstered by the removed risk of higher interest rates.The price of gold will start today down a mere -US$1/oz from yesterday at US$2032/oz.Oil prices are little-changed at just over US$78/bbl in the US while the international Brent price is now just under US$82/bbl. But that masks considerable volatility over the past 24 hours.The OCR no-change has knocked back our currency. The Kiwi dollar starts today at just under 61 USc and down almost -¾c from this time yesterday. Against the Aussie we are down -½c at 93.8 AUc. Against the euro we are down almost -¾c at 56.2 euro cents. That all means our TWI-5 starts today at just under 70.4 and down more than -60 bps. But to be fair that just takes us back to where we were two and three weeks ago.The bitcoin price starts today at US$61,787 and up another strong +8.2% from this time yesterday. It is now back to where it was more than two years ago. Its record high was US$67,633 in November 2021 - although with the retreat this week in the NZD, the bitcoin price in our current is now over NZ$100,000. And at today's NZ$101,323 that is an all-time high. Volatility over the past 24 hours has been unsurprisingly very high as well at +/- 4.6%.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 Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news American data is weaker today, and China is on a sharp turn inward.But first we should note bitcoin's sharp rise in price. However the surge seems to have run out of steam as you read this. But it is enough to note that prices are back to November 2021 high levels.In the US, durable goods orders slumped in January, primarily driven by sharply lower aircraft orders. That makes them -0.8% lower than the same month a year ago. A pattern of surges and slumps interspersed by 'no-change' months, has developed over the past year. However, non-defense capital goods orders actually rose slightly in January from December but these too were lower year-on-year.American retail sales at physical stores (on a same-store basis) were up +2.7% last week from the same week a year ago, not really enough to account for inflation.Consumer sentiment as measured in the Conference Board survey retreated in February, although they noted it is essentially range-bound. It is in a range that is lower than before the pandemic, but at about the same level as pre-GFC.The US Richmond Fed factory survey reported a sluggish situation in February although expectations for better order levels rose sharply. But the service sector in the same district took a sharpish dip.However the Dallas Fed services survey for February reported a notable improvement.The latest US Treasury bond auction for their 7 year Note again brought very good solid support, but the median yield rose from 4.05% a month ago to 4.27% today.Across the Pacific, Japanese consumer price inflation was expected to slow in January, and that is what happened, falling to 2.2% from 2.6% in December. But core inflation fell slightly less to 2.0% from 2.3%, and that is down from over 3% a year ago. They will be nervous that their long-run deflation tendency is not yet beaten.Taiwanese export orders recovered from their December dip to be +1.9% higher in January than the same month a year ago.China has widened its national security laws to include anything Beijing claims is a 'secret', including company information within a foreign owned company. There are harsh penalties for finding out you have shared such information with company bosses who reside outside the country. Obviously the law is wider than just this, but that is one important aspect and it will cast an even darker pall over foreign investment plans. And through the new 'national security' laws in Hong Kong, which extend Beijing laws into the City, businesses there will be concerned too.The overnight GDP Pulse auctions delivered lower prices for both WMP (down -4.2% from the last full GDT auction and down -3.4% from the prior Pulse event), and SMP (-2.6% and -2.0% respectively). These lower results will have surprised the derivatives market.The UST 10yr yield starts today at 4.29% and little-changed from this time yesterday. The price of gold will start today up +US$6/oz from yesterday at US$2033/oz.Oil prices are up +US$1 at just over US$78/bbl in the US while the international Brent price is now just over US$82/bbl.The Kiwi dollar starts today at 61.7 USc and unchanged from this time yesterday. Against the Aussie we are at 94.3 AUc. Against the euro we are still at 56.9 euro cents. That all means our TWI-5 starts today at just under 71.1 and little-changed.The bitcoin price starts today at US$57,114 and up a spectacular +7.1% from this time yesterday. It is now back to where it was more than two years ago. Volatility over the past 24 hours has been high at +/- 3.9%.Join us at 2pm this afternoon for full coverage of the RBNZ's February Monetary Policy Statement and OCR review. Financial markets don't expect any rate change, but of more interest is hearing how the RBNZ views the medium term inflation risks.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news ahead of tomorrow's closely-watched RBNZ OCR decision.First in the US, new home sales rose but by less than expected. The tame result continues a now-long trend of sales levels that are not really growing. Of concern in this market is that they now have over eight months of unsold supply at the current sales rate. 'High mortgage rates' are getting the blame.The February update to the Dallas Fed factory survey in America's oil patch turned from being negative to positive, both on the activity index and the outlook index. But both levels remain below their long term levels. A brighter new order level turned this around.Another very well-supported UST 2yr Note auction brought rising yields, now at 4.64% pa (median) which was up from 4.31% a month ago.Industrial production in Singapore shrank -5.7% in January from December, the second large fall in the past three months. From the same month a year ago it was up just +1.1%.In China, their equities markets are in a post-holiday lull. Prices are retreating. There are no scheduled listings and in fact no applicants cleared for stock exchanges’ review. Existing applications to list are being withdrawn. A heavy clamp is going on the private sector, in complete contrast to official speeches extolling the importance of the private sector. Investors notice the disparity. And investors know that home team interventions never last and are wary of having a stake in an essentially rigged market.Also in a lull are business expectations in China. Steel rebar prices fell to their lowest level in nearly four months. We point out there interesting big trends, but that does not necessarily indicate that their whole economy is backsliding - it just explains why the growth impetus in the world's second largest economy is leaking away. The bulk of their SOE-led economy is still active and supporting their huge population and demand.In Australia, the scale of the discounts on CBD office buildings is getting some focus. Values are still falling to entice buyers, and in Sydney insiders think they will bottom out at a -23% retreat. But those insiders are industry boosters, so you would be brave believing their "the bottom is close" talk. The depreciation is less in other main centers, they reckon.The UST 10yr yield starts today at 4.30% and up +5 bps from this time yesterday. The price of gold will start today down -US$8/oz from yesterday at US$2027/oz.Oil prices are up +50 USc at just on US$77/bbl in the US while the international Brent price is now just under US$81.50/bbl.The Kiwi dollar starts today at 61.7 USc and down -¼c from this time yesterday. Against the Aussie we are still at 94.4 AUc. Against the euro we are nearly -½c lower at 56.9 euro cents. That all means our TWI-5 starts today at just on 71.1 and -30 bps lower.The bitcoin price starts today at US$53,313 and up a solid +3.9% from this time yesterday. It is now back to where it was more than two years ago. 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.

Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news China is having a tough time sharking off its housing blues.However in the week ahead, the Americans will release PCE data that will be closely watched. They will also release updates for the ISM Manufacturing PMI, the second estimate of GDP growth rate, durable goods orders, consumer sentiment, and housing sales data. There will be CPI inflation updates coming from Japan, Australia, and the EU. GDP growth for India and Canada will be updated. And factory PMIs for China, Russia, and Canada will out. And the RBNZ MPS and OCR interest rate decision will attract international focus on Wednesday afternoon. Locally, it is the key focus this week of course.But today we start first in China. They released official data that showed foreign direct investment in January was down more than -11% from the same month a year ago. That is their biggest retreat since the GFC. And the more recent data is even worse, falling more than -20% from December.It wasn't the only retreat released in official data. China's new house prices fell the most in almost a year in January with prices in 60 of their 70 largest cities retreating. For resales, this official data only showed two of the 70 cities in their survey with a month-on-month gain, none with year-on-year gains. For such pervasive declining prices to show up in official data probably means the situation is much worse, and it is now quite difficult to sell a house. Buyers have vanished, unwilling to buy a depreciating property. It is notable that China does not release official sales volume data.Recall that in February, the Chinese central bank chopped its 5 year MLF rate by a record -25 bps to its lowest ever. This is the rate on which home loans are based. They also cut the reserve ratio earlier in the month, another easing that might help their property sector.EU inflation expectations are essentially holding at 3.3% for the next twelve months. The ECB would have been disappointed at that, and the fact that the "last mile" is proving very sticky. However, it is not a problem that they have alone.The German economy slipped into recession in the second half of 2023 if you buy into the "two negative quarters" rule on GDP changes. The retreat is minor however and was as expected.In Australia, Rio Tinto has given the go-ahead for a big new iron ore mine. It is in West Africa. The iron ore price has held relatively high, encouraging miners, and Rio Tinto's decision is just one of many. But the accumulation worries some. Iron ore prices are not factoring in the wave of new supply, leaving it vulnerable to the same collapse that smashed battery metals like nickel, some say. If that were to happen to iron ore, it would rock Australia.The UST 10yr yield starts today at 4.25% and down -1 bp from Saturday, down -5 bps from a week ago. The price of gold will start today down -US$3/oz from Saturday at US$2035/oz and up +US$25 from a week ago.Oil prices are still lower at just on US$76.50/bbl in the US while the international Brent price is still down to just under US$81/bbl. Both levels are -US$2 lower than a week ago.The Kiwi dollar starts today at just under 62 USc and little-changed from Saturday. But it up more than +¾c from a week ago. Against the Aussie we have settled back to 94.4 AUc. Against the euro we are slightly firmer at 57.3 euro cents. That all means our TWI-5 starts today at just under 71.4 and that is +60 bps higher than a week ago.The bitcoin price starts today at US$51,299 and up a minor +0.5% from this time Saturday. But it is down -1.9% from a week ago. Volatility over the past 24 hours has been low at +/- 0.7%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news that while all the market chatter is about the spectacular rise of Nvidia and the emergence of AI as a "new industry", the rest of the global economy seems to be generally expanding modestly.But first up, we should note it is a public holiday in Japan, the world's fourth largest economy, the Emperor's Birthday.In the US, new jobless claims fell to near their record lows of under 200,000 last week and far below what was anticipated. Continuing claim levels fell too and there are now 2.1 mln people on these benefits out of a 161 mln employed labour force, a tiny fraction. Still no labour market stress to report.US existing home sales rose marginally back to an annual sales rate of 4 mln which it was last at in August 2023. (It peaked at 7.25 mln in 2005 so it remains modest and currently at the level first reached in 1975.) It's a market essentially in hibernation.Canadian retail sales probably slipped in January after they reported a strong December expansion and taking overall 2023 sales volumes up +2.3%.Across the Pacific, the Bank of Korea kept its base rate unchanged at 3.5% during its February meeting. This was as expected. Korea's inflation rate is 2.8%.In China, vehicle shipments are projected to drop almost -16% in February from the same period last year, according to preliminary data released yesterday. Demand for electric vehicles is also slowing.China’s overseas investment in metals and mining as part of its Belt and Road Initiative surged by more than +150% in 2023, hitting US$19.4 bln with energy transition metals the main focus. Total Belt and Road investments now top +US$1 tln, this updated report shows.Some preliminary PMIs for February are starting to come through and the first was from Japan, showing its factory sector contracted more than expected, and its services sector expanded again, but by less than expected. Together they paint a picture of growth stalling in Japan.In the US, there were rising expansions to report in their factory sector, to a 10 month high, even if still modest, and they had a slight easing in their services expansion.In Germany things contracted harder, but for the EU overall their services sector is no longer contracting, helping keep things stable.In India, they are in a quite different space with manufacturing expanding strongly, and their services sector doing even better. India has replaced China as a major source of global growth, bolstering the continuing expansion in the US.Australia said average weekly ordinary time earnings for full-time adults was AU$1,888.80 in November (NZ$2030/week). The annual increase of +4.5%, or AU$81 a week, was the strongest since May 2013, other than a brief spike in average earnings early in the pandemic.There was another small decrease in container freight rates last week from the week before, but they remain unusually high on the insecurity same drivers around the canal choke-points. Bulk cargo rates have started to move modestly higher but are not outside 'normal' ranges.The UST 10yr yield starts today at 4.33% and up +1 bp from this time yesterday. The price of gold will start today down -US$8/oz from yesterday at US$2019/oz.Oil prices are +50 USc/bbl firmer at just over US$78.50/bbl in the US while the international Brent price is up to just under US$83/bbl.The Kiwi dollar starts today at just on 61.9 USc and up nearly +¼c from yesterday. Against the Aussie we are also +¼c firmer at 94.6 AUc. Against the euro we are little-changed at 57.2 euro cents. That all means our TWI-5 starts today at just over 71.3.The bitcoin price starts today at US$51,432 and essentially unchanged from this time yesterday. Volatility over the past 24 hours has remained modest at +/- 1.3%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news markets are awaiting signals from the minutes of the late January Fed meeting.In the US, mortgage applications fell rather sharply last week, down more than -10% from the prior week to be -13% lower than a year ago. A key reason for the sharpish pullback was an unexpected surge in mortgage interest rates which jumped +19 bps to 7.06% (plus points) for the benchmark 30 year fixed loan. That is their highest of 2024. These higher rates reflect the shift in market pricing as the chances of near-term Fed rate cuts recede.Another assessment of Fed rate trajectories will come this morning (8am NZT) when they release the minutes of the FOMC's January meeting. The next Fed meeting isn't until this time next month. (But there is an RBNZ one this time next week.)American retail sales rose +3.0% last week from a year ago at bricks & mortar stores in the Redbook survey. This is barely enough to keep up with inflation, a second straight week like this after nine weeks of significant volume growth. A hesitation was always on the cards.Sharply lower oil prices, and exports at a 14 month high have combined to deliver Japan a sharply lower January trade deficit. Those exports were on the basis of good demand from both the US and China.European consumer sentiment improved marginally in February even if it still remains quite negative - just less negative.In Indonesia, their central bank kept its policy rate unchanged at 6%.In Australia, wages rose +0.9% in the December quarter, and +4.2% for the full year, (marginally more than the CPI rise of +4.1%). That's its highest growth since 2008.The UST 10yr yield starts today at 4.32% and up +6 bps from this time yesterday. Wall Street in its Wednesday trade is down -0.4% on the S&P500. Overnight European markets were very mixed again with Frankfurt up +0.3% and London down -0.7%. Yesterday Tokyo ended its Wednesday session down -0.3%. But Hong Kong rose +1.6% in their Wednesday trade while Shanghai rose +1.0%. The China Securities Regulatory Commission has imposed a restriction that prevents sales in the first and last 30 minutes of trading for prices that are lower, part of increasingly drastic measures to prevent the Chinese stock-market slump from extending into a fourth year. The price of gold will start today down -US$3/oz from yesterday at US$2027/oz.Oil prices are +US$1/bbl firmer at just under US$78/bbl in the US while the international Brent price is up to US$82.50/bbl.The Kiwi dollar starts today at just on 61.7 USc and unchanged from yesterday. Against the Aussie we are marginally firmer at 94.3 AUc. Against the euro we are still at 57.1 euro cents. That all means our TWI-5 starts today at just under 71.2 and little-changed.The bitcoin price starts today at US$51,382 and down another minor -0.4% from this time yesterday. Volatility over the past 24 hours has again been modest at +/- 1.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with both the US and China are both back from holiday breaks - to lackluster prospects.But first, the GDT dairy auction earlier today resulted in little overall change (+0.5%), although the strengthening NZD did push the result in local currently lower (-1.1%). This auction did record a big drop in the cheddar cheese price (-7.6%) but a good rise for mozzarella (+5.3%). SMP also rose (+1.3%) but the key WMP price fell (-1.8%. Today's result does not interrupt the general trend of rising prices that started in September last year and is probably an inconsequential hesitation at this point. No farm gate payout prices are likely to be affected by this even if it is the weakest result since November.In the US, the Conference Board's index of leading indicators slipped again in January. It has been slipping slightly for a while, but this update was the least in the series.The FT is pointing out that large banks have more commercial property bad debt than they have reserves for it. The steady discounting of commercial property values as interest rates rise is catching out even the majors now. Their analysis shows that the average reserves at JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs and Morgan Stanley have fallen from US$1.60 to 90 cents for every dollar of commercial real estate debt on which a borrower is at least 30 days late, according to filings to the FDIC.Canadian CPI inflation fell to 2.9% in January from 3.4% in December. The Bank of Canada has a formal target to keep inflation at the 2% midpoint of a 1% to 3% range. The move lower is seen as a positive development in their battle against inflation.The Chinese central bank has surprised markets somewhat with its Loan Prime Rate moves. They didn't change their one year rate, holding it at 3.45% when a -15 bps cut was expected. But they did cut their 5 year LPR by -25 bps when a -15 bps cut was expected. That is the biggest cut they have ever made to this rate. The five year rate underpins their home loan market. The one year rate is more of a reference for other consumer and business lending. These changes show that Beijing's worries about their failing property sector are front-of-mind. However, despite its boldness the moves met with yawns in the market.Prices for steel reinforcing bar (rebar) fell in China yesterday, and sharply to their lowest level of the year. These buyers have not returned from their New Year break in a positive mood, it seems. The retreat isn't overly large but it does essentially wipe out the gains built up in the expectation of major new infrastructure stimulus.The UST 10yr yield starts today at 4.26% and down -7 bps from this time yesterday. The price of gold will start today up another +US$11/oz from yesterday at US$2027/oz.Oil prices are -US$1.50/bbl lower at just on US$77/bbl in the US while the international Brent price is down a bit less to US$81.50/bbl.The Kiwi dollar starts today at just on 61.7 USc and up +¼c and it’s highest in more than a month. Against the Aussie we are also firmer at 94.2 AUc. Against the euro we are still at 57.1 euro cents. That all means our TWI-5 starts today at just on 71.1 and up another +20 bps from yesterday.The bitcoin price starts today at US$51,608 and down a minor -0.6% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 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.And today we lead with global eyes are on how China will manage itself out of its economic funk.First a reminder that it is a public holiday in the US, holiday, Presidents Day, and financial markets are closed there.To the north, Canada said it's producer prices fell marginally in January from December, as expected, and they are now -2.9% lower than a year ago. This is the fourth consecutive month of falls.Across the Pacific, Japanese machinery orders bounced back in December after a terrible November. They came in better that expected (+2.7% vs +2.5%) but nowhere near enough to make up for that November -4.9% fall.Later today the Chinese central bank will reset its Loan Prime Rates. They are widely expected to cut them both to support an economy that seems to be misfiring. The cuts won't be large, probably -15 bps for both the one year and the five year rates. Premier Li is urging officials to do everything they can to support the Chinese economy and "boost confidence".Rivals are becoming concerned that China will dump production resulting from stimulus boosts on world markets. The US has already issued a warning to China on this.In Europe, more evidence inflation is proving quite sticky in the lower ranges, just as it is here. The "last mile" is tough for everyone. Sweden said its rate rose to 5.4% in January, from 4.4% in December. Not exactly what they want or need. A rise was expected, but not by this much. This sort of backsliding affects inflation expectations, a crucial central bank mentric.And European natural gas reserves are at decade highs, and prices have dived. Overall EU gas reserves are currently over 65%, their highest level for the time of year since at least 2011, with Germany at 72%, Italy at 60%, and France at 50%. They started winter with almost 100% of their requirements stored in underground facilities, far above the targets they set for themselves. In the US prices are falling sharply too, now back to levels first seen in 1995. Too much supply, not enough demand. Suppliers using energy as a weapon no longer seems effective.Off the coast of Yemen, although things have quietened recently, there was another serious attack overnight with a South American-registered bulk cargo ship attached and probably sunk. Underwater drone attack weapons were likely used.The UST 10yr yield starts today at 4.33% and up +5 bps from this time yesterday. The price of gold will start today up another +US$3/oz from yesterday at US$2016/oz.Oil prices are still just over US$78.50/bbl in the US while the international Brent price is also still just over US$82.50/bbl.The Kiwi dollar starts today at just on 61.4 USc and up +20 bps overnight. Against the Aussie we are also marginally firmer at 94 AUc. Against the euro we are firmer still 57.1 euro cents. That all means our TWI-5 starts today at just on 70.9 and up +20 bps from yesterday.The bitcoin price starts today at US$51,908 and a mere +0.2% up from this time yesterday. Volatility over the past 24 hours has been low at only on +/- 0.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with all eyes will be on China this week, especially its financial markets, as it returns from a week-long holiday.In the week ahead, there will only be second-tier data and events. The Fed's FOMC will drop the minutes of its late January meeting on Thursday, NZT. They will be watched for rate-cut signals. There will be a big set of preliminary PMIs for February released this week for a range of key countries. Canada will release its CPI result for January on Wednesday. And Wednesday is when we will get the results of the latest dairy auction.In China, financial markets return later today after the Chinese New Year break. Authorities will be ready to cover any weaknesses, and investors are likely to take advantage. The 'Beijing put' is going to save many investors. But it might work for Beijing who seem to be engineering a substantial rise in the proportion of SOE control of overall GDP. Private ownership and control of large enterprises is now not seen by Beijing as in the country's best interests.Overnight the People's Bank of China kept the rate of ¥500 bln worth of one-year policy loans to some core state financial institutions, known as the medium-term lending facility, at 2.5%. The 'hold' was seen as an effort to prevent more pressure on the yuan. The operation resulted in a net ¥1 bln injection into their financial system (+NZ$227 mln), the smallest boost since August, because ¥499 bln worth of MLF loans are set to expire over the rest of February. A related Loan Prime Rate cut is still likely in February however.And official data claims that this Chinese New Year activity was the best ever. Total domestic trips for the eight-day long holiday rose more than a third to 474 million, while tourism receipts grew by almost +50% to ¥633 bln. That's +19% more in term of trips and +7.7% more in terms of tourism spending from the equivalent 2019 holiday period.Meanwhile, updated data also released overnight on China's balance of payments transactions shows that inbound investment in 2023 was its lowest since 1995 at just ¥148 bln (NZ$34 bln). In fact that 2023 level is just one tenth of the 2021 level.Singapore's exports rose notably in January from December and were up almost +17% from a year ago. Analysts were expecting a more modest +5% rise so that is a notable change.And as widely expected, the Russian Central Bank held its policy rate unchanged at 16%, a pause to the +850 bps hiking campaign that started in July 2023.We should also note that it is another long holiday weekend in the US. Monday in the US (Tuesday NZT) will be President's Day and markets, both bond and equity markets, will be closed.The next release of a survey on consumer sentiment has it rising and confirming earlier surveys. The University of Michigan version rose slightly to a fresh high since July 2021 even if it was marginally below market forecasts.US residential building consents slipped in January from December, but were +8.6% higher than a year ago.But American housing starts slumped almost -15% in January to an annualised rate of 1.331 mln, lower than year-ago levels and the lowest since August and missing market forecasts by a lot. It is the biggest fall since April 2020.Inflation is clearly not beaten yet even if it is down. US producer prices were up +0.3% in January from December, the biggest month-on-month increase in five months, following a -0.1% decline in December. Analysts expected a rise of +0.1%. Cost of services rose +0.6% m/m, the largest increase since July. But that all means producer prices are only a modest +0.9% higher than a year ago. It is the recent pickup that worries markets.On Wall Street, with the December company results three quarters released by now, they show a modest +3.2% lift from a year ago. Against expectations however the story is more positive; 75% of S&P 500 companies have reported a positive EPS 'surprise' and 65% of S&P 500 companies have reported a positive revenue 'surprise'. This reminds us that late 2023 expectations were low - and unnecessarily so it turns out.Money that shifted out of equities into money market funds is now moving back. Global equity funds racked up significant inflows in the week to February 14 as investor optimism returned for this stock market rally, despite lingering uncertainties over the Federal Reserve's rate cut plans. It is a global thing, including Australia.Earnings reported in Australia have also been better than expected overall. About a third of the major companies have reported earnings for the December half so far; almost a half of those have beaten consensus expectations, an unusually high proportion, and while a third have missed analyst estimates.The UST 10yr yield starts today at 4.28% and down -2 bps from Saturday. The price of gold

The coalition government's select committee banking inquiry could look at how to encourage banks to lend more to "productive" sectors of the economy rather than having such a big focus on "unproductive" housing lending, Commerce and Consumer Affairs Minister Andrew Bayly says.The National-NZ First coalition agreement says the government will establish a select committee inquiry into banking competition "with broad and deep criteria to focus on competitiveness, customer services, and profitability."Speaking in interest.co.nz's Of Interest podcast, Bayly said the government will wait to see what the Commerce Commission has to say in its market study into personal banking services before launching the select committee probe. The Commission's draft report is due on March 21."Why have we seen outflows from the productive sector like small businesses, farming and property development which is really important if you want to build houses in New Zealand? We've seen funding going out of that sector, going into what I would term the unproductive sector which is the mortgage market. That's interesting because it obviously has a big impact on businesses and the productive sector," said Bayly."Then there are things around margin [and] capital adequacy ratios that the Reserve Bank manages. That will help banks determine where they put their money, and whether they want to invest in more mortgages, or whether they want to invest in supporting businesses.""I'm approaching it with an open mind. I want to see where they [the Commerce Commission] have got to with retail [banking], but I think inevitably there's some other areas we want to cover," said Bayly.Under bank regulatory capital rules overseen by the Reserve Bank, banks are required to hold less capital against housing lending than against other types of lending such as business/corporate and agriculture lending. The major lending exposure of all NZ's major banks is housing. ANZ NZ, the country's biggest bank, has 72% of its total lending in housing.Bayly is also Minister of Statistics, plus Small Business and Manufacturing Minister.On Statistics NZ, Bayly said it will deliver the 7.5% annual spending reduction the government has asked for. Decisions and preparation are ahead for the 2028 census, he said, noting the 2023 census cost $326 million, "a lot of money.""I'm wanting to make sure that what we do drives economic growth for New Zealand, how we can power up those businesses. That's the big strategic intent," he said."Do you run another huge census every five years? That's the first question. And if you read the Stats NZ] briefing [to the incoming minister] there's a proposal that you don't run those big things again. Because governments all around the world are having the same issue where if you front up to someone now and say 'can you fill out this long form' most of them tell you to naf off," Bayly said.The next census could look to make more use of administrative data like home addresses or tax returns, he said, information and data that lies within various government entities."Obviously they've got to do it within privacy settings. But that is certainly the trend overseas and we will have to look at it.. that you may move towards more localised, small surveys, targeted surveys, and look to buttress that information using existing data sources that are potentially untapped at the moment."In the podcast Bayly also talks about Stats NZ reporting Consumers Price Index (CPI) data monthly, funding to update the CPI that's overdue, the Credit Contracts and Consumer Finance Act, the conduct of financial institutions (CoFI) regime, buy now, pay later, anti-money laundering rules, and his plans to rewrite the Companies Act.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with the giant US economy is putting most other major economies in its shadow, expanding while others stumble.But first, the number of people claiming unemployment benefits in the US fell by -12,500 from the prior week to 222,000, firmly below market estimates. It was the lowest reading in nearly one month, adding to the latest jobs report that indicated historical tightness in the US labour market, and so maintaining the leeway for the Federal Reserve to remain hawkish.But American retail sales fell -0.8% in January from December, reversing December's rise, and worse than market forecasts of a -0.1% fall. It is the biggest decrease in retail sales since March last year, primarily driven by the aftermath of the holiday shopping season and cold weather. Car sales were notably weaker.Business inventories rose, but in relation to sales they remain stable and slightly below historical averages.But they need to be cautious; industrial production edged slightly lower in January from December, missing market expectations of an expansion after recording no change in December. And that meant there was zero change from a year ago. Frigid weather got some of the blame for the January result.But things may be on the improve. Both the Philly Fed's factory survey, and a similar one in New York both recorded sharp improvements in their February surveys.Canadian housing starts came in lower than expected in January, and by quite a bit.Official data in Japan suggests their economy was in recession in the second half of 2023. Japan's GDP unexpectedly shrank -0.1% in Q4 from Q3, missing market forecasts of a +0.3% growth and following a revised -0.8% fall in Q3, flash data showed. That is a big miss for the world's third largest economy. That is their first recession in five years, as private consumption, which accounts for more than half of the economy, declined for the third successive quarter. What is off about this is that the granular data that makes up the result was relatively positive in the period.This Japan retreat was enough to sink it from the world's third largest economy, to #4 behind Germany. But while Japan's nominal economic activity slipped below Germany, the country's growth rate has surpassed that of China for the first time in almost half a century (on a nominal basis).India reported very strong growth in car sales in January, driven in large part by sales in rural communities. In fact, they "smashed" the previous record, up almost +14% year-on-year.The British economy contracted -0.3% in Q4 from Q3-2023, following a -0.1% decline the previous period. That was worse than market forecasts of a -0.1% fall. Their economy entered recession (if you use the two-quarter rule) amid a broad-based decline in output, including in services. This is election year in the UK.The euro zone economy will grow slower than expected in 2024 according to updated forecasts from the European Commission. But they also expect to face reduced inflation pressure.For the first time in two years, the Australian jobless rate has risen above 4%. The actual 4.5% rate means they now have 654,000 people without jobs, the highest level since October 2021. (The headline rate is the 4.1% seasonally adjusted rate.)Australian inflation expectations held unchanged in February at 4.5% in this Melbourne Institute survey. Their central bank would have been disappointed in that.Globally, container shipping freight rates slipped slightly last week but are still unusually high. The risks keeping them high are basically unchanged. Bulk cargo rates are again little-changed, and low.The UST 10yr yield starts today at 4.24% and little-changed from yesterday. The price of gold will start today up +US$10/oz from yesterday at US$2001/oz.Oil prices are back up +US$1.50 at just over US$78/bbl in the US while the international Brent price is up a bit less to US$82.50/bbl.The Kiwi dollar starts today at just on 61 USc and little-changed from this time yesterday. Against the Aussie we are still at 93.8 AUc. Against the euro we are still at 57.7 euro cents. That all means our TWI-5 starts today at just under 70.6 and little-changed.The bitcoin price starts today at US$52,232 and another +1.0% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.5%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with supply is rising and demand is shifting away for energy intensity and efficiency reasons, so oil prices are falling.Crude oil prices are falling quite sharply today because the latest US EIA data showed a surge of over +12 mln barrels in American crude oil stocks last week, far higher than the +2.5 mln anticipated. Their economy is expanding in a way that doesn't need as much petroleum and high global supplies have pushed prices down to record lows on an inflation-adjusted basis. Neither Russia's war nor the Middle-East tensions - nor an expanding global economy - are keeping this price elevated.US mortgage applications fell -2.3% last week from the week before, ending the recent and short run of expansions when four of the past six weeks had recorded gains. These levels are -12% lower than a year-ago.Meanwhile, final revisions for American PPI has them falling slightly more than originally estimated for December from November to be only +1.0% higher than a year ago. The January data will be released on Saturday (NZT).In Canada, analysis there now expect their central bank to end its quantitative tightening program much sooner than originally indicated, maybe as soon as April.The EU reported that their industrial production took something of a surge in December, expanding +2.6% (real), to enable it to be +1.2% higher (real) than in the same month a year ago. It was an unexpected bit of good news from them. They weren't able to report any 2023 expansion in economic activity (GDP), calling it "stable". But at least it wasn't a decline. They benchmark themselves against the US, and apart from the pandemic, the gap they suffer now is as wide as it was in the GFC.Staying in the region the UK reported its CPI inflation at 4.0% and core inflation at 5.1%, both unchanged levels in January than December.In Indonesia, former general Prabowo is projected to win Indonesia election on the first round of voting. At first sight, it appears to be a turning away by Indonesia from China to a more Western-friendly stance. But first-looks can sometimes be deceiving in Indonesia.The UST 10yr yield starts today at 4.25% and -4 bps lower. The price of gold will start today down -US$2/oz from yesterday at US$1991/oz.Oil prices are down -US$1 at just over US$76.50/bbl in the US while the international Brent price is now just under US$81.50/bbl. However, prices are still falling as we report this.The Kiwi dollar starts today at just under 60.9 USc and recovering about +¼c from this time yesterday. Against the Aussie we are little-changed at 93.8 AUc. Against the euro we open higher at just over 57.7 euro cents. That all means our TWI-5 starts today at just on 70.5 and up +20 bps.The bitcoin price starts today at US$51,699 and up a very strong +6.6% from this time yesterday. Volatility over the past 24 hours has been high at just under +/- 3.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with a miss on US core inflation has markets moving a lot today.The highly anticipated American inflation rate for January fell back to 3.1% at the headline level following a brief increase to 3.4% in December, but the more important core rate came higher than forecasts of 2.9%. The monthly rate edged up to 0.4%. Markets were expecting better 'progress' than this and have reacted sharply to the news, realising the US Fed may not trim official rates as soon as they expected - and that they should have listened to the Fed's signals that it is a time to be cautious on progress in the fight against inflation. The next FOMC policy meeting is not until March 21 (NZT) however.The USD rose, benchmark bond yields jumped, and Wall Street reacted badly with a sharp selloff. Meanwhile, there was a jolt lower in retail sales growth last week, as measured in same-store bricks & mortar outlets. It was aup, but only by +2.5% from the same week a year ago, the first time it hasn't risen in real terms in five months.Across the Pacific there was another unexpected jolt lower. Japanese machine tool orders slumped in January, coming in at their lowest level since early 2021.The ZEW Indicator of Economic Sentiment for Germany rose for a seventh consecutive month in February, reaching its highest level in a year and bettering market expectations, largely based on hopes that major central banks will start cutting interest rates this year.In Australia, the Westpac-Melbourne Institute Consumer Sentiment Index rose +6.2% to 86 in February, from 81 in January. This is the biggest monthly gain since April last year, when the RBA paused its rapid series of interest rate rises, and takes the Index to its highest level since June 2022.Australian business confidence, as monitored by the NAB survey, rose just 1pt to +1 index point, and still well below its long-run average. The improvement was largely driven by manufacturing and construction, partly offset by falls in wholesale and retail confidence. Confidence remained negative across all the states however.The UST 10yr yield starts today at 4.29% and an +12 bps shift up on the changed views following the US CPI data. In Wall Street's Tuesday trading session, the S&P500 is down a sharp -1.2% on the same driver. The price of gold will start today down -US$21/oz from yesterday at US$1993/oz and a sharp reaction lower after the US CPI data was released.Oil prices are up +US$1 at US$77.50/bbl in the US while the international Brent price is now just over US$82.50/bbl.The Kiwi dollar starts today at just under 60.6 USc and down more than -¾c from this time yesterday. But that is mainly a USD shift up. Against the Aussie we are little-changed at 93.9 AUc. Against the euro we open at just over 57.5 euro cents and a -½c fall. That all means our TWI-5 starts today at just over 70.3 and down -40 bps.The bitcoin price starts today at US$48,482 down -2.0% from this time yesterday but still over NZ$80,000 after the NZD retreat. Volatility over the past 24 hours has been moderate 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 tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news of a warning of a permanent downgrade on asset quality that will affect banks worldwide.But with Japan, China and Singapore all on holiday, global economic news is a bit thin today.First up, American inflation expectations seem to be easing, even if the changes are small. But for the year ahead they were steady in January at 3%, the lowest in three years. Even though the overall pace is steady and key items are declining, some core elements are still relatively high. They were lower for petrol but at 4.2%, the lowest since December 2022, for food at 4.9%, the lowest since March 2020, and for rent at 6.4%, the lowest since December 2020. Overall, looking ahead three years, they are down to 2.4%.In India, consumer inflation is falling also, even if there are some key elements that remain high. Overall it eased to 5.1% in January, the lowest in three months, from 5.7% in December and matching market expectations. Their central bank has a wide 2-6% target range. The slowdown is mostly due to an ease in food inflation and favourable base effects from last year. But food inflation only fell to 8.3% from 9.5%.Indian industrial production was up +3.8% in December from a year ago, handily more than November's +2.4% and the expected +2.5%Indonesia goes to the polls tomorrow in elections that include one for President. And it is looking like one candidate will win in the first round, current Defense Minister Prabowo Subianto. Prabowo is from the Suharto political dynasty. He also chose the son of very popular outgoing president Jokowi as his running mate. Jokowi is barred from running for a fourth term and many believe he is organising the Prabowo candidacy and will be a major influence in the new leadership.And there was a second round presidential election in Finland over the weekend. Alexander Stubb of the centre-right National Coalition Party narrowly won defeating liberal Green Party member Pekka Haavisto, who conceded defeat. Stubb is pro-European and a strong supporter of Ukraine and someone who has taken a tough stance towards Russia.In China, the January data on new car sales were a disappointment. They reported their first month-on-month decline in vehicle sales since August, despite renewed efforts by some carmakers to offer discounts in the world’s largest auto market. Just on 2.04 million vehicles were sold in the month, down -14% from December. Sales of passenger NEVs fell almost -30% month-on-month to 668,000, also the first such drop since August.In Europe, a new ECB official is worried about structural changes in their banking sector and asset quality is starting to deteriorate. She warned of a permanently changed risk landscape that requires lenders to alter how they operate.The UST 10yr yield starts today at 4.17% and little-changed from yesterday. The price of gold will start today down -US$10/oz from yesterday at US$2014/oz.Oil prices are little-changed, still at US$76.50/bbl in the US while the international Brent price is still just over US$81.50/bbl.Perhaps we should also note the rather stunning fall in natural gas prices worldwide. In the US, these prices are back to levels they first had in 1990. In Europe, back to levels they first had in 2011. Not only is Russia a major exporter and suffering the downturn, so is Australia. In inflation-adjusted terms, natural gas has never been cheaper.The Kiwi dollar starts today at just under 61.4 USc and marginally softer that this time yesterday. Against the Aussie we are down nearly -½c at 93.9 AUc. Against the euro we open at just under 57 euro cents and little-changed. That all means our TWI-5 starts today at just over 70.7 and down -20 bps.The bitcoin price starts today at US$49,598 and up +2.8% from this time yesterday. And at that level it is now over NZ$80,000 for the first time since December 2021. 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 Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news bank lending distortions are catching attention in both China and the US.But first in the week ahead, all eyes will be on the American CPI data which comes out on Wednesday - and the following Fed speaker reactions. The US also releases retail sales data and PPI data this coming week along with a big sentiment survey. And the final big earnings reports are due for Q4. There will be the GDP result for Japan, CPI for India, and Australia will chime in with their January labour market update and the NAB January business sentiment report.China is now on a full national holiday for a week (春节, Year of the Wood Dragon) and authorities managed to stave off a share market crisis before they closed in Shanghai (even if Hong Kong got the wobbles again on Friday).In China, under official pressure banks are shovelling out the loans. Banks extended more than ¥4.9 tln in new yuan loans in January, a record high since comparable records began in 2004 and beating forecasts of ¥4.5 tln jump. Mortgages rose to ¥980 bln in new lending and corporate loans jumped by ¥3.86 tln. Meanwhile, "total social financing" which is a broad measure of credit and liquidity, also reached a record high level of ¥6.5 tln (NZ$1.5 tln), well above forecasts of ¥5.55 tln. But while the levels may be high watermarks, the growth isn't. In fact these expansions from a year ago are the least since 2004. That has led to calls to "do more".In Japan, the Nikkei 225 Index jumped as much as 1.1% before settling only marginally higher at 36,897 on Friday, its highest level in 34 years as strong corporate earnings, a weakening yen and a dovish outlook on Bank of Japan monetary policy pushed the markets to these new heights. On Thursday, a Bank of Japan Deputy Governor said the central bank would not aggressively tighten its monetary policy even if it eventually decides to end negative interest rates.In the US, the S&P500 closed above the 5000 index level for the first time. It was up +0.6% on Friday their time, up +1.4% for the week, and up +6% so far this year. And all this is in the face of rising bond yields which makes it a bit unusual. The Fed's 'win' in its battle against inflation while keeping employment growing is a key factor that profits remain robust. Investors seem impressed.Meanwhile, lending by commercial banks to shadow banks ("Loans to nondepository financial institutions" in official language - line #26 in this data) topped $1 tln in January for the first time. It was up +12.2% in a year, although the big expansion came mid-2023. However, that surge caught the eye of the Fed who are watching for system risks from the big non-bank mortgage component.In January, Canada added +37,000 new jobs in the month, a surprise because a decrease was anticipated. But +49,000 were part time positions and full time employment fell -12,000. Their jobless rate eased slightly on this data, also not expected. Unfortunately for them, their population grew faster than employment.With China largely closed for its New Year holidays, commodity prices are likely to just meander along with little direction. But that won't stop chocolate prices racing higher on climate-related supply challenges. Cocoa prices were up +17% last week alone, to be up +42% so far this year alone, up +123% in a year and up +160% since this surge started in mid-2022. Chocolate is back only as a luxury item. Meanwhile sugar prices, which maxed out in 1975, aren't showing any similar acceleration.Staying with commodities, the price of palladium fell below that of platinum for the first time since April 2018 as growing demand concerns and bets on stable supply weighed on the metal. The price of palladium is now at its lowest since mid-2017. Palladium (and/or platinum) is mostly used in catalytic converters for ICE cars.Household spending rose +2.3% in December from a year ago in Australia. This was the smallest growth in household spending since February 2021. But that is before inflation was accounted for. Discretionary spending actually fell -0.6% (also before accounting for inflation). This data highlights how their cost-of-living crisis is affecting them.The UST 10yr yield starts today at 4.18% and down -1 bp from Saturday. The price of gold will start today up +US$1/oz from Saturday, holding at US$2024/oz.However oil prices are still at US$76.50/bbl in the US while the international Brent price is still just over US$81.50/bbl.The Kiwi dollar starts today at just on 61.5 USc and marginally firmer that this time Saturday. Against the Aussie we are unchanged at 94.3 AUc, and a 14 month high. Against the euro we open at just over 57 euro cents and also firmish. That all means our TWI-5 starts today at just on 70.9 and at its 2024 highs.The bitcoin price starts today at U

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news that the rest of the world doesn't actually need an expanding China. Their financial market struggles are - so far at least - having little impact elsewhere even as some investors take sharp losses in the Middle Kingdom, especially on bonds.The strength of the US labour market is on display again with jobless claims falling more than expected last week. There were 233,000 new claims last week a decrease of -32,000 from the week before. There are now still 2.1 mln people on these temporary benefits but that is slightly above year ago levels - although not when you account for the growth of their labour force over that time.Overnight, the USDA released its February World Agricultural Supply and Demand Estimates (WASDE) report. They raised ending stock estimates for American corn, soybeans, and wheat more than traders expected. And they noted a bumper Brazilian soybean harvest. For 2024, beef import estimates were raised largely on higher expected imports from Oceania. 2024 milk production forecasts were lowered and the US expects to export less.The US Treasury had a big 30 year bond auction earlier today, one that was well supported. But the median yield rose to 4.31% from the 4.16% at the prior equivalent tender a month ago. Increases like this are evidence that global rates are still pushing higher.The Reserve Bank of India held its benchmark policy rate at 6.5% for the sixth consecutive meeting at its overnight meeting. This was as widely expected and comes amid persistent price pressure. Indian inflation rose to a four-month high of 5.69% in December due to rising food prices. But that is still within the RBI's generous 2-6% target range "in the medium term". However, dominating this review were questions about how they handled the blocking of Paytm.China released its January CPI data and it isn't calming nerves. Consumer prices fell by -0.8% in January from a year ago, marking the fourth straight month of decline which was the longest streak of drop since October 2009. This data came worse than market forecasts of a -0.5% fall, and is the steepest retreat in more than 14 years. Food prices declined at a record pace with beef prices down -7.7% in a year and lamb prices down -5.9%. Milk prices were more insulated, down just -0.8% in the year.Meanwhile the -2.5% drop in producer prices is actually an easing of the declines in the factory sector, even if it is running more deflationary than consumer prices.Global container freight rates dropped by a marginal -1% last week to remain very high on the shipping crisis induced by military actions and droughts. This minor shift overall masks big changes both ways on many key routes. Meanwhile bulk cargo rates are little-changed again at historically low levels.The UST 10yr yield starts today at 4.17% and up +6 bps from yesterday. The price of gold will start today down -US$8/oz from Monday at just on US$2031/oz.However oil prices are on the move up, up +US$2.50 to just under US$76/bbl in the US while the international Brent price is now just over US$81/bbl.The Kiwi dollar starts today at just under 60.9 and down a bit less than -¼c from this time yesterday. Against the Aussie we are up nearly +¼c at 93.9 AUc. Against the euro we open at 56.5 euro cents and down -20 bps. That all means our TWI-5 starts today at just on 70.4 and essentially unchanged from yesterday at this time.The bitcoin price starts today at US$44,991 and up a notable +4.2% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.6%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news global trade seems to be less of a driving feature of the international economy even if it remains important and there are plenty of shifts. And despite that, the NZD is rising.But first up today, US mortgage applications bounced back last week after the prior week's large -7.2% fall, to rise +3.7% year-on-year. And that was even though mortgage interest rates were virtually unchanged.Also rising strongly was the US logistics managers index (LMI), driven by freight rates. It been almost two years since the rising cost of freight has been a factor in this monitoring.Meanwhile, as expected US exports rose a bit more than imports but their overall trade deficit (goods & services) was little-changed in December. But for the whole of 2023 the deficit was the lowest in three years at 2.7% of GDP. (That is down from -3.0% in 2020.) The 2023 deficit with China shrank to the smallest total since 2010 while trade gaps hit records with Mexico, the EU, Mexico, South Korea, Taiwan, and India. In fact the US imports more from Mexico now than China. Logistics are easier and safer too.China's foreign exchange reserves slipped in January to just over US$3.2 tln, but the slip was less than expected.Although they were up year-on-year, Chinese January vehicle sales fell more than expected from December, especially NEVs which were down almost -39% in the month. The recent economic travails are biting car demand quite hard now in China. Having said that they are running at a 24 mln pa pace, and still easily the world's largest car market.We should perhaps note that the price of lithium, cobalt and nickel are now all at multi-year lows.Meanwhile, Beijing is replacing some senior officials in its struggle to control the economic gloom enveloping parts of their economy. But still no word yet of the expected big stimulus.In Europe, German industrial production fell in December from November to be a full -3.0% lower than year ago levels on a volume (real) basis. The December retreat was its seventh straight month of falls.And staying in Europe, ex-coal company and now renewables giant Ørsted, the world's largest offshore wind farm developer, has cut 800 jobs, lowered renewable development targets and suspended a dividend after a difficult year of trading. It will also withdraw from the Norwegian, Spanish and Portuguese markets and its chair is to stand down after a decade in the role. Its transition has not gone well.The UST 10yr yield starts today at 4.11% and up +2 bps from yesterday. The price of gold will start today up +US$2/oz from Monday at just on US$2039/oz.However oil prices are little-changed at just over US$73.50/bbl in the US while the international Brent price is now just over US$78.50/bbl. The Kiwi dollar starts today at just on 61.1 USc and and up a bit less than +½c from this time yesterday. Against the Aussie we are up nearly +½c too at 93.7 AUc. Against the euro we open at 56.7 euro cents and almost a +¼c gain. That all means our TWI-5 starts today at just on 70.4 and up +40 bps from yesterday at this time.The bitcoin price starts today higher at US$43,161 and essentially unchanged from this time yesterday. Volatility over the past 24 hours has been low at just on +/- 0.6%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the US economy is powering a global expansion, covering a weakening Chinese economy.But first up, the overnight dairy auction was a good one. Prices rose another +4.2% and are now up +5.4% since the start of the year and up +3.3% above year-ago levels, the largest year-on-year rise since July 2022. In New Zealand dollars the rise is +5.4%. WMP was up +3.4% and SMP was up +4.6%. But the most encouraging signals are from the foodservice commodities like cheddar cheese, up +6.3%, and butter, up +10.3%. This is the ninth good rise in the past twelve auctions so analysts will be reaching for their calculators on this one to look at a possible raising of their farmgate milk payout price forecasts.Elsewhere, the weekly monitoring of American retail sales at bricks & mortar stores revealed a strong rise last week, up more than +6% from a year ago and showing excellent above-inflation growth. It is an impressive signal that Q1-2024 is developing positively for them.American household debt is also rising, and although it hit a new record high, the rise was a modest +US$212 bln in Q4-2023 from Q3-2023 to US$17.5 tln. Home loan balances accounted for half the rise (up +0.9%) boosted more by rising interest rates than activity. Credit card balances however rose +4.6% in a quarter (+US$50 bln) but car loans rose only +0.8% in the same period. Of some concern is that delinquency rates rose for all debt types - except for student loans.The ISM services PMI jumped much more than expected, continuing the strong data we have had in 2024. It validates the strong labour market data we have had recently. The result was led by a healthy jump in both new orders and the level of order backlogs. American service industry companies are however cautious about lingering inflation and the associated cost pressures.In Japan, Toyota has raised its profit forecasts as it hybrid business soars. That is notable because EV makers are going the other way with shrinking margins and profits.In China, it is clear Beijing is rattled by their economic stutter. Markets are betting big that some major short-term stimulus is about to be announced. It is also backed up by announcements that home team financials will be big buyers in stock markets, a manipulation that will benefit traders - and give them a profitable lifeline to quit markets. It seems like a naive strategy by Beijing. But you never know, it might work. China is also expecting interest rate cuts soon.China is also struggling with a major cold weather snap, right at the start of their major New Year travel season. It is widespread and a big weather event.The level of "de-risking" from China is expected to be on display in export data due out very soon from China and import data from the US. Analysts are expecting the trade deficit to be its lowest between the two countries since 2003 (when George W Bush was president). It has retreated fast in the past three years.In Taiwan, inflation is easing, coming it at only 1.8% in January, a sharpish fall from 2.7% in the previous month. They were expecting a sharp easing, but only to 2.2% so this shift is an outsized one.EU retail sales volumes declined in December from November, and rather sharply too. That puts them down about the same year-on-year.But they are getting an unexpected boos from a rise in German factory orders in December, boosted by orders for major capital equipment. It was an impressive turnaround from November and recorded a creditable +2.7% gain in real terms from a year ago.Across the ditch, the Aussie central bank held it policy rate in its Tuesday review. This was as expected. Perhaps the only observation worth noting is that they didn't wholeheartedly signal that they are done raising rates, something markets were perhaps expecting. They are still looking for reassurance that recent trends are sustained. The Aussie dollar rose on that thought; true not by much, but it did rise. The RBA has kept the option open to raise rates if inflation's retreat doesn't pan out.And staying in Australia, retail sales barely rose in their Q4-2023 period in real, inflation adjusted terms. But on a per-capita basis retail volumes fell for a sixth straight quarter, down -3.5% compared to the same period in 2022.The UST 10yr yield starts today at 4.09% and up +5 bps from Monday. The price of gold will start today down -US$3/oz from Monday at just on US$2037/oz.However oil prices are +US$1 higher at just over US$73.50/bbl in the US while the international Brent price is now just over US$78.50/bbl. But they are still in this tight range that have been in for a while.The Kiwi dollar starts today at just on 60.7 USc and holding its lower Monday level. Against the Aussie we are still at 93.2 AUc. Against the euro we open at

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news economic conditions in China are in focus today.But first looking ahead, this week we get second tier American data around trade and PMIs (especially for services). It is the same in many other countries including China and Australia. Chinese CPI and PPI data is due this week. Canadian labour market data and EU retail sales data are coming too. Australia (tomorrow) and India (late Thursday) will have interest rate decisions. And StatsNZ will release our labour market data for Q4 on Wednesday which will be closely watched.First up today we can report that the IMF has been reviewing China's economic prospects and it sees growth slowing relentlessly. GDP will slip to +4.6% in 2024 they say and keep retreating to 3.4% by 2028. The IMF sees them stuck paying the price for low quality development in the past, and now demographics limits their ability to up their game in a meaningful way. The seeds for this growth retreat were planted years ago.And China’s real estate market is having a rough start to the year, with January new property sales plunging to a monthly low not seen in five years, despite government measures to boost the ailing sector as it grapples with a liquidity crisis. New property sales were down -34% in January from a year ago and down -48% from December.Last week, Chinese stock markets fell sharply, with Shanghai down a startling -6.2% for the week. And this is presumably after 'home team' intervention. Investors are unhappy. Authorities are nervous. Voices for major emergency stimulus are growing. It isn't helping that the pessimistic mood is spreading just as millions disperse to their villages for Chinese New Year, potentially spreading uncertainty across the country quickly. It also isn't helping that authorities are claiming all is well, nor that the Ministry of State Security has made it a crime to say things aren't going well in the economy.Across the Pacific, the US economy added many more jobs in January than expected. Equity markets rose on the news, the US dollar strengthened, and bond yields rose on the view that the Fed may not cut rates as soon as they expected if the US economy is in a stimulatory phase.At the headline level, American payroll employment rose +355,000 in January and that is almost double the expected +180,000 rise the market was expecting. It is the second consecutive very strong result.Behind this result we see that on an actual basis employer payrolls are +2.9 mln higher than a year ago at 155.6 mln at the end of January, maintaining the "about +2%" annual growth pace they have had since July, which is an eased pace from the "about 2½%+" pace earlier.Looking more broadly, the household survey increase isn't as fast. There are now just under 160 mln people employed, the difference from the payrolls report being the unincorporated self-employed. It is quite clear more people are transitioning into company payrolls now, so the overall growth isn't quite as strong as the payrolls data suggests.Average weekly earnings, which had been rising at about a +4% page in 2023, slipped to +3% from a year ago in January. However markets focused on average hourly earnings which rose more than they expected, up +4.5% in a year. But they are looking at the wrong data - the broader average weekly data is what they should be looking at because that encompasses working hours.After a strong rise in November, American factory orders rose only modestly in December from a month ago to be +1.4% higher than year ago levels. There is nothing encouraging about that although the January PMIs suggested the pace picked up in the next month.Consumers in this market are clearly feeling better however. The University of Michigan sentiment survey reported a big improvement and its highest level in 2½ years. They called the change a "surge".The American earnings season for Q4 results is in full swing now and the news is 'good'. Investors are responding to better-than-expected results and have pushed the S&P500 up to an all-time record high. Wall Street is about halfway through the expected corporate reports and so far earnings growth is +7.8% reported. If that is maintained that would be the best of any 2023 quarter. However we should note that is "above expectations" - and expectations weren't high. Sure, cost control and productivity drives are helping - and effective - but in mid 2023 expectations were higher and have been scaled back considerably since. It is against this scaled-back version that things look good. And most companies are not signaling forward momentum from here. They are cautious, saying if they can hold the line they will count that as a success. So be wary about "better-than-expected results".In Australia, mortgage approvals rose almost +12% over all of 20

New Zealand should be working towards a 100-year planning horizon when it comes to infrastructure, and viewing planning as "an exercise in dynamism and inquisition" rather than a "bureaucratic exercise."That's the view of Geoff Cooper, General Manager of Strategy at the New Zealand Infrastructure Commission.Speaking in interest.co.nz's Of Interest podcast, Cooper argues planning gets a bad rap."It's seen as a bureaucratic exercise and it should be seen as an exercise in dynamism and inquisition. I think we need to see more of this planning expertise coming into government, and planning happening from a much earlier period of time, front footing the needs rather than waiting for them to be in front of us," Cooper says."Getting ahead of the planning cycle is a really obvious place to start. And start identifying options before we get into solutions because the moment a project is announced you've created interests. The moment you announce a project all of a sudden there's interested parties. And once there are interested parties, whatever the project is, it's very difficult to do optioneering, almost impossible.""So what we would say here is think slow, act fast. Go through a slow, rigorous planning process, identify your problem definition first ... then once you've got a preferred solution which you've stress tested, then you get on with it and do it as fast as you can," says Cooper.In terms of the sort of timeframes we should be thinking about for infrastructure planning in New Zealand, Cooper says there's no firm answer."But certainly I would be thinking [a] 100-year [time]frame personally."In the podcast Cooper also talks about the five key drivers of infrastructure demand, NZ's infrastructure deficit, how our infrastructure needs are changing, project selection and delivery, why big projects always seem to cost more and take longer than expected, funding, financing, contestable infrastructure priorities, plus the resilience and sustainability of infrastructure."What we're dealing with here is uncertainty and risk. As we're building our new infrastructure what we're seeing are the risks associated with climate change, and the level of resilience that we need, is far higher than what we thought. In fact a lot of our infrastructure is simply not designed for the level of resilience that we need today. And it's going to take decades to get it there as you've seen with things like the earthquake strengthening. The difficult thing with resilience, of course, is out of sight out of mind. It's very difficult to get the acceptance that we need to invest in something that you may or may not need in the future. So it becomes a very difficult thing to sell," Cooper says.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news there are some significant jitters being felt in a widening range of banks globally as debt maturities for commercial property spook everyone.But first in the US, the number of peopleclaiming for jobless benefits rose for a second consecutive week to the highest level in eleven weeks. There are now almost 2.2 mln people on these benefits and that is the highest in more than a year. Still these overall levels are low in historical context, and compared to the size of their workforce. We will get an update on that tomorrow when the non-farm payrolls data is released. Analysts are expecting a gain of +180,000.However, there was a sizable rise in the number of job cuts reported in January. They typically spike in January so it is hard to assess whether this is out of the ordinary. But this year the spike was more than usual, in fact the highest January since 2009. Job cuts in the financial and tech sectors were prominent in this latest data.But the factory sector might be turning a corner, up. The widely watched ISM factory PMI improved to in January to its 'best' level since October in a sharp and unexpected change. The sector is still contracting although at a much softer pace, as demand moderately improved and output remained stable. The improved bit was that new order levels expanded sharply.The internationally-benchmarked S&P/Markit PMI version delivered a very similar story for Fanuary, but was more positive, suggesting the overall sector is actually now expanding.In India, their central bank has ordered Paytm to immediately cease trading. The ubiquitous payments app and its related bank have ignored regulator warnings about the risks it has been taking. Paytm is backed by both Japan's Softbank, and China's Ant Group.As expected, the EU euro-area inflation report for January came in at 2.8%, holding the lower levels it has reported for the past four months. Again it is lower energy costs that is keeping a lid on rising food prices (+5.7%) but they will be encouraged by the 2.0% rate for other goods.The Bank of England also acknowledged that inflation risks are "more balanced" there when they held their 5.25% policy rate unchanged today in another split decision.Internationally, there were a wide range of factory PMIs released by S&P/Markit for January and they showed an overall improving trend - in fact this sector is no longer contracting globally, the best it has been since mid 2022. And that supports the recent improvements to future global growth prospects that the IMF released recently and we reported yesterday.It is also supported by global passenger air travel data for December which was up strong from a year ago. However, compared to pre-pandemic levels it is not quite there yet. Domestic air travel is higher but international travel is not. In large part that is because the Chinese travellers are staying home still.But the global commercial property market looks like it is just starting a serious downward spiral. Lower valuations are squeezing leveraged owners, many of whom have large maturities imminent. And that is rocking banks. In the past few days banks from Europe (Deutsche), the US (New York Community Bancorp) and Japan (Aozora) have signaled serious consequences from these revaluations. Although it has been long-foreshadowed we may be entering a very rough patch for banks exposed to the sector. About NZ$1 tln is immediately involved.The peaking of container shipping freight rates may be underway because these rates fell -4% last week, the first fall late November. And this is despite no resolution to either the Red Sea crisis or the Panama drought. Rates from China to Europe mostly fell. And freight rates for bulk cargoes remain modest even from a long 50+ year perspective.The UST 10yr yield starts today at 3.87% and down -9 bps from this time yesterday as bond markets price in more anticipated Fed rate cuts. The price of gold will start today up another +US$13/oz from yesterday at just on US$2063/oz.But oil prices are little-changed at just over US$76.50/bbl in the US while the international Brent price is now just under US$81.50/bbl.The Kiwi dollar starts today at just on 61.3 USc and -10 bps softer than yesterday. Against the Aussie we are up +30 bps at 93.4 AUc. Against the euro we are a touch softer at 56.5 euro cents. That all means our TWI-5 starts today at 70.3 and unchanged from yesterday.The bitcoin price starts today softer. It is now at US$42,627 down -2.0%% 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 on

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news financial markets are now more convinced rate cuts will be coming in 2024 as inflation transitions away.First up today we should note that the US Fed will announce the results of its latest FOMC meeting soon, at 8am NZT. No-one is expecting them to change any rates today, leaving their policy rate at 5.5%. But markets have increasing expectations that some sort of signals will emerge about how and when they will start cutting that rate in 2024. Of course that is almost all to do with how they see inflation tracking in the US and where they think it may settle. Benchmark bond yields have sunk in anticipation of those meeting details. There seems little pressure on the employment mandate they have, and little indication that their jobs market is about to change, so that is now only a background factor.After rising strongly for the prior three weeks, last week these was a correction in the number of mortgage applications in the US, dropping -7.2% from the prior week. This was despite no change in benchmark mortgage interest rates.The ADP employment report showed private businesses in the US added +107,000 jobs this month, below forecasts of +145,000. It also showed that the pay premium for those switching jobs has now evaporated. This is the report that comes just before the US non-farm payrolls report for January that is out this weekend. That is expected to show a gain of +180,000 jobs in the month, although analysts have consistently underrated the strength of the US labour markets recently.China's official PMIs for January were out yesterday. The factory PMI was unchanged at 49.2 maintaining the December contraction. It was their fourth consecutive month of decline and the ninth in the past ten months. Their services PMI expanded slightly more than in December at 50.9 and up from 50.4. Their services sector has never slipped into contraction in these official surveys. So overall these surveys record a slight expansion in January.Yesterday, China moved to merge more than 2,100 rural banks with about NZ$11 tln in loans (assets) in a move to contain growing financial risks. These banks have been hit by by bad loans, shrinking margin, and slowing growth.And staying in China, it has been reported that investors sold out of ¥14.5 bln (NZ$3.3 bln) worth of mainland equities (net), a sixth month international investors have pulled back. This is the longest and strongest retreat from Chinese equities in a decade. Meeting notes from the last Bank of Japan review shows that more members are coming to the view that they need to shift their unusually low rate up soon. This will be a very big deal when it happens.Singapore is in the sights of Chinese regulators cracking down on illicit money flows. Oddly, the crackdown is on money flowing in to China, not out.Inflation in Germany fell below 3% in January, its lowest since June 2021. Lower costs of energy enabled the drop to 2.9%. Without food & energy, their rate was 3.4% and also its lowest since mid-2022.In Australia, the Federal Court has declared that Westpac engaged in unconscionable conduct in October 2016 when executing a AU$12 bln interest rate swap transaction, the largest of its kind in Australian financial market history. It did pre-hedging ahead of an interest rate swap transaction with some large customers. Westpac will pay a fine of AU$1.8 mln as a penalty and reimburse ASIC $8 mln for its investigation and litigation costs. No one will go to jail though, and the costs of the behaviour are a rounding error compared to Westpac's profits. Lessons are probably not learned here.Australia's inflation rate came in lower than expected at the end of 2023. The quarterly CPI was 4.1% from a year ago (a two year low) and well below the 5.4% in Q3-2023. Markets expected 4.3%. And their Monthly Inflation Indicator for December alone came in at 3.4%, a big drop from 4.3% in November and well below the expected 3.7% analysts were expecting. Both are substantial shift lower and paint a picture of fast-easing price pressures.These results sparked a rise in the local equities market, and a sharpish fall in bond yields as markets start to price in a 0.25% cut in official interest rates by August. (For reference, markets have priced in almost two -0.25% cuts by then here in New Zealand.)Global air cargo volumes rose +10.8% in December from a year ago, meaning 2023 volumes fell only -1.9% over the whole year. But the year ended with December volumes +2.3% higher than December 2019 volumes, pre-pandemic.The UST 10yr yield starts today at 3.96% and down -12 bps from this time yesterday as bond markets start pricing in anticipated Fed rate cuts. The price of gold will start today up another +US$15/oz from yesterday at just on US$2050/oz.Oil prices are down

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the IMF now expects a global soft landing in 2024 and 2025 after authorities seem to have successfully quelled inflation.But first, an update on dairy prices. We mistakenly signaled a full GDT dairy auction overnight in our report yesterday. But we got that wrong; it is next Wednesday, February 6, 2025. But there was a GDP Pulse even overnight instead and that delivered higher prices. WMP prices were +1.1% higher that the last equivalent event a week ago. SMP prices were +0.3% higher. These gains were less than anticipated in the dairy futures markets, but both continue the recent trend of rising prices.Meanwhile, the US Redbook retail index of bricks & mortar stores came in +5.0% higher last week than a year ago, maintaining the recent gains. And don't forget these are off heady rises a year ago, so there isn't any indication yet American consumers are flagging under household budget pressures in these results.And the widely-watched Conference Board survey of consumer confidence rose in its January edition, largely as expected. Consumers are feeling the most upbeat in two years.And there has been a trifecta of good American data out overnight with the US JOLTS report surprising with a rise in job openings in December. They surged by +101,000 from the previous month to over 9 mln, the highest in three months and above the market consensus which expected to hear of a retreat.The only American data out overnight that was negative was the Dallas Fed's survey on the service sector in the oil patch. Like the factory survey, it retreated.In China, market optimism for an economic rescue package is fading. China’s stock and bond markets are giving a clear signal to policymakers that they need to take more steps to revive investor confidence. Stocks fell for a third day on Tuesday, pulling back from last week’s rebound. Their benchmark 10-year bond yield dropped to the lowest level in more than twenty years, as traders now expect the central bank will release additional monetary stimulus to boost growth. But direct solutions for the troubled sectors still seem unaddressed. The IMF may agree with Beijing that current approaches will be enough, but financial markets remain sceptical.In Europe, sentiment was broadly stable in December.And the EU released it's Q4-2023 GDP result overnight - and it looks like they have avoided a recession, even if the result was weak. The stalled in the last three months of 2023, following a -0.1% contraction in the previous quarter. Analysts had expected Q4 to decline too. But these are preliminary estimates. They avoided a recession because of better-than-expected growth in Spain and Italy while the French economy stalled and Germany, which is the largest one, contracted. They will be relieved at the overall result, but in fact it doesn't really paid an encouraging picture.Australia said that December retail sales were weaker than expected, falling -2.7% from November to be just +0.8% higher than year ago levels. That was the steepest drop since August 2020. This follows a revised rise of +1.6 in November and a fall of -0.2% in October 2023. Meanwhile inflation ran at about 4.3% over the same time, so retail volumes in 2023 shrank about -3.5%.Overnight, the IMF chimed in with an updated 2024 growth forecast, one they raised (which was a bit of a surprise). They now expect 2024 global economic activity to expand +3.1%, and improvement from 2.9% seen in October while keeping the forecast for 2025 unchanged at 3.2%. The key improver came from greater-than-expected resilience in the US and several large emerging market and developing economies, as well as anticipated fiscal support in China. 2024 growth forecasts were revised higher for the US (2.1% vs 1.5%), China (4.6% vs 4.2%) and India (6.5% vs 6.3%) but the institution expects lower growth for the Euro Area (0.9% vs 1.2%) and Japan (0.9% vs 1%). They foresaw small improvements in Australia over the next two years but at modest levels, but forecasts for New Zealand were not included.The UST 10yr yield starts today at 4.08% and down -2 bps from this time yesterday. The price of gold will start today up another +US$8/oz from yesterday at just on US$2035/oz.Oil prices are up +US$1 at just over US$78/bbl in the US while the international Brent price is now just over US$82.50/bbl.The Kiwi dollar starts today at just on 61.2 USc and marginally firmer than yesterday. Against the Aussie we are up +20 bps at 92.9 AUc. Against the euro we are unchanged at 56.5 euro cents. That all means our TWI-5 starts today at 70.2 and up +10 bps from yesterday.The bitcoin price starts today firmer yet again. It is now at US$43,177 which is up +2.1% from this time yesterday. Volatility over the past 24 hours has been moderate at just o

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the world's largest property developer is to be dismembered and liquidated.First up today, while you may already know the headline, we must note that Evergrande has been forced into liquidation by a Hong Kong court. While this may not strictly qualify as a 'surprise' it is still a very big deal, for a number of reasons. First it is a spectacular crash-to-earth by a very well connected company - one that rapidly lost favour. Second, it heightens the risk of all other Chinese large property developers, some of whom (like Country Garden) may have assumed there would be bailouts underpinning their industry. And third, it shows Hong Kong courts are now under the direct control of Beijing, handing down verdicts in big sensitive cases in the way Beijing wishes to signal. President Xi is not happy with his billionaire 'friends'. One reason he will be livid is that Evergrande has liabilities to others of over US$300 bln. Unless there is some sort of rescue package, it is hard to see how there won't be a cascading impact. After all, US$300 bln is 1.7% of China's 2023 GDP.Sadly for China, this won't be a quick crash from which everyone can pick themselves up and carry on. It will be a slow lingering process from here. Evergrande claims assets of US$240 bln, but that valuation must be very suspect. If China dumps on international creditors in this case, it will accentuate the de-risking pullback underway.And we should also perhaps note that the share price of EV maker BYD took a tumble yesterday (-4%) missing profit forecasts despite massive sales gains, and a big jump in profit from a year ago. Shareholders have been highly sceptical about the investment prospects of the company recently, making down its share price by -36% over the past year. Also weaker than expected were international sales of its vehicles; it has strength in the Chinese domestic markets however.Meanwhile in the US, the Dallas Fed factory survey contracted rather sharply in January, falling to its lowest level in eight months, basically on weak order levels. This is a sentiment isurvey in the heart of America's oil patch.Across the Pacific, Taiwan's consumer sentiment rose and has now reached its highest level since March 2022. For them the pleasing thing about this survey was that improvement came across the board. The resolution of their Presidential election clearly helped.Singapore's producer prices ended up -1.1% lower in December than in the same month a year earlier capping a full 12 months of declines. Singapore does go through these producer deflation periods on a regular basis, but the last one (apart from the pandemic) was back in 2015-2016. The current one might only have lasted half that time however.In contrast to China, India claimed that it will grow at a 7%+ rate for the next few years. It says "the strength of the financial sector and other recent and future structural reforms" ensure growth at a fast clip. But independent observers are more sceptical that the official confidence.In Finland, they have just had a presidential election, a serious and civilised affair. A 'conservative' (for Finland) ex-prime minister won of the first round, beating out an independent Green candidate. The key issues weren't economic however, rather focused on its new role as a NATO front-line border state, spooked by the Ukraine invasion. But neither candidate won outright so there will be a runoff election in two weeks.The UST 10yr yield starts today at 4.10% and down -4 bps from this time yesterday. The price of gold will start today up another +US$8/oz from yesterday at just on US$2027/oz.Oil prices are down -US$1 at just over US$77/bbl in the US while the international Brent price is now just over US$82/bbl.The Kiwi dollar starts today at just on 61.1 USc and up +20 bps from yesterday. Against the Aussie we are unchanged at 92.7 AUc. Against the euro we are up nearly +½c at 56.5 euro cents. That all means our TWI-5 starts today at 70.1 and up +20 bps from yesterday.The bitcoin price starts today firmer yet again. It is now at US$43,177 which is up +2.1% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news China's debt problems are just growing and more investors are worried.But first, in the week ahead we will get some key data. In the US, they have a Fed rate review on Thursday and markets will be eyeing signals about when rates might move. Some think a March cut is coming. Then on Saturday, the January non-farm payrolls report on their labour market is out. And PMIs, consumer sentiment data, and factory order data will round out their big economic signals. Their earnings season is in its third week and there are some very large companies reporting, including most of the FAANGs (or now more accurately, MAMAAs). EU GDP will come this week too along with CPI updates from them, South Korea and Australia (on Wednesday). Locally it will be building consent data and the large end of month stats dump from the RBNZ that will interest us.Over the weekend we got data on Chinese industrial profits which rose +16.8% in December above the same month last year. And that was the fifth straight month they have risen. But the bar is low. The year ended with overall profits -2.3% lower over the whole twelve months, and in calendar 2022 they had fallen -4.0%.2024 is going to be a tough year for Chinese corporates. They are facing a record obligation to pay bond debt maturities, which will total ¥6.8 tln, (or NZ$1.55 tln). Their problem is that creditors are either increasingly unwilling to roll it over, or will demand significantly higher interest rates to do so. Both scenarios will hurt, and the pain will grow as the year progresses. Debt obligations have been growing much faster than GDP, making creditors skittish. And in the three years to 2026 the redemption obligation rises to ¥20 tln, so the problems won't fade with time.In the recent past, investors have continued buying Local Government financing bonds (LGFVs) which are part of the overall corporate debt, assuming that they are guaranteed by the government. And none have failed outright yet. But these LGFV bonds linked to "infrastructure" (read, their property development sector) are based on unprofitable enterprises, and maturities are jumping 40% in 2024, accentuating the pressures. Recently, institutions have been dealing with this pressure with very high interest rates (8+%) and much shorter maturities (less than 3 years). It doesn't take a rocket scientists to see what is about to happen. This will only work out if Beijing underwrites everyone, which does seem increasingly unlikely. Xi won't be happy in the trap and will probably want to 'teach' the financial markets a lesson.The scale of the problem is highlighted in an updated report on the country's macro leverage ratio. It rose +13.5 percentage points in a year to 288% in 2023 as a measure of non-financial debt to GDP.To put off the reckoning, last week China rolled out some very large and unexpected stimulus, much of it targeted. Their central bank now seems to have an outsized role in these efforts and the signals are more is to come, with the central bank providing cheap funds via its "Pledged Supplemental Lending" programs. These recent moves cost about ¥3 tln in total.But investors from well-known global institutions and local icon firms at a Hong Kong Government promotion event last week cast doubts on how effective the policies would be. The event was supposed to talk things up, but in fact it just allowed participants to confirm that others share their gloom. So far, key concerns such as China's property crisis and low confidence appear unaddressed.Singapore was expecting to report a bounce-back in industrial production in December after the November fall. But it didn't happen. They reported another, albeit smaller, retreat. Analysts there aren't anticipating any significant improvement in the first half of 2024.American inflation seems to be cooling, and in a way that the US Fed will like. While overall PCE inflation was unchanged at 2.6%, their core PCE rate came in lower than expected at 2.9%, down from 3.2% in November. Remember this was running at almost 5% a year ago.And all this happened while personal spending rose in the December quarter, and by more than anticipated. Higher activity and lower inflation is a goldilocks outcome. 'Real' personal consumption is +3.2% higher than a year ago - that's after inflation!And to add to the vibe, personal income has come in +4.2% higher that year-ago levels on the same 'real' basis, showing households are more than keeping up with inflation.Markets are back thinking this might give the Fed an opportunity to reduce policy rates by mid-2024; some think as early as March. One thing on their mind with falling inflation and a policy rate at 5.5% is that real interest rates are effectively rising now.December American pending home sales a

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the giant US economy grew by +US$1.4 tln in 2023, shrugging off all recession predictions.US initial jobless claims rose last week, and by more than expected, but were still at near the bottom of their ranges. There are now 2.06 mln people on these benefits, lower than last week but there were 1.86 mln on these same benefits a year ago. The seasonal retreat isn't as strong as last year, so the overall level is creeping up.US durable goods orders came in in December less than expected and continuing their recent yoyo pattern. They were virtually unchanged in December 2023, after a +5.5% rise in November and missing market expectations of a +1.1% rise. Excluding aircraft, new orders increased +0.6%. Capital goods orders however were up a very strong +9.8% in December from a year ago, and holding November' very good level.The big news however is that the US economy expanded at a +3.3% rate in Q4-2023, much better than forecasts of a +2% rise, and following a stellar +4.9% rate in Q3. Consumer spending on goods slowed while consumption of services rose faster. Also helping were a rise in exports. For all of 2023, the giant American economy rose +2.5% in real terms and generated US$27.9 tln in economic activity in the year, up an additional +US$1.4 tln or +5.8% more nominally, +2.5% in real terms. That is a larger expansion in volume terms than China's in the same period and is like adding two thirds of Australia over the past twelve months.The current manufacturing sector isn't delivering its share of this expansion however. The Chicago Fed's National Activity Index fell slightly in December, after being downwardly revised slightly in November, indicating activity contracted during the last month of the year. All four broad categories of indicators decreased from November, and three of them made actually contracted.And the Kansas City Fed manufacturing survey retreated rather sharply in January too.US new home sales came in +4.4% higher in December than a year ago, and residential building consents were up +1.8% in the same monthChina is going through a crisis of confidence, one triggered by tightening State control and lackluster economic performance. Their 'security' push to suppress news that isn't positive for the Party is corroding confidence inside and outside the country. It is particularly obvious in a transformed and chilled Hong Kong.South Korea reported a GDP expansion of +2.2% in Q4-2023 over the same quarter a year ago. This was better than expected and the +1.4% rate in Q3-2023.As expected, the ECB kept its hawkish hold position in the face of continuing inflation pressures, and it kept its quantitative tightening program. It claims credit for reducing inflation however due to its set of 2023 rate hikes.Today is a public holiday in Australia, "Australian Day". (Monday is a public holiday in Auckland.)Globally, container freight rates rose by another +5% last week as the latest supply chain pressures in the Red Sea (and the Panama drought) continue to bite. A feature of the latest changes is that trans-Pacific shipping rates are making a sharp catchup even though they are not directly involved. But still, there is no equivalent rise in rates for bulk cargoes.The UST 10yr yield starts today at 4.14% and down -2 bps from this time yesterday. The price of gold will start today up +US$2/oz from yesterday at just on US$2014/oz.Oil prices are up another +US$1 at just over US$76.50/bbl in the US while the international Brent price is now just over US$81/bbl.The Kiwi dollar starts today at 61.1 USc and unchanged from this time yesterday. Against the Aussie we are little-changed at 92.9 AUc. Against the euro we are marginally firmer at 56.4 euro cents. That all means our TWI-5 starts today just on 70.1 and essentially unchanged in a day.The bitcoin price starts today a little lower. It is now at US$39,703 and down -1.1% from this time yesterday. Volatility over the past 24 hours has been low to modest at just on +/- 1.0%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Although the war on inflation is being won, there are still battles to come and it's too soon to expect Reserve Bank interest rate cuts, says Kiwibank Chief Economist Jarrod Kerr.Speaking to interest.co.nz for the first 2024 episode of our Of Interest podcast, Kerr says the cost of living crisis is improving for households and businesses."We are winning the war on inflation but there are a few battles ahead and a few wins that we need over this year. We think inflation will fall to 3% quite quickly, but the move from 3% to 2% might be a bit awkward later this year and into next year," says Kerr.On Wednesday Statistics New Zealand's latest Consumers Price Index (CPI) showed annual inflation down to 4.7% in the December quarter from 5.6% in the September quarter. Hot on the heels of the latest inflation data, Reserve Bank Chief Economist and Monetary Policy Committee member Paul Conway is due to give a speech next Tuesday. This will include comments on NZ data released since the central bank's last Monetary Policy Statement in November.These will be the first public comments from a senior Reserve Bank figure this year. "I think we have to have an acknowledgement [from Conway] that the overly hawkish commentary from November is no longer. When you look at what they told us in November, they basically told us they've got no tolerance for upside surprises. We've had nothing but downside surprises since that statement... The GDP report came out much weaker than what the central bank [expected]," Kerr says."They gave us a clear indication that if everything goes wrong to the upside that they will hike [the Official Cash Rate] again, and they gave us a 60% probability that they would hike again. I think that was wrong at the time and it has been proven wrong now. And I think Paul may hint that suggestions of another hike in this cycle have evaporated. But equally talk of rate cuts, I think they'll be coming out and say that's premature, that's a conversation for later in the year."A key area of concern remaining for the Reserve Bank will be non-tradeable inflation, relating to inflation from domestic goods and services. This came in at an annual rate of 5.9% in the December quarter versus the Reserve Bank's 5.7% forecast. Kerr notes much of this is coming from housing related costs such as rents, helped higher by record net migration levels, insurance, and construction costs. In reality the Reserve Bank doesn't have a great deal of influence in the areas of insurance, rates and rents, Kerr says.In the podcast he also talks about the next OCR review on February 28, whether the Reserve Bank's Monetary Policy Remit to; "achieve and maintain future annual inflation between 1% and 3% over the medium-term, with a focus on keeping future inflation near the 2% mid-point," may need to change in an era of climate change and other challenges, when he expects the Reserve Bank to cut the OCR, the US interest rate outlook, the outlook for the NZ dollar, the inflationary threat from Middle East conflict, and concerns about China.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news China has rolled out what might be the first in a set of ¥1 tln stimulus/recovery moves.But first, American mortgage applications rose for a third consecutive week last week, up +3.7% even though there was little movement on benchmark interest rates. Perhaps this market is emerging from its slumbers.The 'flash' January PMI data for the US is also quite strong. Service sector activity expanded the most in seven months, while manufacturing firms continued to experience a moderate drop in output. New business expanded for the third consecutive month and at the sharpest pace since June, despite the second consecutive monthly decline in new export orders. This is not a description of a struggling economy - maybe not firing on all cylinders yet but certainly on the up.The Bank of Canada held its policy rate at 5% for the fourth consecutive time overnight. This was as widely expected, leaving benchmark borrowing costs at a 22-year high. Like its southern neighbour, it is still selling down its bond holdings via its quantitative tightening program.Japanese exports are firing impressively. They were up +9.8% in December from the same month a year ago, more than expected. And with the sharp drop in oil prices, the cost of their imports fell equally impressively, down -6.8% on the same basis. That enabled them to log an unexpected trade surplus in December. (They can probably thank the missteps from Xi and Putin for this result.)And Japan's January PMI's were all stronger, which is no surprise.In China, their central bank announced they will reduce the reserve requirement ratio (RRR) for all banks by 50 basis points to just 10% starting from February 5, releasing up to ¥1 tln to the market to try and get an economic recovery going. (They seem to have a penchant for 1 tln policy moves at present - and they are adding up.) This would be the lowest RRR level since March 2007. The PBOC had previously cut its RRR by 25 bps in both March and September last year. Additionally, starting today, they have lowered re-lending and re-discount interest rates by -25 bps, targeting the rural sector and small businesses. These announcements certainly boosted equity markets.They need a boost. German companies operating in China are less than positive even if they remain committed to staying. 83% of the 566 respondents in a survey released overnight said China “is facing a downward trajectory” economically. Nearly two-thirds said they expected a recovery to take one to three years.Although China's GDP grew by +5.2% in 2023, achieving Beijing's target of "around 5%", its nominal GDP in US dollar terms fell for the first time in 29 years as its share of the global economy shrank for the second straight year.In Europe, business activity fell at the slowest rate for six months in January, according to 'flash' PMI survey data. But downturns are persisting in both the manufacturing and service sectors as they get further falls in new orders. The overall contraction of new orders was however the smallest recorded since last June, helping stabilise employment levels and lift business optimism about the year ahead to an eight-month high.Meanwhile, the ECD has reportedly asked some banks to closely monitor activity on social media to detect a worsening in sentiment which could lead to a deposit run. While early detection might not stop a bank run like SVB or Credit Suisse, regulators and banks are eager not to be caught off guard, according to the people familiar with the regulators' thinking.In Australia, their 'flash' January PMIs were similarly underwhelming. Activity continued to decline but the pace of reduction eased alongside a slower fall in new orders. However there were improvements in business sentiment while employment levels also continued to rise. Inflation pressure fell.The UST 10yr yield starts today at 4.16% and little-changed from this time yesterday. The price of gold will start today down +US$12/oz from yesterday at just on US$2012/oz.Oil prices are up +US$1at just over US$75.50/bbl in the US while the international Brent price is still just over US$80/bbl.The Kiwi dollar starts today at 60.2 USc and -½c lower from this time yesterday (and a new two month low). Against the Aussie we are firmer at 92.8 AUc. Against the euro we are also firmer at 56.2 euro cents. That all means our TWI-5 starts today just under 70.1 and up +30 bps in a day.The bitcoin price starts today a little higher. It is now at US$40,126 and up +2.5% from this time yesterday. Volatility over the past 24 hours has been modest to moderate 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. A

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news reports of an impending large Chinese share market rescue that were enough to stop falls there yesterday.But first, it is an important day here in New Zealand because we get the Q4-2023 inflation data at 10:45am. That will set the tone for our OCR direction for the first half of the year and the related monetary policy decision-making. Financial markets expect a headline rate of 4.7%, down from the Q3-2023 level of 5.6%. Anything about these levels is still far too high, and with the RBNZ back to having a single inflation-control mandate, they have less room for patience. But as always, the detail (core, or tradable/nontradable) will be what markets are watching.In the US, their weekly monitoring of bricks & mortar retail trade by the Redbook index shows stronger gains, up +5.2% last week from the same week a year ago, notably more than accounted for by inflation. That caps the best four week run since late 2022.But another Fed district has delivered a dour factory survey, this one from the Richmond Fed. But the sluggish manufacturing situation there contrasts with a more upbeat services survey in the same region, although little-changed to be fair.In Japan, their central bank kept its key short-term interest rate unchanged at -0.1% and that of 10-year bond yields at around 0% during its January meeting. This was as expected. Meanwhile, in a quarterly outlook, they trimmed their 2024 CPI estimate to 2.4% from October's projections of 2.8%, reflecting a recent decline in oil prices. For 2025, they expect core inflation to hit 1.8%, slightly higher than its earlier estimates of 1.7%. Policymakers also cut their 2023 GDP growth forecast to 1.8% from 2.0%.Data released in Taiwan yesterday for December wasn't good. Retail sales rose only +1.1% in December from a year ago, a weak result. And industrial production actually fell -4.0% on the same basis. But this is consistent with the weak new order data we reported yesterday.In an effort to stabilise local equity markets as they head into the Chinese Luna New Year holiday (which starts on February 9), Bloomberg is reporting that Beijing is trying to mobilise ¥2.3 tln (NZ$525 bln) for a home team buying spree. Just the rumour brought a turnaround in Hong Kong, Shanghai and Shenzhen yesterday, but the big question is will it be sustained and change attitudes of investors, or will they just take the opportunity to lock in prices they wouldn't otherwise be offered. China has a history of these types of emergency responses, but few of them work. During the 2015 rout, the home team spent about ¥1.7 tln in a summer support drive but stock prices fell anyway after the state buying wound down. It was never clear how the losses were absorbed.And in their property market, newly released data for 2023 shows that foreclosures in the residential market jumped a lot from 2022, up more than +35%. There were 796,000 foreclosure auctions monitored nationwide in 2023 and 389,000 were for residential units. Non-auction foreclosures will be on top of that. The expected small improvement in EU consumer sentiment has not eventuated in January. But to be fair, it is only a minor hesitation in the broader perspective.In Australia, the NAB business confidence index climbed to -1 in December from a downwardly revised -8 in the prior month. It was the third straight month of negative readings but the softest figure in the sequence, supported by a pick-up in the mining and retail sectors.And staying in Australia, it looks like the "stage three" Morrison tax cuts for high earners are to be revised so that they shift to help those on middle and low incomes, including people earning less than AU$45,000 pa, a level ignored in the prior version. High earners who were counting on the tax break are not happy. The 37% tax bracket for workers earning more than AU$135,000 pa is likely to be retained. (Meanwhile, Scott Morrison is quitting the Australian parliament to go work for some ex-Trump Administration officials.)The UST 10yr yield starts today at 4.15% and up +5 bps from this time yesterday. The price of gold will start today little-changed, up a mere +US$1/oz from yesterday at just on US$2024/oz.Oil prices are down -50 USc at just over US$74.50/bbl in the US while the international Brent price is still just over US$79.50/bbl. Not much net change but it has been volatile in between.The Kiwi dollar starts today at 60.7 USc and -¼c lower from this time yesterday (and a two month low). Against the Aussie we are softish at 92.5 AUc. Against the euro we are holding at 56 euro cents. That all means our TWI-5 starts today just under 69.8 and down -15 bps in a day.The bitcoin price starts today lower, again. It is now at US$39,145 and down another -3.4% from this time yesterday.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news investors are marking down Chinese equities in a brutal retrenchment Beijing doesn't seem to be able to arrest. Funds are fleeing to Tokyo and the US both of which reached modern record highs.But first in the US, a closely-watched leading indicator metric slipped marginally in December even though more components rose than fell. However the improving metrics were more than offset by weak conditions in manufacturing, relatively high interest-rates, and lowish consumer sentiment. But the magnitude of monthly declines has lessened, and the LEI’s six-month and twelve-month growth rates have turned upward even if they remain negative. The 'recession; signal from this data is weakening.China's Loan Prime Rates were unchanged yesterday, not a surprise given last week's unchanged Medium-Term Lending Facility rate. The unchanged LPR rates are because their central bank is in a very tough position, having already prioritised keeping up the value of the yuan to try and hold back the equity market retreat. Lower interest rates would make it almost impossible to hold the yuan's value - and they are prepared to take the risk on economic expansion.The declining prospects for the Chinese economy can't now be avoided, even in China itself, it seems. Rare stories are surfacing about a 'deflationary nosedive'.In Taiwan, export orders fell a sharp -16% in December from the same month a year ago to under US$44 bln, far worse than market forecasts of a -0.3% fall and reversing a +1% gain in the previous month. This was the largest annual decline since June, as demand decreased for all product groups. It is a big change, but one magnified by high orders a year ago, so a base effect is in play here. A significant share of these export orders are for production in China by Taiwanese companies, so the decline won't all be felt in Taiwan.The almost halving of the nickel price over the past year is causing a messy shakeout among miners in Western Australia (and globally in fact). Mines are closing and those running are loosing big money. High inventories and very weak demand from China are behind the retrenchments. Nickel is mainly used in making alloys such as stainless steel. Among other technical industrial applications, it is used in batteries as a "critical mineral", including rechargeable nickel-cadmium batteries and nickel-metal hydride batteries used in EV and hybrid vehicles. The lithium price has fallen even further and its miners are taking a cold bath too.The UST 10yr yield starts today at 4.10% and down -3 bps from this time yesterday. Wall Street has opened its week modestly higher, with the S&P500 up +0.2% but that is a new record high. Overnight European markets were up a bit more, up +0.6% on average. Yesterday Tokyo surged again ending up +1.6% apparently driven by offshore demand. Hong Kong fell -2.3% and Shanghai a very large (for them) -2.7%. Singapore was little-changed. The ASX200 ended its Monday session up +0.8% which the NZX50 ended up a more modest +0.2%.The price of gold will start today down -US$6/oz from yesterday at just on US$2023/oz.Oil prices are up +US$1.50 at just under US$75/bbl in the US and the international Brent price is up +US$1 just over US$79.50/bbl.The Kiwi dollar starts today at just under 61 USc and marginally lower from this time yesterday. Against the Aussie we are softish at 92.6 AUc. Against the euro we are also soft at 56 euro cents. That all means our TWI-5 starts today just under 69.9 and down -10 bps in a day.The bitcoin price starts today lower. It is now at US$40,511 and down -2.6% from this time yesterday. Volatility over the past 24 hours however has been modest at +/- 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 Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with good economic news that just keeps coming even as fears don't abate.First, for those returning to work, welcome back. For those still on holiday, lucky you.This coming week we will get some grunty American data along with the meat of their earnings reports for December results. (Tesla's will be particularly interesting.) They will report their first estimate for Q4-2023 GDP, December PCE, and personal income & spending data, as well as durable goods order data. Outside the US, Japan has a rate decision, as does the ECB, Canada, Norway, Turkey and Malaysia. We will get PMIs from Australia and their NAB Business Sentiment update for December.Over the weekend, data from China showed investors are still withdrawing funds from the country on a net basis. Foreign direct investment into the Middle Kingdom fell by -8% in 2023. But although the transparency on this data is limited, there is a suggestion that there was a small improvement in the month of December from a year ago.But that may be a data mirage. Bloomberg is reporting that things are getting grimmer in Chinese equity markets. Tokyo has overtaken Shanghai as Asia’s biggest equity market, while India’s valuation premium over China has hit a record. The meltdown in Chinese share values is wreaking havoc on the nation’s asset management industry, pushing mutual fund closures to a five-year high. But you won't find any of this in Hong Kong or other Chinese analysis.Japan's December CPI inflation rate came in at 2.6%, down from 2.8% in November. And their core rate was at 2.3%, down from 2.5% in November. That is the 21st consecutive month it has been above the Bank of Japan's 2% target. But with this slippage, the central bank will likely remain very cautious that Japanese inflation is really back. 2.3% is a 17 month low even if over all of 2023 inflation was at a 41 year high in Japan. To help ensure that inflation stays embedded, Japan's government is urging businesses to raise wages ahead of annual spring negotiations between employers and labour unions. The largest union is demanding a 5% rise.In the US, consumer sentiment as measured by the widely-watched University of Michigan survey surged in January, and inflationary expectations retreated. This was a combo that was not expected, or at least, not as decisively. Sentiment is now suddenly its highest in 2½ years. Year-ahead inflation expectations softened to 2.9% after plunging in December. That current reading is the lowest since December 2020. Few analysts saw such a sharp improvement in both measures coming although it is reflective of the steady progress in the American economy in other data, especially labour market data.But American existing home sales activity dropped by -1.0% in the December month from a month earlier to an annualised rate of under 3.8 million, reaching the lowest level since August 2010 and falling below the market's anticipated 3.82 million units. For all of 2023, they sold 4.1 mln, the lowest level in nearly 30 years.North of the border, Canadian retail sales jumped in December (but after a drop in November), the sharpest increase in 11 months.Across the Atlantic, German producer deflation got "worse" in December with producer prices falling a whopping -8.6% from the same month a year ago. On an annual average basis, industrial producer prices were -2.4 % lower in 2023 than in 2022. But the December result is not all bad because a lot is due to extreme base effects. And energy prices in December were down more than -23% from the same month in 2022. Basically it is a gift from Russia. Germany is surviving a cold winter with plenty of gas and low prices.Closer to home, in Australia the IMF released the results of its annual staff review. The IMF wants to see meaningful tax reform there, and doesn't like that the markets pricing interest rate cuts in 2024. They [rightly] point out that inflation and inflation expectations are still far too high. The IMF's call for tax reform in Australia is a long-standing position - but one Canberra ignores.The UST 10yr yield starts today at 4.13% and down -3 bps from this time Saturday. In a global market that has been rising since the start of 2023, investment grade corporates have just issued a record $150 bln in debt in January - so far. It's a head-turning pace. Corporate treasurers are voting with their deals, trying to stay away from the upcoming Trump uncertainties, and betting rates will rise sharply in the future. There is also pent-up rollover demand.The price of gold will start today up +US$4/oz from Saturday at just on US$2029/oz.Oil prices are little-changed at just on US$73.50/bbl in the US and the international Brent price is still just over US$78.50/bbl.The Kiwi dollar starts the week at 61.1 USc and little-ch

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news supply-chain pressures are about to hit global trading patterns again.But first, US jobless claims were relatively low last week. In fact, seasonally, new claims fell to levels we last saw in September 2022, and continuing claims down to October 2023 levels. Those losing jobs in the US are clearly having a relatively easier time in finding new positions. No sign of labour stress here yet.US December housing starts have come in better than expected although not quite to the November levels. But they were +7.6% higher than year-ago levels. And there was a big jump (+6.1%) in residential building consents being issued, so the future looks ok for this sector.But the latest Philly Fed factory survey was downbeat, a bit like from some other regions. New order levels are shrinking but perhaps at a slower pace than previously. But shrinking all the same. This report covers an important and very large heartland manufacturing region.Yesterday the US Fed released its Beige Book summary of all these surveys for December and overall it reported little-change from an uninspiring position.In China, analysts are waiting for the official December foreign direct investment data - to see how 'bad' it is. But we have to keep in mind it is not career-enhancing in China these days to report news that doesn't show the Party in a good light.Australia shed -65,000 jobs in December from November, with a huge -107,000 retreat in full time jobs and only +41,000 extra part time jobs replacing them. Their December jobless rate stayed at 3.9%. (NZ releases its December quarter labour force data on Wednesday, February 7. The September level was 3.9%)Australian inflation expectations have settled in at 4.5%, the same in December as November. It has been sticky between 4.5% and 5% since March 2023 - at a level that the RBA is unlikely to feel comfortable with given their target is "between 2% and 3%" and there is no evidence they are moving toward that.The IEA has updated its forecasts for oil demand and they are higher for 2024, both from the Suez supply chain disruption, and from rising demand by China. Global inventories are lowish at present, especially in the US. This report, and a similar outlook from OPEC, raised oil prices today.And in China, despite the official rhetoric about becoming carbon-neutral, their coal mining output hit a new record high again in 2023, and they have plans to boost it much larger than present levels.The spreading of Middle-East tensions and fights has resulted in another very sharp rise in ocean container freight rates. They were up a stunning +23% last week and have now increased by +82% when compared with the same week last year. That is now even affecting outbound trans-Pacific routes where they rose +38% last week. Capacity demand for avoiding the Suez Canal and Red Sea have jerked things around a lot. China's factories won't be enjoying the cost consequences. Meanwhile, bulk cargo rates continue to ease.The UST 10yr yield starts today at 4.14% and up another +2 bps from this time yesterday. The price of gold will start today up +US$9/oz from yesterday at just on US$2014/oz.Oil prices are a lot firmer, up +US$2.50 at just under US$74/bbl in the US and the international Brent price is now at just over US$78.50/bbl and up US$2.The Kiwi dollar starts today at 61.1 USc and little-changed from this time yesterday. Against the Aussie we are down -¼c at 93 AUc. Against the euro we are unchanged at 56.2 euro cents. That all means our TWI-5 starts today just on 70.1 and virtually unchanged.The bitcoin price starts today lower again, now at US$41,808 and down another -1.2% from yesterday. Volatility over the past 24 hours however has remained modest at +/-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.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the strains in the Chinese economy are grabbing market attention today.But first, it is mostly upbeat economic news from the US. American mortgage applications were up +10% last week as this market shows signs of stirring again. Benchmark mortgage rates slipped with the key 30 year fixed rate down to 6.89% plus points.So it won’t be a surprise to know that the NAHB/Wells Fargo Housing Market Index rose, extending the rebound from a near-on-year low touched in November and its best level since August 2023December retail sales came in much better than expected. They were up +0.6% from the prior month, following a +0.3% rise in November and beating forecasts of +0.4%. It is the biggest increase in three months, led by sales of cars. Year on year they were up +5.6% and handily beating inflation which rate at 3.4% over the same period.Adding to today's positive vibe, US industrial production also rose more than expected in December although the bar wasn't high here. On a volume basis, it is +1% higher than a year ago.The UST 20yr bond auction today was well supported, with a median yield of 4.36%, up from the prior equivalent event a month ago at 4.15%. That is a notable rise.There was a big set of important Chinese economic releases late yesterday. As foreshadowed in Davos, China recorded a Q4-2023 GDP expansion of 5.2% which was marginally less than the +5.3% expected. The official 2023 target was "around 5.5%" so they undershot slightly. Disappointing analysts was that this was only achieved by outsized public-sector spending. Consumer spending was a drag on this result.China's industrial production grew by +6.8% year-on-year in December 2023, after a +6.6% gain in the previous month and beating market forecasts of +6.6%. It was the fastest recorded pace of expansion in industrial production since February 2022 and electricity production rose +8.0% which supports the industrial production claim.However their housing development retreat deepened in December. And new house prices fell at their fastest pace since March. Prices for pre-owned units fell faster and everywhere.Meanwhile, China's population is declining faster now, as deaths rise above norms. The number of people in the world’s second-largest economy fell for a second year to 1.41 billion in 2023. The Chinese population started shrinking in 2022 for the first time since 1961.We should also note the Chinese Lunar New Year runs this year from January 26 to March 5. It is the Year of the Wood Dragon. It is also the first post Covid period where family travel is high. In the middle, Spring Festival, China's biggest festival, will fall on February 10. Passenger trips via railway, highway, waterways, and civil aviation are expected to hit 1.8 billion during the period officials predicted. About 80% of the trips will be by car, which are likely to hit a new high. They also expect Covid to spike and spread during this gigantic travel and intermingling.Both S&P and Moody's issued separate global reports overnight for 2023 that showed sharply higher funding costs are resulting in many more corporate defaults. The 12 month trailing corporate default rate rose to 4.8% in December, the highest rate since May 2021. Although almost half the defaulters they rated were in the US, Europe was where the biggest increase came from. And in 2024 it is the "media and entertainment" industry that is the most vulnerable.In Australia, they are getting to realise that rate cuts may not be on the agenda as soon as they had priced in. And in Canberra yesterday at a long press conference, the Chinese ambassador took a tough line over Australia's complimentary comments about the free and fair democratic voting in Taiwan. There seems to be a cooling underway in China-Australia relations not long after a thawing had started.Locally, the REINZ will release its December transaction data at 9am this morning. We will have full coverage.The UST 10yr yield starts today at 4.12% and up +4 bps from this time yesterday. The price of gold will start today down another -US$22/oz from yesterday at just on US$2005/oz.Oil prices are softer at just under US$71.50/bbl in the US and down by another -50 USc. The international Brent price is now at just over US$76.50/bbl and down almost -US$1.The Kiwi dollar starts today at 61 USc and down almost another -½c from this time yesterday. Against the Aussie we are holding at 93.3 AUc. Against the euro we are lower at 56.2 euro cents. That all means our TWI-5 starts today just under 70.1 and -30 bps lower.The bitcoin price starts today lower, now at US$42,308 and down -1.9% from yesterday. Volatility over the past 24 hours however has remained modest at +/-1.5%.You can find links to the articles mentioned today in our show notes.You c

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news expectations for US Fed rate cuts in 2023 were scaled back by financial markets overnight on Fed-speak commenting. Benchmark bond yields rose.But first, the overnight dairy auction was a 'good' one with prices up +2.25% in USD terms, and boosted by a falling NZD to be +4.1% higher on the local basis. Most products got better prices, especially butter which was up +5.8% from the prior event two weeks ago. The key WMP was to +1.7%, but that was enough to take it back to a level that we had not seen in more than a year. SMP was up +1.2%. Today's event helps underpin the better farmgate payout levels analysts had expected late in 2023.In the US, the New York Fed's Empire State factory survey delivered a fierce blow, diving sharply. New orders and shipments also posted sharp declines. The headline general business conditions index fell twenty-nine points, its lowest reading since May 2020. Perhaps oddly however, their expectations of future activity rose just as sharply and while still subdued, clearly firms don't expect the current drop-off to continue into 2024.Meanwhile a national household survey, also released by the New York Fed, showed a continuation of the recent declining trend in monthly household spending growth, even though spending growth remains well above pre-pandemic levels.In Canada, December inflation rose to 3.4% in December from 3.1% in the previous month, a rise that was expected - but probably not welcomed by their central bank all the same.They would have been pleased by the very good rise in housing starts in December, however.In China, Bloomberg is reporting that China is considering ¥1 trillion (NZ$225 bln) of new debt issuance under a so-called special sovereign bond plan, only the fourth such sale in the past 26 years, as authorities seek more money to finance intensifying efforts to shore up the world’s second-largest economy.Meanwhile in Davos, a senior Chinese official said the 2023 GDP economic expansion would come in at 5.2% for his country. Apparently there are no inhibitions there for officials releasing market sensitive data early.The ECB survey of inflation expectations shows it trending in the desired direction there. Median consumer expectations for inflation over the next 12 months dipped to 3.2% in November, marking the lowest rate since February 2022 and down from the previous month's 4.0%.Also better than expected, the German ZEW sentiment survey rose again for a fifth consecutive time to its highest level since February 2023.In Australia, the Westpac-Melbourne Institute Consumer Sentiment index fell -1.3% in January from December, remaining in negative territory now for nearly two years. A surge in the cost of living and high interest rates continued to dominate sentiment. The index has been below the 100 mark since February 2022, the longest streak since the early 1990s recession.The UST 10yr yield starts today at 4.08% and up +10 bps from this time yesterday. The price of gold will start today down -US$28/oz from yesterday at just on US$2027/oz.Oil prices are marginally softer at just under US$72/bbl in the US and down by -50 USc. The international Brent price is still at just under US$77.50/bbl.The Kiwi dollar starts today at 61.4 USc and down another -½c from this time yesterday. Against the Aussie we are holding at 93.2 AUc. Against the euro we are almost unchanged at 56.5 euro cents. That all means our TWI-5 starts today just under 70.4 and -10 bps lower.The bitcoin price starts today having turned up, now at US$43,116 and up +1.5% from yesterday. Volatility over the past 24 hours however has remained modest at +/-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 tomorrow.