Economy Watch

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 in the shadow of closed American markets.First, remember today is a public holiday in the US - Martin Luther King Birthday. Both the bond and stock markets are closed.First we should note that the Davos talkfest is underway again. It will have no impact this year despite the headlines it generates, just as it hasn't had for years. But both China and Hong Kong senior officials will be there to try and divert attention from Taiwan's free elections and Hong Kong's recent clampdown moves.In China, their central bank did not cut its medium term lending facility rate as was expected. It held it at 2.5%. But it did add much more to banking system liquidity, a +¥216 bln (+NZ$47 bln) net injection from its overall ¥995 bln (NZ$222 bln) offering yesterday. This was a surprise (unexpected) move. Markets are now absorbing the implications of these two policy actions.In Canada, the Business Outlook survey run by their central bank reported further declines in sentiment and now there is barely more 'positive' views than 'negative' ones. If anything the negative momentum is building. Almost 40% of firms surveyed said that are suffering sales declines. The same survey found that price pressures are easing however.Japanese machine tool orders revealed a recent recovery in December, up +9.2% from November driven by strong local orders, up more than +15% on the same basis. These recent gain a reduced the year-on-year deficit to under -10% and its least since late 2022.Indian exports rose strongly in December from November, up +13% on that basis, but were only +1% higher than the same month a year ago. The Red Sea choke effects haven't hit them yet.EU industrial production withered further in November, down -0.3% from October to be -5.8% lower than the same month a year ago. It is not a healthy track overall, but was particularly hurt by Ireland, Belgium and the Netherlands. Showing good gains were Denmark especially, but also Sweden. Even France managed a year-on-year rise. But not so Germany. (If the UK was still included, it would have been a drag too, although not by as much as the average.)Meanwhile, Germany released its full year 2023 GDP result which recorded a small -0.3% drop. That was far worse than the +1.8% expansion in 2022 although it was what was expected. The 10 year long-run annual gain has been +1.2% so 2023 was disappointing all round for them and they had the dubious distinction of being the worst performing major economy in 2023. But they are not yet in "recession" if your definition is two straight declining quarters; despite the -0.3% drop in Q4 from Q3, their Q3 change was revised to be flat.In Australia, there has been a rather remarkable legal decision handed down relating to a gas pipeline proposal and "cultural heritage". Justice Natalie Charlesworth rejected claims on behalf of a group of Tiwi Islanders that the proposed pipeline would damage Sea Country and anger two creatures of their Dreaming stories – Ampiji, the rainbow serpent and the Crocodile Man. Her judgment slammed the evidence based on “cultural mapping” presented by the taxpayer-funded Environmental Defenders Office as “so lacking in integrity that no weight can be placed” on it and said there was “a significant degree of divergence” in the evidence given by Tiwi Islanders. She called the EDO positions "confection" and "made up" by their lawyers, and not supported by the Tiwi Islanders themselves.The UST 10yr yield starts today at 3.98% and up +4 bps from this time yesterday. The price of gold will start today up another +US$6/oz from yesterday at just on US$2055/oz.Oil prices are marginally softer at just under US$72.50/bbl in the US and down by -50 USc. The international Brent price is now at just under US$77.50/bbl.The Kiwi dollar starts today at just under 62 USc and down almost -½c from this time yesterday. Against the Aussie we are down -¼c at 93.1 AUc. Against the euro we are almost -½c lower at 56.6 euro cents. That all means our TWI-5 starts today just on 70.5 and -40 bps lower.The bitcoin price starts today lower again, now at US$42,485 and down another -1.0% from yesterday. Volatility over the past 24 hours however has been modest at +/-1.5%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand 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 inflation's impulse seems to be easing worldwide.In the week ahead, the big international data will focus on the Q3 Chinese GDP result on Wednesday. In the US, the data will be second tier this coming week, although Q4 earnings reports will be released in a swelling tide. We will get some European CPI data and the same from Japan.Locally, we could get REINZ December data this week too depending on how fast agencies got their reports in over the holiday period.Over the weekend, China's new yuan lending for December came in well short of what was expected. Beijing is clearly having trouble getting funding out of its large policy banks. The December +¥1.17 tln was marginally higher than in November but well short of the expected +¥1.4 tln. In their context ¥1.4 tln isn't large by historic standards. And the +10.4% rise from a year ago is very low by Chinese standards - in fact a record low expansion on that annualised basis. China's exports rose from US$292 bln in November to US$304 bln in December, a +4.0% rise and a bit more than expected. They were up +2.3% from the same month a year ago. But the good December result - aided by a depreciated currency - masks that for all of 2023 exports dropped -4.6% from the record 2022 level.Helping the December result was that producer prices fell -2.7% in China, quite a different pressure than the virtual no change in December 2022.And as expected, consumer inflation was negative - that is, deflation - with prices -0.3% lower in December than the same month a year ago. This was slightly "less worse" than expected, and is the third month in a row of year-on-year deflation. But that is their longest deflation streak in 14 years. Overall food prices rose +0.6% in the month to be -2.0% lower than a year ago. But beef prices are -6.0% below year ago levels, lamb -5.7% down, and milk down a lesser -0.9%.The Taiwan election result delivered a tough outcome for the winner, the China-sceptic DPP candidate. Lai Ching-te won by a comfortable margin though with less than half the vote, but his party lost control of parliament on which the president-elect will have to rely to pass legislation and spending.Indian industrial production momentum fell away in November. It was up +2.4% from a year ago, marking the lowest reading since March last year, following a downwardly revised +11.6% growth in October. Analysts had expected November to expand by 4%. Output decelerated sharply across all key sectors. Meanwhile consumer inflation ticked up slightly in December, up to 5.7%, above the November 5.4% but less than the expected 5.9% rate.American producer prices unexpectedly fell in December from November but only by a tiny amount. That means that their producer prices were up only 1.0% in the year, up from a rise of +0.8% in November on that basis. A year ago US PPI was rising at a +6% rate. This latest PPI data was less than expected.The January edition of the USDA's WASDE report forecasts lower American beef exports in 2024 and higher imports from Australia and New Zealand. The American milk production forecast is lowered too.We should also note that for all states and the US Federal Government, it will be a holiday tomorrow, Martin Luther King Day. American stock and bond markets will be closed. In Australia, they set their milk price for dairy farmers at AU$9.44/kgMS once a year in June. That is a mandated, government policy. Since then international prices for dairy products have dived significantly. In New Zealand, our June price was NZ$8.75/kgMS. But as prices retreated it has been eased back to NZ$7.50/kgMS. However the Aussie price is still AU$9.44/kg. That makes Australian dairy products very expensive locally, makes exporting from there near impossible - and it encourages imports. In fact because we have full access to the Aussie market under CER, our exports dairy to have surged, for some products by more than +60%. More is to come. Some local Australian dairy facilities are in threat of closing, some already have. It is all a lesson in the folly of a government-mandated price "to protect farmers". It will end up hurting them more. It is clearly much better to have market signals all the way down the supply chain.The RBNZ reported that the total value of our housing stock as at the end of September rose by +$27.6 bln from June to $1.59 tln. That was the first quarter-on-quarter rise since December 2021, although a year ago this value was $1.63 tln, so it is still some way down on that basis and still -$172 bln lower than the peak in December 2021. Over that time we have been building new houses, aggressively in some places (Auckland), so that data shows the per-dwelling value down more than -13% from that peak, nationally, a retreat of -$118,000 per dwell

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 have a quick news wrap-up so you can get back to your 'time-off'.First, American inflation has proved more sticky than markets had hoped, up to 3.4% in December, a rise from a five-month low of 3.1% in November. Market had expected a 3.2% rate. Energy prices went down at a slower pace as did food prices and rents. Core inflation came in only marginally lower than the prior month at 3.9% when a fall to 3.8% from the prior 4.0% was expected.US equities retreated in the news and bond yields rose marginally, with investors less certain a US Fed rate cut is coming soon.Meanwhile the signals from their labour market remain strong. US jobless claims fell last week from the low seasonal level the prior week. This data is still not revealing the long-expected labour market stress market bears have been warning about.Meanwhile we should note that Hertz is selling down its EV rental fleet in the US, reverting to ICE cars. Hertz previously set a target for 25% of its fleet to be electric by the end of 2024 but high operating costs mainly related to collision damage, and very weak resale values have them reassessing the move. They will take a -US$250 mln witeoff related to the move.The latest US 30 yr bond auction brought a median yield of 4.16%, down from the prior 4.28% a month ago. Both were well supported with competitive bidding.In China, December vehicle sales data for December is out revealing a record high 3.15 mln units sold in the month, and taking the annual total to just over 30 mln and also a new record high. NEVs accounted for 9.5 mln units for the year (no, China is not an all-electric market yet). Even for December NEVs sold almost 1.2 mln but that was only just over a third. (You may recall, New Zealand NEV car sales in December were more than 80%.)We will get China's December CPI inflation rate today at 3pm. Expect deflation again of -0.4% for the year after a -0.5% retreat in November.In Norway, with an 80:20 approving vote, their parliament pushed ahead with commercial plans to open the Arctic Ocean to seabed mineral exploration. That was despite environmental groups and the fishing industry’s warnings that the move would put the biodiversity of vulnerable ecosystems at risk.Globally, containerised shipping freight rates rose again last week to be +15% higher than the surge the prior week, again all about the Red Sea risks. China to Europe rates were up almost +25%. Transpacific rates to the US barely changed. Going the other way, bulk cargo rates retreated rather sharply this week.Australian exports rose to AU$46.3 bln in November, +1.7% higher than October but -8.2% lower than a year ago. Meanwhile imports slipped rather sharply, down almost -8% from October, so their trade surplus got a boost to +AU$11.4 for the month.Locally we should note that the new head of the Insurance Council is Kris Faafoi, replacing retiring Tim Grafton. Faafoi is an ex-minister in the previous Labour Government. He will start in the role in April.The UST 10yr yield starts today at 4.03% and up +3 bps from this time yesterday. The price of gold will start today down another -US$9/oz at just on US$2017/oz.Oil prices have risen +US$1 to be now just over US$73/bbl in the US. The international Brent price is now just over US$78/bbl.The Kiwi dollar starts today at 62.1 USc and -10 bps softer from yesterday. Against the Aussie we are little-changed at 93.3 AUc. Against the euro we are marginally softer at 56.7 euro cents. That all means our TWI-5 starts today still just under 70.7.The bitcoin price starts today slightly firmer, now at US$46,017 and up +1.1% from this time yesterday. Volatility over the past 24 hours however has been very high at +/-4.3%. At one point bitcoin got up to US$49,000 but has retreated most of that since. In a 3-2 split vote, the SEC has approved the establishment of Bitcoin exchange traded funds. Now rather than storing Bitcoin in online wallets, speculators in Bitcoin ETFs would own shares in funds containing the digital currency.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 have a quick news wrap-up so you can get back to your 'time-off'.First, after the sharp fall in the two week Christmas holiday period, American mortgage applications recovered as strongly last week. Average mortgage rates were little-changed at 6.81%, plus points.More generally, Bloomberg is reporting that most large economies are about to issue very large volumes of bonds in 2024, almost US$2.1 tln worth and a +7% rise from 2023. This comes at the same time central banks are selling down their own holdings. It will be up to private investors to take up these unprecedented volumes and there is likely to be strong upward pressure on interest rates as a consequence. European bond sales have already hit a record this week at more than €108 bln, and there’s still two days of issuance to go.Meanwhile, an ECB official says the eurozone needs to be ready for another downturn.Tomorrow we will get the US CPI data and that is expected to come in little-changed at 3.2% and well above its policy targets. This, along with still-strong labour markets probably means the bond market pricing of five -25 bps rate cuts in 2024 might be somewhat aggressive.And we are also likely to get China's new bank loan data for December which is widely expected to come it at +¥1.4 tln (+NZ$315 bln) and a sharp increase from the November ¥1.1 tln. That would take the 2023 bank debt increase to a massive +¥23 tln (+NZ$5.2 tln) which incidentally is more bank debt issued than the 2023 GDP of countries like the UK. Beijing is pushing out new debt at scale as a way to keep its economic activity expanding, using its five big policy banks as the funnel for most of it.In Australia, they released their November monthly CPI indicator which rose at a 4.3% rate. That however is down from 4.9% on October and 5.6% in September; going the right way but still far above where they need it to be.Interestingly, the fastest rises were for insurance premiums, up more than +16%. And a new report out overnight noted that more than 0.5 mln Aussie homes will be uninsurable by 2030.That same report identified the top five risks for New Zealand, in order, as the cost-of-living crisis, rapid and/or sustained inflation, natural disasters and extreme weather events, an asset bubble burst, and a debt crisis.Locally, we will get November building consent data later this morning. Yesterday, ANZ said 2023 ended with a little momentum in card spending in their monitoring of customer card use. However they noted that spending on durables and clothing was particularly weak, while spending on utilities and miscellaneous spending is growing faster than other types of spending. However they put some of this 'strength' down to outsized inflation.Meanwhile commodity prices ended the year on the up. The ANZ World Commodity Price Index gained +2.4% in December from November, seeing it end the year down just -1.8% from a year ago. Dairy prices improved to drive the index higher, more than offsetting weaker aluminium prices. In New Zealand dollar terms, the index lifted a lesser +1.9% from November as the NZ dollar gained +2.4% against the trade weighted index.With job ads falling rather quickly locally it is perhaps surprising that the latest employment data for November reveals an expanding workforce. Most of the recent growth was from the primary and factory sectors, also somewhat unexpectedly given the economic struggles in both. The slowdown in earnings per filled job growth reflects a labour market that is loosening from its tight stance earlier in 2022 and early 2023, with the war for talent more or less over and reducing the pressure for higher wages from “high” to “moderate”.Globally, demand for air cargo seems to be recovering well. No doubt it will be getting a further boost with the Red Sea / Suez problems. Volumes were up +8.1% in November from a year ago and now down only -3.1% from November 2019. Asia Pacific volumes are up +9.8% from a year ago, but have more to climb to get back to equivalent 2019 levels.Global passenger traffic seems fully recovered. Total traffic in November rose almost +30% compared to a year ago. And that almost matches its November 2019 levels. But there is still some way to go in the Asia/Pacific region where we still lag -17% for international travel, almost all due to Chinese tourists staying at home.The UST 10yr yield starts today at 4.00% and down a mere -1 bp from this time yesterday. The price of gold will start today down another -US$4/oz at just on US$2026/oz.Oil prices have slipped -50 USc to be now just over US$72/bbl in the US. The international Brent price is now just over US$77/bbl.The Kiwi dollar starts today at 62.2 USc and -20 bps softer from yesterday. Against the Aussie we are down -¼c at 93.3 AUc. Against the euro we

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 have a quick news wrap-up so you can get back to your 'time-off'.First, American retail is still rising at an increasing rate, up +5.9% last week on a bricks & mortar same-store basis. The gains above inflation are mounting, with Q4-2023 putting in an impressive performance and this latest data for the first full week of January continuing that trend.It looks like the American economy will post another solid expansion in Q4-2023.Meanwhile the consumer debt data we were awaiting yesterday has been released, and it expanded far more than we were expecting, driven in large part by "a big jump" in the use of credit cards. To be fair the "big jump" is only the seasonally adjusted change from October; year on year it is +9.5% higher and that is its slowest gain in 22 months. The dollar rise actually isn't anything special either with single month rises in 2022 and 2021 outshining November 2023. There is actually a slowing in credit card debt rises, not the quickening that some 'analysts' jumped to when they saw the s.a. result.The US logistics managers index (LMI) rose into expansion in December, led by better warehousing utilisation and prices and rising transport utilisation.But both US exports and imports fell in November (goods and services), with imports falling a bit more so narrowing their trade deficit situation and an improvement that has been evident all year.Canadian goods exports slipped -0.6% in December from November to be +3% higher than a year ago, ending a strong run of monthly rises starting mid-2023. Their exports to the US and China held up, but to other countries - mostly the EU - were for almost -5% lower in the month.Taiwanese goods exports soared almost +12% in December from the same month a year ago, driven by good demand for its electronics of course. That was a shar0p gain from November’s 3.8% rise and well above market expectations of a 5% increase. It is the largest growth since July 2022.Australia posted good retail sales data for November yesterday. Retail sales in Australia rose by +2.2% from the same month a year ago and although this exceed market estimates it is still undershooting inflation. Despite that, it was the strongest pace in retail trade since November 2021, boosted by Black Friday events.Overall Australian building consent levels came in at modest levels in November but were still better than expected. But house building is a real drag; it is the multi-unit projects that are still being consented quickly. Year on year, overall consents were down -4.6% from the same month in 2022. Houses were down -6.2% on that same basis, but multi-units were up +0.8%. Month on month, multi units were up +6.7%. It is not a happy time for Aussie housebuilders, but ok for the big apartment builders.Elsewhere in Australia, their resources industry it taking some lumps. Plant closures at both aluminium and nickel refineries have been announced and it just seems a matter of time before lithium miners will retrench too. But at least the iron ore price is holding.On their domestic front, their peak financial complaints system said they feel overwhelmed by the current levels, with more than 100,000 complaints received in 2023, up +23% from 2022. Compensation they awarded exceeded AU$300 mln, up +38%.Globally, food prices eased substantially in 2023, and ended with dairy prices rising and meat prices falling. Global food security wasn't as stressed in 2023 as many were expecting.And staying global, the World Bank says the global economy is set to grow at its slowest pace since the pandemic, up just +2.4% in 2024. They said higher interest rates were a major factor in stunting expansion and that trade and investment would continue to be stifled by wars. At +2.4% it would be the weakest since the GFC (pandemic excepted). The also said that the good expansion in the US meant that 2023 expanded +2.6% globally.The UST 10yr yield starts today at 4.01% and up +3 bps from this time yesterday. The price of gold will start today down -US$3/oz at just on US$2030/oz.Oil prices have recovered from yesterday's drop, up +US$2.50 at just over US$72.50/bbl in the US. The international Brent price is now just under US$77.50/bbl.The Kiwi dollar starts today at 62.4 USc and marginally softer from yesterday. Against the Aussie we are up at 93.3 AUc. Against the euro we are firmer too at 57.1 euro cents. That all means our TWI-5 starts today just under 70.9 and marginally firmer from this time yesterday.The bitcoin price starts today much higher, rising to US$46,831 and a jump of +4.1% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 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 Zeal

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 have a quick news wrap-up so you can get back to your 'time-off'.Firstly, for those who missed yesterday's update, we now expect the Barfoot December results tomorrow (Wednesday).We start today in the US, with lower inflation expectations for both food and rent that are depowering price increases there. Consumer inflation expectations for the year ahead fell for a third consecutive month to 3% in December from 3.4% in November and the lowest level since January 2021.American consumer debt levels are due later this morning and only a modest +US$9 bln rise is anticipated.Meanwhile, the US Fed balance sheet was reduced by a net -10% to US$7.7 tln in 2023, and this was despite the emergency addition of almost US$400 bln in March to cover their SVB/regional banking crisis. That lost them three months of progress.And we should perhaps note that in the wake of the latest Boeing 737MAX troubles and fleet grounding, Air New Zealand does not have any of these aircraft. Boeing's stock suffered a sharp -10% fall yesterday but no more today.In the EU, overall sentiment recorded a moderate gain in December, perhaps a surprise given their lackluster recent economic performances. The rises were driven by higher confidence among consumers, and managers in retail trade, services, and construction, while confidence in industry remained broadly unchanged.Maybe part of that improvement can be attributed to a good rise in November exports from Germany, and a modest rise in November factory orders there.We should also note that from the start of 2024, all Chinese tariffs on New Zealand dairy products expired and these exports are duty-free into China now. China is our largest export market, taking more than 34% of dairy exports. Likewise, New Zealand is China’s largest source of dairy imports, accounting for 46% of China's total dairy imports. Chinese firms have bought up Westland Milk, Oceania Dairy, as well as being involved in exporting both fresh milk and infant milk powder products, and these direct ownership links have powered these exports.The UST 10yr yield starts today at 3.98% and down -7 bps from this time yesterday. The price of gold will start today down -US$12/oz at just on US$2033/oz.Oil prices are sharply lower, down -US$4 at just over US$70/bbl in the US. The international Brent price is now just under US$75.50/bbl. A surprise price cut by Saudi Arabia has jolted this market - mainly because the Saudi's feel they have been gamed by Iran, Russia, and a number of other intermediate producers like Angola and Nigeria.The Kiwi dollar starts today at 62.5 USc and marginally firmer from yesterday. Against the Aussie we are holding at 93 AUc. Against the euro we are softer at 56.9 euro cents. That all means our TWI-5 starts today just under 70.8 and little-changed from this time yesterday.The bitcoin price starts today higher again, rising to US$44,972 and a further gain of +2.4% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.4%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to 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 have a quick news wrap-up so you can get back to your 'time-off'.In the week ahead, we will be on the lookout for the Barfoot December sales result. It in fact may come later this morning if last year's schedule is any indication.In the United States this week, the main focus will be on December inflation rates, followed by exports, producer prices, and speeches by Fed officials. Also, Switzerland, Mexico, Brazil, Australia and India will unveil their CPI figures.It will be a busy week in China who will release consumer and producer inflation updates, export data, and new yuan lending data. Germany will release factory orders, industrial production, and exports data too. And a range of countries will update their jobless rates for December, including the Euro Area, Italy, Turkey, South Korea, and the Philippines.In China, they released their December foreign exchange reserve data over the weekend and it showed a big jump, rising +US$66 bln to US$3.24 tln. This was more than expected, and is now at its highest level since December 2021 and the second highest since December 2015. Much of this change however was because of exchange rate changes rather than inflows. The yuan rose +0.5% against the US dollar, while the dollar fell by -2% against a basket of other major currencies. At the same time, China's gold reserves increased by +US$2.5 bln to just over $148 bln.On Friday, a Beijing court placed Zhongzhi Enterprise Group (ZEG) into bankruptcy. It has been a major player in their US$3 tln shadow banking sector and has lent billions to real estate firms. Zhongzhi has US$64 bln in debt and now far more than its fast-depreciating property loan base. It will not end well for its managers (some of whom have skipped town).And they may be joined by some carmakers in 2024. Bloomberg is reporting that only four of the 13 brands that have disclosed annual sales figures accomplished their 2023 targets, with many missing by wide margins. A consolidation is due, but for those that aren't picked up, it could be a messy end. Overall, momentum loss is affecting one of China's big three economic regions.In Japan, consumer sentiment rose in December and to its best level in two years.Singapore retail sales made some sort of recovery in November after falling in October. They are now +2.5% higher than in November 2022.In the US their giant labour market has impressed with more job gains than expected. The headline expansion was +216,000 when a gain of about +170,000 was anticipated. This is the employer payroll data. They also survey households and that reported a fall, something unusual in the November to December period. For the full year, payrolls rose +2.7 mln, whereas the household survey reported a gain in employment of +1.9 mln for the year. It seems workers are shifting out of self-employment on to employer payrolls.Average weekly earnings rose +3.8% for the year in this survey, enough to best inflation but not by much. But the pace slowed in December from November, so this is one to watch.Meanwhile, the ISM services PMI delivered only a minor expansion in December, although new order growth was good. Prices rose slower, a +0.9-percentage point decrease from the November. But that wasn't as fast a decline as the ISM factory survey showed, a -4.7 percentage point decrease.But overall American factory order growth recorded its best rise in three years, a +2.6% expansion pace in November from October, and +3.3% year-on-year.This weekend data probably pushes back when the US Fed will feel a need to start trimming rates. The current sanguine situation may well have them keep current levels for some time. But this is not the scenario that bond markets have assumed.Canada disappointed in its labour market change in December, with virtually no change from November when a +13,500 rise was expected and after a +24,500 rise in November. Worse, full-time employment fell -24,000 jobs and part-time employment rose +24,000 jobs. They will be quite disappointed in that.European inflation seems sticky above levels they want to see, according to the December data. While lower energy costs are certainly helping, food costs are not. Their +6.9% pa rise in food costs and -11.9% fall in energy costs balanced out to a +2.9% rise in overall inflation in December, up from +2.4% in November. In Germany, inflation is running at 3.7%.A sharper than expected pullback in November German retail sales won't hep either as those price pressure mount.The UST 10yr yield starts today at 4.05% and up another +2 bps from this time Saturday. The price of gold will start today up +US$4/oz at just on US$2045/oz.Oil prices are +50 USc higher at just under US$74/bbl in the US. The international Brent price is still just over US$78.50/bbl.The Kiwi dollar st

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 a quick news wrap-up so you can get back to your 'time-off'.We are still seeing geopolitics and great power rivalry upending some parts of the global economy, and oil prices as a consequence, but generally conditions are quite stable-to-positive which is perhaps a bit of a surprise in the circumstances. The latest set of US Fed meeting minutes set the scene for more 'normal' market conduct.First up, markets are turning their attention to the US labour market again, a market the bears have thought would be tanking by now (they have expected a rise in joblessness there monthly for more than two years now). But they may be disappointed yet again and have to reach deeper into their excuse box. The December non-farm payrolls report is out tomorrow and analysts now expect a +150,000 gain.Today, US jobless claims came in lower than expected and a decrease from the prior week. Seasonal factors had anticipated a rise in claims, but it was not to be. There are now 1.89 mln people on these benefits, and insured jobless rate of 1.3%.American employers announced the fewest job cuts since July, just 34,817 in December, down -24% from 45,510 in November. Announced layoffs fell -20% from December 2022.The pre-cursor ADP employment report anticipated a payroll gain of +115,000 in December, but delivered a +164,000 rise in filled jobs, driven by big gains in California which accounted for about half the rise. This same December report shows that pay rose +5.4% for people who stayed in their jobs, and by +8.0% for people who changed jobs. This is more evidence that workers are making real pay gains in this labour market.The first of the two reports on the services sector in the US in December is out and it underpins the stronger labour market data. It reports the fastest upturn in new business since June which is spurring the rise in activity, and employment growth rose its quickest in six months. The ISM services report will be out tomorrow. From an historic perspective the pace of this expansion isn't notable, but it certainly isn't a contraction.But sadly, Canada cannot claim the same. Its services sector was shrinking in December and at a faster pace.In China, the Caixin services PMI reported an activity expansion at its quickest pace for five months in December (52.9). This is in marked contrast to the official services PMI which found barely any expansion (50.4) in the firms they surveyed. The Caixin survey found better underlying market conditions and greater intakes in new business.Germany reported its December inflation rate at 3.7% which was up from 3.2% in November. But this was basically because of base effects on energy costs, and their core inflation rate continues to track lower, now at 3.5% and its lowest rate since mid-2022.In Australia, insurer IAG said they have more than 17,000 severe weather claims from recent Queensland and Northern NSW storms. This will hit the insurer and others like Suncorp who say they have 19,000 claims from the same events. The blowback could well accelerate premium rises and coverage restrictions in future that include New Zealand. The effect of climate change at work.And staying in Australia, evidence is mounting that CBA's stand against home loan rate cutting can't be sustained as rivals eat away at their market share. You will recall this reticence drove ASB to avoid low margin deals, and that too saw its share shrink. Now there appears to be a change of heart within CBA that has them actively defending their portfolio. ASB will no doubt fall into line as well and now be more active.The Suez Canal / Red Sea shipping risks are roiling global container freight rates. These jumped an outsized +61% last week. Even trans-Pacific rates rose a sharplish +30%. But the really big increases were for China to Europe routes where prices rose more than +110% in a week. However, it is equally notable that bulk cargo rates have moved little over this same period.The UST 10yr yield starts today at 4.01% and up +11 bps from this time yesterday. The price of gold will start today up +US$10/oz at just on US$2043/oz.Oil prices are -50 USc softer at just under US$72.50/bbl in the US. The international Brent price is now just over US$77.50/bbl.The Kiwi dollar starts today at 62.2 USc and +20 bps lower than this time yesterday. Against the Aussie we are holding higher at 92.9 AUc. Against the euro we are more than -¼c lower at 56.9 euro cents. That all means our TWI-5 starts today just on 70.6 and down -10 bps.The bitcoin price starts today higher, bouncing back up to US$44,085 and a gain of +2.7% from this time yesterday. Volatility over the past 24 hours has been extreme at just under +/- 5.7%.You can find links to the articles mentioned today in our show notes.You can get more new

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 a quick news wrap-up so you can get back to your 'time-off'.First, the closely-watched US ISM factory PMI contracted again in December, but by less than expected and less than in November. But the number of months in contraction is now mounting; now its 14th straight month, the longest string since 2000-2001. New order levels remained weak.But despite a key strike, and chip shortages earlier in the year, America's General Motors came out on top in their 15.5 mln vehicle sales market in 2023, edging out Toyota for the top spot - again.US job openings eased slightly in November from October to 8.8 mln. This caught the attention of financial markets because this is now a 13 month low, but to be fair it is very little changed from October and has been hovering at this level since July.Also falling, and quite sharply, were mortgage application levels in the US. And that was even after adjusting for the holiday period. Mortgage interest rates were stable at 6.76% plus points.But expanding, and at a faster pace now were retail sales at traditional outlets. They were up +5.6% from the same week a year ago in a rising pace, solid real increases and much more than can be accounted for by inflation.India's factories ended 2023 with a good but easing expansion. However that expansion remains above its long-run trend levels. They had substantial rises in new orders and production, and managed to keep its input cost inflation down, now its weakest rise in more than three years.In China, it is now very tough being a new graduate and looking for work. Average starting pay offered to new hires in 38 key Chinese cities fell -1.3% to ¥10,420 per month (NZ$2,350/month) in Q4-2023 from a year ago. That was their worst drop since at least 2016 when this data started to be collected, according to data from a national online recruitment platform. And it is worse in some very big centers. In Beijing, starting salaries decreased -2.7% from a year ago and they have been falling all year. In Guangzhou they fell -4.5%.In Australia, the house price juggernaut seemed to run out of steam in December. Sydney prices were little-changed and Melbourne prices actually fell. But for all of 2023 they did manage an +8.1% rise overall, with Sydney up +11.1%, Melbourne up a much more modest +3.5%, Brisbane was up +13.1% and Perth roaring ahead, up more than +15% for the year. Although Brisbane, Adelaide and Perth maintained the pace in Q4, that was not the case in either Sydney or Melbourne and questions are rising about a 2024 reversal.Rising, and at a faster pace is the price of iron ore, now up at US$145/tonne, a gain of +18% in a little over a month, and up +30% in six months. Australia's budgets (state and federal) are all being fattened by this rise.The UST 10yr yield starts today at 3.90% and down -5 bps from this time yesterday. Wall Street has started today down -0.3% in Wednesday trade on the S&P500. The Nasdaq is down another -0.6% so far. Overnight European markets all fell sharply, with London down -0.5%, Frankfurt down -1.4% and Paris down -1.6%. Yesterday Tokyo did not trade as it is a standard holiday there. They should be back today. Hong Kong fell another -0.9%. Shanghai however rose +0.2% as the home team came out to stabilise things. On the other hand, the ASX200 fell -1.4% yesterday. In its first day of trading this year, the NZX50 closed down a more modest -0.3%.The price of gold will start today down -US$29/oz at just on US$2033/oz.Oil prices are +US$2.50 higher at just under US$73/bbl in the US. The international Brent price is now just over US$78/bbl.The Kiwi dollar starts today at 62.4 USc and only marginally different from this time yesterday. Against the Aussie we are nearly +½c higher at 92.8 AUc. Against the euro we are marginally firmer at 57.2 euro cents. That all means our TWI-5 starts today just on 70.7 and up +10 bps.The bitcoin price starts today much lower at US$42,945 and retreating -4.8% from this time yesterday, suggesting yesterday's surge was overdone. Volatility over the past 24 hours has been extreme at just under +/- 5.7%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with a quick news wrap-up so you can get back to your 'time-off'.First, we kick off the New Year with another dairy auction, this one again modestly positive. The key WMP price was up +2.5% from the prior event. Butter was up +2.1%. But both cheddar cheese and SMP eased. Overall the result was +1.2% higher than the prior event in USD terms, up +1.5% in NZD terms as the Kiwi dollar slipped in its first trading of the New Year. Volumes sold were modest. Demand from China for WMP and butter was ok, but these buyers were quiet for SMP indicating their foodservice demand remains subdued.There were final December factory PMI's released everywhere over the past few days and these paint an overall picture of weaker demand and both output and employment levels slipping lower. Of more of a worry perhaps is that neither input nor output prices are receding, suggesting price inflation will be hard to contain.In the key US economy, their factory PMI was weak with a renewed contraction in output as orders fall at sharper pace. They also reported a rise in producer inflation.As has become standard recently, there are mixed signals coming out of China. The private Caixin factory PMI is expanding but barely and didn't show the retreat expected. But it is displaying a yo-yo tendency around a steady state. However the official PMI does show an extended contraction by their factory sector. The Caixin survey tends to focus on mid-sized private companies. The official survey is more attuned to larger State-owned factories. And that is now contracting at the same rate as June 2023, and has contracted consistently since April 2023.Unfortunately for them, their services sector isn't picking up the slack. Yes, it is expanding - just - but not be enough that anyone would notice. December is the third month in a row that the official services PMI has failed to fire.The Chinese central bank has used its controversial Pledged Supplemental Lending program to inject NZ$80 bln extra into property lending support.South Korean exports rose +5.1% from a year earlier to a 17-month high of US$58 bln in December. Shipments to the US rose +21% but they fell -3% to China, Korea's top export market. But the overall result was lower than expected and lower than the +7.7% gain in the previous month. But it was the third consecutive month of increase in exports, and has been driven by a rise in semiconductor exports. Meanwhile, South Korean imports fell rather sharply, down -11% mainly on lower oil prices. Compared to the recent nine straight months, imports are tracking a stable path.It has been a very tough few days in Japan, first with having to deal with a deadly earthquake mid-winter. Now an Airbus aircraft from a domestic flight caught fire on a Tokyo airport after crashing with a Coast Guard plane on quake-aid duties. Fortunately everyone escaped from the passenger plane, but there were deaths on the Coast Guard plane.Singapore released its 'flash' Q4 GDP result overnight. That is fast - we have to wait until mid-March for ours. The Singaporeans have current data for their policy makers to absorb and respond to already. They report the city-state's GDP grew by +2.8% in Q4, accelerating from a marginally revised +1.0% in Q3. This was their 12th straight quarter of economic expansion and the strongest pace since Q3 2022. The service sector contributed most to this recovery, modest by their usual standards. In the 20 years to 2018 it averaged +5%.A new analysis for 2023 shows that compared to 2022, investments by sovereign wealth funds fell -20% to US$125 bln in 324 transactions; while investments by Public Pension Funds fell -26% to US$ 80 blnin 268 deals. Of the sovereign wealth fund investing, about a quarter can be accounted for by activity by Saudi Arabia's Public Investment Fund. Sovereign wealth funds had a tough year - in fact in the six months through October our own NZ Super Fund has posted negative returns in four of the last six months, and in six of the past twelve months.One reason for poor performance generally might be exposures to commercial real estate. In the US, of the 605 buildings with mortgages expiring soon, there are 224 that Moody’s Analytics estimates owners will have trouble refinancing this year, either because the properties carry too much debt or because their rental performance is poor. There are now roughly US $800 bln in American commercial mortgage-backed securities and delinquencies on office loans financed by them topped 6% at the end of November, up from 1.7% a year earlier. The expectation is that a lot of pain and write-downs will happen in 2024 and the pattern will be repeated worldwide, made worse because most of the "long term funding" that expires this year was on interest-only terms.Shipp

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 generally positive news in the US, but extended worries about China's property sector.After quite a jump in the prior week, American mortgage application levels slipped last week and for the first time in six weeks, despite a hefty retreat in benchmark 30 year mortgage interest rates. Those came in at 6.83% plus points, down from 7.07% the prior week, the first time they have been below 7% since early August.All that was despite an impressive rise in American consumer sentiment and optimism in December, as tracked by the respected Conference Board survey. It hasn't been this high since mid-year. This rise mirrors the recent parallel University of Michigan survey. To be fair, both are back in the range from 2021, but there is a rising optimism about future expectations.Perhaps reflecting that, US existing home sales rose in November, and for the first time in five months.Also positive, the American current account deficit shrank to -US$200 bln in Q3-2023, 'only' -2.9% of GDP. That's its lowest level since Q2-2021 in dollar terms and its lowest since pre-GFC. For comparison, the New Zealand current account deficit is -7.6% of our GDP.Australia and New Zealand are not the only countries facing record high immigration; Canada is as well. The post-pandemic surge seems to have caught many countries by surprise.Japan's exports shrank in November when a small gain was expected. Data released today shows they fell -0.2% from the same month a year earlier mainly because China-bound chip shipments dived, underscoring worries that slowing overseas economies may deal another blow to the trade-reliant economy just as their domestic demand slows. At the same time imports dived significantly and that meant their trade deficit shrank rather quickly.Taiwan's export orders didn't bounce back in November as expected, rising just +1% from a year ago and well short of the +4.3% rise expected. But that was their first rise in more than a year.Another large Chinese property developer has filed for bankruptcy in the US, using its protections while it "restructures". (Evergrande was the last major Chinese property developer to try that manoeuver.) Interestingly, it didn't notify investors in stock exchange filings, of the move. This may be behind the chunky drop on the Shanghai stock exchange yesterday. But they aren't the only listed company facing existential pressures.In the EU they are 'reforming' their fiscal rules which have become a straightjacket for some countries. EU finance ministers have bowed to German pressure for tough debt-reduction rules, as part of a deal to phase in a sweeping overhaul of their budget framework. After months of haggling, the new rules gives member states greater independence on debt and deficit plans, but only within tight spending limits demanded by fiscal hawks.German inflation is likely to return to target ranges if their producer prices are any indication. Those remain in deflationary mode, falling -7.9% from a year ago driven primarily by much cheaper energy costs. The sizable retreat is essentially a base effect.British consumer inflation is falling from the same energy cost retreat, now down to +3.9% in the year to November. But without those energy effects, their core inflation is still running at +5.1% - a small retreat but far above its neighbours and far above their central bank's target still. (Locally, they fudge the international standards of reporting inflation, but it is still high on their local basis.)In Australia, the Melbourne Institute leading index has stopped falling which is a good way for them to end their year.The UST 10yr yield has slipped -3 bps today, now at 3.89%.The price of gold will start today down -US$9 at just on US$2034/oz.Oil prices are +50 USc higher at just on US$74.50/bbl in the US although they have been higher in between. The international Brent price is now at US$80/bbl.The Kiwi dollar starts today at 62.8 USc and marginally firmer than yesterday. Against the Aussie we are also firmer at 92.9 AUc. Against the euro we are unchanged at 57.1 euro cents. That all means our TWI-5 starts today just on 71, up +20 bps from yesterday and the highest since May 23, 2023 - just before the RBNZ's MPS signaled that its rate-hiking cycle was over.The bitcoin price starts today at US$43,770 and up another +3.4% from this time yesterday. Volatility over the past 24 hours has been moderate-to-high at just under +/- 3.0%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.We will be taking a short break from these podcasts. Enjoy your summer holiday break.Kia ora. I'm David Chaston. And we will do this again starting on Wednesday after the New Year.

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 should note some more suggestions that the global hard landing may be even further away. The 'soft landing' has actually happened and that's despite wars, China's stumbles and trade tussles.But we start today with the results of the final dairy auction of the year and the results are somewhat mixed. The headline change is a good +2.25% rise overall in USD terms. The key WMP price rose +2.9% and the foodservice commodities rose much more with cheddar cheese up +6.9% and butter up a strong +9.9%. But volumes offered and sold were on the lowish side. And the whole event was somewhat undermined by a sharp rise in the NZD at the same time so that in NZD terms there was essentially no change from the last auction. Overall, the story is somewhat similar - from a year ago prices are now little-changed which isn't that great when you realise that prices this time last year were -20% lower than the prior year (even if they were unusually high in 2021). At least today's result is better than another retreat.In the US, housing data has surprised with new housing starts soaring. Bolstered by low inventories and now lower mortgage rates, they jumped unexpectedly by almost +15% in November from October to an annualised rate of +1.56 mln starts, the highest rate in six months, and well above market forecasts of 1.36 mln. Starts for single-family homes jumped +18%, the highest level since April 2022, and those for buildings with five units or more went up +8.9%. It is certainly an eye-catching move. But we should note that residential building consent levels did not jump, so the housing start data may just be a one-off catch-up.American retail sales last week rose +3.6% at bricks & mortar stores on same-store basis, so those gains above inflation are holding and a good sign for holiday retailing. Early indications however are that online shopping is performing better than in-store this year.Meanwhile, consumer inflation in Canada eased in November to be +3.1% higher than a year ago. A year ago it was running at well over double that. Still, that is stubbornly above their central bank's inflation target. Canadian producer prices are still falling however, down -2.3%, so perhaps the Canadian CPI has more falls to go.The Bank of Japan maintained its key short-term interest rate at -0.1% and that for 10-year bond yields at around 0% in a final meeting of the year and by unanimous vote. There are no surprises here and that was widely expected. The central bank also left unchanged a loose upper bound of 1.0% set for the long-term government bond yield. The yen fell -½% after the announcement, vs both the USD and the NZD.Yesterday the release of the RBA minutes brought a fresh perspective to their 'warning' that rate rises may be needed if inflation doesn't cool further there. However those warnings are being ignored in wholesale markets, who are pricing in rate cuts in late 2024, not rises. And that is because the RBA also has an employment mandate, so markets don't believe its hawkish inflation-fighting talk.We should also note that the Icelandic volcano near Grindavik has suddenly exploded. But this time there are no major ash emissions. Still, natural events like this (and the 2022 Tongan explosion) can have lingering global atmospheric implications.Of more immediate concerns are the security issues for shipping in the Red Sea. An international military effort to keep the routes open is underway. Now giant Chinese shipping company COSCO is avoiding the area. Freight rates and the cost of many essential raw materials will likely rise because of all this.The UST 10yr yield has slipped -4 bps today, now at 3.92%. The price of gold will start today up +US$21 at just on US$2043/oz.Oil prices are holding higher at just on US$74/bbl in the US although they had been lower in between. The international Brent price is now at US$79.50/bbl.The Kiwi dollar starts today at 62.7 USc and up more than +½c from yesterday. Against the Aussie we are holding at 92.7 AUc. Against the euro we are up at 57.1 euro cents. That all means our TWI-5 starts today just on 70.8, up +40 bps from yesterday and back to more than a six month high.The bitcoin price starts today at US$42,329 and up +2.1% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.5%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to 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 2023 is winding down with mixed outlooks in what may look like second tier data and events, but some of which could blow up over the holiday period.In the US, house builder sentiment has turned higher. The closely-watched Housing Market Index has risen from its lowest in nearly a year, beating forecasts. It was the first improvement in sentiment in five months, driven by declining mortgage rates that sparked increased interest among potential buyers and raised expectations for sales.But the iconic US Steel business is to be sold, ending a 122 year run, and it will be acquired by Japan's Nippon Steel. They beat out other local and offshore bids and have acquired the business for less than US$15 bln.Meanwhile, more Fed officials are coming out says they are surprised by the outsize market reaction to the Fed’s updated quarterly economic projections last week. They think the market is getting ahead of itself in expecting significant 2024 rate cuts.In China, their property crisis is getting worse, A developer in the southern city of Shenzhen (and partly owned by the City authorities) has warned it can’t pay interest due tomorrow, raising the risk of its first default. China South City Holdings said that it doesn’t have the resources to pay the interest of its 9% notes due July 2024, citing "liquidity and cash flow constraints from a deteriorating operating environment". That developer stress is now infecting local government-owned companies is an increased worry, especially as Shenzhen is an icon city featuring China tech prowess.In Singapore, (non-oil) exports rose +1.0% in November from a year ago but that was off a low base in 2022. Their export of electronic goods decreased rather sharply (down -12.7%) while the much larger group of non-electronics exports grew +5.7% from a year agoIn Germany, the widely watched Ifo Business Climate indicator slipped to a three-month low in December from a downwardly revised November adjustment, but to be fair the shifts were minor and this sentiment index is bouncing along in a trough after a good start to the year. The Bundesbank released its Monthly Report today and that noted much lower inflation, but they are not "all clear" yet on the inflation front, they said.In the Red Sea, now BP says it will cease using the Suez Canal for tanker transit while the security situation deteriorates.The UST 10yr yield has risen +4 bps today, now at 3.96%. The price of gold will start today down -US$11 at just on US$2022/oz.Oil prices are +US$2 higher from yesterday at just on US$74/bbl in the US. The international Brent price is now at US$78.50/bbl.The Kiwi dollar starts today at 62.1 USc and unchanged from yesterday. Against the Aussie we are still at 92.7 AUc. Against the euro we are still at 56.9 euro cents. That all means our TWI-5 starts today just on 70.4, essentially unchanged from yesterday.The bitcoin price starts today at US$41,443 and down -1.1% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 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.

Following COP28's call for a transition away from fossil fuels, a key test will be how quickly a rethink of the market capitalisation of oil and gas companies starts emerging, says Rod Oram.Fresh from attending COP28 in Dubai, Newsroom journalist Oram spoke to interest.co.nz for the latest episode of our Of Interest podcast.COP28, or the 28th meeting of the Conference of the Parties to the United Nations Framework Convention on Climate Change, was overseen by its president Sultan Ahmed al-Jabar, managing director of Abu Dhabi National Oil Company, or ADNOC, the United Arab Emirates' state owned oil company.Fossil fuels did, however, make it into the final agreement in a substantial way for the first time at a COP, Oram says. Whilst it's "weaker and slower and less specific [language] than is actually required," it's still significant progress.The "UAE Consensus" text agreed by 198 countries also includes a global renewables and energy efficiency pledge."That does start to send a signal. Not only to governments as they prepare their next commitments under the Paris Agreement, by 2025 countries have to come back with an improved commitment, but it sends a powerful signal to them that they must be working more on fossil fuel reductions in consumption and production, and it also starts to send a stronger message to financial markets," says Oram.The Paris Agreement is a legally binding international treaty on climate change."I think the key test in financial markets, both of that language on fossil fuels but then [also] on this language of a big increase in renewables, is how quickly we start to see a reappraisal of the market cap of oil and gas companies. And how quickly we'll see an appraisal that says 'oh, maybe they aren't going to be producing as much as we thought, say over the next 10 years, because people won't be burning as much because governments have started to shift, consumers have started to shift, renewables are escalating at a rapid pace.' And that to me is going to be the acid test as how soon we start to see that revaluation in the stock market of oil and gas companies," Oram says.In terms of the annual COP meetings, Oram points out they require consensus across all 198 countries so it's not the place for really big breakthroughs. Instead COP, once a year, provides "a really good scorecard about what the state of play is on all of these issues.""This isn't anymore just about negotiations between government officials and politicians. This is very much an all-of-society meeting, and that's why the numbers [of delegates attending] were so big this year."In the podcast Oram also talks about the New Zealand presence at COP28, NZ winning fossil of the day, the first official recognition of and finance mechanism for helping developing countries cope with economic losses and physical damage from storms, droughts, and other climate impacts, the first time there has been a COP declaration on agriculture, and the "deeply, deeply, deeply fascinating" experience of attending a COP in person. Oram also addresses criticism of people flying across the world to discuss climate change, and his hopes for COP29 next year in Azerbaijan.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with the 'final' week of shopping is here for the holiday season and most analysts are focussed on what that reveals about economies worldwide.Also in the coming week the American data releases are mostly second-tier but there will be special interest in their PCE inflation, durable goods order levels, and a set of housing data. Japan has a big set of releases including from the Bank of Japan, and their inflation rate. Canada and the UK will also release inflation data. But of course everywhere hints about retail sales activity levels will be sought outBut first, China released a wide set of national data over the weekend. In the official data none of their 70 largest cities reported any house price growth based on housing resales. Overall their housing index was said to fall -0.2%, but sales of new units are low and now quite problematic. Sales of used units are showing much larger declines than the index they released, both month-on-month and year-on-year. In fact they are now heading for a multi-year retreat, the first they have had.Going the other way, China reported that electricity production was up +8.4% in November from the same month in 2022. That supports the better than expected industrial production data they also reported, up +6.6%.And also gaining were retail sales. Although very little changed from October, the jump from a year ago is an eye-catching +10.1% - at least until you realise the base was very stunted and they were just contemplating easing Covid restrictions. Correcting for that, the year-on-year gain seems to be about +4%.China is getting ultra-sensitive about talk of economic problems - and their Ministry of State Security is on the case warning officials and commentators about not holding the Party line about the country's "bright future". And in Hong Kong the Party is putting on a show trial for an imprisoned publisher.Meanwhile, foreign patent holders are finding that Chinese courts side with local companies and will chop royalties agreed in existing deals that they subsequently don't like.In the US, retail shopping this year is even more focussed on the online sector. Turnover in traditional bricks & mortar stores is expected to just be level in volume terms.Meanwhile an early look at their PMIs shows services rising while factory activity is contracting. The sharpest increase in new orders since July is pushing their dominant service sector to a quicker expansion, but the reverse is the case for manufacturing where new order levels are retreating.The NY Fed Empire factory survey sank sharply in December from its unusual rise in November. But the longer term trend is still in place for a gradual move up from its deep negatives at the start of the year.Meanwhile, overall American industrial production made a minor gain on November from October but is still slightly lower than year ago levels. Manufacturing output (led by business equipment), which accounts for 78% of total production, rose by +0.3% from October, marginally missing market expectations of +0.4%.Canadian housing starts took an unseemly dive in October as they dropped to just an 213,000 annual pace and far below the expected 257,000 pace, or the 272,000 pace in October. For them, this is a huge and unusual miss probably reflecting the impact higher interest rates have on multi-family housing units.And in Australia, the extent of bribery and corruption in China's environmental regulatory system is laid bare in the collapse of a public company there.In India, export levels are neither growing nor retreating significantly. They were up in November marginally from October but down -2.9% from year-ago levelsIn the eurozone, the early PMI surveys show activity is falling at an increasing rate in December and that is true for both their factory and services sectors.Two of the world's largest container shipping groups stopped using the Red Sea and the Suez Canal. Germany's Hapag-Lloyd and Denmark's Maersk both said the dangers are too great at the moment and have instituted temporary halts. They have now been followed by two more European shipping lines, MSC, and CMA-CGM. This will put a giant spoke in global trade as more than 10% of world trade depends on the Suez canal.The UST 10yr yield has fallen slightly today as things settle down in the new levels, now at 3.92% and little-changed from Saturday. The price of gold will start today also unchanged at just on US$2033/oz and that is up +US$36/oz from a week ago.Oil prices are marginally firmer from Saturday at just on US$72/bbl in the US. The international Brent price is now at US$77/bbl.The Kiwi dollar starts today at 62.1 USc and little-changed from Saturday. but it is up more than +1c from a week ago. Against the Aussie we are still at 92.6 AUc. Against t

By Gareth VaughanThe first-half of 2024 is likely to be tough with rising unemployment and more businesses failing as the economy "bounces along the bottom," says BNZ Head of Research Stephen Toplis. In a new episode of interest.co.nz's Of Interest podcast, Toplis delves into the swathe of domestic economic data from the past week including Gross Domestic Product, migration, Statistics New Zealand's Selected Price Indexes, the Real Estate Institute's latest monthly housing data, the current account deficit, the dovish US Federal Reserve monetary policy review, China and more.It's tough times for businesses and households are under the cosh, Toplis says."Our view has long been that the second-half of 2023 and first-half of 2024 would be the trough in the economic cycle. And I think this [recent data] is confirming evidence of it," says Toplis."We're just bouncing along the bottom. And we'll continue to bounce along the bottom, probably until the central bank starts lowering interest rates. So there's more of this really, probably until the second-half of next year."He notes the economy would look even worse without surging migration, but this is becoming problematic."We knew prior to Covid that we were having difficulty as an economy absorbing more than about 50,000 or 60,000 people in a given year. Now we're trying to absorb double that, and that's resulting in things like pressure on your rents, pressure on your housing market, and a pick up in demand in some places that will be difficult to meet," Toplis says.Thus it's time to "look very closely at tweaking the [migration] settings to moderate those inflows."Meanwhile, with the new coalition government planning to reduce government consumption aggressively, the reduction in the size of government "is going to be a headwind to New Zealand for some time to come.""There are quite strong multiplier effects of that because government consumption is largely people employed. So if you reduce the size of the state sector, particularly its employment, it will have multiplier impacts on spending throughout the economy.""If you think about the last time we had a massive correction in the size of government, that was actually in the early 1990s when Ruth Richardson ran her mother of all budgets as she called it. The sort of decline in government consumption that we're talking about now is of a similar magnitude. Back then it had a very, very big impact on both the unemployment rate and economic activity generally. The broader environment was quite different so it would be remiss to suggest it would be exactly the same impact, but it will be meaningful," Toplis says.In the podcast he also talks about the inflation outlook, including why we "need to be a little bit careful in being overly concerned about non-tradeables" inflation, the housing market, the labour market, the outlook for interest rates, and more. (See more on tradeable versus non-tradeable inflation here)."Volatility remains the order of the day unfortunately, and we still have the worst of this economic recovery to get through."*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 global interest rates are on the move.The big news is the sharp dive in wholesale benchmark interest rates. And American benchmark mortgage interest rates have fallen below 7% for the first time since August.But first, American jobless claims fell last week and by more than expected, and back to the low end of the range over the past year. There are now less than 1.8 mln people on this support, also a drop from last week but less than expected, but not enough to change the shallow rising trend.As earlier indicators had suggested, the US holiday season retail impulse was good. Now the official retail sales data for November is out and that confirms the earlier data. Value levels were up +4.1% from a year ago, so there has likely been an expanding retail volume too.And you can see the impact of that demand on business inventories, which fell - a small slip from October, true, but one that wasn't expected. From a year ago they were up +0.5% in value terms, so clearly falling in volume terms.In Canada, their housing market sales are retreating, even if the shrinkage is still small.Taiwan's central bank kept its policy rate at 1.875%.In Hong Kong, 38% of people polled said they want to quit the City, mainly because of oppressive 'freedom' restrictions. That was up from a 29% in the same poll a year ago.Overnight the ECB was clear that it will keep its rates at multi-year highs for a long time yet in its battle to get on top of inflation. In contrast to the US Fed signals that softenings are coming in 2024, the ECB was staunch. However Norway's central bank raised its policy rate by +25 bps to 4.5%. But the Swiss National Bank held its rates unchanged, as did the Bank of England which also conveyed a tough line against price pressures. The ECB and English pushbacks had the effect of bolstering their currencies.And staying in Europe, the EU has "unanimously" agreed to open talks with Ukraine to join the bloc.Australian inflation expectations fell from 4.9% in November to 4.5% in December, according to the latest update of the Melbourne Institute survey. At these levels, the RBA will also likely remain staunch in its monetary policy positions, even it it is at its lowest level since early 2022.Although the Aussie jobless rate rose to 3.9% in November, the number of new jobs rose more than expected and most of them were full-time positions. The number of unemployed increased by +18,800 to 572,000. But the labour force rose +61.500 to 14.3 mln of which +57,000 were full-time. Their participation rate edged up.Global container shipping freight rates rose another +4% last week as the world adjusts to the two big canal pressures, mainly on routes out of China. Meanwhile bulk cargo rates remain high but are coming off their early December peak.The UST 10yr yield has fallen sharply in the wake of the Fed meeting, now at 3.93% and down -23 bps from yesterday. And the last time we were at this level was in July. The price of gold will start today just on US$2037/oz and up a very sharp +US$55/oz from this time yesterday.Oil prices are up +US$3/bbl from yesterday at just over US$72.50/bbl in the US. The international Brent price is now up at just on US$77/bbl.The Kiwi dollar starts today at 62.2 USc and up a full +1c from yesterday. Against the Aussie we are -¼c lower at 92.7 AUc. Against the euro we are down -10 bps at 56.6 euro cents. With falls against the Yen and Pound, that all means our TWI-5 starts today just on 70.3, just +10 bps firmer than yesterday at this time.The bitcoin price starts today at US$42,617 and up +1.8% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.0%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again 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 we are waiting on the US Fed.Financial markets are in limbo, cautious ahead of the US central bank's monetary policy meeting results that will be released at 8am NZT today. We will update our webside when these details are released. They are widely expected to keep the fed funds rate steady at 5.5% for a third consecutive meeting and push back against expectations of rate cuts early next year. Back in September, the Fed's dot plot indicated two cuts in 2024, but Chairman Powell recently deemed it premature to discuss rate decreases. They will release new economic and rate forecasts which will be closely watched and parsed.Meanwhile American producer prices were unchanged in November from October to be just +0.9% ahead of year-ago levels - and that was a lower increase than expected. Consumer inflation might be stubborn but producer prices are now rising at very modest levels. Recall, US PPI peaked at more than +11% pa in early 2022.American mortgage applications rose an unexpected +7.4% last week from the week before, a sixth consecutive weekly and driving applications to their highest level in over four months, thanks to the continuous decline in interest rates. The benchmark 30 year fixed home loan rate is now down to 7.07% in this survey, it lowest since July.In China, the expected bounce-back from October's weak new lending levels came but it wasn't as robust as expected. China's banks extended almost ¥1.1 trillion in new yuan loans in November, a good rise from October's weak level but falling short of market expectations of ¥1.3 tln. Household loans, including mortgages, rose by almost +¥300 bln after shrinking in October, while corporate loans also rose by +¥300 bln from October.In their Capital Flows Report, the IIF says China will suffer net outflows from Chinese stocks and bonds of -US$65 bln in 2024 from foreign investors, extending the 2023 trend of de-risking. In November alone, foreign investors pulled a net -US$3.7 bln from Chinese equities and bonds. Other emerging markets are not getting this cold shoulder.China's delayed but important 2 day Central Economic Work Conference has wrapped up, but you would hardly know. The readouts of decisions and goals are in special Beijing-speak and opaque to most. Most of the released goals are platitudes.The newly-elected Argentine government devalued the peso’s official exchange rate by -54% to 800 to the greenback on their second day in office, firmly above market expectations that ranged from a 27%-44% devaluation, marking a new record-low for the battered currency. The decision also narrowed the gap between the official rate and dollar prices for individuals available in parallel markets, which have approached 1,100 pesos per USD. It followed a group of aggressive economic measures passed by the new administration, the so-called “shock treatment” pledged by newly-elected President Milei that aims to battle inflation that approaches 150%, a plunging peso, and elevated levels of money creation to service spiraling debt. The new government stated it will cut an equivalent of -2.9% of GDP in spending, including reductions in social subsidies and pensions, while implementing a +2.2% increase in taxes over the next year. As a consequence, official forecasts for monthly inflation rose to over 20%.Australia's Mid Year Economic & Fiscal Outlook (MYFEO) was released yesterday and it was surprisingly positive, signaling that they may in fact get another surplus this year - making it two years in a row Canberra has achieved that. It is built on the "usual suspects" - very high mining profits and delaying infrastructure spending. The tax receipt uplift is due predominantly to personal income taxes being +$30 bln higher than forecast, including +$9 bln for this financial year, and company tax. Tax relief for bracket-creep may be coming soon.The UST 10yr yield is softer on secondary markets at 4.16% and down -5 bps from yesterday at this time ahead of the Fed. The price of gold will start today just on US$1982/oz and up +US$2/oz from this time yesterday.Oil prices are up +US$1/bbl from yesterday at just over US$69.50/bbl in the US. The international Brent price is now down at just under US$74.50/bbl.The Kiwi dollar starts today at 61.2 USc and little-changed from yesterday. Against the Aussie we are -¼c lower at 93.1 AUc. Against the euro we are down -10 bps at 56.7 euro cents. That all means our TWI-5 starts today just on 70.2, -20 bps softer than yesterday at this time.The bitcoin price starts today at US$41,856 and up +1.4% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.9%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand fr

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news financial markets are now turning their eyes to the US Fed meeting results tomorrow after it became clear today that while still easing, wringing the last bit of inflation's impulse from their economy could be tougher than first thought.The US Fed targets 2%.The American November inflation rate came in exactly as expected, at 3.1% and down marginally from 3.2% in October. Their core rate (without food or energy) was unchanged at 4%. This unchanged result has markets reassessing those 2024 rate-cut bets. Inflation in the world's largest economy is sticky at the end of its cycle and getting it back to 2% isn't going to be as straight forward as anticipated by financial markets. The Fed's caution is being justified.Food prices rose +2.9% and fuel prices fell -5.4% so they are not weighing on the overall level. But rent is, up +6.5%. And airfares are up more than +10% in the year.The Redbook index of bricks & mortar retail store sales on a same-store basis rose +3.4% last week, so the engine of American retail sales is still expanding on a volume basis.American small business owners are still feeling the pressure however, but more from a tight labour market than from demand. 40% of all owners reported job openings they could not fill in the current period, keeping them glum even if business is expanding faster.In Canada, they have a housing crisis - and perhaps a back-to-the-future solution. Home prices and rents have soared in part because housing starts have not kept pace with record immigration, and the official estimate is that 3.5 million more dwellings will be needed by 2030 to restore affordability. A 'new' policy has been announced, one with echoes of the housing-building boom after WWII. Standardised units will get blanket building consent approval with the idea that this will speed construction. This time however, the focus will be on density.In India, the monsoon has been weak this year and that is affecting food prices. Overall, consumer prices rose 5.6% in November, the first increase in four months, up from 4.9% in October. Food inflation however went up to 8.7%, the highest in three months, up from 6.6% in October so the pressure is on, on that front.India also reported October industrial production which was up +11.7% from a year ago, a much stronger rise than in the prior month and more than expected.In China, a couple of random points to note: it seems banks are reluctant to ease loan conditions for home buyers in distress. Only a handful of Beijing controlled banks have shown any sympathy.Also, the child walking pneumonia crisis apparently became a national issue due to very widespread antibiotic resistance, making a mild condition very much worse.In Germany, sentiment as measured by the widely-watched ZEW survey rose in December. It is now at a new high since March. Despite their current budget crisis, the assessment of the situation and economic expectations have improved again, as more respondents expect interest rate cuts by the ECB in the medium term, and inflation to stay down.In Australia there were two sentiment surveys out yesterday. The Westpac MI consumer survey found low but improving sentiment in December as the holiday season approaches. The icon NAB business survey recorded a sharp dip in sentiment in November to its lowest level since the pandemic in early 2020.The UST 10yr yield is softer on secondary markets at 4.21% and down -6 bps from yesterday at this time. The price of gold will start today just on US$1980/oz and down -US$2/oz from this time yesterday.Oil prices are down -US$2.50/bbl from yesterday at just over US$68.50/bbl in the US. The international Brent price is now down at just over US$73/bbl.The Kiwi dollar starts today at 61.3 USc and little-changed from yesterday. Against the Aussie we are up +10 bps at 93.4 AUc. Against the euro we are down -10 bps at 56.8 euro cents. That all means our TWI-5 starts today just under 70.4, +10 bps higher than yesterday at this time.The bitcoin price starts today at US$41,298 and down -1.1% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.3%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news we have some major set piece central bank meetings this week and there is a growing feeling they will each try to challenge investors' expectations of 2024 interest rate cuts.But first, American consumer inflation expectations for the year ahead fell to 3.4% in November, the lowest since April 2021. That is down from 3.6% in the previous month, and aligns with a number of separate private consumer surveys that have picked up a disinflation trend in the US economy. (Disinflation is falling positive inflation, deflation is where prices are falling.)It is not only inflation that is reducing, US Treasury bond yields are too. Today there were two major auctions. The three year Note was well supported with $121 bln offered for the $50 bln available. Investors won that with a median yield of 4.43% pa which was down from 4.65% at the previous equivalent auction a bit more than a month ago.It was a similar story for their ten year bond. Today $94 bln was bid for $37 bln available, so again well supported. Today's median yield was 4.22% pa and that compares to the 4.44% at the prior equivalent auction 5 weeks ago when US$40 bln was available.In Japan, the latest official sentiment survey for large businesses there has revealed fast rising optimism, their best in two years.Locally, inflation pressures are easing too. The Infometrics/Foodstuffs grocery cost index monitoring reports prices rose +4.8% in November from a year ago, the first sub-5% annual increase since March 2022. There are some categories (bulk foods and meat) that are now well under +3%, although some others still around +6%. Recall for the three year period 2019 to 2022, grocery prices rose overall less than +2%, so the current levels remain unusually high even if they are moderating fast.And we should note that the aluminium price has fallen to its lowest level since April 2021.The UST 10yr yield is firmer on secondary markets at 4.27% and up +4 bps from yesterday at this time. You will note that is a premium to today's US Treasury auction (above). The price of gold will start today just on US$1982/oz and down -US$23/oz from this time yesterday.Oil prices are down -50 USc from yesterday at just over US$71/bbl in the US. The international Brent price is now just over US$75.50/bbl.The Kiwi dollar starts today at 61.2 USc and unchanged from yesterday. Against the Aussie we are up +10 bps at 93.3 AUc. Against the euro we are still at 56.9 euro cents. That all means our TWI-5 starts today just on 70.3, +10 bps higher than yesterday at this time.The bitcoin price starts today at US$41,753 and down a sharpish -4.7% from this time yesterday. Volatility over the past 24 hours has been very high at +/- 4.3%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news that a lot happened so let's get into it.In the week ahead we will get the US Fed's interest rate decision, and American inflation and retail sales data. We will also get central bank updates from the ECB, the Bank of England, the Swiss National Bank, Norges Bank, and Brazil’s central bank.But first up we need to report that China is now in deflation again. Consumer prices fell -0.5% in November from a year ago, steeper than a -0.2% drop in the prior month and compared with market forecasts of a moderated -0.1% fall. It was the fastest decline in Chinese inflation since November 2020, driven my faster falling food costs, at the strongest pace in over two years and the biggest impact here was from a sharper fall in pork prices. Beef, lamb and milk prices are also falling although nothing like the pork prices. Meantime, non-food inflation slowed notably from +0.4% from +0.7%.Chinese producer prices also fell faster and by more than anticipated.But even in the face of current and obvious economic restraints, Beijing looks set to launch an ambitious growth target for 2024. Maybe as high as +5%. But there is no indication that huge stimulus programs are about to be launched. New debt support however will be a part of it. One thing is becoming clearer however, Hong Kong's days as a financial center are drawing to an end with mainland policies undermining its judicial independence and court transparency. Contracts entered into there have to meet Beijing's control measures. This sort of window dressing doesn't apply when it puts the CCP in a bad light.Across China, presale properties are taking a hit as homebuyers fear that financially distressed developers will not be able to deliver despite upfront payments. The share of presale properties between January and October this year slumped to the lowest point since 2017.Meanwhile, Taiwan's export growth was expected to have turned positive in November and that is how it turned out - although the year-on-year gain wasn't quite what was expected even if the miss was minor. It has been a year and a half since they have had a gain like this, however.Across the Pacific, the US economy added +199,000 jobs in November, more than the +150,000 added in October and better than the expected +180,000 gain. The strength was across the board, including for manufacturing.Away from the headline seasonally-adjusted data, the actual employer payrolls came in at a record 158.5 mln, up a strong +488,000 from October. For the broader household survey of employment which includes the unincorporated self-employed, it rose to 162.1 mln and also an all-time record, swelling +473,000 in the month (revealing a small shift to company payrolls). Either way you look at it there were many more workers getting paid in November than October, +3.4 mln more in a year (+2.8 mln more on company payrolls). It is a significant shift (and achievement).The golden jobs run is lifting confidence. The University of Michigan's consumer sentiment survey surged to 69.4 in December, rising from 61.3 in the previous month and surpassing market expectations set at 62.0. It was the highest level recorded since August, largely driven by positive shifts in the expected path of inflation. They dropped to 3.1% from November's 4.5%, marking the lowest level recorded since March 2021.And there doesn't seem to be any stress showing up in American consumer debt levels. They rose a much tamer (and minor) +US$5.1 bln in October from September to US$4.968 tln or just 18.1% of US GDP. A modest +US$9 bln rise was expected and that too would have been low. Rising employment and solid pay increases (+4.0%, so higher than inflation) are helping consumers keep a lid on their consumer (non-housing) debt. If the global economy does wobble, it won't be because of US household finances in the current state.All this run of positive data has markets pulling back on their enthusiastic expectation that the Fed will be cutting rates in 2024. Again, it is the Fed that is getting the future view right, not the commentariat. They are meeting this week and will announce the results of its policy deliberations on Thursday (NZT) along with their closely watched and highly anticipated quarterly Summary of Economic Projections. Markets expect no change in their policy rate at 5.5%, and holding at its 20+ year high. (Remember, markets have priced in American rate cuts starting in Q2-2024.)The release of the December version of the USDA WASDE report caused barely a ripple, mainly because they report a sanguine crop and livestock situation worldwide with adequate stocks and balanced demand and supply. US beef import estimates are raised for 2024 on expectations of demand for processing-grade beef. US milk production is retreating so

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 are in the shadow of tomorrow's US non-farm payrolls report which will give an important steer on where the world's largest economy is heading.But there were some labour market indicators out today ahead of that report. First, jobless claims rose last week. However, this was the usual seasonal increase, but little more, and were basically at the same level as the same week a year ago.Secondly, the Challenger job cut report noted a tiny rise in November from the tiny level a month ago. But these levels very much less than the same month a year ago. There is nothing here to suggest labour market stress is building.In Japan, there are a series of subtle signals coming out that the Bank of Japan is about to end its negative interest rate policy. These moves are expected over the New Year period. That saw the yen rise.Exports from China unexpectedly rose by +0.5% in November from the same month a year ago, after a -6.4% fall in the previous month and beating market forecasts of a -1.1% drop. It was their first increase in exports since April. But it isn't the gains that were expected and essentially dashes any hopes for an economic rebound in China. Among key trading partners, exports increased to the US (+7.3%) and Taiwan (+6.4%), while shrinking to Japan (-8.3%), South Korea (-3.6%), Australia (-9.1%), New Zealand (-15.2%), and the EU (-14.5%).The spread of the dangerous respiratory infection illness in China seems to be bringing back their mobile "health code" apps - in at least two provinces so far, as officials struggle to contain it spreading nationwide.Australian exports were -11.9% lower in October than the same month a year ago, down -0.4% from September.But global freight rates for containerised cargoes rose +6% last week, no doubt due to the difficulties in traversing both the Suez and Panama canals. China to Europe rates rose +15% in a week, whereas China to the US West Coast actually fell. Meanwhile, bulk cargo rates peaked on Monday, but have eased marginally since.The UST 10yr yield is unchanged from yesterday at 4.11% in a basic holding pattern.The price of gold will start today just on US$2,020/oz and down -US$10 from yesterday.Oil prices are staying down, unchanged from yesterday at just on US$69.50/bbl in the US. The international Brent price is now at US$74/bbl. These are 5 month lows, and on an inflation-adjusted basis, decade-lows. It is fair to wonder if the OPEC cartel has lost its influence.The Kiwi dollar starts today at 61.7 USc and +10 bps firmer from yesterday. Against the Aussie we are down -20 bps at 93.5 AUc. Against the euro we are up fractionally to 57.2 euro cents. That all means our TWI-5 starts today just on 70.6 and -10 bps lower from this time yesterday.The bitcoin price starts today at US$43,637 and down -0.4% from this time yesterday. Volatility over the past 24 hours has been 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 world's economy seems to be ending the year in a flat funk. Momentum has leaked away and financial markets are sensing a fairly bleak 2024.However American mortgage applications rose by +2.8% last week from the prior week, marking the fifth consecutive weekly increase and pushing applications to their highest level in ten weeks. Helping was the continuing fall in home loan interest rates with the benchmark 30 year fixed rate now down to 7.35% plus points.Private businesses in the US hired +103,000 workers in November, below a downwardly revised +106,000 in October and well below the expectation of +130,000. That is according to the ADP survey. The November result brought the expected rise in services hiring, but an unexpected fall in manufacturing job levels. However, expectations for Saturday's (NZT) non-farm payrolls have firmed and are now at a +180,000 gain.US exports of goods and services came in little different in October than September (-1.0%), but were +1.3% higher than year-ago levels.In Canada, they too delivered a hawkish hold in their overnight monetary policy decision. They held its target for the overnight rate at 5% for a third consecutive meeting, in line with market expectations, leaving borrowing costs at a 22-year high. The Canadian economy currently seems stalled.Canadian exports were also little changed in October from September (+0.1%), and almost the same year-on-year.In Japan, sentiment at big manufacturers there surged, improving for a second straight month as the vehicle sector continued to recover from last year's semiconductor shortage and supply chain woes.China is really battling that flu outbreak we noted a week or so ago. Hospitals are crowded, healthcare employees very stressed. Authorities are worried, using language that is easily decoded by their population.Moody's put Hong Kong, Macau and lots of China's state-owned firms and banks on downgrade warnings overnight as it wasted little time in following up on an identical move the previous day on the mainland government's rating. The Hong Kong government isn't happy.EU retail sales volumes rose in October from September but not by as much as expected. In the end the rise was trivial, but at least it is a volume rise. However, from a year ago, these volumes are -1.2% lower, although that is much better than the -2.9% decrease in September.But German factory orders were unusually weak in October. They fell -3.7% in October from September, following an upwardly revised 0.7% rise in September. Analysts had expected a gain, but their industrial sector remains fragile. The biggest drag came from orders for machinery and equipment. These October order levels were -7.3% lower than year-ago levels. For an economy as large as Germany, that is a lot.In Norway, their parliament has backed deep-sea mining in the Arctic Ocean. This is a bit of a surprise given they have a center-left government.Yesterday’s independent Aussie PMI from the Australian Industry Group was also something of a depressing read. Their Index sank deeper into contraction in November on the back of falling demand and activity. It is now back at levels last seen in the depths of the pandemic. The activity/sales, new orders and input volumes indicators all materially fell in the month. Employment increased marginally. November's was the lowest reading since June 2020. On a trend basis, all four activity indicators point to contractionary conditions.Australia released at Q3 GDP data yesterday, showing their economy grew +2.1% in the September quarter from the same period in 2022. That is better than the expected +1.8% year-on-year expansion, and the same as their Q2 expansion. Having noted all these year-on-year changes, we should also note that the change from the June quarter came in softer than anticipated - and it is this softness that is grabbing headlines across the ditch, especially the lower household incomes. It is a sharp contraction in per capita terms.The UST 10yr yield is down -7 bps from yesterday at 4.11% with the slide extending.The price of gold will start today just on US$2,030/oz and up +US$13 from yesterday.Oil prices are -US$3.50 USc lower in a notable drop at just on US$69.50/bbl in the US. The international Brent price is now at US$74.50/bbl. These are new 5 month lows.The Kiwi dollar starts today at 61.6 USc and up +¼c from yesterday. Against the Aussie we are up +10 bps at 93.7 AUc. Against the euro we are up +¼c to 57.1 euro cents. That all means our TWI-5 starts today just on 70.7 and up +2 bps from this time yesterday.The bitcoin price starts today at US$43,815 and up another +2.6% 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

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 Moody's has downgraded the Chinese economy's outlook.First up today however there was a dairy auction overnight and that came in with a minor +1.6% gain in USD terms, although only a +0.5% rise in NZD terms. Rather oddly, most of the major components managed better rises. Cheddar cheese recovered +9.7%, SMP was up +1.2% and WMP rose +2.1% from the prior event two weeks ago. This auction won't be changing minds about farm gate payouts, but at least it wasn't negative.In the US the news is quite mixed. Starting with the positives, the ISM services PMI expanded faster and ny more than expected. A feature is that it led by faster expanding new order levels. The internationally-benchmarked S&PGlobal (ex Markit) one also reported a pick up in expansion and better new order levels, but at a lower level that the ISM one.However the LMI logistics survey revealed a contracting sector in November quite a sharp turn down from October. But at least inventory levels and freight costa are reducing, which is probably a good thing for them.Also falling however are job openings. This data is for October and the retreat reported is quite sharp, down -617,000 from the previous month to 8.733 mln and the lowest since 2021. Perhaps this is the early indication of a slowing American jobs market, something analysts have been expecting for almost two years now. But the current forecasts for non-farm payrolls are a +185,000 expansion in November when the data is released Saturday NZT (and the ADP report at +130,000) and analysts have been increasing their bets recently.US retail sales as reported by their Redbook index for bricks & mortar stores on a same-store basis has slipped back to +3.0% year-on-year. Just enough to account for inflation perhaps, but nothing more and certainly not the real gains we have had in the past eight of twelve months.In China, Moody's affirmed their credit rating at A1 but revised the outlook from "stable" to "negative", citing growing risks stemming from lower medium-term economic growth, rising debt, and the ongoing restructuring of their property sector.The OECD released their PISA review results of education and they make grim reading for New Zealanders. Schools are failing our kids, according to these reviews. The education community is brushing these results off as "pandemic-related" and that may be a part answer. But the OECD itself says there is more at play here. Australia also scored worse although got gains in science. The US held its own, but Japan for instance improved.Yesterday, the Reserve Bank of Australia held its policy rate unchanged at 4.35% and delivered the expected hawkish commentary.Internationally, the Bank for International Settlements has warned that rapid global growth in buy now, pay later services could create risks in the financial system. The warnings are focused on both Australia and Sweden who have the heaviest adoption.Air cargo volumes continue to rise and in October were +3.8% higher than the same month a year ago. For the Asia/Pacific region they are up +7.6%. But to be fair they still trail pre-pandemic (2019) levels although the shortfall is now a minor -2.4% on that basis.On the same basis, international passenger travel is still -20% lower in the Asia/Pacific region than pre-pandemic equivalents, down -5.8% globally. But the gains from last year are very sharp as the return to globe-trotting returns to normal. But the biggest gains aren't international, they are domestic air travel which is now greater than pre-pandemic.The UST 10yr yield is down -11 bps from yesterday at 4.18% with the slide resuming.The price of gold will start today just on US$2,017/oz and down another -US$9 after yesterday and now way off its all-time high.Oil prices are -50 USc lower at just under US$73/bbl in the US. The international Brent price is now at US$77.50/bbl and -US$1 lower. These are new 5 month lows.The Kiwi dollar starts today at 61.3 USc and down another -40 bps from yesterday. Against the Aussie we are up +40 bps at 93.6 AUc. Against the euro we are down -20 bps to 56.8 euro cents. That all means our TWI-5 starts today just on 70.5 and down a mere -10 bps from this time yesterday.The bitcoin price starts today at US$42,725 and up another +2.7% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.6%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again 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 major global trade choke-points are under threat and this may bring very costly work-arounds.But first in the US, October factory orders fell sharply and by more than expected. They fell -3.6% from September to be down -1.4% from the same month a year ago. But to be fair, this is essentially a story of a drought of new aircraft orders (down -50% from the prior month). True, other order levels were soft, but only by a smaller amount, down -1.2% from September after being up +0.8% the prior month.It may still be early days, but the new central bank policy approach in Turkey hasn't yet had any effect on bringing down inflation there. It is still running at 62% pa in November.In Australia, there are building signs their economy is softening, and quite quickly.In fact, a NSW survey of a wide range of businesses found that Christmas trading is expected to fall on average -11% this year compared to last year. Businesses in two pf the state's regions are anticipating a decline in excess of -20% - and in those two regions almost half plan to cut staff after Christmas. Things are decidedly ropey.And extending the ropey feel, a broader Australian survey found that activity is being propped up by making more inventory. Meanwhile sales are retreating and profits are under real pressure - although to be fair the overall picture is twisted by a big drop in mining profits. That wages rose while sales fell doesn't give you a good feeling about future employment, or wages for that matter.Canberra is preparing a new round of cost-of-living relief measures to roll out if things get dire. They are most likely to be released in their May 2024 Budget. However those latest Business Indicators show that wages were up +9.7% in the year to September so it certainly isn't "dire" yet.Later today, the RBA review will release its final review for 2023 of its cash rate target and it is universally expected to be on hold at 4.35%. Tough talk about inflationary risks are falling on deaf ears in financial markets; they now price in no change all the way through 2024.But we should all hold our breath. Conflict in the Middle East, and drought in Panama, means that the two vital canals for world trade are under threat and operating sharply below capacity. In Russia, the only two rail links from China have been put out of action by sabotage. (Not to mention South China Sea stresses.) In each case, the alternatives are very costly and will sharply discourage trade. It is very unusual that these threats are all happening at the same time. One measure, the Baltic Dry Index is zooming higher suddenly.The UST 10yr yield are up +8 bps from yesterday at 4.29% with yesterday's slide arrested. The price of gold will start today just on US$2,026/oz and down -US$45 after yesterday reaching an all-time high.Oil prices have stayed down at just under US$74/bbl in the US. The international Brent price is now at US$78.50/bbl. These are 4½ month lows and levels first reached 16 years ago.The Kiwi dollar starts today at 61.7 USc and down -40 bps from yesterday. Against the Aussie we are up +20 bps at 93.2 AUc. Against the euro we are still at 57 euro cents. That all means our TWI-5 starts today just on 70.6 and down -20 bps from this time yesterday.The bitcoin price starts today at US$41,583 and up +4.7% from this time yesterday, and confirming the break out of its recent range. Volatility over the past 24 hours has been high at just on +/- 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.

Reserve Bank Governor Adrian Orr says he's "extremely confident" the world is heading back to a period of low inflation, saying the central bank is prepared to do "whatever it takes" to achieve its mandate of low and stable inflation.Speaking in in the latest episode of interest.co.nz's Of Interest podcast, Orr talks about the reaction from financial markets to last week's Reserve Bank monetary policy review, what its Monetary Policy Committee members will be watching between now and when they next review monetary policy on February 28, and what the Reserve Bank would need to see to be more relaxed about inflation."We just need to repeat we are willing to do whatever it takes to achieve our mandate, [of] low and stable inflation. If we get further inflation shocks there may be more work to do. So we're in a holding position, but we've made it clear where our nerves sit," Orr says."Basically we need to see more spare capacity in the economy to have the real confidence that the inflation pressures are coming off. All the indicators are moving in the right direction, but there's a lot of news still to arrive on the table."He also talks about "historically significant" immigration, noting countries such as Australia, Canada and New Zealand, with strong net inward migration are "having the highest core inflation challenges."With the new National-led government set to remove the Reserve Bank's requirement to "support maximum sustainable employment," from its monetary policy remit, Orr discusses how different monetary policy might have been over recent years if that hadn't been part of the Reserve Bank's mandate.Orr also says profit-led inflation, businesses pushing through price increases under cover of news about a major shock to the economy because there'll be less pushback from customers at such times, has been happening in NZ as it has overseas."We just used to call that inflation expectations and generalised inflation," Orr says."Whenever you've got high inflation people can hide price rises even though it's not something specific to their good or service. They can get away with high or variable inflation, they can start shifting relative prices around, and then that leads to more generalised inflation as input costs rise and wage costs rise and so on.""And it's that scramble and mess that causes long-term inflation problems. And so I would say all of those things have been happening in New Zealand as they have been everywhere else," Orr says."This is the challenge for monetary policy, we have to lean against that desire to tuck a little price increase in behind generalised inflation hoping no one notices. Consumers have to be laser-like focused and think 'is that right, should I be shopping somewhere else?'," Orr adds.In the podcast Orr also discusses the degree to which Official Cash Rate (OCR) rises are responsible for reducing inflation, inequities involved with monetary policy, whether price controls could be used to help fight inflation, whether the Reserve Bank's monetary policy should be required to support sustainable house prices, what he expects to see from the Commerce Commission's market study into retail banking competition, the level where he'd consider the OCR to be neutral in that it's neither stimulating nor constraining economic activity, his ideal scenario for monetary policy a year from now, and how he's "fully convinced" the world is heading back to low and stable inflation but there may be higher interest rates on average to achieve that.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the social consequences of the Chinese economic slowdown are just not going away.But first, there were a flurry of factory PMIs released over the weekend confirming a global manufacturing downturn remains, even it is minor.But not minor is the widely-watched US ISM version as that reports a noticeable shrinkage across the board. The internationally benchmarked S&PGlobal (ex-Markit) version however records barely a drop. But it does confirm lower demand.In a Friday speech, Fed boss Powell signaled that they are likely done raising rates, but his comments were laced with caution.Canada's labour force grew at a faster pace than expected in November, faster than the good +24,900 increase in employment. Payrolls swelled much more, but the number of self-employed fell rather sharply. That meant that their jobless rate inched up to 5.8%. This wasn't unexpected.In China the Caixin factory PMI diverged from the official NBS version again, and again was more positive. But to be fair it is just oscillating around a steady state with this an 'up' month. However this report does note "a sustained rise in new orders".Meanwhile, Beijing has pledged to target ¥1 trillion in manufacturing and infrastructure development. Along with some supply knocks in Panama, this has helped jerk up the price of copper to US$8,615/tonne, it highest since August. (But still a long way below the US$9400/tonne it reached in January.)Overall, China's economic performance remains problematic, and along with the implied criticism he received from Party elders during their summer retreat, it now looks like President Xi is delaying a major set-piece economic conference (the "third plenum"), one where Xi's new team (the one appointed at the "second plenum") releases its longer-term economic plans.Meanwhile, Chinese borrowers are defaulting in record numbers as their economic troubles extend. More than 8.5 mln people are sharply downgraded in their 'social credit' which essentially means they are blacklisted, after missed payments on mortgages and business loans. That is about 1% of working-age Chinese adults, and is up from 5.7 mln defaulters in early 2020.And another Chinese property developer is scrambling to save itself - Gemdale.We should also note a sudden uptick in China's actions to take over the whole South China Sea, with a particular flashpoint in the Philippines.In Australia, CoreLogic reported that in November the heat came out of their housing market as values across Melbourne dipped and Sydney slowed.Australia faces its final RBA rate review for 2023 on Tuesday and markets don't expect their 4.35% rate to be changed. This is the last of their monthly reviews. In 2024 they change to a less frequent meeting schedule much like the RBNZ one.The UST 10yr yield fell sharply on Saturday, now just under 4.21%. That is a massive -22 bps retreat for the week and is now at a 2½ year low. The price of gold will start today just on US$2071/oz and up +US$11/oz from this time on Saturday after briefly touching its all-time high of US$2,089.70 intraday. A week ago it was at US$2000/oz, so a +3.6% gain since then.Oil prices fell a sharpish -US$2.50 over the weekend to just on US$74/bbl in the US. The international Brent price also got a sudden shift and it is now down to US$79/bbl.The Kiwi dollar starts today at 62.1 USc and up +10 bps from Saturday. A week ago it was at 60.7 so a +1½c gain from then. Against the Aussie we are still at 93 AUc. Against the euro we firm at 57.1 euro cents. That all means our TWI-5 starts today just on 70.8 and up +10 bps from this time Saturday, up more than +100 bps in a week.The bitcoin price starts today at US$39,703 and up +2.4% from this time Saturday, and confirming the break out of its recent range. A week ago it was at US$37,928 so up +4.7% rise from then. Volatility over the past 24 hours has remained modest at just on +/- 1.4%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again 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 global inflation is coming down as energy cost pressures recede. And so far it hasn't been at the expense of global economic expansion.But first today, US headline jobless claims rose but the increase was minor and less than expected. On an actual basis the fall was rather sharp but recall last week was a retail holiday week. There are now just 1.56 mln people on these benefits, almost the lowest in a year. So still no sign of rising labour market stress in this data. A week from tomorrow their November non-farm payrolls report is released and markets currently expect an expansion of +175,000 - modest but still expanding.October pending home sale levels gave up more ground in the continuing trend. Pending home sales is a forward-looking indicator of home sales based on contract signings and the -1.5% drop in October is the lowest number since this index was originated in 2001. The prospect of low demand because buyers are put off by high mortgage rates is holding back sellers from listing into a falling market.October income and spending data growth was modest, each rising just +0.2% from September. That is the lowest for both in seven months of much better gains. Perhaps of more interest was that PCE inflation eased again, now down to +3.0% (3.5% on a core basis) and closer to the US Fed's 2% target range. But even if it is moving in the right direct, there is still some way to go yet.The slowing the Fed wants, to quash inflation, is well underway according to the November Beige Book surveys. Economic activity slowed since the previous report, with four Districts reporting modest growth, two indicating conditions were flat to slightly down, and six noting slight declines in activity. They are managing to slow things without falling into recession. It's actually an impressive performance.It is tougher in Canada however. They reported a Q3 GDP decline of -1.1% from a year ago, a sharpish shift from the +1.4% expansion in Q2. Analysts expected a small +0.2% expansion in Q3, so this is a big miss.India also released Q3 GDP results overnight and these came in better than expected. The Indian economy expanded +7.6% year-on-year in the period, following a strong +7.8% growth in the previous period and beating forecasts of a +6.8% rise. The reading is also higher than the Reserve Bank of India projection of +6.5%.In Japan, the steam seems to have gone out of their rising retail trade. It fell in October from September by -1.6% to be +4.2% higher than a year ago. Meanwhile, Japanese industrial production has turned up in October, its biggest monthly rise in almost a year.China's official November PMIs brought some more minor slippage and at a faster pace. The factory sectors contracted slightly faster (although it is still minor); it was expected to contract less. And their services sector's expansion, already minor, eased toward a steady state. It is hard to see how Beijing will be happy about these trends. Their top-level charm offensive of recent weeks isn't working yet in terms of getting business people to change their actions and reactions.In Europe declining energy costs are still helping cool inflation there. The inflation rate in the Euro Area declined to 2.4% year-on-year in November 2023, reaching its lowest level since July 2021 and falling more that the market consensus of 2.7%. Meanwhile, the core rate, excluding food and energy, also cooled to 3.6%, marking its lowest point since April 2022 and coming in below forecasts of 3.9%.In Australia there is some substantial positive action in residential building consents. They rose an impressive +7.5% in October from September to be -6.1% lower than a year ago. That is a huge improvement from the year-on-year fall of over -20% in September. It is a sharp shift up that wasn't anticipated by analysts. Still, despite the rise the overall levels remain low.Container freight rates were unchanged last week. Bulk cargo rates leapt however in a surge we haven't seen since 2022 and to its highest level since May 2022.The UST 10yr yield has risen +6 bps from yesterday, now just under 4.34%. The price of gold will start today just on US$2040/oz and down -US$2/oz from this time yesterday.Oil prices have fallen -US$1.50 since yesterday at just under US$76/bbl in the US. The international Brent price is now just under US$81/bbl. Markets were unimpressed by the latest OPEC non-decisions.The Kiwi dollar starts today at 61.7 USc and unchanged from yesterday. Against the Aussie we are marginally firmer at 93.2 AUc. Against the euro we are back up +20 bps at 56.5 euro cents. That all means our TWI-5 starts today just under 70.5 and up +10 bps from this time yesterday.The bitcoin price starts today at US$37,795 and almost unchanged (-0.1%) from this time