Economy Watch

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news of some major emergency moves in China to reinvigorate their economy.But first, there was a good GDT Pulse auction result earlier this morning, although the reverse of what the futures markets had signaled. There was no gain in SMP prices, holding its recent higher levels. But the important WMP price rose +2.8% from the full auction a week ago and back to levels of a year ago.This is a good backdrop to this morning's Fonterra 2023/24 results announcement.The expansion of American retail sales at physical stores rose +4.1% last week from the same week a year ago. That is good but a slowing from the gains since August. A year ago they were rising +3.6%.But the widely-watched Conference Board consumer sentiment survey for September has brought a hesitation, slipping to the lower end of the narrow range it has been in for the past two years. Worries about job security seems to be a key factor here, although we probably shouldn't make too much of a range-bound shift.Election jitters have hit the Richmond Fed's factory survey covering the mid-Atlantic states, all "battle-ground states" where uncertainty of the outcomes is pronounced.There was a very well supported US Treasury 2 year bond auction today, delivering a median yield of 3.47%. That is down from 3.83% at the equivalent event a month ago. In both more than US$100 bln in bids went unsatisfied.And ratings agency Moody's has warned that a downgrade for the US Federal Government is a live possibility unless it tackles its growing deficits. This comes a year after it placed the AAA rating on 'negative outlook'. Clearly it is watching this with some unease.Across the Pacific, Japan's business activity continues to rise, largely based on a service sector that is now expanding at its fastest pace since April. Factory activity isn't expanding however, according to this PMI survey.Taiwanese export orders rose +9.1% in August from the same month a year ago, to a nine month high.In China, "a leading Chinese economist" and politician has called for Beijing to launch a ¥10 tln stimulus package (NZ$2.2 tln) equivalent to 8% of Chinese GDP, to tide their economy over through the rest of 2024, as credit growth and domestic demand remain drained of energy. The economist calling for this is Liu Shijin, deputy-director of the China Development Research Fund and deputy-chair of the economics committee of the Chinese People's Political Consultative Conference (CPPCC). He has been echoed by Yu Yongding.Responding to the plea for a jolt, the Governor of the Chinese central bank said in a rare briefing that they will cut their reserve requirement ratio by 50 bps, and likely match that again before the end of 2024. Together, these will add ¥2 tln 2024 liquidity. .He also said that the seven-day repo rate will be reduced by 20 basis points to 1.5%. And there will be a -30 bps drop in their medium term lending facility. Mortgage rates will be dropped by -50 bps and the minimum deposit on a home purchase will be dropped to 15%. They did not specify exactly when these changes will go into effect however. More here.Although these measures have more than a whiff of panic surrounding them, clearly President Xi has given his officials a rocket to act quickly to turn around an economy stuck in a rut. And equity markets responded with their own rocket.And so did some components of the commodities market; copper, for example. We may see more commodity action today. But we should also keep in mind the program announced yesterday is very much less than what its own experts are calling for.Yesterday, the RBA's policy review kept its rates unchanged in the face of higher than target inflation levels. It has been four years since they have had a rate cut. But inflation remains above target and is proving persistent so their room to move is limited.The UST 10yr yield is now at just on 3.73% and down -2 bps from yesterday. The price of gold will start today at US$2650/oz and up +US$32 from yesterday to yet another new all-time high.Oil prices have risen +US$1 to US$71.50/bbl in the US while the international Brent price is now just on US$75/bbl.The Kiwi dollar starts today at 63.3 USc and up +½c from this time yesterday and its highest of the year and back to where it ended in 2023. Against the Aussie we are up +40 bps at 92 AUc. Against the euro we are up +30 bps at 56.7 euro cents. That all means our TWI-5 starts today at 70.6, and up +40 bps from yesterday and a three month high.The bitcoin price starts today at US$63,216 and little-changed from this time yesterday. Volatility over the past 24 hours has been low at just under +/- 1.0%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest

Milford Asset Management’s head of KiwiSaver says KiwiSaver – the country’s voluntary retirement savings scheme which is in its 17th year – is a teenager that’s about to head into adulthood.“I think it's the right time to have the discussions we were having at the [Financial Services Council] Conference. By and large, providers are pretty well aligned around how we can improve KiwiSaver and make it better for New Zealanders retirements,” Milford's Murray Harris says on a new episode of the Of Interest podcast.KiwiSaver has become a bigger topic of financial conversation this year and the discussion around potential tweaks and changes to the savings scheme has become more of a ‘when they happen’ and less of an ‘if’ scenario.At the Financial Services Council Conference in early September, KiwiSaver was a hot debate, with KiwiSaver providers discussing how New Zealanders are simply not saving enough for their retirement and the Retirement Commissioner pointing out that Kiwisaver governance lacks clarity.Harris tells interest.co.nz that KiwiSaver has been “very successful” in attracting members and the savings scheme doesn’t have a participation problem.The latest KiwiSaver statistics out of Inland Revenue shows over 3.36 million people are now enrolled in KiwiSaver as of July 2024 and Harris says the participation rates are highest amongst those between the age brackets of 25–34 and 35–44. “The participation's really good, but we have an issue around the contribution rate or the amount that people are contributing,” he says.“Most people are doing 3%, and ... 90% of employers only do 3%. So together, those contributions are not going to be enough to get people to where they need to be for a really comfortable retirement. And I think that's the key issue. That's the real nub of it being very successful in terms of getting people interested and involved, but we're just not contributing enough.”The Financial Markets Authority released its 2024 KiwiSaver report on Tuesday which showed total KiwiSaver contributions – this includes employee, employer and government contributions – came to $11.2 billion in the March 2024 year. This is up 6.5% from the prior year.Harris says the KiwiSaver industry has a job to do in terms of educating its members that the current default contribution rate in KiwiSaver, which is 3%, is a good start – but not enough to get people to where they likely think they're going to be savings wise by retirement.“Most people think it's 3%, and that's the problem with the settings as they are. You tell people to do 3%, that's what they'll do, and they'll think that's all they need to do. But in reality, it's a lot more,” he says.The Retirement Commission has called for a higher default contribution rate of at least 4% and says employers should be matching at this level or more. Harris says there are also things New Zealand can learn from “the lucky country” – Australia – when it comes to saving for retirement. The minimum contribution rate for Australia’s superannuation scheme – the equivalent to NZ’s KiwiSaver scheme – is currently 11.5% for employees and employers. This is being raised to 12% in 2025.“They've amassed a lot of assets and they've been able to reinvest those assets into the local economy. So you go to Australia, you cross some wonderful bridges, the motorway systems, the tunnels through central Sydney. Now they've been built with superannuation money and it's been a win-win because the economy moves better, industry can move their goods and services at a better pace and they've provided some great investment returns for investors, for super investors. So that's a win win. I think that's something that we could definitely learn from,” he says.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the global expansion seems to be getting more uneven.In the US, the good economic data keeps on coming. They reported a healthy PMI expansion in September, driven primarily by their service sector which is now expanding its fastest since March 2022.And the Chicago Fed's National Activity Index surprised with an unexpected gain in August.And because there is now less than a week until the end of Q3-2024, the estimates now see an expanding economy rising at between a +2 and +3% rate 'real', and keeping up the pace of expansion that shows no sign of slacking. On a 'real', inflation-adjusted basis, the Trump economy grew +2.8% in his four year term. On the same 'real' basis the Biden economy has grown just on +10% during his 3½ years so far.So it may seem a bit odd that the heads of the regional Fed banks in Chicago, Minneapolis, and Atlanta all said, at a conference yesterday, they recommend more rate cuts.India's economy is still expanding fast in September, according to the same PMI survey results. However, the pace isn't quite as fast as they had in August.Singapore said its August inflation rate fell to 2.2% in August from 2.4% in the prior two months, matching market forecasts and notching the lowest level since April 2021, as food prices stayed at their lowest in over two years.China's September PMIs aren't released until next week. But they may not be great.China's car dealers are pleading for government help as demand softens fast.So in China yesterday, their central bank unexpectedly lowered the 14-day reverse repurchase rate by -10 bps to 1.85% yesterday. They also injected ¥75 bln in liquidity into the banking system. And they pumped in up to another ¥160 bln via 7-day reverse repos, but kept the rate unchanged at 1.7%.And in another unusual step, their central bank said its boss will give a unique briefing later today on "financial support for economic development".Also not great were EU PMIs. Their service sector is still expanding, but not as fast and service activity is now at a 7 month low. Their factory sector is actually contracting and at a nine month low. Leading them down is Germany.The flash Australia Manufacturing PMI fell further into contraction in September, an eighth consecutive month of contraction in manufacturing activity and at the fastest drop since May 2020. New orders and production also fell at the quickest pace in 52 months amid softening demand conditions. Their service sector expansion has almost evaporated, according to this same survey.And staying in Australia, their competition regulator is taking on the two dominant and giant supermarket chains (Coles & Woolworths), alleging that ‘Prices Dropped’ and ‘Down Down’ claims and the like are actually misleading.The UST 10yr yield is now at just on 3.75% and up +2 bps from yesterday. The price of gold will start today at US$2628/oz and up +US$7 from yesterday to a new all-time high again.Oil prices have dipped -50 bps to US$70.50/bbl in the US while the international Brent price is now just under US$74/bbl.The Kiwi dollar starts today at 62.8 USc and up +40 bps from this time yesterday and near its highest of the year. Against the Aussie we are unchanged at 91.6 AUc. Against the euro we are up +½c at 56.4 euro cents. That all means our TWI-5 starts today at 70.2, and up +30 bps from yesterday.The bitcoin price starts today at US$63,245 and +0.3% from this time Saturday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news a risk-on shift will start the week in most major economies.As we wind down September this week here, into both school holidays upcoming and daylight saving on the weekend, the key focus will shift to Fonterra's results on Wednesday, and local consumer sentiment on Friday.And tomorrow the RBA will review its monetary policy settings including its cash rate target. Despite the continuing inflation pressures, no-one really expects them to alter their existing 4.35% policy rate this time. Oddly that comes a day before they release their August monthly CPI report, which is expected to slip from 3.5% to 3.1%. They hope so at least. And a day after that they release their Financial Stability Report.In the US, the key focus will be on PCE prices, personal income and spending reports. They are expected to validate the Fed rate-cut move. And they will release their final Q2 GDP report, PMI data, consumer confidence, durable goods orders, and both new and pending home sales data too. There will be September PMI reports from many other economies as well.Over the weekend, China left its loan prime rates unchanged in its September fixing, as expected. These remain at record lows.And their 'youth' (16-24) unemployment rate was 18.8% in August according to official data, the highest since they changed the basis of this stat in January. They say their general jobless rate is 5.4%, and that too is its highest in a year.And don't forget, next week is China's National Day Golden Week from October 1 to October 7. Most businesses and factories in China will be closed for the holiday. This extended shutdown will significantly impact international supply chains.Japan reported 3.0% CPI inflation in August, up from 2.8% in the prior three months. It is their highest level since October 2023. Japanese inflation now seems well embedded, after decades of deflation.The Japanese central bank left its 0.25% policy rate unchanged, as expected late on Friday. They said "Japan's economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions." But press conference remarks after the release suggests that the Bank has turned dovish, so expectations for more rate hikes are lower now.India's economic surge is built on aggressive borrowing. Loan growth is running higher than +13% from the same month a year ago, even if that is lower than the almost 20% rate it was running in the same month in 2023.Canadian retail sales rose more strongly than expected in July, up +0.9% from a year ago when a +0.6% rise was expected. A key driver was car sales. And these retail rises are expected to continue as a new sense of optimism grows in Canada.Consumer sentiment in the EU continues to rise, in spite of their obvious economic struggles. In fact, it is almost back to its long-run average levels, something it hasn't managed since the pandemic period.The UST 10yr yield is now at just on 3.74% and up +1 from Saturday. But that is up +8 bps from a week ago.The price of gold will start today at US$2621/oz and up +US$1 from Saturday to near a new all-time high again. That is a +1.5% rise from a week ago when it was US$2582/oz.Oil prices are unchanged at US$71/bbl in the US while the international Brent price is still just on US$74.50/bbl.The Kiwi dollar starts today at 62.4 USc and little-changed from Saturday but up +80 bps from a week ago. Against the Aussie we are unchanged at 91.6 AUc. Against the euro we are still at 55.9 euro cents. That all means our TWI-5 starts today at 69.9, unchanged from Saturday but up +60 bps from a week ago.The bitcoin price starts today at US$63,055 and +0.9% from this time Saturday. Volatility over the past 24 hours has been low at just on +/- 0.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news stock markets are roaring today after the US Fed rate cut, many, including Wall Street, powering up to record highs. And interest rate curves are steepening.But first, the actual number of people making initial unemployment benefit claims in the US dropped from the previous week to 185,000 last week, significantly lower than the expected 230,000, and a 4-month low. There are now 1.68 mln people on these benefits, also a decrease.Meanwhile the Philly Fed factory survey reported improved conditions in the rust-belt states in September. Although the new orders component didn't rise, the sentiment indexes for the future all did.But not rising is their real estate market. Existing home sales fell -2.5% in August from the previous month, the fourth decline of the year. It was down -4.2% from the same month a year ago. The fall happened despite the drop in mortgage rates in the period. And the median existing-home sales price fell too, to US$416,900 (NZ$670,000). The inventory of unsold housing rose rose to 18 weeks of sales at the latest rate, rising from 15.6 weeks in the prior month.But one thing the Fed rate cut did was suddenly drop home loan interest rates, falling more than -25 bps in the first day to 6.09% for their benchmark mortgage. It is likely to go sharly lower tomorrow again.The US current account deficit widened slightly to -3.7% of GDP in Q2-2024. That is entirely manageable, especially as the USD is still the world's reserve currency. (For comparison, the New Zealand current account deficit is running at -6.7% of our GDP - and we are certainly not a reserve currency.)Overnight there were central bank rate decisions in both Taiwan and England. Both made no changes. Perhaps the Taiwanese one was a bit of a surprise because they tend to follow the US Fed's moves. Later today Japan will also review rates, and no change in their rate is expected either. But markets will be looking for signals about when the next rise is coming.Will the start of the rate easing cycle trigger an economic upside? Certainly some commodities markets think so. And they also expect China to come to the party soon with new emergency stimulus, which would be another boost.In Hong Kong, a man was jailed for 14 months for wearing a t-shirt with a protest message.In Australia, their number of workers without a job fell by -10,500 to 627,000, or an unchanged 4.2% of their workforce. Even though employment rose by much more than the expected +25,000, the number of new part-time roles rose +47,500 and the number of new full-time roles fell -3,100 in August. Almost 31% of all Aussie jobs are now part-time. (In New Zealand it is barely touching 20%.)The overall jobs growth in Australia has analysts thinking that the RBA will delay any move to cut rates there any time soon. But a rise doesn't seem on the cards either, despite their outlier sticky inflation.Container freight rates fell another -5% last week, taking them back to where they were at the start of the year. But they remain 180% higher than the average 2019 pre-pandemic rate. The Panama issues are resolved, but the Suez/Red Sea issues are not. The shipping industry is adjusting to that new reality however. Bulk cargo rates fell -3.6% over the past week and are now themselves +30% higher than year-ago levels. As we all know, for both there has been a lot of volatility in between and that volatility has probably not ended.The UST 10yr yield is now at just on 3.73% and up +2 bps from this time yesterday. The key 2-10 yield curve is now +14 bps positive. Wall Street is surging today with the S&P500 up +1.8% from yesterday after the Fed decision. Overnight, European markets were all up too, but with varying enthusiasm. Tokyo ended its Thursday trade up is own strong +2.1%. Shanghai was up a more modest +0.7. But Hong Kong closed up +2.0%. Singapore was up +1.1%. The price of gold will start today at US$2589/oz and up +US$14 from yesterday's high to near a new all-time high again.Oil prices are up +US$1.50 at US$72/bbl in the US while the international Brent price is still just under US$75/bbl.The Kiwi dollar starts today at 62.5 USc and up +10 bps from yesterday. Against the Aussie we are down -20 bps at 91.6 AUc although all of that before the Fed. Against the euro we are up +10 bps at 56 euro cents. That all means our TWI-5 starts today at 69.9, and up +10 bps from yesterday.The bitcoin price starts today at US$63,817 and up another strong +5.6% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.6%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news of a big call by the US Federal Reserve.First up you should know that the US Fed cut its benchmark policy rates by -50 bps, to the 4.75%-5.00% range, a larger cut that most professional observers had anticipated, but in line with some advance financial market pricing. (And it might be notable, that for the first time in almost 20 years, one voting member dissented, preferring only a -25 bps cut.)They say the key to the cut is their "greater confidence" that inflation is beaten.The Fed’s so-called dot plot, which they use to signal its outlook for the path of interest rates, shows the median 2024 year-end projection for the federal funds rate fell to 4.38%. That implies another -50 bps in cuts are coming soon. The median estimate for the end of 2025 decreased to 3.38%.Markets initially reacted with Wall Street rising, commodity prices rising, the USD falling, and UST bond yields moving relatively little at the long end but dipping at the short end. But conviction in these early market moves seems to be wavering.Of course, the US Fed isn't the first to cut rates in this cycle. We have already seen them from the ECB, Canada and England. And yesterday, Indonesia delivered a surprise rate cut. But now the Fed has moved, and decisively, many others will no doubt follow. Global rates are in a clear easing cycle, now that inflation seems to have been tamed.American mortgage applications leapt +14% last week from a week earlier, the fourth consecutive gain, marking the sharpest increase since the 18-month high of almost +17% in mid-August. The surge in home loan demand tracked the fall in borrowing costs, with the average interest rate on a benchmark mortgage falling by -14 bps from the earlier week to a two-year low of 6.15%.And there was a good (but not great) rise in American housing starts in August. They were up almost +10% from the previous month to an annualised rate of 1.36 mln units in the month, firmly above market expectations of 1.31 mln units, and rebounding from the near 7% plunge in the previous period. It was the sharpest increase in nine months. Starts of single-family homes rose by nearly +16%. Despite all that, housing starts are still -6.5% below the year-ago level.Japanese exports rose +5.6% from a year ago in August, slowing sharply from a 10.2% rise in July and falling short of market forecasts of another 10% rise. But it was the ninth successive month of increased export shipments.In China, and in another sign of worsening tensions, China has 'blocked' a Taiwanese company manager from returning home, essentially kidnapping him at the border.But that is minor compared to the economic signals. Mid-Autumn Festival mooncake sales were reportedly quite weak; celebrations didn't deliver the expected boost.In the UK, they delivered another tame inflation result for August. It was unchanged from July at 2.2% and as markets expectation. The largest upward contributions came from the almost +12% rise in air fares, mainly for European routes. The most significant falls came for petrol and other energy costs.The UST 10yr yield is now at just on 3.71% and up +7 bps from this time yesterday. The price of gold will start today at US$2575/oz and up +US$9 from yesterday's high to a new all-time high. This price jumped after the Fed decision to almost US$2600 but has since fallen backOil prices are down -US$1 at US$70.50/bbl in the US while the international Brent price is still just under US$73/bbl. Trading is active post the US Fed, but net movements are lower.The Kiwi dollar starts today at 62.4 USc and up +60 bps from yesterday after the US Fed decision although softening subsequently. Against the Aussie we are up +20 bps at 91.8 AUc although all of that before the Fed. Against the euro we are up +30 bps at 55.9 euro cents. That all means our TWI-5 starts today at 69.8, and up +40 bps from yesterday.The bitcoin price starts today at US$60,835 and up +4.9% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.3%.Join us at 10:45am this morning when we will be covering the Q2-2024 GDP release.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news we are in the shadow of tomorrows US Fed rate decision. There almost certainly will be a rate cut, but the size of it is still in doubt. Place your bets.Meanwhile, today's dairy auction was a relatively tame affair, largely delivering what the derivatives markets signaled. But AMF and butter slipped, with the rest of the powders and cheese all rising about +3%. But there was more of the weak milkfats in this auction than normal so the overall price rose only +0.8%. In NZD terms it was similar. There will be little to shake farmgate payout forecasts in this event's results.And staying local, we should note that there is another electricity crunch underway this morning from 7am to 8:30am. Prices are under pressure as you would expect.Elsewhere in the US, the data released overnight delivered another set of positives. August retail sales grew when a slip was expected. And July retail sales were sharply revised higher. Last week's Redbook index rose +4.7% from the same week a year ago.US industrial production rose and by more than expected in August. And that means on a year-on-year basis it is no longer negative.And their NAHB/Wells Fargo Housing Market Index rose in September beating expectations. This breaks a string of four consecutive monthly declines.There was a well-supported but relatively small UST 20yr bond auction today where the median yield came in at 3.97%, down from 4.10% at the equivalent event a month ago.In Canada, their CPI inflation rate fell to 2.0% and back to where their central bank needs it to be. It was a slightly larger adjustment lower than expected. The Bank of Canada next reviews rate on October 23 and there is growing talk of a -50 bps reduction then.Meanwhile Canada housing starts in August came in lower than expected.Across the Pacific, Singapore's August exports came in softer than was anticipated.But India's August exports beat estimates, even if the rise seems minor and overall Indian exports are not large by world scales.Remember, China is on holiday today.The UST 10yr yield is now at just on 3.64% and up +1 bp from this time yesterday. The price of gold will start today at US$2566/oz and down -US$15 from yesterday's high.Oil prices are up +US$1 at US$71.50/bbl in the US while the international Brent price is now just under US$74/bbl.The Kiwi dollar starts today at 61.8 USc and down -10 bps from yesterday. Against the Aussie we are down -20 bps at 91.6 AUc. Against the euro we are down -10 bps at 55.6 euro cents. That all means our TWI-5 starts today at 69.4, and down a minor -10 bps from yesterday.The bitcoin price starts today at US$60,835 and up +4.9% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.3%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news financial markets are now expecting a -50 bps rate cut from the US Fed later in the week.But first up in the US, the next regional factory survey came in surprisingly strong. The NY Empire State Manufacturing Index unexpectedly jumped sharply in September to its highest since April 2022. A key driver was new order growth.Also coming in better than expected was Canada's July manufacturing levels. Oil and coal production drove that. Also probably helping was an unexpected rise in Canadian vehicle sales. But that monthly gain only limited the retreat from a year ago to -1.1%.As regular readers will know, Canada has had longstanding housing affordability issues. Today it loosened some eligibility rules for first-home buyer access to 'insured mortgages'. But this is a demand side move. So these changes are likely to have the unintended consequence of adding more competitive pressures to already stressed markets.In China, the typhoon that hit Shanghai yesterday has come at a tricky time for China and its financial capital. Delayed and cancelled transport connections will have undermined their Mid Autumn Festival holiday spending in the region.In Australia, the ASX200 closed at an all-time high yesterday, fueled by bets the US Fed would cut interest rates by -50 bps on Thursday (NZT).But the same financial market 'bets' are pushing the USD lower, along with benchmark interest rates. Falling rates are having a global effect, except perhaps in Australia where there is widespread acknowledgement that the RBA hasn't tamed inflation yet. But they may be able to hold on with unchanged policy rates as the gap with others widens over the next few months.Interestingly, financial markets are also betting heavier that the next RBNZ rate change, on October 9, will also be -50 bps.The UST 10yr yield is now at just on 3.63% and down -3 bps from this time yesterday. The price of gold will start today at US$2581/oz and up +US$3 from yesterday's high.Oil prices are up +US$2 at US$70.50/bbl in the US while the international Brent price is now just under US$73/bbl.The Kiwi dollar starts today at 61.9 USc and up +30 bps from yesterday. Against the Aussie we unchanged at 91.8 AUc. Against the euro we are up +10 bps at 55.7 euro cents. That all means our TWI-5 starts today at 69.5, and up +20 bps from yesterday.The bitcoin price starts today at US$57,987 and down -3.0% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.3%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the world's second-largest economy is having trouble convincing anyone it is under control.This coming week it will be all about the US Fed rate decisions, and the size of the rate cut. We will get that on Thursday NZT. And there will be central bank rate decisions this week from Japan, Norway, China, the UK, and Turkey. Australia will release its labour market updates. And of course, the New Zealand Q2 GDP result will also come Thursday.But over the weekend it was mostly about China.China’s industrial production rose by +4.5% in August from a year ago, falling short of market forecasts and slowing from July. This was the softest growth since March, and the fourth straight month of a slowdown. But at least it was confirmed by their electricity production data, up +5.8%. It is rare that electricity use exceeds industrial production expansion, so perhaps that is an encouraging signal for them.But China's retail sales underperformed, rising just +2.1% from a year ago in August, moderating from +2.7% growth in the prior month and missing market consensus of +2.5%. Lower car sales kept a lid on this sector amid unusual weather events this summer.New home prices in 70 cities fell faster, down -5.3%in August, after a -4.9% fall in the previous month. It was the 14th straight month of decrease and the steepest pace since May 2015, despite Beijing's extensive measures to reverse a downturn in the property sector, such as trimming mortgage rates and reducing home buying costs.Every one of those cities recorded a fall in these official stats for used houses. The largest was the -13% fall in Wuhan. When resales lose money it will be very hard to sell new ones.So it will be no surprise that their August data shows new loan growth remains very subdued in what is extending to be unusual difficult trading conditions. Chinese banks extended +¥900 bln in new yuan loans in August, above a fifteen-year low of ¥260 bln in July, but less than the expected bounce-back. It is also the lowest value for an August month since 2015.And it won't be a surprise to that August FDI was particularly weak, down more than -48% in the year to August from the same period in 2023.We have noted the trend before, but the weak Chinese economy is driving a bond rally there. Yields fell to a new record low on Thursday, and state banks have been drafted in to sell some of their long-dated bonds to try and stem the rally. But until more confidence returns to the Chinese economy generally, it unlikely to work. If Beijing institutions don't have the firepower to move this market, it is unlikely the core SOE banks do either.In a rare statement with the loan growth data release, the central bank indicated that new stimulus is on the way to shore up the economy. Late last week, President Xi exhorted his government to ensure the 5% growth target is reached this year. Xi's intervention came after widespread voices warned that the 5% target was probably out of reach.Coming at a time that isn't convenient for their economy, China is going into an end-of-summer period of public holidays. First there is the upcoming Mid-Autumn Festival, September 15 to 17, a total of 3 days off - but where Saturday, September 14 has been declared a workday. That will be followed by the seven-day "National Day" holiday from October 1 to 7. But that is being offset by making it full workdays on September 29 (Sunday) and October 12 (Saturday). One consequence of all this time off is that foreign travel is expected to boom. Visa-free policies and lower air fares is seeing the number of Chinese booking holidays abroad surge.In India, officials there are chaffing over creditor moves in the US to put Byjus into bankruptcy. Indian officials have arbitrarily removed the creditors who petitioned the US court that ruled on bankruptcy, from the creditor processes in India. It might get quite messy.In Europe, July industrial production (real) was flat from June in the EU, but lower in the wider Euro Area. From a year ago the declines are -2.2% and -1.7% respectively.In Russia, their central bank increased its policy rate by +100 bps to 19% in a move markets did not expect. They are battling high inflation in a war economy that is distorting faster than their central bank is comfortable with.And in the US, the University of Michigan consumer sentiment survey increased for a 2nd month in September, to its highest level since May. This was above what was expected. Both current conditions and expectations improved, topping estimates. Meanwhile, inflation expectations for the year-ahead declined to 2.7% but those for the next five years rose marginally to 3.1%.You will recall that the Bank of Canada cut its policy rate two weeks ago, by -25 bps to 4.25%. But now the talk there is

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news it is Friday the 13th, so don't expect too much from the day.The actual number of American jobless claims last week were +178,000, a one year low, taking the total number of people on these benefits to 1.71 mln, a nine month low. But the seasonally adjusted level reported was +230,000. It is unclear why the variance is so large this week.Meanwhile, American producer prices rose +1.7% in the year to August, the lowest in six months, easing from a downwardly revised +2.1% gain in July and below market expectations of +1.8%. Their 'core' PPI rose +2.4% however emphasising the role much cheaper energy costs are playing in keeping inflation down.The September USDA WASDE report confirmed global wheat and rice production will be higher than expected earlier in the year, coarse grains slightly less. They also say American beef imports will rise on rising demand. American milk production is expected to slip on lower local production.There was another well-supported US Treasury 30 year bond auction overnight delivering a 3.95% median yield. That is down sharply from the 4.22% yield at the prior equivalent event a month ago.India's inflation rate rose to 3.65% in August from an upwardly revised 3.60% in July (which was the lowest since August 2019). But the August level was above forecasts of 3.55%.. However, these levels are below the RBI's targets, and while food prices are still rising at a +5.7% rate, that is down from year-ago levels of +9.9%. It is this base effect change that is making overall price increases look low.Meanwhile, India's July industrial production was up +4.8%, about the average level it has been for all of 2024.In China, markets are expecting some significant cuts for interest rates for home loan borrowers soon. These were signaled earlier, but are now imminent. At the same time Beijing is rounding up investment bankers, taking passports, and investigating them for 'corruption'. Despite all this, their government bond sector is rallying sharply today in defiance of Beijing's efforts to calm matters. Equity prices are falling, also on the uncertainty, and in contrast to what is happening in other global markets.As expected the ECB cut its policy rates but they varied a lot this time by type of facility. The deposit rate was cut by -25 bps to 3.50%. But the main refinancing operations rate and the marginal lending facility rate were lowered to 3.65% and 3.90%, both from 4.00%, so these cuts are larger. They see a better inflation outlook and "better transmission of policy". They are also facing a weaker level of economic activity in the bloc. Their balance sheet reductions continue at an unchanged pace.It seems the Australian central bank is right to be sceptical inflation is trending in the way they need it to. Consumer inflation expectations are still at 4.4% in September in Australia, only slightly down from August's 4-month high of 4.5%. Perhaps the situation will turn soon. The same survey showed that respondents expected total pay was expected to grow by just +1.4% over the next 12 months.World container freight rates fell a rather sharp -13% last week as the shipping industry adjusts to the Suez Canal risks, and the Panama Canal drought impacts fade. Prices were down -13% last week from the week before to be only about double what they were a year ago. This is counted as 'progress'. The biggest falls were for cargoes outbound from China. But bulk freight rates are rising, up +3% over the past week but they are +60% higher than a year agoThe UST 10yr yield is now at just on 3.68% and up +3 bps from yesterday. The price of gold will start today up a significant +US$40 from yesterday at US$2554/oz and almost touching its record high of US$2555 on September 12, 2024. In fact, as we publish, it may have bested that ATH level.Oil prices are up another +US$1.50 at just on US$69/bbl in the US while the international Brent price is now just over US$72/bbl.The Kiwi dollar starts today at 61.6 USc and +30 bps firmer from this time yesterday. Against the Aussie we are down -10 bps at 91.9 AUc. Against the euro we are +20 bps firmer at 55.8 euro cents. That all means our TWI-5 starts today at 69.5, and +20 bps higher from yesterday.The bitcoin price starts today at US$58,242 and up almost +1.0% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.1%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news inflation is easing in the world's largest economy.First up today, the American August CPI inflation rate slowed for a 5th consecutive month to 2.5%, its lowest since February 2021 and below market expectations of 2.6%. But it was up +0.2% from July, which was as expected. Meanwhile, their core inflation rate steadied at a 3-year low of 3.2% but this core rate was up +0.3% from July. So some mixed signals here. Energy costs were much lower, rents and travel costs a little higher.There were only modest market movements after this data. Benchmark bond yields firmed slightly, the USD rose, and Wall Street took it in its stride shaking off the pre-release jitters.None of this will change the Fed meeting discussions a week from today. Today's data probably locks in a -25 bps rate cut rather than the option of a -50 bps cut.American mortgage application levels were little-changed last week, continuing at a low level. But mortgage rates fell with the benchmark rate falling to under 6.3%. However, that was not enough to entice any significant change in housing market activity.Lower yields were also on full display in the UST 10yr bond auction. Today's event was strongly supported with a median yield of 3.61%, down from 3.98% at the prior equivalent event a month ago.Across the Pacific, China's August vehicle sales were soft. They were 2.45 mln units in the month, -5.0% lower than for August 2023. And this was despite a Beijing program to boost this key domestic market. 1.1 mln of the sold units (45%) were EVs or hybrids. In July, sales were -5.4% lower than a year ago. Without the support, you have to wonder what levels they would be at.Chinese long-term government bond yields hit a fresh low yesterday, underscoring strong investor appetite for these expected capital gains even as the central bank intervenes to tamp down what it considers a bubble. The yield, which moves inversely to price, on the China government 10 year bond fell to 2.106% at one point. That is its lowest level since 2015, the starting point for comparable data. That has Beijing officials scrambling (and threatening traders).And that is not the only problem they face in their financial sector. Recently Beijing cracked down on banks offering higher than official rates for deposits. That had the perhaps-predictable outcome that depositors - especially corporate depositors - withdrew their deposits from banks and shifting them to places they get better returns. The effect on bank balance sheets was substantial. And there is a new scramble on to shore up this sudden distortion.In a key update from an RBA official yesterday, they reinforced their guidance that the tight labour market is a key element in their hawkish views on inflation and its likely trajectory. They see it staying tight enough to prevent inflation from falling to where they need to get it. That reinforced last week's comments by Governor Bullock who said that monetary policy will need to remain sufficiently restrictive until inflation actually moves toward the central bank’s 2-3% target range on a sustainable way. Clearly they don't think they are there yet. Rate cuts are a ways off in Australia.The UST 10yr yield is now at just on 3.67% and up +3 bps from yesterday. The price of gold will start today up an insignificant +US$1 from yesterday at US$2514/oz.Oil prices have recovered +US$1.50 at just under US$67.50/bbl in the US while the international Brent price is now just over US$70.5/bbl.The Kiwi dollar starts today at 61.3 USc and -20 bps softer from this time yesterday. Against the Aussie we are down -40 bps at 92 AUc. Against the euro we are -20 bps softer at 55.6 euro cents. That all means our TWI-5 starts today at 69.3, and -30 bps lower from yesterday.The bitcoin price starts today at US$57,692 and up +0.9% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.2%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news that while oil producers see sharply lower demand, the world's largest economy shows rising retail demand.But first, the overnight dairy Pulse auction saw SMP dart higher than expected to US$2800/tonne, its highest level since February 2023. The WMP component however slightly undershot expectations at US$3438/tonne, but holding its level of four weeks ago. It is not a serious weakness in over a series of auction events where the WMP price has been a little volatile.And staying with commodities, OPEC cut its demand forecast - for the second time in two months. That suddenly dropped the price of crude in all markets by almost -5%.So it might be a surprise to know that US retail demand at physical stores rose last week by +6.5% than in the same week a year ago, far outpacing inflation, and to it's fastest growth since the end of 2022 when it was recovering from the weak pandemic base. Prior to that anomaly, it is its highest growth rate since 2006 !Away from the business community and the Masters of the Universe crowd, a comprehensive review of US incomes for 2023 revealed a +4.0% rise in the year, and no-change in their poverty rates, which stand at income levels below US$30,900 (NZ$50,000). Their poverty rate was marginally lower at 11.1%.The NFIB Business optimism index slipped in August, but only off a very high level in the prior month. Even after this slip it is still near its highest since the end of 2022.There was another very well supported US Treasury bond tender today, this one for their 3 year Note. It brought a 3.40% yield. That is much lower than the 3.75% yield at the prior equivalent event a month ago.In China, foreign demand for their exports was strong in August. They increased by +8.7% in August from the same month a year ago, the most since March 2023, and to a 23-month high of US$309 bln. That was more than the expected rise of +6.5% and more than July's growth of +7.0%. It was the fifth straight month of expansion. The Chinese factory sector is being held up by international demand, not domestic demand.New Zealand and Australian demand for Chinese exports is falling however Ditto the EU, Japan and South Korea. Demand from the US is up but only by +2.8%. The countries with the largest demand increases are Brazil, South East Asia, and interestingly, Taiwan.In China, they are about to require basic military training for high school and university students, part of a broader push by Beijing to place a greater emphasis on national security in education.Outside their borders, China will help to train 3,000 foreign law enforcement officials over the next year to tackle global security issues and better protect Chinese interests beyond its borders, the country’s public security minister said.Australia's Westpac-Melbourne Institute Consumer Sentiment index dipped by +0.5% in September from August, the sixth time of decline in 2024. Consumers are still concerned their economy is heading for a harder landing. They are less fearful of interest rate rises, but more fearful of losing their jobs.The drop in business sentiment in Australia was a surprise, an outsized slump to a nine-month low and the weakest August since 2021.Aussie prudential regulator APRA has started the process to have banks cull their hybrid capital issues. They say these won't work as intended in a crisis. They are learning the lessons from the 2023 US and EU bank fizzes. Banks who need more capital will have to raise it directly, as full loss-absorbing shareholder support.The UST 10yr yield is now at just on 3.64% and down -6 bps from yesterday. The price of gold will start today up +US$11 from yesterday at US$2513/oz.Oil prices are down -US$2.50 at just under US$66/bbl in the US while the international Brent price is now just over US$69/bbl and these levels are a three year low.The Kiwi dollar starts today at 61.5 USc and marginally softer from this time yesterday. Against the Aussie we are +10 bps firmer at 92.4 AUc. Against the euro we are also +10 bps firmer at 55.8 euro cents. That all means our TWI-5 starts today at 69.6, and little-changed from yesterday.The bitcoin price starts today at US$57,169 and up +1.3% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 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 Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the EU has suddenly realised it is on the wrong track, with an unstainable mix of policies which are leading them into blind social and economic alleys.But first, US consumer inflation expectations for the year ahead were unchanged at 3% in August, the same as in July and June. The five-year-ahead inflation expectations was also steady at 2.8%. These same consumers said median one-year-ahead expected earnings growth is expected to be +2.9% and up from 2.7% in July, and above its 12-month trailing average of 2.8%. There is nothing here suggesting consumers expect inflation to be a problem, or that it threatens their real earnings.Also not a problem is the level of wholesale inventories which continue to run at normal levels in July, showing no early signs of business stress.But perhaps some more current data points to an issue. Total vehicle sales in the US ran at the annual rate of 15.1 mlnn much lower than the 15.8 mln rate in July. That was softer than the expected dip to a 15.4 mln annual rate.American consumer debt rose by more than +US$25 bln in August, about double what was expected and the biggest rise since the end of 2022. The outsized +6.0% jump was driven by higher 'revolving' debt, like credit cards. It is a change that is sure to raise a few eyebrows.Across the Pacific, Taiwan said its exports were particularly strong in August at US$43.6 bln. That was more than +16% better than the same month last year and far more than the expected +7.4% rise. Imports rose too, by almost +12% but that was less than expected. Taiwan's economy is certainly starring in the region. And this data reveals another big trend. Taiwan's largest export market is no longer Mainland China. It is the US. The shift has been swift. It also mirrors what is happening in other East Asian nations.In China, the threat of deflation, a risk high on Beijing's agenda, is not fading as fast as they would like. Their CPI inflation rate edged up to +0.6% in August from a year ago, from +0.5% in June, but less than market forecasts of +0.7%. Still, it was the highest level since February, mainly due to a strong pick-up in food prices, especially fresh food. However, beef prices are down nearly -13% in a year, lamb prices by -6.3%. Milk prices are down -1.7% on that same basis.Meanwhile, Chinese producer prices fell by -1.8% year-on-year, the most since April, and steeper than the expected -1.4% drop.And a large investment bank, China Renaissance, has seen its share price collapse after Beijing apparently arrested its chairman on unknown charges. The bank was an important funder of China's digital economy. Local economists aren't as positive about China's immediate prospects any more. Beijing is losing the hearts and minds of and important set of influencers.Halfway around the world, a new EU report said they must be spending about €800 bln per year on investment if they are not to lag the US, China or Japan in productivity projects. Without that they would be “forced to choose” between climate, economic and foreign policy goals. That is about 5% of the bloc's GDP and would require a massive new commitment. Without this extra investment, the reports ays the EU will be unable to finance its social model and will have to "scale back some, if not all, of [its] ambitions".. It is a tipping point moment for Europe as their competitiveness wanes. They need to change direction.In Australia, all eyes are on the fast-falling iron ore price. In some markets it is now below US$90/tonne which represents a -23% fall in the year, down a massive -38% since the start of 2024.The UST 10yr yield is now at just on 3.70% and down -2 bps from yesterday. The price of gold will start today up +US$5 from yesterday at US$2502/oz.Oil prices are up +US$1 at just on US$68.50/bbl in the US while the international Brent price is now just under US$72/bbl.The Kiwi dollar starts today at 61.6 USc and and marginally softer from this time yesterday. Against the Aussie we are -30 bps softer at 92.3 AUc. Against the euro we are unchanged at 55.7 euro cents. That all means our TWI-5 starts today at 69.6, and little-changed from yesterday.The bitcoin price starts today at US$56,426 and up +3.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.4%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this tomorrow.

The integrity of bond markets on both sides of the Tasman is at stake as regulators probe issues of potential market manipulation, Australian Financial Review senior reporter Jonathan Shapiro says.Shapiro is covering the Australian Securities and Investments Commission (ASIC) probe of the ANZ Group's role in a A$14 billion 2023 Australian government bond sale, and taking an interest in the Financial Markets Authority's probe into possible manipulation in New Zealand's wholesale interest rate and government bond markets. Speaking in the latest episode of the Of Interest podcastShapiro says the ASIC probe of ANZ boils down to allegations of interest rate rigging, allegations of providing false information to the Australian Office of Financial Management (AOFM), which manages the Australian government's debt portfolio and hired ANZ as risk manager for government bond issues, and workplace culture issues."What is alleged is in that role they [ANZ] might have moved the market in their favour and made trading profits. And those trading profits came at the expense of the [Australian] government because ultimately their alleged actions forced up the government bond [borrowing] rate. We calculated about five basis points extra ... and that's for $14 billion of debt over 11 years," Shapiro says.ANZ Group CEO Shayne Elliott says the bank itself has found no evidence misconduct or market manipulation by ANZ in connection with the bond issues cost the government financially. Elliott also says whilst some information provided to AOFM may have been incorrect, this was a mistake, rather than a deliberate act. Meanwhile, three traders have left the bank and a fourth has been warned.Shapiro says what's being alleged is very serious and everyone in Australia has an interest in the outcome because the government was ANZ's client.In New Zealand the Financial Markets Authority (FMA) says it's investigating two complaints about possible market manipulation in NZ's wholesale interest rate and government bond markets.Shapiro says market integrity is absolutely critical, with pension funds, sovereign wealth funds, central banks and other investors trading government bonds."They don't want to be on the other side of of any funny business...it's extremely important that these markets are trustworthy."Because they're viewed as the risk-free rate of return, government bond rates underpin the whole market, Shapiro notes."So regulators should absolutely be looking at any issues in these markets and making sure that they're transparent, that they're clean, and that there's nothing untoward going on. And one would think that participants in that market, especially the big banks of countries like New Zealand and Australia, would have an interest in making sure that, firstly, they're doing everything they can for their client, the government, but also making sure the bond market works as efficiently as it can."The ANZ Group has been left out of the last three Australian government bond issues, Shapiro says.In the podcast Shapiro also talks about why he refers to the ASIC probe as the biggest scandal in the ANZ Group's 182-year history, goes into detail on the three key issues at stake and the ANZ Group's responses, what's at stake for the bank potentially financially and reputationally, as well as for Elliott, possible similarities with what's at issue in the FMA investigations and more.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news expectations of flatter demand are hurting commodity prices. And that includes some key food prices which are also impacted by healthy supply levels.But first, this coming week will bring more attention to inflation rates. We will get monthly updates from the US, China, and India. And we will get industrial production data from India. There will also be sentiment data from the US and Australia. The ECB meets again this week and the results will be released Friday morning (NZT). Most see a -25 bps cut coming then, to 4.0%. And locally the focus will be on Wednesday's migration and tourism data.Over the weekend the data showed the US economy created fewer new jobs in August than expected, adding +142,000 in August, and below market expectations of +160,000. July's increase was revised sharply lower. Most job gains occurred in construction and healthcare while manufacturing employment declined. But their jobless rate edged lower to 4.2% in August from 4.3% in July.But we do need to note that the +142,000 rise is the seasonally-adjusted number. The actual rise is +263,000 from July which is pretty healthy, it must be said. From a year ago, payrolls are +2.3 mln larger. The economic impact of +2.3 mln more people employed is not insignificant. And that is after the March revision.Weekly earnings are up +3.5% from a year ago, hourly earnings up a bit more, and that was better than expected.The US job market is cooling, but not cracking. This fact will give the US Fed more room to maneuver at their meeting on September 19, in ten days time.Separately, Canada said it added +22,000 jobs in August, a recovery from the small dip in July. Almost all the August increase was for women.But their local, and widely-watched Ivey PMI fell sharply in August, down to its lowest level since December 2020. However it wasn't matched by the internationally benchmarked S&P/Markit version which reported a stable situation. One of them isn't right.In China, the end is nigh for struggling developer China Vanke. They reported terrible July metrics, and their liquidity situation worsened notably. Not helping them, China's regional banks are moving faster to quit nonperforming real estate loans. That is leaving the majors holding the bag as the government urges them to lend more to support a weak housing market. It is hard to see how the management of their real estate crisis won't end very badly. China's neighbours are increasingly concerned.Germany reported a very tough situation for industrial production in July, down -5.3% from the same month a year ago and worse than the June result. But at least exports are limiting the downside. These were up +1.7% from June and that was a gain that was better than expected and one that clawed back its year-on-year dip.In Australia, home loan activity for owner-occupiers picked up in July, adding +AU$18.9 bln in the month and the most in two years. For investors the rise was +AU$11.7 bln which was an even faster rate of increase and the most since January 2022.Prices for iron ore, nickel, cobalt, and lithium are all falling, and are all at or near their five-year lows.World food prices actually dipped in July with declines in cereal and meat prices in the month. (Dairy prices rose.) Overall prices remain their lowest in three years. Good agricultural conditions have persisted for some time now, boosting output. Updated forecasts for global cereal production point to a weather-driven drop in coarse grains offset by expected increases for wheat and rice. So far there is no indication yet that the world can't feed itself, and more than adequately, despite some high-profile pressures.The UST 10yr yield is now at just on 3.72% and unchanged from Saturday.The price of gold will start today up +US$4 from Saturday at US$2497/oz.Oil prices are -50 USc lower at just over US$67.50/bbl in the US while the international Brent price is now at just on US$71/bbl. Both are down -US$6/bbl in a week, or -7.5%.The Kiwi dollar starts today at 61.7 USc and unchanged from Saturday. That is -¾c lower in a week. Against the Aussie we are +10 bps firmer at 92.6 AUc. Against the euro we are also unchanged at 55.7 euro cents. That all means our TWI-5 starts today at 69.7, unchanged from Saturday, but down -75 bps in a week.The bitcoin price starts today at US$54,341 and up +1.5% from this time Saturday. Volatility over the past 24 hours has been low at just under +/- 1.0%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this tomorrow.

Grocery Commissioner Pierre van Heerden wants a third supermarket competitor to set up shop in New Zealand in order to tackle the country’s supermarket duopoly, but reducing the barriers to entry won’t happen overnight.“What we've been told by these players is when they come and they want to open up a large store in New Zealand, the cost to get a spade in the ground is double that of Australia,” he says in a new episode of the Of Interest podcast. “Now that is significant. And when they look at 'do we open up a store in Wagga Wagga or Tamworth or wherever in Australia' versus coming to open up in Auckland where there is massive demand or any of the other centres, really, the cost is double that of Australia. And the timeframe often is more than double as well. So when they do their business cases, they look at that and say, 'well, we're going to be better off by going elsewhere rather than here.' Now the government is saying that they're going to change things to make New Zealand more competitive for international players. And that's really what we're looking at.”The Commerce Commission released its first annual grocery report on Wednesday which revealed ComCom’s efforts to boost grocery competition over the past year hasn’t had much impact. The report found between 2019 and 2023, price-cost margins on non-fresh products across the New World, Pak’nSave, and Woolworths brands increased by 3.1 percentage points on average, while fresh food margins rose a lesser 0.4% on average.The Commission defines price-cost margins as a measure of the difference between the price a firm receives for the sale of an item and the direct supply costs incurred.Broken down, the price-cost margins for non-fresh products in that period rose the most at Foodstuffs North Island’s New World stores which reported a 3.9 percentage point increase in that period.In second and third, Woolworths NZ’s Countdown stores, now renamed back to Woolworths, reported a 3.6 percentage point increase, and Foodstuffs South Island reported a 2.9% percentage point increase during 2019 and 2023.The consumer watchdog said the report provided “clear evidence for stronger action” in NZ’s $25 billion grocery sector.Speaking on the Of Interest podcast, van Heerden says the Commission wants to make sure the barriers to entry are reduced enough to make NZ’s supermarket sector more competitive. Barriers to entry for potential new supermarket hopefuls also include things outside the Commission's control like planning regulations including zoning requirements within the local council’s District Plan, and the resource consent process in some cases. The Overseas Investment Act 2005 can also create additional costs, delays and uncertainty in relation to site acquisition by overseas entities looking to enter or expand in the New Zealand grocery industry, van Heerden says.Asked if a giant entity would be needed to enter NZ’s supermarket sector – which is currently controlled by Woolworths NZ and Foodstuffs – as a third entrant or if a smaller grocery player could work as well, van Heerden says it can be a combination.“We would like to see someone who can come in and has the scale to do it nationally, because that's the way they're going to get the best prices from suppliers. You know, they can get good trade spend or discounts in their stores as well. Because when I look at Auckland as an example, in Auckland, the concentration or the market share of the major supermarkets has come down by 4% from 74 to, I think it's 70%. What has caused that – Costco coming into the market. A lot of the Asian supermarkets are growing and we've just seen Foodies open and they sold out from what I've seen, you know, four weeks' stock in three days,” he says.“So consumers are anxious and they want to get better deals and they will support these players. But I want to see that same level of competition out in the smaller areas. And if a big player comes in and as in Australia, a hard discounter where they really give very good prices, I think that will shake up the industry and it will ensure that the big players are more competitive.”Van Heerden says the supermarkets have “said all the right things” when contributing to the Commission’s work on the grocery sector“If you look at the comments that both the major supermarkets have brought out since the report came out, they all say they work, they work with us, they support the objectives. But I want those words to change into actions. I want to actually see it happening. I look at, for instance, the refund policies and the pricing issues. We've raised that now with them since I started. And quite honestly, the response has been, 'yes, we're getting it done,' but the actual actions have been slow. So I'd like to see them ramping up those actions and letting their actions be the same as what they're telling us, that they're happy to work with us to get things done,” he says.The Commerce Commission's grocery report can be found here.*You can

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news mixed news but the underlying vibe is positive.First in the US, all eyes are now on tomorrow's August non-farm payrolls report. Analysts expect a rise of +160,000 jobs. But today's pre-cursor ADP Employment Report sharply undershot that level suggesting only +99,000 jobs will be added. If that is the case that would make it the smallest gain since 2021.This data has clouded financial markets today.A jump in reported layoffs in August added to the mood, but to be fair they only rose back to 'normal' levels.But there was good news about the US economy too.The level of jobless benefit claims last week fell, when a rise was anticipatedThe ISM services PMI rose more than expected, on the basis of better new order levels. That was backed up by the companion S&P/Markit services PMI.And the latest update for American productivity (for Q2) was particularly positive with a strong rise.So you would have to think there might be upside in tomorrow's US labour data. We will know soon enough.Wages in Japan rose by +3.6% year-on-year in July, slowing from a +4.5% rise in June which was the highest in 26 years, since January 1997. Markets expected a July rise of +3.1%.EU retail sales volumes rose in July, the fourth rise in the past sixth months. Better yet, they were higher than a year ago on a volume basis.German factory orders for July were another overnight surprise. They bounced back in June and July was expected to be weak. But in fact a good rise was posted again in July.And it might also surprise you to know that after being hooked on Russian energy, the Germans have made a substantial shift away, not to other fossil-fuel suppliers, but rather to renewables. More than 60% of electricity production is now by renewables. And the overall energy intensity in the German economy is declining (ie improving). Both are huge shifts for Europe's largest economy.Australia's merchandise trade surplus rose in July to its highest since February as exports grew to a 5-month high while imports fell to a 3-month low.But the iron ore price took a sharp tumble yesterday. While that isn't great news for Australia, it isn't all bad. They have advantages over their rivals in Africa and South America in both freight costs and mine productivity.Although China's media mouthpieces are talking up the prospects for recovering steel production, their trade association is warning that any short-term bump will probably be just a "flash in the pan".Bulk freight rates continue to rise however. And global container freight rates are still extremely high essentially because of the Suez Canal/Horn of Africa security issues. They did fall -8% last week, but they remain +236% higher than pre-pandemic levels. (China to Europe rates fell quite sharply, but trans-Pacific rates didn't move much.)The UST 10yr yield is now at just on 3.73% and down another -4 bps from yesterday. The price of gold will start today up +US$10 from yesterday at US$2513/oz.Oil prices are -US$1 lower at just under US$69/bbl in the US while the international Brent price is now at just on US$72.50/bbl. That has forced OPEC to delay is planned rise in production.The Kiwi dollar starts today up +30 bps from yesterday at 62.3 USc. Against the Aussie we are +10 bps firmer at 92.4 AUc. Against the euro we are also up +10 bps at 56 euro cents. That all means our TWI-5 starts today at 70 and up +10 bps from yesterday.The bitcoin price starts today at US$56,336 and down -2.7% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.3%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news markets see a cooling US labour market in signals ahead of this weekend's August non-farm payrolls report.But first, US mortgage applications rose by an insignificant +1.6% from the previous week in the last week of August, a low and stable situation. They are now -4% lower than the soft year-ago levels. Their benchmark 30 year fixed home loan interest rate slipped slightly to 6.35% and its lowest since May 2023.(Yesterday, we mistakenly reported US retail sales from two weeks ago, up +5.0% at physical stores from a year ago. The actual result from this metric for last week was very much more positive, up +6.3% from the same week a year ago, its best rise since the end of 2022 when the very low year-ago base boosted results. This current result is actually quite impressive.)US exports hit their highest level ever in July at US$267 bln. Imports rose too, but not to a record high. Their full trade deficit rose to -US$79 bln but that was well short of records set during the pandemic. This deficit continues to quite small in relation to US GDP.US factory orders were solid in July. New orders rose by +5% from the previous month, above market expectations of a 4.7% increase. Year-on-year they are up +3.8%. Better, new orders rose by +9.8% for durable goods, lifted by transportation equipment which was up more than a third.But there was a sharper-than-expected drop in July job openings in the US. The number of job openings fell by -237,000 to just under 7.7 mln in July from a downwardly revised 7.9 mln in June. That is the lowest level since January 2021 and below market forecasts of 8.1 mln. This is a first real sign of a cooling labour market there, although the new order data may make that a temporary dip. This is the data that has the financial market's attention today.Meanwhile, the US Fed's Beige Book survey for August painted a modest picture of the American economy but with the balance of opinion that things are picking up from the current stable positions. This survey found little evidence of labour market stress.Canadian exports came in little-changed in July, holding the higher levels first achieved in mid 2022.And as expected, the Bank of Canada cut its policy rate by -25 bps earlier today to 4.25%, its third consecutive cut, saying excess supply in the Canadian economy continued to put downward pressure on inflation there which is now running at 2.5%, its lowest level in more than three years.In China, the Caixin services PMI eased a bit but is still expanding. Incoming new business and activity remained in growth, with export business rising at a faster rate in August. Meanwhile capacity pressures were still evident, but firms reduced staffing levels amid cost concerns.Bloomberg is reporting that China is considering cutting interest rates on as much as NZ$8.5 tln of mortgages in two steps to lower borrowing costs for millions of families while mitigating the profit squeeze on its banking system. To do that, financial regulators have proposed reducing rates on outstanding mortgages nationwide by a total of about 80 bps, part of a package that includes an accelerated timeline for when mortgages become eligible for refinancing, according to people familiar with the matter. The first cut may come in the next few weeks while the second move would take effect at the beginning of next year, said the people, asking not to be identified, they reported.The EU said producer prices are now edging lower in July from a year ago, helped by the falling cost of imported energy.Australia said its GDP was +1.5% higher in its June year after a smaller-than-expected +0.2% expansion in the June quarter. "Helping" keep it positive was record federal government spending on the public payroll and on the healthcare sector.Meanwhile an August survey of the Australian manufacturing sector was particularly grim. The Ai Group Industry Index dropped sharply by 11.3 points to -30.8 in August, further deepening the contraction that has persisted for two years.The UST 10yr yield is now at just on 3.77% and down another -7 bps from yesterday. The price of gold will start today up a minor +US$2 from yesterday at US$2493/oz.Oil prices have held from yesterday's lower level at just under US$70/bbl in the US while the international Brent price is still at just on US$73.50/bbl.The Kiwi dollar starts today unchanged from yesterday at 61.9 USc. Against the Aussie we are nearly +20 bps higher at 92.3 AUc. Against the euro we are -20 bps lower at 55.9 euro cents. That all means our TWI-5 starts today at 69.9 and down -20 bps from yesterday.The bitcoin price starts today at US$57,910 and virtually unchanged from this time yesterday. However, volatility over the past 24 hours has been moderate at just on +/- 2.5%.You can fin

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news financial markets are looking for excuses to be negative, and they found one - sort of.But first up today there was another full dairy auction and that brought a somewhat disappointing result. Overall prices fell a minor -0.4% in USD, down -1.1% in NZD. This event failed to maintain the upward demand for WMP, which fell -2.5% hurting the overall result. That contrasted with most other components, especially SMP which was up +4.5%. China and "North Asia" were the dominant buyers today but there was notably less demand for WMP from other regions. Although it was an unexpectedly soft result overall, at least it basically confirmed most of the prior months gains.In the US, the two August factory PMIs each show a contracting manufacturing sector. The ISM one improved from July's deeper contraction, but the S&P/Markit one slipped back but to a similar level to the ISM one. Slower new order growth was a shared feature, especially for export orders. Although the variance in both from market expectations was very minor, it has had an outsized impact on the mood of financial markets today, post the US-holiday. Equities fell, benchmark yields retreated, and the USD softened.Market ignored the rise of economic optimism in the RCM/TIPP survey, now at a 17 month high.They also ignored the rise of US retail sales last week at physical stores, up +5.0% above the same week a year ago on a same-store basis.Also ignored by markets was the 'good' logistics managers index for August that showed firms are gearing up positively for Q4-2024 activity.The Canadian factory PMI continues to be marginally disappointing, although it is broadly stable.China said it will likely impose tit-for-tat tariffs on Canadian canola imports as a retaliation for Canada's duty level on them dumping EVs into Canada.In Australia and despite strong mineral exports, they are now back running balance of payments deficits. Australia’s current account balance fell by AU$4.4 billion to a deficit of -AU$10.7 bln in the June quarter. This was the largest since June 2018, double what was expected, reflecting continued falls in bulk commodity prices and higher income paid to non-residents. They ran a +AU$6.3 bln current account deficit in Q1. For the year to June, they now have a -AU$18.8 current account deficit, the largest annual level since March 2018.The UST 10yr yield is now at just on 3.84% and down -9 bps from yesterday. Wall Street has opened after the holiday down -2.0% on the ISM result trigger. The NASDAQ is down -3.1%. The price of gold will start today down -US$8 from yesterday at US$2491/oz.Oil prices have dropped -US$3.50 from yesterday to just under US$70/bbl in the US while the international Brent price is now just on US$73.50/bbl. That makes it the lowest since the brief dip at the end of 2023, and prior to that, at 2021 levels. The restoration of Libyan oil supply after the apparent end of political and security issues there was a key trigger to today's drop.The Kiwi dollar starts today down -40 bps from yesterday at 61.9 USc and a two week low. Against the Aussie we are +40 bps higher at 92.1 AUc. Against the euro we are -20 bps lower at 56.1 euro cents. That all means our TWI-5 starts today at 70 and down -20 bps from yesterday.The bitcoin price starts today at US$57,914 and down almost -1.0% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.9%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the world's second largest economy may be seriously out of balance, with implications for everyone.With the US on holiday. the big global influences come from elsewhere today. First up, the private Caixin PMI for Chinese factories moved up from a minor contraction in July to a minor expansion in August. According to this survey, output growth accelerated amid an upturn in new orders and a stabilisation in employment. Meanwhile, price pressure eased and confidence hit a 3-month peak. All this was marginally better than the official factory PMI which recorded a slightly deeper contraction. The difference is that the Caixin survey is more about their private sector, the official PMUI more about their SOEs and the enterprises that dominate Chinese manufacturing.But despite this stable factory activity, their firms have been buying raw materials at a high rate, so consequently there is a huge buildup in inventories across a wide range of sectors. If the world doesn't take the surge in exports that would be necessary to justify this build-up, then the resulting pullback will have large-scale international consequences. There are plenty of signs this imbalance may end badly for everyone involved.And China's property woes are deepening, which is driving sharper equity market retreats. Falling prices aren't being stemmed, squeezing developers further and keeping house buyers away.Taiwan's August PMI only registered a modest expansion in the island nation, about the same as for China.Japan's August PMI showed neither an expansion nor contraction.South Korea's August data pointed to sustained and stronger increases in both output and new orders for their manufacturing sector amid growing signs of client confidence.India's August PMI registered softer increases in new business and output during August, albeit with rates of expansion remaining elevated by historic standards.In Australia, their factory sector is deteriorating at a faster rate, but there are some signs things may improve later in the year. Although new orders and production continued to fall, export orders picked up and along with it, confidence in the future. But they also report that cost pressures are not easing, which will worry the RBA.Australia is quite vulnerable to the Chinese economy's strugglesSo it will be no surprise that job ad levels continue to shrink in Australia. And that company profits seem to be diving.Meanwhile on the Australian property front, building consents jumped in July, especially for multi-unit developments although to be fair that is off a very low base, so it may not be significant.And CoreLogic said August house prices rose only modesty from July to be up +7% for the year. However all this rise was from Brisbane (+15%), Adelaide (+15%) and especially Perth (+24%). Without them, there would be no rises.The UST 10yr yield is now at just on 3.93% and up +2 bps from yesterday. The key 2-10 yield curve inversion has now disappeared, replaced by a positive +1 bp.The price of gold will start today down -US$4 from yesterday at US$2499/oz.Oil prices are little-changed from yesterday again, still just under US$73.50/bbl in the US while the international Brent price is still just over US$77/bbl.The Kiwi dollar starts today down -20 bps from yesterday at 62.3 USc. Against the Aussie we are sharply lower at 91.7 AUc. Against the euro we are also lower at 56.3 euro cents. That all means our TWI-5 starts today at 70.2 and down -30 bps from yesterday.The bitcoin price starts today at US$58,472 and back up +0.8% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.4%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the big northern hemisphere countries are starting to report their August activity levels - and most of them are fine.But first in China, their official August PMIs were released over the weekend. Their factory PMI fell a bit further into a minor contraction. New orders, foreign sales, and buying levels all dropped for a fourth consecutive month. Their employment weakness also persisted in this sector.However, the Chinese service sector lifted to maintain a minor expansion, but is still far below the February to May levels. In that broader perspective the August lift seems within the margin of error.The private Caixin versions of these PMIs should be released later today.Unofficial data of housing sales volumes and values in China weren't encouraging in August. More developers are being ordered to liquidate, unaided by any return of demand for housing. The top 100 developers faced a -10% retreat in sales in August from July, down more than a quarter from August 2023.South Korean exports were more than +11% higher in August than a year ago, but that undershot the expected +13% rise, and they rose almost +14% in July. The growth of exports to China lagged the overall gains but those to the EU and the USA outperformed. But China remains their top export destination.Japanese industrial production expanded in July, a good recovery from the June dip. But Japanese retail sales rose at a slightly slower rate than expected.In the US, they are ending their summer with a major national three-day-weekend holiday, Labor Day. Their markets return in full on Wednesday NZ time.But before this weekend started, another piece in the policy jigsaw was put in place for the US Fed, the PCE inflation level and that came in low and little-changed, confirming the conditions for a September rate cut. The July core PCE price index rose just +0.2% from the previous month and the market-expected change. The +0.2% monthly increase in headline PCE prices was also in line with expectations. That puts it +2.6% up on a year ago. Nothing disturbed market expectations here - although it probably means the chance of a -50 bps Fed cut is now off the table.Perhaps helping, there was a slight improvement in the Chicago PMI from the American industrial heartland although this is more of a "contracting less" situation rather than an expansion. New order levels edged up.Canada said its economy grew at a good +2.1% rate in Q2-2024 and that was better than what was expected by analysts there (+1.8%). Higher wages and savings helped, which drove more government spending.India also released its Q2-2024 GDP and that rise was in a different league - up +6.7% from a year ago. However analysts had expected a +6.9% rise so that result was tinged with a slight disappointment.The annual inflation rate in the Eurozone fell to 2.2% in August from 2.6% in the prior month, matching market expectations to result in the smallest rise in consumer prices since July of 2021. Much lower energy costs allowed the moderation.Australian retail sales were a disappointment in July, with no rise from June and up +2.3% from the same month a year ago, well short of inflation's impact. It is worse on a per capita basis. And given the elevated inflation level they face the real prospect of an interest rate hike. (Financial markets however are not pricing in a hike.)For the rest of the week, there will be a full dairy auction on Wednesday morning.And a slew of PMIs from all the major economies are due this week. Australia will release its Q2-2024 GDP and Canada will have a rate decision (where a -25 bps cut is expected). And this week will end with the US non-farm payrolls report which is expected to show a solid +163,000 jobs gain. If it does, that will bolster the expected Fed normalisation move the following week and the rate cut by them.The UST 10yr yield is now at just on 3.91% and unchanged from Saturday, up +11 bps for the week.The price of gold will start today yp +US$2 from Saturday at US$2503/oz.Oil prices are little-changed from Saturday, still just under US$73.50/bbl in the US while the international Brent price is still just under US$77/bbl. Despite all the obvious tensions in the usual places, actually global supply is more than enough and keeping prices low.The Kiwi dollar starts today up +10 bps from Saturday at 62.5 USc, up a full +1c from a week ago, up +3c from the start of August. Against the Aussie we are firm at 92.4 AUc. Against the euro we are up +10 bps at 56.6 euro cents. That all means our TWI-5 starts today at 70.5 and up +10 bps from Saturday, up +100 bps in a week and up +200 bps since the start of August.The bitcoin price starts today at US$57,989 and down -1.2% from this time Saturday. Volatility over the past 24 hours has been mode

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the northern holiday season can still spring a few economic and market surprises.First in the US, mortgage applications last week were little-changed from a week ago (down -0.5%) and that is despite mortgage rates falling for a fourth consecutive week to 6.44% for their benchmark 30 year fixed loan. That is its lowest level since April 2023, and interestingly is the same rate that applied 30 years ago in October 1993. If you took our one of these loans back then and had to renew it today (!), the rate would be exactly the same.In their government bond market, the US Treasury had a 5 year bond tender and that was very well supported - again. There was a massive US$100 bln more offered than they accepted. It gave investors a median yield of 3.59%, down from 4.05% at the prior equivalent event a month ago. Their bond rally is extending, so perhaps it is no surprise investors are so enthusiastic. Lower rates also mean the pressure on their Federal deficit is less than it would otherwise be. On average, the US Federal government pays about 3.35% over all its debt, so today's tender is approaching that average again.The US holiday driving season is coming to an end with one final burst for their Labor Day holiday this coming weekend. Motorists there are paying -12% less for petrol than they did at this time last week, and on their way home they will be paying -1.4% less than they did a month ago. Energy inflation is not a thing there at the moment.Today will also be signature days on the US equity markets after Wall Street closes. Nvidia will release its results and investors will then know if their sky-high valuation is reasonable. And Berkshire Hathaway may hit a capitalisation of US$1 tln, putting it in a very small and exclusive club of seven, all the others big tech companies.In China, the levels of dissent are rising as their economy wavers, although the rises are containable by Beijing. In the year to October, they were up +16% according to detailed monitoring. Most current dissent is in the south in Guangdong province, but the big central provinces that include Beijing are also seeing rises in dissent. The October monthly levels may end up being the highest of the year. Almost half relate to workforce issues, about a fifth relate to homeowner stress.And in some parts of China, stress is more than citizen protest. In giant Chengdu, the capital of Sichuan province, they are in an extended and crushing heat wave. Electricity is being rationed with many companies halting production after the local government imposed sharp restriction as the power supply buckled.Australia released their month CPI Indicator yesterday. It rose 3.5% in July from a year ago, down from June's 3.8% but above consensus of 3.4%. It was the lowest figure since March, as electricity prices fell sharply following the extended Energy Bill Relief Fund rebate. Inflation remains outside the RBA’s target range of 2-3% and that electricity component is hiding some of the higher prices elsewhere. Don't expect Aussie rate cuts any time soon. And staying in Australia (and speaking of extremes), their Green Party said its “Robin Hood” reforms would levy an extra AU$514 bln in taxes over 10 years to pay for sweeping social benefit increases. (Chances of enactment are low however, because they only have 4 MPs in the House of Representatives, plus 12 of 76 in their Senate.) The Aussie Green's alignment to the bikie-gang controlled CFMEU union isn't endearing their policies to a wider audience either.The UST 10yr yield is now at just on 3.84% and unchanged from yesterday. The price of gold will start today down -US$13 from yesterday at US$2506/oz, another record high.Oil prices are down -US$1 at US$74.50/bbl in the US while the international Brent price is now just over US$77.50/bbl.The Kiwi dollar starts today down -20 bps from yesterday at 62.3 USc. Against the Aussie we are unchanged at 92 AUc. Against the euro we are up +20 bps to 56.1 euro cents. That all means our TWI-5 starts today at 70.1 and unchanged from yesterday.The bitcoin price starts today at US$58,877 and down another -4.7% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.7%.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 on Monday because I am taking a short winter break.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the last few days of the northern summer holiday period that is quiet but basically positive.First, American retail sales at physical stores were up +5.0% last week from the same week in 2023, another pointer that the consumer side of the American economy hasn't stumbled yet.But there are of course pockets of regional variation. The Richmond Fed's factory survey wasn't so flash in its August survey with a tenth straight contraction. The service sector in the region was stable however.But the Texas Dallas Fed service sector survey is contracting just as we reported yesterday its manufacturing sector was.But these regional business sentiment pockets might be outliers. As we noted for the Redbook retail survey, consumers seem upbeat. And that is reinforced by the latest Conference Board survey of consumer sentiment. The rise in optimism on a national level contrasts with a few pockets of business pessimism.A very well supported US Treasury 2yr bond auction brought a median yield of 3.83% overnight, down more than -50 bps from 4.39% at the prior equivalent event a month ago. It's a bond rally directly related to the Fed signals at Jackson Hole.Across the Pacific, China said profits at its largest industrial firms (mostly SOEs) rose +3.6% in the first seven months of 2024. This was little-changed from June. They were up +4.1% in July from the same month a year ago. That they are still profitable overall is a good sign, and they are not getting worse.As China returns from its summer holidays, one thing may be missing - childcare. The sharp demographic shifts are moving faster now and a nationwide causality is childcare centers. Businesses providing these services closed for summer and a rather large number of them aren't re-opening. Enrolments are diving reflecting the swift shift in attitudes from the 'last generation'. (Of course, China doesn't have this problem on its own, but it is particularly fierce there.)Taiwan however has reported a continuing rise in consumer sentiment there. In fact, these levels are now back at levels last seen in March 2020 before the pandemic hit the island nation. From June this year, you may even call the rise a surge.The UST 10yr yield is now at just under 3.84% and up +3 bps from yesterday. The price of gold will start today up +US$1 from yesterday at US$2519/oz, another record high.Oil prices are down -US$1.50 at US$75.50/bbl in the US while the international Brent price is now just over US$78.50/bbl.The Kiwi dollar starts today up nearly +40 bps from yesterday at 62.5 USc. Against the Aussie we are up about the same to 92 AUc. Against the euro we are up +30 bps to 55.9 euro cents. That all means our TWI-5 starts today at 70.1 and also up +40 bps.The bitcoin price starts today at US$61,804 and down -3.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

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

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

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news financial markets in the US have the jitters ahead of a key speech by Fed boss Powell tomorrow at the Jackson Hole central bank shindig. Equities fell, bond yields rose, and the USD firmed and expectations grew Powell will make the case for only a gradual pace of rate cuts.Meanwhile, US jobless claims actually fell last week and by about what was expected. But the seasonally-adjusted level rose and that wasn't expected and that grabbed the headlines in the absence of any other major economic news. There are now 1.86 mln people on these benefits, also a fall.The 'flash' US PMIs from S&P/Markit shows their factory sector contracting slightly but their services sector expanding faster. New order levels are problem for their manufacturing sector. But service sector activity grew at a solid and increased rate in August, and because that sector is far larger than the factory sector, that points to robust GDP growth in excess of 2% annualised in the third quarter, which should help allay near-term recession fears.The Chicago Fed's National Activity Index for July basically confirmed the manufacturing slowdown.But the Kansas City Fed factory survey held on with an improvement in August, showing there are some regions still improving in their manufacturing sector.Also improving were the July existing home sales which rose modestly at about the expected level and that ended a four month retreat. But despite that, the sales volume levels essentially remained at the low levels they have had since early 2023. And on a broader perspective, sales volumes at this level were first achieved in the mid-1970s, and were the levels in the GFC. So July's rise is a very low bar.In Canada (and the US), all eyes are on a stoppage in their key rail network due to industrial action. It is a lockout, and it will have many spillover impacts in both countries.In India, the expansion rolls on for both their factory and services sectors in an impressive way, with them shrugging off capacity issues in their factory sector with a notable rise in job creation. 'Growth' is creating many more employment opportunities.In Japan, although it rose, its August factory PMI is still contracting, slightly. On the other had Japan's service sector is expanding at a good rate. That is the seventh consecutive expansion in their services sector.In China, Reuters is reporting that regulators there will likely impose a six-month business suspension on a big part of PwC's auditing unit in the mainland as a penalty for its work on troubled property developer Evergrande.In Europe, business activity rose at faster pace in August, but the rate of new order intake continued to ease. The uptick in business activity is largely due to the Paris Olympics however, so that probably won't last.In Australia, their August PMI's sort of mirrors Japan but at a slightly lower level. The factory PMI is up but still contracting. Their services PMI is expanding although only at a modest rate.Global container freight rates slipped another -2% is a continuation of the minor moves down from the extreme July heights, with the basic pressures unresolved. These rates are still almost three times higher than pre-pandemic and pre-canal-pressure levels. There is no real sign of a proper normalising. Bulk freight rates rose slightly last week.The UST 10yr yield is now at just on 3.86% and up +8 bps from this time yesterday.The price of gold will start today down -US$27 from yesterday at US$2482/oz.Oil prices are recovered yesterday's US$1.50 drop, now back at US$73/bbl in the US while the international Brent price is now just under US$77/bbl.The Kiwi dollar starts today down -30 bps from yesterday at 61.3 USc. Against the Aussie we are up +10 bps too at 91.5 AUc. Against the euro we are still at 55.3 euro cents. That all means our TWI-5 starts today at 69.4 and little-changed.The bitcoin price starts today at US$60,305 and up +0.7% from this time yesterday in its recent yoyo pattern. Volatility over the past 24 hours has been modest at just under +/- 1.6%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

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

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

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

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

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

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

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

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

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

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news that is second tier today ahead of a string of key data releases. But there are many interesting bits today all the same.First in the US, a national NY Fed survey of consumer expectations in July showed medium term inflation expectations are falling. The three-year-ahead inflation expectations fell by 0.6 percentage point to 2.3%, hitting a new series low since the survey’s inception in June 2013. Median one- and five-year-ahead inflation expectations were unchanged at 3.0% and 2.8% respectively. The labour market expectations were essentially unchanged too with consumers not expecting any significant rise in unemployment.USDA's August WASDE revealed that they will have record output and yields for both soybean and corn this season although wheat production there will be down marginally. But they expect world wheat production to be up. Climate stress is not reflected in this global assessment of food production, yet anyway, even if global rice production is seen easing, but only by -0.1%. Lower Vietnam production is the reason.US beef production will be lower they say, made up by imports. US milk production is easing off slightly but they still expect to be active in butter and cheese exports and they think those will rise.In Canada, building consents were expected to rise more than +5% in June from May after a sharpish -12.7% fall in May from April. But that did not happen. In fact the June fall was down almost -17% from a year ago. It is rather a grim set of data for this sector.In China, and although never far from the surface of Beijing concerns, demographic forces have moved them to act on the long awaited raising of their retirement age. The average life expectancy is now 78 years, but local males can claim their 'pension' at 60. For women it depends on their job, but it is as low as 55 years for them. Fast-shifting demographics mean the working aged population is down to 68% and falling. Ten years ago to was near 75%. (NZ is 59% currently.) Details are awaited but they may implement a +3 or +4 month-per-year rise in their retirement age, which would be quite a fast change.And although they are not reported locally, it appears strikes and labour unrest is on the rise in China. Raising the retirement age when there are growing labour stresses isn't going to help sentiment.Indian consumer inflation fell rather sharply in July and by a bit more than expected. It came in at 3.5%, down from 5.1% in June. (A year ago it was running at 11.5%.) This latest level is now below their central bank's mid-point in its target range of 4%, the first time it has undershot in almost five years. The reason for the fall is essentially because of food prices, and the reason foods prices fell to 5.5% from 9.4% in June is essentially because of year-ago base effects. So this easing of inflation will probably not last.Meanwhile, the Indian industrial production expansion eased off rather sharply in the June data released overnight. It was up 4.2% from a year ago, sharply lower than May's +5.9% rise. +4.2% is still exceptional but clearly the rapid expansion is reverting to a more sustainable pace. Pharma product growth actually shrank.The UST 10yr yield is now at just on 3.91% and down -3 bps from yesterday. The price of gold will start today up +US$38 from yesterday at US$2468/oz which is closing in on its record high.Oil prices are +US$2 firmer at just over US$78/bbl in the US while the international Brent price is now just on US$81.50/bbl. We should keep an eye on the Straits of Hormuz. Iran seems to have seized a Malaysian ship travelling through there in what could a portend flashpoint.The Kiwi dollar starts today up +20 bps from this time yesterday at just on 60.2 USc. Against the Aussie we are also up +20 bps from yesterday at 91.4 AUc. Against the euro we are up +10 bps at 55.1 euro cents. That all means our TWI-5 starts today at 68.9 and up +20 bps.The bitcoin price starts today at US$59,340 and down -1.6% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.5%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news China is struggling to revive consumer interest in spending and consumption.But first, this coming week the key focus will be on the RBNZ Monetary Policy Review on Wednesday. A feature of the past month has been the volatility in the financial market pricing of this upcoming rate decision. Financial markets have had little conviction, shifting their pricing from 'zero change' to -50 bps cut. Currently they are guessing a -25 bps cut. But it is only a guess. We must remember, the new Government stripped jobs their mandate, leaving only inflation as they goal. And as we all know, inflation isn't beat yet. What we will all be looking for is whether the RBNZ committee thinks it is beaten on a semi-permanent basis. Two sleeps to know.Also this week we will get the US July inflation results, both CPI and PPI. Analysts expect a 2.9% CPI and a 2.6% PPI there. Retail sales data along with industrial production data will also be released for the world's largest economy.China will report new yuan loans for July later today, expected to be weakish, along with retail sales, house prices, and labour market data. In Australia, we will get the NAB business confidence report and a Westpac consumer sentiment survey, both probably tomorrow. And that will be followed later in the week by their July labour market data, expected to show only modest gains.In China, their consumer inflation picked up from an ultra-low +0.2% in June to +0.5% in July. But food prices are still showing some deflationary effects. Although overall those food prices are up a tiny +0.2% year-on-year, that is only because of a +20% rise in pork prices (from very low levels a year ago). Beef prices are down almost -13% in the year, lamb prices down more than -6%. Milk prices are down -1.9% on the same basis. If you take out the base effect from some key items like pork, the deflationary threat in China is still very much alive.And still in China, producer prices are still deflating, down -0.8% in July from the same month a year ago. That is the same fall recorded in June.And Chinese July vehicle sales fell to just under 2.5 mln units or -2.4% lower than in June but +4.1% higher than the same month a year ago. China is the world's largest vehicle market. But those sales figures include exports. Domestic sales fared far worse, falling -10.1% on the year to just under 1.8 million units for a steeper drop than the -7.4% decline recorded in June. Wider than cars, others are reporting that consumer demand is weak in their categories too. The pall of 'value losses' from their housing 'investments' is weighing heavily on consumer sentiment there. It must be bad because their official consumer sentiment survey hasn't been updated since May, after it recorded a big drop from April.In the US we should note that the US Fed is not shrinking its balance sheet as fast as it planned, with only a tiny -US$49 bln reduction in the past month. That takes it back to the level it first rose to at the outset of the pandemic four years ago. From its peak in April 2022, it is down -US$1.8 tln or -20% however. Progress now is slowing however.In Canada, their labour market is marking time. Employment fell by -2,800 in July to 20.5 mln, a surprise because analysts expected a +22,500 rise. Still, the number of unemployed fell by -8,600. They also had a -0.3 percentage-point drop in their labour force participation rate, and that takes it to a two-year low of 65%, the lowest since 1998 if you exclude the pandemic.In Russia, they are suffering the opposite through fast-rising inflation. In July it rose to 9.1% from 8.6% in June. Everything is rising faster there, especially food prices.The UST 10yr yield is now at just on 3.94% and unchanged from Saturday. The price of gold will start today up +US$4 from yesterday at US$2431/oz.Oil prices are marginally firmer at just under US$76/bbl in the US while the international Brent price is now just on US$79.50/bbl.The Kiwi dollar starts today little-changed from this time Saturday at just on 60 USc. Against the Aussie we are down -10 bps from yesterday at 91.2 AUc. Against the euro we are up +10 bps at 55 euro cents. That all means our TWI-5 starts today at 68.7 and up +10 bps.The bitcoin price starts today at US$60,318 and up a minor +0.2% from where we left it Saturday. Volatility over the past 24 hours has been low at just under +/- 1%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news Monday's equity dump is now a fading memory.First up, the latest signals from the US labour market are that there is no rising stress. Initial jobless claims came in less than expected at 203,000 and there are now 1.9 mln people on these benefits. Both are lower than last week and -10% lower than the same week a year ago.This was data financial markets noticed today. Along with confirmation that mortgage interest rates are falling.It is the summer driving season in the US, so petrol prices are important there too. And they are lowish, for them, down almost -10% from year-ago levels. In some places they are under US$3/gal (NZ$1.32/L) at the pump.US wholesale inventories were up marginally (+0.1%) in June from a year ago. However the steady rises recently have ticked up the inventory-to-sales ratio recently, although it is still lower than year-ago levels.And there was a well-supported UST 30yr bond auction earlier today and that delivered a median yield of 4.23%, lower than the 4.33% yield at the equivalent event a month ago.In India and as expected, their central bank's monetary policy review brought no change to their 6.5% policy rate. It has been held at that level since February 2023.Taiwanese exports held steady at about +US$40 bln in July. But that was 'only' +3.1% higher than the same month a year ago. However it comes on top of a steady expansion since November 2023.Later today, China will release its July CPI inflation data and it is expected to remain very low (+0.3% year-on-year). Their PPI is again expected to report deflation.Global shipping freight rates for containerised cargoes slipped marginally again last week, down -3% from the prior week. But they remain three times higher than year-ago levels. Bulk cargo freight rates were unchanged from the prior week, up +50% from the same week a year ago (although that year-ago level was a bit of a low point).We have noted low steel prices recently. But we should also note than both wheat and soybean prices are also low, now down near five year lows. If there is food stress it is not because the cost of basics are high.The UST 10yr yield is now at just on 4.00% and up another +3 bps from yesterday. The price of gold will start today virtually up +UAS$31 from yesterday at US$2423/oz.Oil prices are +US$1 USc firmer at just over US$75.50/bbl in the US while the international Brent price is just on US$79/bbl.The Kiwi dollar starts today little-changed from this time yesterday at just over 60 USc. Against the Aussie we are back down almost -¾c at 91.1 AUc. Against the euro we are up +10 bps at 55 euro cents. That all means our TWI-5 starts today at 68.7 and down -20 bps.The bitcoin price starts today at US$59,562 and up +6.5% from where we left it yesterday. Volatility over the past 24 hours has been very high at +/- 4.8%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news of a day of mostly restrained gains in economic metrics.First in the US, mortgage applications rose nearly +7% last week from the week before, driven by a sharpish -27 bps retreat in mortgage interest rates. Despite the gain, they are still -11% lower than the same week a year ago, itself quite weak.American consumer debt only rose a very modest +US$8.9 bln in June from May, less than the +US$10 bln expected and the +$11 bln gain the prior month. These levels are up just +1.8% in a year. Clearly, Americans are not being profligate in taking on new consumer debt.The latest US Treasury bond auction was again well supported, this one their 10 year. It delivered bidders a median yield of 3.89%, sharply lower than the 4.22% at the prior equivalent event a month ago.Across the Pacific, China released its July trade data late yesterday. Their exports were up less than expected, a three month growth low. An export-led recovery doesn't seem to be happening. Their imports rose more than expected and their strongest rise since April. That meant their trade surplus shrank in July.The Chinese dairy industry is going through a tough time at present with a number of listed companies in the sector delivering operating losses and warning of tepid demand.China's FX reserves rose to US$3.26 tln, an eight year high even if the monthly gain was relatively minor. But it is still somewhat short of their all-time US$3.98 tln high reached in May 2014.In Europe, German industrial production rose by +1.4% in June from May, better than expected on strong new order growth and making back about half the prior month's retreat. However both metrics remain deeply negative on a year-on-year basis.Australia released its five Living Cost Indexes for Q2-2024 today, supplemental to their CPI. For 'pensioners & beneficiaries' they were up +4.1% for the year. For 'aged pensioners' up +3.7%. For 'self-funded retirees, up +3.6%. For other benefit recipients, up +4.6%. For 'employees', living costs were up +6.4%. The overall CPI was up 3.8% in the same period.The UST 10yr yield is now at just on 3.97% and up another +9 bps from yesterday. The price of gold will start today virtually unchanged from yesterday at US$2392/oz.Oil prices are +US$1.50 USc firmer at just on US$74.50/bbl in the US while the international Brent price is just over US$78/bbl.The Kiwi dollar starts today up almost +½c from this time yesterday at just on 60.1 USc. Against the Aussie we are up almost +¾c at 91.8 AUc. Against the euro we are up +40 bps at 54.9 euro cents. That all means our TWI-5 starts today at 68.9 and up +70 bps.The bitcoin price starts today at US$55,912 and down -1.4% from where we left it yesterday. Volatility over the past 24 hours has been moderate, at +/- 2.0%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news global equity markets have essentially bounced back, consigning the Monday ructions to just a 'summer wobble'.But first up, there was another full dairy auction earlier today. It was a much larger event with more than 35,000 tonnes sold. Overall prices rose +0.5% from the prior full event three weeks ago. More than a quarter of the volumes were for SMP which fell -2.7%. More than a half were for WMP which rose +2.4%. The rest of the products offered brought variable results too. Although the result was little-changed in USD, the much lower NZD brought a +1.9% rise in local currency.Globally, world food prices are low and little-changed. If any category is changing, it is a slight uptick in meat prices.In the US, the data released overnight was largely positive, assisting the financial market recoveries. The US Redbook index of retail sales at physical stores was up +5.1% last week from a year ago, rising from the prior week.Their Logistics Managers Index (LMI) rose more than expected showing their logistics industry expanding more than expected in July and at a good clip.The RCM/TIPP Economic Optimism Index for investors rose in August to its highest in seven months.And US exports for both goods and services rose more in June than imports, allowing their trade deficit to ease back slightly. Those exports are now +5.9% higher than year-ago levels. As we have noted before, this deficit is just a rounding error for the giant US economy, even if it is a political football.While none of these overnight data releases on their own are terrible important, the combination supported the sharp mood change. The earlier suggestion of imminent recession in the US may only have been from summer keyboard warriors.Canadian exports also rose notably in June to be +10.6% higher than a year ago.I know we have mentioned this before, along with the reasons, but the Chinese steel rebar price is turning into a bit of a rout, with extended sharp dives. It is now down almost -23% lower than year-ago levels. The copper price is wavering too.In fact, aggressive price discounting in many Chinese sectors has become the norm there casting a pall over general business conditions. It probably can't go on like that without widespread enterprise failures.Elsewhere EU retail sales volumes fell in June after the small rise in May. Most countries in the bloc struggled, but Spain, Portugal and Denmark were among the few that bucked the trend.Yesterday the RBA left its policy rate unchanged at 4.35%. But its accompanying commentary was direct and specific; they haven't beaten inflation yet and the progress they may have made isn't sufficient. It was a hawkish hold. Markets bid up yields on benchmark bonds following the statement. The AUD rose. (And that pushed the NZD down.) It seems there will be no rate cuts in Australia in 2024. What will now be of interest is whether financial markets take the RBA guidance on board in its pricing.Later this morning StatsNZ will release the June labour market report. Our unemployment rate is expected to come in at 4.7%, a rise from 4.3% in Q1. That would be an increase of +10,000 more people without jobs in the quarter. But it could be more than that. The rise of those on JobSeeker benefits was +8,450 in the same period but not everyone who is jobless claims for those benefits. But a notable rise above a 4.7% rate would probably be influential in the next week's RBNZ considerations (even if there is no longer a jobs mandate).The UST 10yr yield is now at just on 3.88% and up +11 bps from yesterday. The price of gold will start today down -US$12 from yesterday at US$2391/oz.Oil prices are +50 USc firmer at just under US$73/bbl in the US while the international Brent price is just over US$76.50/bbl.The Kiwi dollar starts today up +¼c from this time yesterday at just on 59.6 USc. Against the Aussie we are down -20 bps at 91.1 AUc. Against the euro we are up +30 bps at 54.5 euro cents. That all means our TWI-5 starts today at 68.2 and up +20 bps.The bitcoin price starts today at US$56,690 and up +3.9% from where we left it yesterday continuing the recent volatility. In fact, the volatility over the past 24 hours has been very high, at +/- 4.2%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

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

The balance of power in the labour market sits firmly with employers, with a big rise in job applicants over the past year chasing a significantly diminished number of jobs, says Frog Recruitment Managing Director Shannon Barlow."For our recruitment agency, we're probably experiencing around three to four times the volume of applications compared with last year. And that's across the board, across different industries and job types," Barlow says in the latest episode of interest.co.nz's Of Interest podcast."At the extremes, it can be even more than that. So for some business support [roles], other industries like supply chain or operational roles where we were happy to get, say, 30 applications, we'd be celebrating last year. Now those can reach up to nearly 300 applications and that's within a week. So you have to pull the ad so that you've got the time to get through all those applications.""I'd say with the higher volumes of applications as well, I think the biggest factor isn't actually about there being more people looking for work...the big factor is there are less jobs available. So there's less than half the number of job postings in the market today compared with 2022," says Barlow.Her comments come ahead of the June quarter labour market data from Statistics NZ, due out of Wednesday, August 7 and expected to show an increase in unemployment.Barlow previously appeared on the Of Interest podcast in August 2022 at a time when the border had just fully reopened following its closure due to Covid-19, and the balance of power in the labour market was firmly in favour of job seekers, or workers.Since then there has been a massive surge of inward migration, which hit a record high for a calendar year of 126,000 in 2023, according to Statistics NZ. Despite this Barlow says it hasn't solved skill shortages."The problem is that quantity doesn't always equal quality. There've been problems with the new accredited employer programme and the new government is still working through changes to those immigration settings. So we haven't got it quite right yet. So although we've refilled the talent pool, we haven't necessarily attracted the right people to be able to cover our areas of skill shortages;" says Barlow."Plus we might have had record migration, but we've also had record numbers of Kiwis leaving New Zealand this year."Statistics NZ's latest figures show a net loss of 2,000 people due to migration during May.In the podcast audio Barlow also talks about the regions were job seekers are really feeling the pinch, and regions where job listings are actually increasing, how and why some workers are having to take pay cuts, how the labour market has got harder for graduate or entry level roles, what the biggest challenge is for employers now, lingering effects of Covid-19 including attitudes and expectations for working from home, whether she thinks the jobs market has bottomed out yet, and more.*You can find all episodes of the Of Interest podcast here.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news investors globally are having a re-think about the valuation rises that have gotten embedded since the pandemic. Warren Buffett is now cashed up.But before that, although it will be a relatively quiet week for international economic data releases, it is a big week at home. The important Q2-2024 labour market report gets released on Wednesday and there will be more real estate market data early in the week. Plus there is a full dairy auction on Wednesday morning.There will be living cost data released in Australia. And before that we will get the RBA's rate review decision late tomorrow. And inflation expectations survey results will be released this week across the ditch. China will update its CPI and PPI. Plus there will be slew of services PMIs out everywhere too. Wall Street will start to wrap up its Q2 earnings season reports with some big later reports. By the way, Warren Buffet's Berkshire Hathaway reported its Q2-2024 position late last week - and it has about US$270 bln/NZ$450 bln in cash (or cash equivalents) on hand. See page 3 here. That is actually more than the NZ$409 bln NZ GDP over the past year.But basically it is the Northern Hemisphere holiday season, so financial market activity will be relatively light for the rest of the month. (In fact, it is a public holiday in Canada today.) This tends to accentuate any changes more than they would otherwise be.In China, their central bank said it will be pushing commercial banks to "do more" for the "real economy". It wants to shift the financial sector’s focus to "benefiting people’s livelihoods and boosting consumption" over the coming months. This change in emphasis follows pressure from the CCP Third Plenum meeting chaired by President Xi earlier in the week. The practical impact? Perhaps more debt issued for projects that have immediate effects but little long-term gains.There are calls for monetary authorities to allow higher inflation as some sort of spur to 'growth'. Meanwhile, commodity prices keep on sinking as the overall stall extends. None of this is coming at a good time for China and they take their summer break. That tends to be when the leaders 'relax' at their seaside compound. If they don't return with better plans and actions, there will be some grumpy countrymen.One initiative underway is to boost its urban living. In 2012, a bit over half of China's population lived in cities. In 2023 that had risen to two-thirds. Their new goal is to get it to 70% by 2029 thereby generating a surge in new economic activity. But there will be issues from this drive, not the least of which is food security.Meanwhile, flooding pressures are not easing. And that too has implications for food security and agricultural output, especially for gains.Singapore's widely-watched local PMI was modestly positive in July, but far less positive than the internationally-benchmarked version.The US economy added only +114,000 jobs in July, well below a downwardly revised +179,000 in June and forecasts of 175,000. It is also the lowest level in three months, below the average monthly gain of 215,000 over the prior 12 months, signaling that their labour market is in fact cooling off. But most of the weakness was in the tech sector with almost all other sectors holding their own.Pressure on wages is easing too, with weekly earnings up only +3.3%, again driven by their tech sector.Their jobless rate rose marginally to 4.3%, up from 4.1% in June. (s.a.) There are now 162.0 mln people employed, a record high, in a 169.7 mln labour force. (not s.a.)This weakish American report actually had little impact on global markets because they were mostly sharply lower before this release and there was no added change after. You can claim it was 'priced in' and perhaps it was. But there is a broader re-ranking going on with a settling back in risk appetites. We shouldn't be surprised - markets never go up forever. The US Q2 earnings season reporting has been strong, but it is the less-than-stellar outlooks that are influencing investors.Meanwhile, US factory orders, which were expected to show a dip in June, did just that but the dip was larger at -3.3% than the -2.9% correction anticipated. The June fall comes after four consecutive rises however.But American new vehicle sales rose more than expected in July to an annual rate of 15.8 mln, a good bounce back from the 15.2 mln vehicle sales rate in June.We should also note that the UN-based International Seabed Authority has just elected a Brazilian scientist to lead it, it first scientists Secretary-General. This is expected to sharply slow seabed-mining activity everywhere.The UST 10yr yield is now at just on 3.79% and unchanged from Saturday. The price of gold will start today up +US$9 from Saturday at US$24

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

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

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news two big central banks have been active in their signaling over the past 24 hours.First up today, as many expected the US Fed sent a clear signal that they are more open to a September rate cut. That first came from changed wording in their no-change statement that was more balanced between the two aspects of their mandate: inflation and jobs. Powell then confirmed a potential September rate cut at his press conference.Because this was largely what was assumed in advance, there has been no major financial market reaction, but the reactions there were, were 'positive'.The US dollar slipped marginally on the news, the S&P500 rose after already being up sharply. The benchmark UST 10yr fell -3 bps.The US ADP jobs report came in lower than the expected +150,000 gain. It reported a gain of just +122,000 in July. This is the precursor report to the official non-farm payrolls report which is expected to show a +175,000 gain when it is reported on Saturday (NZT). The ADP Report slowing is consistent with the Fed's expectation that the labour market is not pushing undue labour market pressure on the US economy.The Chicago PMI also came in very much as expected, also not putting upward pressure on inflation from the heartland factory sector.And neither are American pending home sales. They may have risen in June from May, but they are still lower year-on-year.However, mortgage applications are still shrinking, despite mortgage interest rates staying well below 7%.The Bank of Japan actually has raised its official policy rate, and from 0.1% to 0.25% with a +15 bps hike late yesterday. They also said they will cut their bond buying activity. This has been seen as an aggressive move that signals the central bank's growing confidence in the recovery of the domestic economy and its concern about the sharply weaker yen.The yen appreciated significantly. Equities rose. Their benchmark bond yields rose.Taiwan's GDP expanded +5.1% real in Q2-2024, high, but less than the very high +6.6% rate in Q1-2024. Both were the best results since the pandemic recovery, and back to their long golden economic expansion between 1994 and 2008.China's official July factory PMI fell slightly into a further contraction. Their official services PMI fell to a very minor expansion. Both were about what was expected, but neither is very promising.In Europe, their Euro Area inflation rate unexpectedly edged up to 2.6% in July from 2.5% in June, when forecasts expected it would slow to 2.4%. The larger economies kept it elevated, the smaller ones generally reported lower rates.In contrast, Russian inflation hit 8.6% and well higher than the +6.3% rise in retail sales. War inflation is eating them up, which is why their central bank recently raised its policy interest rate to 18%. And it is not going to help that Russia is having to double its 'bonuses' for fighting in their invasion army.The Q2-2024 CPI in Australia rose to 3.8%, exactly as analysts expected. Their June month inflation indicator came in at the same 3.8%. Markets seem to have focused on the 'trimmed mean' quarter-on-quarter rate of +0.8% which was lower than expected - and concluded the RBA is likely to hold rates unchanged next week.The UST 10yr yield is now at just on 4.10% and down another -4 bps from yesterday. The price of gold will start today up another +US$20 from yesterday at US$2426/oz.Oil prices are +US$3 higher at just over US$77.50/bbl in the US while the international Brent price is just over US$80.50/bbl. Rising Middle-East tensions are behind the move.The Kiwi dollar starts today another +40 bps firmer at just on 59.4 USc. Against the Aussie we are almost +1c higher at 91.1 AUc. Against the euro we are up another +40 bps at 55 euro cents. That all means our TWI-5 starts today at 68.5 and up +40 bps from yesterday.The bitcoin price starts today at US$66,595 and up +1.1% from this time yesterday. Volatility over the past 24 hours has been modest, at +/- 1.1%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.Today we lead with news the Bank of Japan will grab the headlines later today.But first up, there was another dairy auction event overnight, the shorter Pulse event of SMP and WMP only. This one delivered results very little-changed from the prior event last week, essentially locking in those earlier price dips.In the US retail sales at physical stores rose +4.5% last week from a year ago, the smallest rise since late March. But at least it is still well better than inflation.Meanwhile, job openings in June were little-changed from the prior month - but that is better than it sounds because May was revised higher. Both levels are better than analysts had expected. And their quit rate fell to its lowest since November 2020.Remember, we get the July non-farm payrolls data on Saturday (NZT) this week and markets now expect a +175,000 gain. There is nothing in the JOLTS data to suggest this is at risk - if anything perhaps an upside chance.Perhaps supporting that is that the widely-watched Conference Board survey of consumer sentiment rose in July and by more than expected. However, this survey shows that consumers are less upbeat about the present than they are about the future. Election jitters are at play now. (But despite the overall gains, the levels in this survey are still quite low.)And there was a follow-up from the US oil patch. The Dallas Fed services sector survey came in much less negative in July than June, and much less negative than their factory survey.Later today we will get the Bank of Japan monetary policy decisions. Most analysts see them holding with a +0.1% policy rate. But a growing cohort see a rise to +0.25% today as wages and inflation rise there. Also of interest is what they do with their bond buying program. It would not be a surprise if they signal they will be reducing it from about NZ$65 bln per month to about half that.And now we can report the June foreign direct investment data for China. And no wonder they held it back. It was terrible. They attracted only a net +¥1.6 mln in the June month from May. That is their worst level almost ever. In June 2023 it was a worryingly low +¥13.6 bln. In June 2022 it was ¥24.2 bln. In NZD the June inflow was virtually nothing - NZ$350,000 ! Even for New Zealand that would be very low. For the second largest economy in the world, it is a stunningly negative result. Beijing will be worried that these flows have dried up. Now their worry is that a net outflow by foreign investors beckons.We have noted this recently, but it is worth updating again. The fall in Chinese steel rebar prices is turning into a rout with sharp daily drops now. They are now at eight-year lows. It is hard to know where tis will end.In Europe, their Q2-2024 GDP expansion came in low again, but a +0.7% gain from the same period a year ago, similar to Q1-2024 but slightly better than expected. Expansions in Spain and France drove this result, but it was lagging in Germany.Meanwhile German CPI inflation rose a very modest 2.3% in July (2.6% on an EU harmonised basis). This was little-changed from June.In Australia, they are waiting for the Q2-2024 CPI data to be released later today (1:30 pm NZT). Markets expect that to come in at 3.8% and up from 3.6% in Q1. And they will release the June month inflation indicator at the same time where a 3.8% rate is expected, down from 4.0% in May. This data will go a long way to setting the RBA stance expectations for their Tuesday, August 6 MPS review.Meanwhile, Australian building consent levels for June came in weak, led by low apartment and townhouse construction intentions. In fact, the levels for these dwellings that are not stand-alone houses are now down at levels last seen in 2011. Over the past 12 months, there have been a total of 162,892 dwellings approved, compared to 177,936 in the 12 months prior, representing a -8.5% decrease. This is the lowest number of dwellings approved on a June year basis since 2011/12.The UST 10yr yield is now at just on 4.14% and down another -3 bps from yesterday. The price of gold will start today up +US$28 from yesterday at US$2406/oz.Oil prices are almost -US$1 lower at just over US$74.50/bbl in the US while the international Brent price is just under US$78.50/bbl.The Kiwi dollar starts today is +20 bps firmer at just on 59 USc. Against the Aussie we are +40 bps higher at 90.2 AUc. Against the euro we are up +30 bps at 54.6 euro cents. That all means our TWI-5 starts today at 68.1 and up +30 bps from yesterday.The bitcoin price starts today at US$65,882 and down -US$1046 or -1.6% from this time yesterday. Volatility over the past 24 hours has been modest, at +/- 1.5%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand fr

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

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

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