Kia ora, Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news that global manufacturing indicators have turned quite positive. First in China, their official March PMIs have set a bullish tone to start the week. Their official FACTORY PMI https://www.stats.gov.cn/sj/zxfb/202403/t20240329_1954065.html rose to 50.8 from 49.1 a month earlier and export orders also recovered. The official SERVICES PMI https://www.stats.gov.cn/sj/zxfb/202403/t20240329_1954065.html rose to its highest since June. These were followed by the private CAIXIN FACTORY PMI https://www.pmi.spglobal.com/Public/Home/PressRelease/1ed2224c655e44da9b2bbaa347a55475 and that broadly confirmed to improved outlook and new expansion, actually a 13 month high. This apparent recovery energised the Shanghai stock exchange yesterday. In Japan, industrial production fell and their jobless rate rose, both not expected. But that data was for February. For March, their central bank SENTIMENT SURVEY https://www.boj.or.jp/en/statistics/tk/gaiyo/2021/tka2403.pdf of mostly large businesses remained broadly positive. And in South Korea, INDUSTRIAL PRODUCTION ROSE https://kostat.go.kr/board.es?mid=a10301010000&bid=216&list_no=430187&act=view&mainXml=Y and by more than expected. Back in China, the slow motion real estate sector crash rolls on with more troubles at both Vanke and Country Garden. It is more than them of course. And banks that responded earlier to Beijing's call for them to support the sector are TRAPPED IN GROWING BAD LOANS https://www.bloomberg.com/news/articles/2024-03-28/china-s-property-crisis-is-rippling-through-its-biggest-banks. Asset quality pressure is "immense" said one major bank. In India, we should note A NEW ILO REPORT https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---sro-new_delhi/documents/publication/wcms_921154.pdf that shows the jobless rate for Indian graduates at home was a massive 29%, almost nine times higher than the 3.4% for those who can’t read or write. The unemployment rate for young people with secondary or higher education was six times higher at 18.4%. This data reinforces DAVID HARGREAVES POINT https://www.interest.co.nz/public-policy/126987/david-hargreaves-suggests-its-time-we-looked-purely-number-migrant-arrivals that even if New Zealand's local labour market struggles, it will still look attractive to Indian immigrants. It isn't our attractiveness that draws them, it is the job pressure at home that pushes them out. In the US, the widely-watched ISM FACTORY PMI https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/march/ has been shifted into expansion mode on the strength of new order levels. It joins the internationally-benchmarked S&P GLOBAL (EX-MARKIT) ONE /Output%20price%20inflation%20quickens%20for%20fourth%20month%20running which already moved to expansion the previous month. But it was the size of the ISM shift that got market attention, enough that the view formed it will keep the Fed from cutting any time soon. Both showed prices are no longer falling. It is not all good news in the US. 'Extend & Pretend' is back, especially in US commercial office markets and particularly for office buildings. The US Fed is on watch for financial stability risks although they claim it is an issue for small and mid-sized banks, not the systemically important big banks. And staying in the US, Fed Chair Powell SAID https://www.frbsf.org/news-and-media/events/2024/03/jerome-powell-remarks-with-kai-ryssdal-2024/ that PCE inflation data for February was along the lines of what the Fed wants to see and broadly expected. However, the latest readings aren’t as good as what policymakers saw last year and the Fed can wait to become more confident before cutting interest rates. In fact, he said policymakers don't need to be in a hurry to reduce borrowing costs. The Fed's base case is for inflation to come down but if the base case doesn't happen the Fed would hold rates where they are for longer, he said. Today's PMI's reinforce that position. But he was responding to PCE INFLATION https://www.bea.gov/news/2024/personal-income-and-outlays-february-2024 data for February which rose +2.5% and that was following a January 2.4% rate and a December 2.6% rate. Core PCE inflation rose 2.8% after being 2.9% in the prior two months. Powell and his colleagues won't be unhappy with these levels but they aren't seeing downward progress either. Meanwhile American PERSONAL INCOMES https://www.bea.gov/news/2024/personal-income-and-outlays-february-2024 were +1.7% higher than a year ago and personal consumption is +2.4% higher on the same basis. This is the first time income growth trailed spending growth in a long time. It is too soon to know whether this is a turning point, or just a data blip. So perhaps it will be a surprise to know that the University of Michigan sentiment index ROSE http://www.sca.isr.umich.edu/ more than expected to its highest level since July 2021. In Australia, INFLATION EXPECTATIONS https://melbourneinstitute.unimelb.edu.au/publications/macroeconomic-reports, which had been suck at 4.5% since December, actually slipped in March to 4.3%. While this may be its lowest since October 2021, it does emphasise just how sticky Aussie CPI inflation has become. Meanwhile, China has dropped its tariffs on Australian wine after years of sanctions that crippled the billion-dollar export industry. The UST 10yr yield is now at 4.33% and up +14 bps from the end of trading last week.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today firmer by +US$7 from yesterday at US$2240/oz, but -US$26 below its new all-time high reached over the past 24 hours. Oil prices have risen +US$1 to just on US$84/bbl in the US while the international Brent price is now just over US$87.50/bbl. The Kiwi dollar starts today at just on 59.4 USc and -35 bps lower than this time yesterday. Against the Aussie we are unchanged at 91.6 AUc. Against the euro we are holding at 55.4 euro cents. That all means our TWI-5 starts today just on 69 and down -20 bps from this time yesterday. The bitcoin price starts today softer at US$68,671 and down a sharpish -3.7% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 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.

6m

Apr 01

Kia ora, Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news natural events will likely have an increasing say in how the international economy operates. But first in the US, MORTGAGE APPLICATIONS WERE LOWER https://www.mba.org/news-and-research/newsroom/news/2024/03/27/mortgage-applications-decrease-in-latest-mba-weekly-survey last week again, and the good rises in the first two weeks of the month are fading. Even essentially unchanged mortgage interest rates isn't stimulating new loan applications. The talk of an American housing market recovery might be a mirage. There was another UST 7YR BOND AUCTION https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240327_3.pdf earlier today and that brought rising demand. Today's event delivered a median yield of 4.14% which was lower than the 4.27% at the PRIOR EQUIVALENT EVENT https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240227_2.pdf a month ago. It is only marginal, but the interest rate load on the US Federal government borrowing is easing. China's INDUSTRIAL PROFITS BOUNCED-BACK https://www.stats.gov.cn/sj/zxfb/202403/t20240327_1953907.html in February, rising by +10.2% from the same month a year ago. They are cheering the 'strong rise'. But we must recall they were especially weak last year. Compared with 2022, the February 2024 result is down -21.2%. And it is -17.7% lower than 2021's result. So they shouldn't be too satisfied. There was almost no recovery in State-owned enterprises - all the current 'recovery' came from the private sector. The central bank of Sweden LIKES https://www.riksbank.se/sv/press-och-publicerat/nyheter-och-pressmeddelanden/pressmeddelanden/2024/styrrantan-oforandrad-pa-4-procent2/ what it sees locally in the track of inflation. It is currently running at 4.5% and has been sticky. But they expect it will fall soon to near 2%. That view encouraged them to signal that their current policy interest rate of 4% will be trimmed soon, starting in May or June. In Australia, their MONTHLY INFLATION INDICATOR https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/monthly-consumer-price-index-indicator/feb-2024 was at 3.4% in February. This is the same rate they reported in December and January. Their core rate fell to 3.9% in February, down from 4.1% in January. Like everyone, they are finding it hard to wring out the last elements of excessive inflation. New Zealand's March quarter CPI rate will be released on Wednesday, April 17, 2024. In Q4-2023 it ran at 4.7%. You know about the West African crisis hitting cocoa production and prices. Now you should know that a cyclone in Madagascar will roil the market for vanilla beans. Vanilla is a main source of foreign currency for the country. And back in the US, WARNINGS https://corporate.accuweather.com/newsroom/severe-weather-advisories/severe-weather-advisory-march-27-2024/ are starting to appear that their hurricane season this year could be their biggest and most damaging. Further, we should note that a giant of psychology and a huge contributor to behavioural economics, DANIEL KAHNEMAN HAS DIED https://en.wikipedia.org/wiki/Daniel_Kahneman earlier today. He was a Nobel Laureate, and if you haven't read his hugely influential book https://en.wikipedia.org/wiki/Thinking,_Fast_and_Slow, which summarises much of his research, you should take the time to do so.  The UST 10yr yield will today at 4.19% and down -5 bps from this time yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today firmer by +US$14 from yesterday at US$2191/oz. Oil prices have fallen -US$1 to just under US$81/bbl in the US while the international Brent price is now at US$85/bbl. American crude oil stocks are running much higher than anticipated. The Kiwi dollar starts today at just on 60 USc and marginally softer than this time yesterday. Against the Aussie we are unchanged at 91.9 AUc. Against the euro we have softened slightly to 55.4 euro cents. That all means our TWI-5 starts today just under 69.3 and again little-changed. The bitcoin price starts today softer at US$68,998 and a full -1.0% dip since this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.4%. Over the Easter holiday break, we will have normal weekend service, and will return with these daily briefings on Tuesday, April 2, 2024. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again on Tuesday.

4m

Mar 27

Kia ora, Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news that is increasingly positive in the world's largest economy. First up today, the retail signals in the US are quite positive. Their REDBOOK SURVEY https://www.redbookresearch.com/ of bricks-and-mortar store shows sales rose +3.9% last week from the same week a year ago, handily besting inflation again. A bounce back in orders for transport equipment, including aircraft, gave a more-than-expected push to their FEBRUARY DURABLE GOODS ORDER LEVELS https://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf. They came in +8.9% higher than year-ago levels. The capital goods orders came in +11.8% higher on the same basis. Certainly board rooms are giving bullish signals about the future. Meanwhile, FEBRUARY HOUSE SALES VOLUMES ROSE https://www.nar.realtor/newsroom/existing-home-sales-vaulted-9-5-in-february-largest-monthly-increase-in-a-year in February. They were up a strong +9.5% from January on a seasonally-adjusted basis, but that still left these transaction volumes -3.3% lower than year ago levels. House prices rose marginally, ending a long string of month-on-month retreats that started in July 2023. It's a shift higher that OTHERS https://www.spglobal.com/spdji/en/documents/indexnews/announcements/20240326-1471289/1471289_cshomeprice-release-0326.pdf have noted too. Given this set of positives, it maybe a surprise that consumer sentiment didn't improve in the MARCH CONFERENCE BOARD SURVEY https://www.conference-board.org/topics/consumer-confidence. But it didn't slip either, holding its recent levels. The current mood improved but anxiety about the future did too. The latest US TREASURY 5YR NOTE AUCTION https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240326_2.pdf was very well supported, delivering a median yield of 4.19% and slightly lower than the 4.25% at the PRIOR EQUIVALENT EVENT https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240226_3.pdf a month ago. These public debt auctions are not showing any of the expected stress the doomsters anticipated by now. The lower yields are probably driven by normal market expectations of upcoming rate cuts by the Fed. Of course that doesn't mean THE OUTLOOK https://www.cbo.gov/system/files/2024-03/59711-Long-Term-Outlook-2024.pdf is any better - it isn't if no action is taken by Congress to address the deficits. In Canada a measure of their wholesale trade activity ROSE https://www150.statcan.gc.ca/n1/daily-quotidien/240326/dq240326g-eng.htm more than expected in February. In Singapore, they REPORTED https://www.interest.co.nz/sites/default/files/2024-03/EDB%20Monthly%20Manufacturing%20Performance-February.pdf a better-than-expected rise in manufacturing production. It grew +3.8% in February from a year ago, easily beating market expectations of a +0.5% rise. The upturn was mainly boosted by a sharp rebound in biomedical manufacturing. The UST 10yr yield will today at 4.24% and down -2 bps from this time yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today marginally firmer by +US$2 from yesterday at US$2177/oz. Oil prices have risen +50 USc to just under US$82/bbl in the US while the international Brent price is unchanged at US$86/bbl. The Kiwi dollar starts today at just on 60.1 USc and marginally firmer than this time yesterday. Against the Aussie we are also marginally firmer at just over at 91.9 AUc. Against the euro we have firmed slightly to 55.5 euro cents. That all means our TWI-5 starts today over 69.3 and again little-changed. The bitcoin price starts today softer at US$69,695 and a -0.8% slip since this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 0.8%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

3m

Mar 26

Kia ora, Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news the American economic juggernaut rolls on, dominating global markets. American NEW HOME SALES https://www.census.gov/construction/nrs/pdf/newressales.pdf levels in February missed estimates, but ~7% mortgage interest rates basically explain that. They eased by a minor -0.3% from January to an annualised rate of 662,000, and below market expectations of a 675,000 rate. Although the DALLAS FED FACTORY SURVEY https://www.dallasfed.org/research/surveys/tmos/2024/2403 eased back a bit in March, it is still at levels better than for most of the past two years. A contracting oil patch doesn't really qualify as 'news' any more. Nationally, the US Chicago Fed's NATIONAL ACTIVITY INDEX https://www.chicagofed.org/research/data/cfnai/current-data expanded in February and pushing past the January retreat. But to be fair it is in a bit of a yo-yo pattern and has been since the end of the pandemic. RECENT ESTIMATES https://www.atlantafed.org/cqer/research/gdpnow of American economic activity generally agree its economy is expanding at about a +2% (real) clip in Q1-2024. For an economy as large as their, this represents the bulk of the global economic expansion, adding more than +US$1 tln in nominal economic activity at an annualised pace. Nowhere else comes close. Interestingly, today's UST 2YR BOND AUCTION https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240325_3.pdf has brought slightly lower yields. It ended with a median 4.54% yield today, compared with THE EQUIVALENT EVENT A MONTH AGO https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240226_1.pdf at 4.64%. Investors are not demanding higher yields from these benchmark bonds despite the rise in issuance. The doomsters are still waiting for their moment – it’s been a very long time for them. In China, the IMF has NOTED https://www.imf.org/en/News/Articles/2024/03/24/sp032424-md-cdf-remarks that China needs to take a different path to recovery. It's "fork in the road" comments challenge China's standard paybook to stimulus. Presently they are using their considerable reserves to support the yuan against market challenges. In Taiwan, RETAIL SALES https://www.moea.gov.tw/Mns/dos_e/bulletin/Bulletin_En.aspx?kind=15&html=1&menu_id=6745&bull_id=16039 grew an eye-catching +9.3% in February from the same month a year ago, a sharp rise from January on the same basis. This was their sharpest growth in retail activity since June 2023. Clothing and food drove the expansion. But things aren't so bullish for Taiwanese INDUSTRIAL PRODUCTION https://www.moea.gov.tw/Mns/dos_e/bulletin/Bulletin_En.aspx?kind=13&html=1&menu_id=6743&bull_id=16041 which fell -1% from year-ago levels in February darta released overnight. We have noted the rise and rise in cocoa prices before, but they reached NEW EXTREME LEVELS https://tradingeconomics.com/commodity/cocoa overnight, based on recent poor harvest results in West Africa. US$10,000/tonne (NZ$17/kg) beckons. The UST 10yr yield will today at 4.26% and up +6 bps from this time yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today firmer by +US$10 from yesterday at US$2175/oz. Oil prices have risen +US$1 to US$81.50/bbl in the US while the international Brent price is now up at US$86/bbl. The Kiwi dollar starts today at just on 60 USc and marginally firmer that this time yesterday. Against the Aussie we are -¼c lower at just over at 91.8 AUc. Against the euro we are still just on 55.4 euro cents. That all means our TWI-5 starts today under 69.3 and little-changed. The bitcoin price starts today up strongly at US$70,247 and a +7.4% rise since this time yesterday. Volatility over the past 24 hours has been very high at just on +/- 4.3%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

4m

Mar 25

Kia ora, Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news all eyes are on China to see if they pull the trigger on their old stimulus playbook again. But first this week, the focal point in the United States will revolve around the PCE price indexes, and data on personal income and spending. Other key data include durable goods orders, their final Q4 GDP growth reading, a key consumer confidence survey, and housing market indicators such as new and pending home sales. It will be a busy week in Japan with BoJ minutes, and data on their unemployment rate, industrial production, retail sales, and housing starts. It will be a quieter week for Chinese economic releases but it will include data on industrial profits. And markets will pay close attention to potential stimulus announcements and how authorities will let the yuan’s price shift. In Australia, February’s inflation rate is expected on Wednesday and a rise is expected, inflation expectation survey data may come in before that, while markets also await the Westpac consumer confidence survey results. And staying in Australia, there is plenty of evidence their housing market is back on a roll with AN ACTIVE AUCTION MARKET https://www.corelogic.com.au/news-research/news/2024/auction-market-preview-24-march-2024 this past weekend and sales volumes high.PRICES SEEM TO BE RISING https://www.afr.com/property/residential/booming-suburbs-where-house-prices-surged-more-than-20pc-in-12-months-20240321-p5fe3z. Behind it all is a shortage of housing as their inward migration levels rise fast. Meanwhile the Australian central bank released its half-yearly FINANCIAL STABILITY REPORT https://www.rba.gov.au/publications/fsr/2024/mar/pdf/financial-stability-review-2024-03.pdf on Friday and it concluded that while conditions will remain challenging for many households and businesses there this year, "strong conditions in the labour market, the large savings buffers accumulated by many borrowers during the pandemic and rising housing prices are helping households to adapt." The Australian financial system has a high level of resilience and is well positioned to continue to support the economy, they say. In China, incoming FOREIGN DIRECT INVESTMENT http://www.mofcom.gov.cn/article/xwfb/xwrcxw/202403/20240303485190.shtml fell more than -19% in February from a year ago, the largest fall since the GFC and far more than in the early stages of the pandemic. Recent 'legal' changes and the rise of the MSS in the Middle Kingdom is making it too tough to operate there. The trade disengagement underway isn't ending. Only US$14.3 bln arrived as investment in February about half the stunted levels on one and two years ago. Meanwhile, China is making A CONCERTED EFFORT http://www.mofcom.gov.cn/article/xwfb/xwrcxw/202403/20240303485312.shtml to qualify for the CPTPP trade group with new 'negative list for cross-border trade in services' management. "," a spokesperson SAID https://www.chinadaily.com.cn/a/202403/22/WS65fcd713a31082fc043be10f.html over the weekend. The recent visits by Chinese foreign minister WANG YI https://en.wikipedia.org/wiki/Wang_Yi_(politician) to both New Zealand and Australia in an unusual 'CHARM OFFENSIVE https://www.interest.co.nz/sites/default/files/2024-03/Letter%20from%20Consul%20General.pdf' by the usually prickly WOLF WARRIOR https://en.wikipedia.org/wiki/Wolf_warrior_diplomacy needs to be seen in the light of this CPTPP push. In Japan, inflation is finally embedding there. It's been a long slog to get out of deflation. Their inflation rate climbed to 2.8% IN FEBRUARY https://www.stat.go.jp/data/cpi/sokuhou/tsuki/pdf/zenkoku.pdf from 2.2% in the prior month, the highest figure since last November. It has been over 2% since March 2022. Across the Pacific, although they eased in January CANADIAN RETAIL SALES https://www150.statcan.gc.ca/n1/daily-quotidien/240322/dq240322a-eng.htm?HPA=1 rose in February according to an early estimate. But both shifts are minor. Hesitating car sales are behind the lackluster results. Across the Atlantic, GERMAN COMPANIES ARE GAINING CONFIDENCE https://www.ifo.de/fakten/2024-03-22/ifo-geschaeftsklimaindex-gestiegen-maerz-2024, and rather quicker now. Sentiment for Europe's largest economy reached its highest point since June 2023, fuelled by anticipations of potential interest rate cuts by the European Central Bank and a gradual easing of inflationary pressures. But GERMAN CONSUMER SENTIMENT https://www.gfk.com/de/home remains stick at low levels, generally unchanged since May 2022. The UST 10yr yield will today at 4.20% and down -2 bps from this time Saturday, and -11 bps from a week ago.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today firmer by +US$6 from Saturday at US$2165/oz. But that is little different to week-ago levels. Oil prices have stayed at US$80.50/bbl in the US while the international Brent price is still at US$85/bbl. These levels are also unchanged in a week. The Kiwi dollar starts today at just under 59.9 USc and marginally lower that this time Saturday. A week ago it was at 60.9 USc so a -1c fall since then. And it is the first time in four months since we have been below 60 USc. Against the Aussie we are marginally firmer at just over at 92.1 AUc. Against the euro we are still just on 55.5 euro cents. That all means our TWI-5 starts today at 69.3 and down -60 bps in a week. The bitcoin price starts today at US$65,430 and up +2.9% from this time Saturday. A week ago this price was US$68,378 so a -4.3% fall since then, Volatility over the past 24 hours has been modest at just on +/- 1.7%. You can find links to the articles mentioned today in our 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.

6m

Mar 24

In five years' time we would see things we can't imagine today if the Government adopts the Commerce Commission's recommendations to boost competition for personal banking services, Commission Chairman John Small says. Speaking about the Commission's DRAFT REPORT https://www.interest.co.nz/sites/default/files/2024-03/Draft-report-Personal-banking-services-market-study-21-March-2024.pdffrom its banking market study in the latest episode of interest.co.nz's  https://www.interest.co.nz/of-interest-podcastsSmall says he'll be interested to see what sort of response the Commission gets from the big four banks, ANZ, ASB, BNZ and Westpac, who it says are an oligopoly who don't face strong competition. "We haven't accused them of doing anything nefarious. They're responding to the incentives that are in front of them. And we think that they've settled into a particular pattern of conduct that we think should be disrupted. But we don't blame them for that," Small says. "I'll be really interested to see what they do have to say about it." The Commission makes 16 recommendations in its draft report, and says they should be considered as a whole. He's optimistic about what the market for personal banking services could look like five years from now if the Government was to adopt them all.  "We would see things that we just can't imagine today. So if open banking is operational within a couple of years, if Kiwibank has already been disruptive, then I think we've set the industry up for a really healthy, competitive future that will be greatly beneficial to New Zealanders throughout their economy. And that [interest] rates will be sharper, and the range of services will be much wider and the choice between providers, trusted providers, will be much wider as well. So I would see it as being really positive five years from now," says Small. In the podcast Small also discloses which three of the Commission's 16 recommendations he believes are most important. With the Commission recommending the Reserve Bank review its bank regulatory capital settings, he also discusses dialogue with the Reserve Bank about this, and wanting them to "think really carefully about the competitive aspects of their decisions." He also talks about why the big four banks don't face strong competition, what could be done to make Kiwibank a disruptive competitor, how the banking industry hasn't disrupted itself via open banking, customers moving between banks, the competitive landscape for home loans versus deposits, his take on the idea of a windfall profits tax on banks, and what a parliamentary select committee bank inquiry could probe.  https://www.interest.co.nz/category/tag/interest-podcast

28m

Mar 23

Kia ora, Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with that is full of unexpected data and outcomes. US JOBLESS CLAIMS FELL https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20240572.pdf last week to 190,000 and this was lower than expected. The number of people still on this unemployment insurance is lower too, at just over 2 mln. Neither signals growing labour market stress. The PHILLY FED'S FACTORY SURVEY https://www.philadelphiafed.org/-/media/frbp/assets/surveys-and-data/mbos/2024/bos0324.pdf?la=en&hash=2913CE46973B9CEA186D9325CB581ED0 was expected to retreat in March following a good rise in February. But it surprised with another good expansion. And these heartland rust-belt manufacturers are looking ahead with surprisingly strong optimism. EXISTING HOME SALES https://www.nar.realtor/newsroom/existing-home-sales-vaulted-9-5-in-february-largest-monthly-increase-in-a-year jumped and by more than expected in February, up +9.5% from January on a seasonally-adjusted basis. But year-on-year, sales declined in all regions. Meanwhile the US economic expansion kicks along. The latest internationally-benchmarked PMIS https://www.pmi.spglobal.com/Public/Home/PressRelease/949f155d1bf6438bb2bda4e3537d2f75 show their service sector activity growth eased to a three-month low amid reports that price pressures that had restricted customers' ability to commit to new projects, while manufacturing production expanded the most since May 2022. Overall, new orders increased but at a slower pace, while the rate of job creation ticked higher, marking the fastest in 2024 so far. We should also note that a California referendum to raise property taxes to finance 11,000 treatment beds and housing units with health care and social services for homeless people suffering from mental illnesses and addiction, has PASSED https://www.kqed.org/elections/results/california/proposition-1. This is somewhat unexpected given the range of opponents and their well-funded opposition. In Japan, March is delivering their strongest rise in PRIVATE SECTOR ACTIVITY https://www.pmi.spglobal.com/Public/Home/PressRelease/43e302e1e53e44389dc545a2bf830147 in seven months. Their factory PMI 'rose' to a smaller contraction in March while their services PMI expanded much faster. New orders featured as the driver. In INDIA https://www.pmi.spglobal.com/Public/Home/PressRelease/375f0302f8cd4d368eef537b6db44506, their March PMIs showed a surging manufacturing sector, but it was still overshadowed by even faster expansion in their services sector. India is on a fast-track. The March 'flash' EU https://www.pmi.spglobal.com/Public/Home/PressRelease/81953eba38c14ecfba77a05e3de050df PMI is being held up to a stable level by its services sector which is still expanding and covering a continuing contraction in its manufacturing sector. Things are similar in the UK https://www.pmi.spglobal.com/Public/Home/PressRelease/949f155d1bf6438bb2bda4e3537d2f75 although their factory sector seems to be in better shape. And there were a set of European central bank decisions out overnight. First TURKEY https://www.tcmb.gov.tr/wps/wcm/connect/tr/tcmb+tr/main+menu/duyurular/basin/2024/duy2024-14 sharply raised its rate unexpectedly, up +500 bps to 50%! (I kid you not.) And SWITZERLAND https://www.interest.co.nz/sites/default/files/2024-03/pre_20240321.en_.pdf unexpectedly cut its key policy rate by 25 bps to 1.5%, making it the first major central bank to cut. And in between, the ENGLISH https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2024/march-2024 reviewed and did nothing, holding their rate at its historically high 5.25%. In Australia, their LABOUR MARKET REPORT https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/feb-2024 for February has delivered a big surprise. Analysts were expecting a very good +40,000 rise in the employed workforce, but actually they got an extra +78,000 full time jobs in the month, plus an additional +38,000 part-time roles. Their jobless rate slipped to 3.7%. While this is 'good', we should remember that 31% of their 14.3 mln workers are still part-time, an unusually large proportion. (In New Zealand, that level is less than 20%.) Still, the jobs surge probably means any rate cuts in Australia are now further away. AUSTRALIA'S POPULATION https://www.abs.gov.au/media-centre/media-releases/australias-population-grows-25 is probably now touching 27 mln. It was at 26.8 mln people in September according to official data, and is growing at a record pace, fuelled by immigration and a longer life expectancy among boomers. Global CONTAINER FREIGHT RATES https://www.drewry.co.uk/supply-chain-advisors/supply-chain-expertise/world-container-index-assessed-by-drewry eased another -5% last week but remain unusually high because the reasons for the January surge have not gone away - drought in Panama and pirate activity in the Red Sea. Interestingly, trans-Atlantic rates are now rising while the largest falls are Chine-to-Europe. BULK CARGO RATES https://tradingeconomics.com/commodity/baltic are staying elevated. The UST 10yr yield started today at 4.28% and unchanged from this time yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today higher by +US$21 from yesterday at US$2157/oz but in between they surged to well over US$2200 and then fell back quickly too. Oil prices are lower today by -50 USc at just on US$80.50/bbl in the US while the international Brent price is now just on at US$85/bbl. The Kiwi dollar starts today at just under 60.5 USc and little-changed from yesterday at this time. Against the Aussie we are down nearly -½c at 92 AUc following their strong labour market news. Against the euro we are still just under 55.7 euro cents. That all means our TWI-5 starts today at just on 69.6 and essentially unchanged. The bitcoin price starts today at US$66,649 and up +3.1% from this time yesterday. Volatility over the past 24 hours has been very high at just on +/- 4.2%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again on Monday.

5m

Mar 21

Kia ora, Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news the Fed has held its policy rate unchanged at 5.5% but given strong signals cuts are coming - but later than markets were expecting. However they still see three cuts in 2024. The UST 10yr yield fell slightly on the news. The US dollar fell slightly too. Wall Street moved higher. Meanwhile, American mortgage interest rates rose back to just on 7% last week for their benchmark 30 year fixed rate following the prior week's surprise drop. That came as mortgage applications ticked lower again last week and are now -14% lower than the same week a year ago. China HELD http://www.pbc.gov.cn/rmyh/108976/index.html#LPR its prime loan rates unchanged at record lows in its review yesterday. You will recall they cut its 5 year prime rate (the reference for mortgage lending) by an outsized -25% bps last month. Taiwanese EXPORT ORDERS SLUMPED https://www.moea.gov.tw/Mns/dos_e/bulletin/Bulletin_En.aspx?kind=14&html=1&menu_id=6744&bull_id=16037 more than -10% in February, a surprise because markets had expected a +1.3% rise following a +1.9% gain in January. But it was not to be. Orders for heavy equipment fell, especially from the EU, Japan and China, and these falls overwhelmed their rising AI chip exports. The EU SENTIMENT ROSE https://economy-finance.ec.europa.eu/document/download/310986e7-9acb-4fbc-9f08-7b0e6984a640_en?filename=Flash_consumer_2024_03_en.pdf to be less negative in its March survey. It is now at its least-weak level since February 2022, amid a gradual slowdown in inflation and optimism surrounding potential interest rate cuts by the ECB later in the year. BRITAIN'S INFLATION RATE https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest dropped to 3.4% in February, down from 4% recorded in both January and December and slightly below market expectation of 3.5%. It was their lowest rate since September 2021. In Australia, a recent swell in business failures in construction, hospitality and retail has pushed up the number of monthly INSOLVENCIES https://asic.gov.au/regulatory-resources/find-a-document/statistics/insolvency-statistics/insolvency-statistics-current/ to the highest in almost a decade. The absolute levels aren't high, but the trend will worry officials. New Zealand has slipped one place in the WORLD HAPPINESS REPORT https://worldhappiness.report/ed/2024/happiness-of-the-younger-the-older-and-those-in-between/#ranking-of-happiness-2021-2023 rankings, and now sits just outside the top ten (at #11) in 2024. Australia moved up from 12th last year to 10th this year. The UST 10yr yield started today at 4.28% and down -2 bps from yesterday. After the Fed's decision it fell to 4.25%.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today little-changed from yesterday at US$2157/oz. Oil prices are lower today at just on US$81/bbl in the US while the international Brent price is now just on at US$85/bbl. Both are -US$1.50 lower than this time yesterday. The Kiwi dollar starts today at just on 60.4 USc and a small -10 bps dip from yesterday. After the Fed news, it rose to 60.6 USc. Against the Aussie we are still at 92.4 AUc. Against the euro we are still at 55.6 euro cents. That all means our TWI-5 starts today at just on 69.6 and marginally firmer. The bitcoin price starts today at US$64,620 and up +1.6% since this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.8%. There seems to be an outflow rush underway from some key ETFs. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again on tomorrow.

3m

Mar 20

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

29m

Mar 19

Kia ora, Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news of a week of big policy announcements with some potentially very big implications. First all eyes will be on Japan's rate review (tomorrow, Tuesday). STRONG WAGE GAINS IN JAPAN https://www.jtuc-rengo.or.jp/activity/roudou/shuntou/2024/yokyu_kaito/sokuho/keiyaku_06.pdf?187, and by much more than expected, are FUELING SPECULATION https://asia.nikkei.com/Economy/Bank-of-Japan/BOJ-to-end-negative-rates-marking-1st-hike-in-17-years that that Bank of Japan won't wait any longer and will shift out of its negative policy rate when they meet. And the US Fed meets Thursday NZT with a review that includes economic forecasts and the so-called 'dot plot' interest rate projections. Also, in the US indicators such as Manufacturing and Services PMIs, along with building permits, housing starts, and sales of existing homes will be under review. Australia, Brazil, Turkey, Switzerland, The UK and Norway will all also be be reviewing that monetary policy positions and official interest rates. And this week we get inflation data from Canada, the UK, and Japan. Services PMIs from Australia, Japan, India, the EU are coming too this week. In China, they are scheduled to release data on industrial production, retail sales, their labour market, fixed asset investment. And their loan prime rate (LPR) reviews are on the docket as well. Chinese banks extended ¥1.45 TLN IN NEW LOANS http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/5275776/index.html in February, down from the record ¥4.9 tln in January. (January is usually a seasonal high.) The February level was basically as expected. But authorities would be disappointed it is not higher because they had taken action to encourage lending. The central bank had announced its largest-ever reduction in a key mortgage reference rate. And they signaled recently there was still room for cutting banks' reserve ratios, following a 50-basis point cut in January. Banks are finding to tougher to identify lending opportunities. CHINA'S HOUSE PRICES ARE FALLING https://www.stats.gov.cn/sj/zxfb/202403/t20240315_1948439.html, and a bit faster now according to official data. New house prices were down -1.4% from a year ago. In January the decline was -0.7%. Only seven of the 70 largest cities recorded any rise, all tiny, from a month ago. From a year ago only 13 showed rises. For resales, only two of those same 70 cities recorded a rise in February from January, none on a year-ago basis. But prices are -6.3% lower than year-ago levels and the largest fall since these records started in 2011. China's one-year medium-term lending facility (MLF) rate was unchanged at 2.5% in FRIDAY'S UPDATE http://www.pbc.gov.cn/zhengcehuobisi/125207/125213/125431/125475/5275522/index.html. China’s national emissions trading scheme is set to EXPAND TO COVER THEIR ALUMINIUM SECTOR https://www.caixinglobal.com/2024-03-15/china-expands-emissions-trading-scheme-to-include-aluminum-industry-102175796.html as the compulsory carbon market pushes ahead to expand beyond the power sector and include more heavy emitters. Across the Pacific, American consumer sentiment is HOLDING ITS RECENT HIGHS http://www.sca.isr.umich.edu/ in March, essentially the same as the past three months and back at levels prevailing in mid-2021. And at these current levels it is up a sharp +23% in a year. American INDUSTRIAL PRODUCTION ROSE https://www.federalreserve.gov/releases/g17/current/default.htm (slightly) in February from January following a previous month retreat. Most of the gains were in construction activity. But it is still marginally lower (in real terms) than year ago levels. But March won't be helped by activity in the New York region. They reported a sharpish decline in their LATEST SURVEY https://www.newyorkfed.org/survey/empire/empiresurvey_overview. In Canada, housing starts jumped by +14% in February from January, to 253,500 units and well above market expectations of 230,000 units, according to OFFICIAL DATA https://www.cmhc-schl.gc.ca/media-newsroom/news-releases/2024/housing-starts-february. It was the highest reading in four months. We perhaps should note that the current El Niño weather pattern is changing. THE EXPERTS https://www.cpc.ncep.noaa.gov/products/analysis_monitoring/enso_advisory/ensodisc.shtml are saying La Niña is on its way with its cooler-than-average seawater in the central and eastern Pacific Ocean. In the past La Niña TYPICALLY https://niwa.co.nz/climate/information-and-resources/elnino delivers northeasterly wind trends, bringing moist, rainy conditions to northeastern areas of the North Island and reduced rainfall to the lower and western South Island. Warmer than average air and sea temperatures can occur around New Zealand during La Niña. In Australia, rural areas typically benefit from more rainfall. But as global temperatures are elevated, maybe 'typical' reactions this time will be different. They were with the current El Niño. The UST 10yr yield starts today at 4.31% and unchanged from Saturday but it is up a sharp +29 bps for the week.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today -US$1 lower than Saturday at US$2156/oz and -US$30 lower than a week ago. Oil prices are little-changed at just on US$80.50/bbl in the US while the international Brent price is now just under at US$85/bbl. That is nearly +4% higher in a week however. The Kiwi dollar starts today at just on 60.8 USc and unchanged from Saturday. But that is a full -1c lower than a week ago. Against the Aussie we are still at 92.8 AUc. Against the euro we are still at 55.9 euro cents. That all means our TWI-5 starts today at just on 69.9 and unchanged as well but -40 bps lower in a week. The bitcoin price starts today at US$67,946 and a mere -0.6% slip from this time Saturday. And this level is virtually unchanged from a week ago. Volatility over the past 24 hours has been moderate at just on +/- 2.9%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again on tomorrow.

6m

Mar 17

Kia ora, Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news American data supports the Fed's cautious approach to its monetary policy management - pushing away imminent rate cuts. Benchmark rates have risen sharply. US new jobless claims came in less than expected when a rise was anticipated. There were less than 200,000 new actual claims last week, and that takes the number of people on these benefits to under 2.1 mln. At the risk of sounding like a broken record, there is still no sign here of a wavering American labour market But American RETAIL SALES https://www.census.gov/retail/marts/www/marts_current.pdf were up +0.6% in February from January, following an upwardly revised -1.1% fall in January and below market forecasts of a +0.8% gain. The relatively modest increase, combined with a larger decline in January, suggests a potential slowdown in consumer spending. But the February level is in fact +5.5% higher than year ago levels, pointing out the longer-term above-inflation expansion of consumer activity. Also rising are PRODUCER PRICES https://www.bls.gov/news.release/ppi.nr0.htm. They rose by +0.6% in February from January, marking the largest increase since last August and surpassing market expectations of a +0.3% rise. Goods prices rose by +1.2%, the most in six months, primarily driven by a surge in energy and food prices. These are not signals the Fed will like Although they are definitely not at concerning levels and remain at long term average levels, AMERICAN INVENTORIES https://www.census.gov/mtis/www/data/pdf/mtis_current.pdf are rising which will bring increased management attention at firms. We should point out that the official release on China new yuan loans seems to be delayed. Markets had expected a modest rise, but maybe it isn't like that. Meanwhile data is COMING TO LIGHT https://www.msci.com/research-and-insights?topic=real_estate that the 2023 level of commercial property sales in China were unusually light, and marked by distressed sales. More than 20% of all sales were because of seller stress. And it may be more. Some non-distressed deals were made by stressed developers in need of liquidity. Nearly half of the distressed deals in 2023 were in the industrial sector. It seems the office sector's pain is yet to come. Distressed deals also have make up a high proportion of commercial real estate sales this year. In the first two months of 2024 more than 30% were distressed, and these were dominated by smaller deals. In India, Bloomberg is pointing out a rather SHARP FALL IN THEIR LISTED SMALL-CAP EQUITIES https://www.bseindia.com/sensex/code/103. So far in March, they have fallen -7.5% even if yesterday there was a small recovery. More than NZ$100 bln has been 'lost' in this retreat. It does point out that this market has gotten rather over-valued. CONTAINER FREIGHT RATES FELL https://www.drewry.co.uk/supply-chain-advisors/supply-chain-expertise/world-container-index-assessed-by-drewry another -4% last week although they remain 77% higher than year ago levels. Trans-Atlantic rates rose, but all others fell. BULK CARGO RATES https://tradingeconomics.com/commodity/baltic basically held over the past week, with the recent sharp rises ending. The UST 10yr yield starts today at 4.30% and up +11 bps from this time yesterday.  We should note that the TESLA SHARE PRICE https://www.google.com/search?q=s%26p500&oq=s%26p500&gs_lcrp=EgZjaHJvbWUqDggAEEUYJxg7GIAEGIoFMg4IABBFGCcYOxiABBiKBTIOCAEQRRgnGDsYgAQYigUyDQgCEAAYgwEYsQMYgAQyBwgDEAAYgAQyCQgEEAAYChiABDIJCAUQABgKGIAEMgYIBhBFGD0yBggHEEUYPdIBCDI3NDNqMGo0qAIAsAIA&sourceid=chrome&ie=UTF-8 has fallen a very sharp +3.7% so far today. Over the past week that has compounded to a -10% drop. It is actually down more than a third so far this year. THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today -US$15 lower than yesterday at US$2158/oz. Oil prices have risen another +US$1.50 to just over US$81.50/bbl in the US while the international Brent price is now just over US$85/bbl. The Kiwi dollar starts today at just under 61.4 USc and -20 bps softer than this time yesterday. Against the Aussie we are firm at 93.2 AUc. Against the euro we are holding at 56.4 euro cents. That all means our TWI-5 starts today at just on 70.3 and unchanged from yesterday. In fact we have been within a tight range around this level for more than two weeks now. The bitcoin price starts today at US$71,337 and down -2.5% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.5%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again on Monday.

4m

Mar 14

Kia ora, Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news China's inward turn is gathering pace as it fears foreign influence. But first, US MORTGAGE APPLICATIONS https://www.mba.org/news-and-research/newsroom/news/2024/03/13/mortgage-applications-increase-in-latest-mba-weekly-survey rose strongly last week from the week before, up more than +6%. and that was because mortgage interest rates fell rather sharply, down nearly -20 bps in a week to go under 7% for the benchmark 30 year home loan rate for the first time in a month. Still, mortgage applications are running -11% lower than year-ago levels - and they were very weak then too. Today's US Treasury 30yr bond auction was well supported and delivered slightly lower yields than the equivalent auction a month ago, but only fractionally lower. TODAY'S EVENT https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240313_2.pdf delivered a median yield of 4.28% whereas THE MONTH-AGO RESULT https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240208_3.pdf was 4.31%. In China, a Beijing-directed rescue of property giant China Vanke is APPARENTLY UNDERWAY http://www.eeo.com.cn/2024/0311/643558.shtml. We should all hope it works. But even if it does it will take a tough toll on the Chinese economy, Shenzhen in particular. And more developers there are FALLING https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0311/2024031100995.pdf. The downstream impacts are also pretty significant. EXCAVATOR SALES ARE DOWN -40% https://www.thepaper.cn/newsDetail_forward_26608842 from year ago levels, as an example. China's Ministry of State Security (MSS) is now increasingly focused on "food security". They are banning foreigners traveling the countryside. The MSS SAYS https://mp.weixin.qq.com/s/FaQrm1LpeTnRUpWBXAMdkA “In recent years, national security agencies have cracked down various espionage activities related to food security, cutting off the "black hands" of foreign espionage targeting China's germplasm resources, preventing and addressing the risks of food security leaks, and ensuring the smooth implementation of the national food security strategy”. That will put paid to the normal global method of sending analysts into the field to assess upcoming grain and crop harvest (something necessary because satellite photos can't yet assess yield prospects - you need to be in the field.) Without that sort of crop intelligence from a major producer (China), global seasonal food planning is going to be far less accurate. EU INDUSTRIAL PRODUCTION PLUNGED https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/4-13032024-ap -2.1% in January from December, marking a stark reversal from the downwardly revised -1.6% retreat recorded in December and faring much worse than market projections of a -1.5% decline. It was the sharpest contraction in activity since March 2023. Worse, it is now down -5.7% in a year. Anywhere that would be a lot. In an economic bloc as large as the EU, that is enormous. In fact, Ireland RECORDED https://www.cso.ie/en/releasesandpublications/ep/p-ipt/industrialproductionandturnoverjanuary2024/ an eye-popping -34% decline. Media REPORTS https://www.reuters.com/business/pwc-australia-cuts-another-300-plus-jobs-wake-leaked-tax-plan-scandal-2024-03-13/#:~:text=SYDNEY%2C%20March%2013%20(Reuters),partner%20leaked%20government%20tax%20plans. say that PwC Australia is cutting another 5% of its staff and partners, a culling of more than -300 jobs as a result of the tax scandal that engulfed the firm in early 2023. The job cuts come on top of 338 announced in November. And after they hived off its advisory business. About 1,400 PwC Australia staff moved over to the new firm which was renamed Scyne Advisory. And staying in Australia, prudential regulator APRA HAS CLEARED NAB https://www.apra.gov.au/news-and-publications/apra-removes-national-australia-bank%E2%80%99s-operational-risk-capital-add-on (BNZ's parent) of having to hold extra capital due to inadequate governance issues. But is is strangely silent on both Westpac and ANZ who are also facing this capital penalty. CBA (ASB's parent) was never on the APRA radar. China has proposed easing the punitive tariffs on Australian wine, imposed as part of their displeasure at the Morrison government’s foreign policies. But that pullback does not apply to Australian beef - not yet anyway. The UST 10yr yield starts today at 4.19% and up +3 bps from this time yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today +US$8 firmer than yesterday at US$2173/oz. Oil prices have risen +US$1.50 to just under US$79.50/bbl in the US while the international Brent price is now just over US$83.50/bbl. The Kiwi dollar starts today at just on 61.6 USc and marginally firmer than this time yesterday. Against the Aussie we are soft at 93 AUc. Against the euro we are holding at 56.3 euro cents. That all means our TWI-5 starts today at just on 70.3 and unchanged from yesterday. The bitcoin price starts today at US$73,189 and up +3.7% from this time yesterday. Volatility over the past 24 hours has been high at just under +/- 3.5%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

4m

Mar 13

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

39m

Mar 13

Kia ora, Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news the never-ending car crash that is China's residential property development sector, took another bump today. But first in the US, their INFLATION RATE UNEXPECTEDLY EDGED UP TO 3.2% https://www.bls.gov/news.release/cpi.nr0.htm in February, compared to 3.1% in January and above forecasts of 3.1%. The closely-watched core inflation rate slipped to 3.8% when it was expected to come in at 3.7%. And it will not have escaped the market's notice that the +0.4% monthly rise from January was the same as the prior month and the highest since April 2023. That means the recent pressure is building again. These misses bolster the Fed's view that they need to be patient to get conditions where consumer inflation actually will fall into its target range before they start cutting rates. The REDBOOK INDEX https://www.redbookresearch.com/ of retail rates in the US rose +3.0% last week from the same week a year ago, and not quite enough to cover inflation.. There was a well-supported US TREASURY 10YR BOND AUCTION https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240312_2.pdf today which saw a median yield achieved of 4.10% and that was actually not too different to THE SAME AUCTION A MONTH AGO https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240207_2.pdf where the median yield was 4.04% pa. India's January INDUSTRIAL PRODUCTION https://www.mospi.gov.in/sites/default/files/press_release/IIP_PR_12mar24.pdf came in lower than expected, rising +3.8% from a year ago when a 4.1% rise was expected , and down from +4.2% in December. The heady growth they reported most months to October now seems to have been exhausted, although expansions at the current lower level will still be looked on with envy by others. India's CPI INFLATION https://www.mospi.gov.in/sites/default/files/press_release/CPI_PR_12Mar24.pdf remained stuck at 5.1% in February. INDIA'S CAR SALES https://pune.media/car-sales-soar-to-record-highs-in-february-maruti-suzuki-leads-know-who-is-no-2-and-3/ rose +9.5% in February from a year ago, also an easing from the +14% rise in January. Over the past year, 3.6 mln passenger vehicles were sold, a far smaller market than the US (18 mln) or China (22 mln). China's property sector has taken another blow. State-backed property development giant Vanke had its investment-grade rating stripped by Moody's overnight who warned of potential further cuts, predicting credit metrics and liquidity will weaken because of falling home sales and funding uncertainties. Immediately, Vanke went into talks with banks (State-owned banks) on a debt swap that should help them stave off it’s first-ever bond default. Earlier this week they felt compelled to ANNOUNCE https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0308/2024030801255.pdf that they had made the most recent bond repayment. But the obligations ahead look daunting. As expected, the German INFLATION RATE EASED TO 2.5% https://www.destatis.de/EN/Press/2024/03/PE24_094_611.html in February, down from 2.9% in January and 3.7% in December. Inflation-control progress is coming fast in Europe's largest economy, even if it is at the expense of demand. Not expected was A FALL IN BRITISH EMPLOYMENT https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/latest in January and a rise in their jobless rate. In Australia, the NAB business sentiment survey REPORTED https://business.nab.com.au/wp-content/uploads/2024/03/NAB-Monthly-Business-Survey-February-2024.pdf that business conditions rose in February, signalling their economy has remained resilient in the new year but inflation is still a challenge despite slowing growth. Business confidence fell slightly however, as firms struggled to deal with the combination. Russia's invasion of Ukraine caused wheat prices to spike. But that is over now with prices falling to a four year low and back to levels we had in the 2015-2020 period. Buyers rule. And now China is CANCELLING PURCHASE CONTRACTS https://fas.usda.gov/newsroom/cancellation-export-sales-china-5 from the US - and at a rate faster than usual. This is because it can buy supplies cheaper elsewhere. The UST 10yr yield starts today at 4.16% and up +6 bps from this time yesterday in a rising market.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today -US$13 lower than yesterday at US$2165/oz. Oil prices have firmed less than +50 USc just under US$78/bbl in the US while the international Brent price is now just over US$82/bbl. These minimal changes come even after Russia suffers BROAD STRIKES ON ITS OIL REFINERIES https://www.aljazeera.com/news/2024/3/12/ukrainian-drones-and-missiles-strike-russian-oil-refineries by Ukraine, as Ukraine tries to balance its resources deficit compared to the invader. The Kiwi dollar starts today at just on 61.5 USc and nearly -¼c lower than this time yesterday. Against the Aussie we are soft as well at 93.2 AUc. Against the euro we have slipped to 56.3 euro cents and -20 bps lower. That all means our TWI-5 starts today at just on 70.3 and also -20 bos lower. The bitcoin price starts today at US$70,562 and down -2.6% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.0%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

5m

Mar 12

Kia ora, Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news about how hard it is to get the 'last mile' of above-policy inflation accomplished. American CONSUMER INFLATION EXPECTATIONS https://www.newyorkfed.org/microeconomics/sce#/ for the year ahead remained stuck and sticky at 3% in February, the same as in the previous two months, and holding at three-year lows. But is it enough for the Fed? Of some concern is that inflation expectations for 3 and 5 years ahead are rising, but only toward that same 3% mark. Clearly there is work to do to quell these expectations. The next big watch is on the actual February inflation and that comes tomorrow. Markets expect 3.1% with a core at 3.7% - in other words, no progress lower. There was a UST 3YR BOND AUCTION https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240311_3.pdf today and that was very well supported. The median yield came in at 4.15% and only marginally higher than the 4.09% at the EQUIVALENT AUCTION https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240206_2.pdf a month ago. There seems no sign investors are either pulling back, or demanding sharply higher yields. Demand remains high, yields are as you would expect. The earlier official reports that Japan had slipped in to recession have proven incorrect. Their revised and updated data SHOWS https://www.esri.cao.go.jp/en/sna/data/sokuhou/files/2023/qe234_2/pdf/gaiyou2342_e.pdf in fact it expanded at a healthy rate, driven by strong capital expenditure in the business sector. Private consumption, which accounts for more than half of Japan's GDP, remained weak at -1.0%, slightly worse than the preliminary -0.9% decline. All eyes are now turning to the next Bank of Japan meeting this time next week. Markets are increasingly expecting them to signal the end of their ultra-low (negative) interest rate policy, one they have had in place for eight years now. China's VEHICLE SALES SLUMPED IN FEBRUARY http://en.caam.org.cn/Index/lists/catid/70.html, down -20% from the same month a year ago. But that comes after an exceptionally strong January. Combining the two months, overall vehicle sales in the world's largest market rose +11% to 4 mln units when you look at them both, with the NEV segment rising +29%. Indian vehicle sales for February are now awaited. They too come off very strong gains in January (+14%). In Australia, the peak body representing financial regulators, The Council of Financial Regulators, (The RBA, APRA, ASIC and the Australian Treasury) RELEASED https://www.cfr.gov.au/news/2024/mr-24-01.html the points they are talking about in a quarterly statement. The main issue seems to be the rise of hardship among borrowers, and the increase in the share of households who had fallen behind on loan payments (although from historically low levels). And since the start of 2024, the IRON ORE PRICE https://tradingeconomics.com/commodity/iron-ore has fallen almost -20% - largely because of falling expectations China will deploy its traditional infrastructure stimulus as a way to reinvigorate its stuttering economy. It's new focus on "high quality development" won't be minerals-intense. The UST 10yr yield starts today at 4.10% and up +2 bps from this time yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today little-changed from yesterday at US$2178/oz. Oil prices have stayed at just over US$77.50/bbl in the US while the international Brent price is now just under US$82/bbl. The Kiwi dollar starts today at just on 61.7 USc and little-changed from this time yesterday. Against the Aussie we are firmish at 93.4 AUc. Against the euro we have held at 56.5 euro cents. That all means our TWI-5 starts today at just on 70.5 and now unchanged over the past five days. The bitcoin price starts today at US$72,448 and up +4.0% from this time yesterday. Volatility over the past 24 hours has been very high at just under +/- 4.0%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

4m

Mar 11

Kia ora, Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news China seems to have managed to arrest its deflationary mood with solid consumer spending in their Lunar New Year holiday. But first, in the week ahead, we get the important US CPI inflation rate on Wednesday, along with retail sales, producer inflation, the Michigan consumer sentiment index, and industrial production data this week. In Japan we will get a Q4-2023 GDPO update and it will likely be more positive than the shrinking first estimate. In Australia, the NAB business confidence index will also come this week. Also, the inflation rate for India is due along with its industrial production data. From China, the focus this week will be on monetary indicators including new yuan loans, car sales, and the house price index. They will also review their one-year medium-term lending facility rate. In China over the weekend they reported February CONSUMER PRICES AND THEY ROSE https://www.stats.gov.cn/sj/zxfb/202403/t20240309_1948279.html by +0.7% from the same month a year ago, above market forecasts of an expected +0.3% rise and a turnaround from the sharpest drop in over 14 years of -0.8% in January. Seven of their past twelve months have reported zero inflation or deflation. The latest result was the first positive consumer inflation since last August, hitting its highest level in 11 months. This was due to better Lunar New Year holiday spending. Food prices declined the least in eight months. Beef prices fell but lamb prices turned up from the prior month. Milk prices are still falling however. Meanwhile they still have PRODUCER PRICE DEFLATION https://www.stats.gov.cn/sj/zxfb/202403/t20240309_1948276.html. This sector is wallowing in -2.7% deflation, marginally more in February than January. A year ago their PPI ran at -1.4%. Another LARGE PROPERTY DEVELOPER https://www.caixinglobal.com/2024-03-09/in-depth-chinese-property-giant-vanke-seeks-more-time-to-repay-debts-as-market-slump-lingers-102173525.html is showing signs of struggle. And they aren't the only one. The issue is spreading into signs of STRESS IN THE LOCAL GOVERNMENT BOND MARKET https://asia.nikkei.com/Economy/China-s-real-estate-slump-hits-municipal-bond-market now. Separately China's Ministry of Finance data SHOWS https://asia.nikkei.com/Business/Markets/China-debt-crunch/China-s-debt-servicing-costs-to-top-170bn-on-growing-bond-issuances that interest on debt obligations are rising fast for the Chinese government - in fact a jump of +7.8% in interest payments this year is a bigger relative rise than for their defense spending (+7.2%). If, as some expect, Beijing suffers a RATINGS https://www.interest.co.nz/credit-ratings-explained downgrade this year from "A1", that cost will only grow. TAIWANESE EXPORTS https://www.mof.gov.tw/singlehtml/384fb3077bb349ea973e7fc6f13b6974?cntId=82f38993d0a644a1a2eea79893acdc91 are still expanding on a year-on-year basis, although not as fast in February as they recorded in January. After a longish run of decreases, this is the fifth month in the past six where exports have risen. Japanese HOUSEHOLD SPENDING FELL https://www.stat.go.jp/data/kakei/sokuhou/tsuki/index.html more sharply than expected and continuing a run of retreats, this one the largest in six months. Japanese policy makers might be a bit worried about this latest data trend. Across the Pacific and at the headline level, THE AMERICAN ECONOMY ADDED +275,000 JOBS IN FEBRUARY https://www.bls.gov/news.release/empsit.nr0.htm, beating forecasts of +200,000 and higher than a downwardly revised +229,000 in January. But their unemployment rate ticked up as more people joined their labour force, and wage growth slowed. Behind the headline numbers (and looking at actual rather than seasonally adjusted numbers), employer payrolls rose by +1.1 mln to 156.5 mln people now employed. That is +2.7 mln more than a year ago. The household survey, which includes self-employed people, rose +665,000 from the prior month to 160.3 mln, and up +602,000 from a year ago. The shift from self-employment to payroll employment continues. American CONSUMER DEBT ROSE https://www.federalreserve.gov/releases/g19/current/g19.pdf by nearly +US$20 bln in January, following a +US$1.6 bln rise in the previous month and way above market expectation of a +US$9 bln rise. Revolving credit, like credit cards, increased by +7.6% on an annualised basis from the previous month. Non-revolving credit, typically auto and student loans, rose by +3.6% on the same basis). According to the USDA's MARCH WORLD AGRICULTURAL SUPPLY AND DEMAND ESTIMATES https://www.usda.gov/oce/commodity/wasde/wasde0324.pdf, the Chinese might be back buying soybean in larger volumes, suggesting the Chinese are struggling with expanding their local output. The same report reveals American beef imports are rising. And that American milk production is slowing. Canada also RELEASED https://www150.statcan.gc.ca/n1/daily-quotidien/240308/dq240308a-eng.htm?HPA=1 labour force data over the weekend. They added +40,700 jobs in February, following a +37,300 rise in January. This was double the forecasted +20,000 increase. February brought a notable bounce back (and more) of full-time positions, up + 70,600, while part-time jobs decreased by -29,900.. GERMAN INDUSTRIAL PRODUCTION https://www.destatis.de/EN/Press/2024/03/PE24_088_61241.html rose +1.0% in January (in 'real' terms) from December but that still leaves it -5.5% lower than the same month a year ago. The UST 10yr yield starts today at 4.08% and down -1 bp from Saturday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today down -US$7 from Saturday at US$2179/oz and just off its record high. But that is a +4.9% rise for the week. Why is the gold price rising just now? Some think it is new demand out of China as investors there start to fret that the economic management by Beijing is leading down a not-so-good path. Oil prices have stayed down at just over US$77.50/bbl in the US while the international Brent price is now just on US$81.50/bbl. Both are -US$2 lower than a week ago. Weakening demand out of China is GETTING THE BLAME https://oilprice.com/Latest-Energy-News/World-News/Chinese-Oil-Demand-Growth-Is-Set-to-Slow-as-Sales-of-EVs-and-LNG-Trucks-Climb.html. And here's something you might not have expected. Saudi Arabia is in recession. It's GDP shrank -3.2% in Q3-2023, and it has now followed that up with an even sharper -4.3% FALL IN -Q4-2024 https://www.stats.gov.sa/sites/default/files/GDP%20FQ42023A_0.pdf. MBS is no saviour. ARAMCO https://en.wikipedia.org/wiki/Saudi_Aramco, which Saudi Arabia partially listed (10%) in 2019, has RAISED ITS DIVIDEND https://www.aramco.com/en/news-media/news/2024/aramco-announces-full-year-2023-results despite a retreat in energy prices and lower production, a boost for Riyadh as it faces a widening budget deficit. The Kiwi dollar starts today at just on 61.8 USc and little-changed from Saturday. But it is up +¾c in a week. Against the Aussie we are firmish at 93.3 AUc. Against the euro we have remained at 56.5 euro cents. That all means our TWI-5 starts today at just on 70.5 and unchanged over the past four days. The bitcoin price starts today at US$69,652 and up +1.2% from this time Saturday. That means for the week it is up +11%. Volatility over the past 24 hours has been modest at +/- 1.3%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

7m

Mar 10

Kia ora, Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news we seem to be "not far" from getting interest rate cuts from the central banks in the US and Europe - and perhaps an unusual hike from Japan. Tomorrow we get the important February US non-farm payrolls report, and today there are more precursor updates. The number of PEOPLE CLAIMING UNEMPLOYMENT BENEFITS https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20240471.pdf for the first time in the US was 213,000 last week, slightly more than in the previous week. That is down from 238,000 new claims in the same week a year ago. All up, there are now just over 2.1 mln people claiming these benefits, a minor increase from a week ago and a year ago. US-based employers ANNOUNCED https://www.challengergray.com/blog/job-cuts-jump-in-february-2024-ytd-cuts-down-8-over-last-year/ plans to cut 84,638 jobs in February, the most in eleven months, compared to 82,307 in January, and 77,770 a year earlier. It is also the highest February total for the month since 2009. But it is still just a rounding error in the perspective of a 161.2 mln employed labour force. American export values were little-changed in January, marginally more than in December but marginally less than in January 2023. Their goods and services deficit rose slightly in the month, but over the past year is a massive -17% lower than in the prior year. It has fallen from a manageable -3.5% of GDP to a much better -2.8% of GDP now. (The New Zealand goods and services trade deficit is -4.1% of our GDP.) There was MORE POWELL TESTIMONY https://www.reuters.com/markets/us/feds-powell-says-aware-policy-risks-workers-cuts-depend-inflation-2024-03-07/ to the US Congress today, this time to a Senate committee. In the US, Google may have had its KEY AI CODE STOLEN https://www.justice.gov/opa/media/1341356/dl and passed to China. And sadly, this case will reinforce nationality stereotyping that is growing in the US-vs-China rivalry. In Japan, WORKER EARNINGS ROSE BY 2.0% https://www.mhlw.go.jp/english/database/db-l/r06/2401pe/2401pe.html in January from the same month a year ago, rising from a +1.0% gain in December and posting the highest reading in seven months. That is triggering talk that a central bank rate hike may be in the offing. It did that last seventeen years ago. China's EXPORTS SURGED HIGHER http://www.customs.gov.cn/customs/302249/zfxxgk/2799825/302274/302275/5716196/index.html in the January-February period they report at the start of the year. This is not only good news for them, but it also indicates global demand is rising, and probably by more than we might otherwise have assumed. But we should probably also note it is off a quite low base in the same period in 2023. New Zealand received +7.7% more exports from them, but they bought -14.9% less from us in the period. One consequence? CHINA'S FX RESERVES https://www.safe.gov.cn/safe/2022/0207/23934.html inched higher. The Malaysian central bank kept its overnight policy rate at 3% in its latest MONETARY POLICY REVIEW https://www.bnm.gov.my/-/monetary-policy-statement-07032024. As expected, the ECB kept its main policy rate UNCHANGED https://www.ecb.europa.eu/press/pr/date/2024/html/ecb.mp240307~a5fa52b82b.en.html at 4.5%, at its overnight review. And it is keeping up its quantitative tightening program at the same pace. But they lowered their inflation forecast, and their growth forecasts, and signaled that they might cut rates in July. Meanwhile, German REPORTED https://www.destatis.de/EN/Press/2024/03/PE24_086_421.html that factory orders fell worryingly sharply in January to be -12% lower than the same month a year ago. In Australia, LENDING FOR HOUSING https://www.abs.gov.au/statistics/economy/finance/lending-indicators/jan-2024 fell more than expected in January, trimming their year-on-year rise to +8.5%. For owner-occupiers, the monthly drop was -4.6% taking the year-ago change to just +3.4%. GLOBAL CONTAINER FREIGHT RATES https://www.drewry.co.uk/supply-chain-advisors/supply-chain-expertise/world-container-index-assessed-by-drewry fell another -6% last week but remain +82% higher than year ago levels. The pressures remain even if an easing trend is building. FREIGHT RATES FOR BULK CARGOES https://tradingeconomics.com/commodity/baltic are still rising however and are now +70% higher than year-ago levels. The UST 10yr yield starts today at 4.12% and up +3 bps from yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today up another +US$11/oz at US$2156/oz and another new record high. Oil prices are down -US$1 at just over US$78.50/bbl in the US while the international Brent price is now just over US$82.50/bbl. The Kiwi dollar starts today at just on 61.7 USc and another overnight gain of +¼c. Against the Aussie we are still at 93.3 AUc. Against the euro we have firmed slightly to 56.4 euro cents. That all means our TWI-5 starts today at just on 70.5 and up about +10 bps. The bitcoin price starts today at US$67,389 and up +1.0% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.8%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again on Monday.

5m

Mar 07

Kia ora, Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news the US Fed says it needs to see more progress on inflation before it considers a rate cut. But they hinted that a cut could be coming later this year. That was enough to see markets worldwide start pricing that in. Benchmark interest rates retreated everywhere. But first in the US, there was actually quite A JUMP IN MORTGAGE APPLICATIONS https://www.mba.org/news-and-research/newsroom/news/2024/03/06/mortgage-applications-increase-in-latest-mba-weekly-survey last week after the prior week's unusual fall. And this latest week more than made up for that prior retreat. That came despite the benchmark 30 year mortgage interest rate staying up above 7%. In its precursor reports, ADP SAID https://adp-ri-nrip-static.adp.com/artifacts/us_ner/20240306/ADP_NATIONAL_EMPLOYMENT_REPORT_Press_Release_2024_02%20FINAL.pdf?_ga=2.117191430.1899121149.1709745391-2125275654.1709745391 private businesses in the US hired an extra +140,000 workers in February, following an upwardly revised +111,000 in January, but slightly below forecasts of +150,000. Services companies were responsible for +110,000 of those extra jobs, while goods producers added +30,000. Meanwhile, the number of JOB OPENINGS WENT DOWN https://www.bls.gov/news.release/jolts.nr0.htm by -26,000 from the previous month to 8.863 mln in January, the lowest in three months and below the market consensus of 8.9 mln. Still, this data lags current conditions in a way the jobs reports don't. These American labour market updates came ahead of Saturday's (NZT) February non-farm payrolls report which is currently expected to deliver a +200,000 increase on top of the very strong +353,000 January rise. It would be appropriate to start reducing the Fed funds rate at some point this year, but only when there is greater confidence that inflation is sustainably moving towards the 2% target, Federal Reserve boss Powell SAID https://www.federalreserve.gov/newsevents/testimony/powell20240306a.htm in his semiannual https://www.federalreserve.gov/publications/files/20240301_mprfullreport.pdf. “,” he noted. But markets moved past that caution almost instantly, with benchmark rates falling, equity prices rising, and the US dollar easing. The Fed releases its February Beige Book survey results at 8am NZT and if there is anything notable in that we will update this item. North of the border, the Bank of Canada DELIVERED https://www.bankofcanada.ca/2024/03/fad-press-release-2024-03-06/ the expected no-change rate decision, holding its policy rate at 5% and saying it is in no hurry to cut. We should perhaps note that the South Korean inflation rate TICKED UP ABOVE 3% AGAIN https://www.interest.co.nz/sites/default/files/2024-03/2024%EB%85%84%2B2%EC%9B%94%2B%EC%86%8C%EB%B9%84%EC%9E%90%EB%AC%BC%EA%B0%80%EB%8F%99%ED%96%A5_0.pdf in February. They are having "last mile" problems too. China has appointed A KNOWN HARD-MAN https://en.wikipedia.org/wiki/Wu_Qing_(born_1965) to head its Securities Regulatory Commission who is determined to STAMP OUT UNWANTED BEHAVIOURS https://www.yuantalks.com/chinas-top-securities-regulator-to-take-resolute-moves-to-stabilize-market-in-irrational-volatilities-to-step-up-crackdown-on-illegal-activities/. Traders are going to have to be very careful they adopt the Party narrative in their trading actions. Only 'up' is now likely to be tolerated. India SAYS https://economictimes.indiatimes.com/news/economy/indicators/indias-gdp-growth-to-exceed-govt-estimate-of-7-6-in-fy24-may-touch-8-rbi-governor-das/articleshow/108266162.cms it is looking at a growth rate this year of about +8%. Perhaps surprising some, the volume (ie real) of RETAIL SALES https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/4-06032024-ap in the EU rose in January from December. But they are still lower than year-ago levels. Readers of this column will recall us suggesting the the good Australian current account data was likely enough to ensure a good Q4-2023 growth outcome for economic activity (GDP) in Australia. Well that was a misplaced reading. THE GDP DATA https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/dec-2023 today disappointed many, with real economic activity up just +0.2% in the quarter, up +1.5% over the year. Clearly, the contribution from households was lower than expected amid budget and rate pain. And without that strong current account data they may have had to book a contraction. The global airline industry is CLAIMING https://www.iata.org/en/iata-repository/publications/economic-reports/air-passenger-market-analysis-january-2024/ that the passenger travel market was nearly fully recovered from the 2020 pandemic in January with 'resilient' growth in both domestic and especially international travel volumes. The UST 10yr yield starts today at 4.09% and down -6 bps from yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today up +US$19/oz at US$2145/oz and another new record high. Oil prices are up +US$1.50 at just on US$79.50/bbl in the US while the international Brent price is now just under US$83.50/bbl. The Kiwi dollar starts today at just on 61.4 USc and an overnight gain of +½c. Against the Aussie we are down -¼c at 93.3 AUc as the Aussie rose more. Against the euro we have risen to 56.3 euro cents. That all means our TWI-5 starts today at just on 70.4 and up +20 bps. The bitcoin price starts today at US$66,709 and up almost +2.0% from this time yesterday. Volatility over the past 24 hours has been extreme at +/- 6.6%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

5m

Mar 06

Kia ora, Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news that with a few notable exceptions, commodity prices are soft across the board. The overnight DAIRY AUCTION https://www.globaldairytrade.info/en/product-results/ brought a -2.3% retreat, principally because the powder prices fell. WMP was down -2.8% and SMP was down -5.2%. However cheese was up +4.0%, that only ingredient to show a gain. The overall decline was the first in the first of the year and the only significant one in the past 15 events. Last week's GDT PULSE https://www.globaldairytrade.info/en/gdt-pulse-results/ event's retreat signaled that this correction was on the cards. One retreat in 15 isn't significant however at this point and it is unlikely it will cause any analyst to change their forecast payout levels. Last week's RETAIL SALES https://www.redbookresearch.com/ in the US rose +3.0% from the same week a year ago, on a same-store basis, just enough to stay ahead of inflation. The American middle class is still creating the core consumer demand that essentially powers the global economy. But the same was not true for FACTORY ORDERS https://www.census.gov/manufacturing/m3/prel/pdf/s-i-o.pdf in January, which were down -1.6% on that same basis. From December they fell at a sharper pace. However, the American SERVICES SECTOR WAS STILL EXPANDING https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/february/ in February, even if it was marginally back off the fast pace in January. And this expansion was CONFIRMED https://www.pmi.spglobal.com/Public/Home/PressRelease/3d1517f30b994abebbc751214e091391 in a separate internationally-benchmarked services survey. And their LOGISTICS INDUSTRY IS EXPANDING https://www.the-lmi.com/february-2024-logistics-managers-index.html faster too, indicative of rising commercial demand in February. Encouragingly, American VEHICLE SALES ROSE https://www.nada.org/nada/nada-headlines/nada-market-beat-february-2024-new-light-vehicle-sales-finish-strong to a 15.8 mln annualised rate in February, an almost +6% gain on January's rate. And that puts them above the recent long run average. A major set-piece meeting of the People Congress in Beijing has seen them SET https://www.caixinglobal.com/2024-03-05/chinas-gdp-growth-target-for-2024-102171656.html an "about +5%" growth target for 2024. But even the Premier who delivered the target acknowledged it will be a reach. But analysts see it as a "target without a Plan".  Without such a plan, there is unlikely to be any support for global commodity prices. The sharp retreat of foreign investment is drawing calls for 'ACTION https://www.chinadaily.com.cn/a/202403/05/WS65e65d03a31082fc043ba8a5.html' to reverse the slide. Lower energy costs (and energy intensity) are still driving down EU producer prices. Industrial PRODUCER PRICES https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/4-05032024-ap in the Euro Area decreased by -8.6% year-on-year in January, but that was a moderation from a revised -10.7% drop recorded in the preceding month. Australia delivered a bumper CURRENT ACCOUNT SURPLUS https://www.abs.gov.au/media-centre/media-releases/australia-records-current-account-surplus-118b in Q4-2023 or +AU$11.8 bln, much more than was expected. This was their best 2023 quarter, taking the annual current account surplus to +AU$31.9 bln. That probably means their Q4-2023 GDP activity will be positive too, helped by a slump in imports and less Aussies making overseas trips. Australian Q4 GDP results will be released later today. And staying in Australia, their competition authorities have DECIDED https://www.accc.gov.au/media-release/accc-update-on-tribunal%E2%80%99s-decision-to-authorise-anzs-acquisition-of-suncorp not to appeal their loss in the case that overturned their block on the ANZ-Suncorp banking acquisition. January air cargo data was RELEASED https://go.updates.iata.org/webmail/123902/1634819997/1b0a4ee3b31d4593c9ceabebb91d64dfeba393537dfa196171a184a3b67283aa overnight and it pointed to rising demand and a strong start to 2024. International cargo demand was +20% higher than year ago levels, even better in the Asia/Pacific region. The UST 10yr yield starts today at 4.15% and down -8 bps from yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today up +US$9/oz at US$2126/oz. That is another new record high. Oil prices are down -50 USc at just over US$78/bbl in the US while the international Brent price is now just over US$82/bbl. The Kiwi dollar starts today at just on 60.9 USc again, marginally softer. Against the Aussie we are holding at 93.6 AUc. Against the euro we have eased fractionally to 56.1 euro cents. That all means our TWI-5 starts today at just on 70.2 and down another -10 bps. The bitcoin price starts today at US$65,430 and down -2.8% from this time yesterday. At one point it did hit a record high in the past 24 hours but has backed off since. Volatility over the past 24 hours has been high at +/- 3.4%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

4m

Mar 05

Kia ora, Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news that non-China Asia seems to be on the rebound, and it is not just India driving it. Japanese corporate SPENDING ON PLANT AND EQUIPMENT https://www.mof.go.jp/pri/reference/ssc/results/r5.10-12.pdf in Q4-2023 jumped an unprecedented (and surprising) +16.4% from the same period a year earlier. It was very much more than was expected and will ease some concerns about weak domestic demand. Companies are clearly looking ahead with optimism. It is not as though it is off a low base; a year ago they reported a very creditable +8% rise. This latest gain is the largest since this data series started in 2009. In South Korea, their PMI FACTORY SURVEY https://www.pmi.spglobal.com/Public/Home/PressRelease/e9ddebd5ffb84ed59af0cd00b11a9366 shows conditions continued to improve during February. They have a sustained expansion in both output and new orders amid the launch and manufacture of new products, while also seeing a boost in confidence. Payrolls are rising too. In Australia, they got some disappointing BUILDING CONSENT DATA https://www.abs.gov.au/statistics/industry/building-and-construction/building-approvals-australia/jan-2024 for January, particularly for building new houses. Apartments seem ok. Levels were weaker than expected, recording a -1% decline vs expectations of a +4% rise from the prior month. These consent levels were coming off a sharp fall in December which was revised sharply lower. The absence of a rebound and the approvals detail suggest there has been an underlying weakening, although we should to be careful with housing data over the summer holiday period. The IEA released its 2023 GLOBAL EMISSIONS REPORT https://iea.blob.core.windows.net/assets/33e2badc-b839-4c18-84ce-f6387b3c008f/CO2Emissionsin2023.pdf overnight. Emissions increased by +410 million tonnes, or 1.1%, in 2023 – compared with a rise of +490 million tonnes the year before – taking them to a record level of 37.4 billion tonnes. An exceptional shortfall in hydropower due to extreme droughts – in China, the United States and several other economies – resulted in over 40% of the rise in emissions in 2023 as countries turned largely to fossil fuel alternatives to plug the gap. Had it not been for the unusually low hydropower output, global CO2 emissions from electricity generation would have declined last year, making the overall rise in energy-related emissions significantly smaller. Total advanced economy GDP grew +1.7% but emissions fell -4½%, a record decline outside of a recessionary period. Having fallen by -520 Mt in 2023, emissions are now back to their level of fifty years ago in these advanced economies. Total CO2 emissions from energy combustion in the United States declined by -4.1% (-190 Mt) despite its drought and hydro hesitations, while the economy grew by +2.5%. Two-thirds of the emissions reduction came from the electricity sector. More from the IEA HERE https://iea.blob.core.windows.net/assets/d718c314-c916-47c9-a368-9f8bb38fd9d0/CleanEnergyMarketMonitorMarch2024.pdf. The UST 10yr yield starts today at 4.23% and up +4 bps from yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today up +US$35/oz at US$2117/oz. That is a new record high, eclipsing the previous all-time high of US$2,087 at the end of 2023 by +1.5%. Oil prices are down -US$1 at just over US$78.50/bbl in the US while the international Brent price is now just over US$82.50/bbl. The Kiwi dollar starts today at just on 61 USc again, little-changed. Against the Aussie we are holding at 93.6 AUc. Against the euro we have eased to 56.2 euro cents. That all means our TWI-5 starts today at just on 70.3 and down about -10 bps overnight. The bitcoin price starts today at US$67,311 and up +7.2% from just yesterday. That is another big gain and puts it just about its all-time high in November 2021. Volatility over the past 24 hours has been very high at +/- 4.0%. (It is very volatile as we record this, so it has likely changed again since.) You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

4m

Mar 04

Kia ora, Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news the world's factories are signaling quite varied status indications. But OVERALL https://www.pmi.spglobal.com/Public/Home/PressRelease/4bb2843d8c8b4de0ba782f834b5f391e February saw global manufacturing show signs of renewed vigour. Output expanded for the second successive month, supported by the first increase in new order intakes since June 2022. The outlook remained broadly positive overall, with optimism regarding the year ahead staying close to January's nine-month high. But first this week, all eyes will be on the US non-farm payrolls report but not until Saturday NZT. Markets currently expect it to expand by another +200,000. Prior to this other American labour market indicators will be release like the JOLTS report and the layoff survey. The US will also deliver factory order data and Fed speakers will be out in force while the Fed itself reports to Congress on monetary policy. Separately the Bank of Canada and the ECB will deliver rate reviews. Others will report trade, inflation and PMI data. Locally there is not much big data released although the Tuesday release of 2023 household expenditure survey results will be interesting, both for what they say, and what they don't. In China there were two PMI surveys out. The OFFICIAL FACTOR ONE https://www.stats.gov.cn/sj/zxfb/202403/t20240301_1947971.html wasn't very optimistic but the private CAIXIN VERSION https://www.pmi.spglobal.com/Public/Home/PressRelease/3f0f76ba5a8649b09b86fea155607bc7 reports improving and expanding factory conditions. It is more understandable in China why the two might vary. The official one focuses on large state organisations, the Caixin one more on private businesses. Still, the results are opposite to what you might have expected. The official version also covered their services sector and that part REPORTED https://www.stats.gov.cn/sj/zxfb/202403/t20240301_1947971.html an improving expansion. In China, it now seems it is NEWS https://www.caixinglobal.com/2024-03-01/chinese-developer-gemdale-keeps-its-streak-of-not-defaulting-alive-102170842.html that a large property developer actually IS able to make payments on their bonds. Also in their news is that you can get ARRESTED https://www.caixinglobal.com/2024-03-01/guizhou-probes-arrest-of-contractor-owed-millions-by-local-government-102170881.html for asking local government authorities to pay their debts. It will be no surprise, the INDIAN PMI https://www.pmi.spglobal.com/Public/Home/PressRelease/0b5c0c4b4a55460ebdfc474e86275158 rose in February, complementing its economic expansion. But the JAPANESE PMI https://www.pmi.spglobal.com/Public/Home/PressRelease/60d8366918004bd8bcdeb51eae94f575 reported 'deteriorating' factory conditions. After a sharp +18% jump in January, SOUTH KOREAN EXPORTS https://www.interest.co.nz/sites/default/files/2024-03/%E2%97%8F%20240301_%EC%88%98%EC%B6%9C%EC%9E%85%EA%B3%BC_24%EB%85%84_3%EC%9B%94_%EC%88%98%EC%B6%9C%EC%9E%85_%EB%8F%99%ED%96%A5.pdf were expected to rise only modestly (less than +2%) in February on that same basis. But they rose almost +5% on the year-on-year basis pointing to resilience in export demand for them. Much lower imports (due to lower oil prices) enabled them to book a sharp rise in their trade surplus. With an unexpected fall in new order levels, the widely watched American ISM PMI /The%20ISM%20Manufacturing%20PMI%20in%20the%20United%20States%20fell%20to%2047.8%20in%20February%202024%20from%2049.1%20in%20the%20previous%20month,%20firmly%20below%20market%20expectations%20of%2049.5%20to%20point%20to%20the%2016th%20consecutive%20period%20of%20declines%20in%20manufacturing%20activity,%20erasing%20previous%20hopes%20of%20fresh%20traction%20in%20the%20sector.%20New%20orders%20swung%20to%20the%20contraction%20territory dipped deeper in contraction in February. The companion internationally benchmarked MARKIT PMI https://www.pmi.spglobal.com/Public/Home/PressRelease/4b4d1eb122e34625ad17114f644f2a15 (now called the S&P Global PMI) told a very different story however in the same market, swinging up sharply to an expansion, and one this survey hasn't had since mid-2022. The driver? Well, it was a surge in new orders. The two surveys could not have been more different this month, an unusual set of views. The widely-watched UNIVERSITY OF MICHIGAN CONSUMER SENTIMENT SURVEY http://www.sca.isr.umich.edu/ for February is clearly upbeat however. Although consumer sentiment moved sideways in the month, slipping just two index points below January, it is holding the gains seen over the past three months. Expected business conditions remained substantially higher than six months ago. And long run expectations are much higher too. EU (Euro Area) INFLATION FELL https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/2-01032024-ap in February but not by as much as expected. It is now at 2.6% pa on falling energy costs. Like everyone, they are finding the "last mile" hard to achieve. Meanwhile the Euro Area JOBLESS RATE https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/3-01032024-bp fell to a record low 6.2%. But these days, governments get little credit for keeping employment high even when economic activity wavers. But in the sweep of economic history, it IS a remarkable factor. However, the EUROZONE PMI https://www.pmi.spglobal.com/Public/Home/PressRelease/edf3e826a3704b8d9223415410388c01 does not make for happy reading. The UST 10yr yield starts today at 4.19% and up a marginal +1 bp from Saturday but down -6 bps from a week ago. In fact that is near a three week low.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today at Saturday's higher level of US$2082/oz. And that is also up from US$2038/oz a week ago. Oil prices are little-changed at just over US$79.50/bbl in the US while the international Brent price is now just under US$83.50/bbl. Both are +US$3 higher than a week ago. In a bid to try and raise the price, OPEC has EXTENDED https://www.spa.gov.sa/en/N2058033 its production cuts. The Kiwi dollar starts today at just on 61 USc and little-changed from this time Saturday. But that is -1c lower than this time last week. Against the Aussie we are holding at 93.6 AUc. Against the euro we have firmed slightly to 56.4 euro cents. That all means our TWI-5 starts today at just on 70.4 and little-changed from Saturday, but down about -100 bps in a week. The bitcoin price starts today at US$62,810 and up +1.3% from this time yesterday. But it is up more than +US$10,000 in a week or +25%. Volatility over the past 24 hours has been modest at +/- 1.2%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

6m

Mar 03

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

34m

Mar 02

Kia ora, Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news India is the world's bright economic star at the moment. But first in the US, the actual number of PEOPLE CLAIMING JOBLESS BENEFITS https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20240429.pdf fell last week, but by less than expected to 194,000. Continuing jobless claims were unchanged at 2.1 mln, still the highest since November. It was a mixed picture. Seasonally these levels are higher than was expected. American PCE INFLATION https://www.bea.gov/index.php/news/2024/personal-income-and-outlays-january-2024 for January came in at the expected 2.4% which was a dip from the December 2.6%. Core PCE dipped slightly too. Personal income jumped an outsized +1.0% in January from December which puts it +2.1% higher than a year ago (real), while personal spending rose +0.3% on the same basis, also +2.1% higher than a year ago (also real). The CHICAGO PMI FELL https://chicago.ismworld.org/news-publications/reports/research-survey/ again, its third straight fall. But there was a sharp recovery in the KANSAS CITY FED FACTORY SURVEY https://www.kansascityfed.org/surveys/manufacturing-survey/tenth-district-manufacturing-activity-declined-slightly-in-february/ although new order growth was flat. American PENDING HOME SALES IN JANUARY DROPPED https://www.nar.realtor/newsroom/pending-home-sales-receded-4-9-in-january -4.9% as the residential sector stays in the doldrums. The Northeast and West posted monthly gains in transactions while the Midwest and South recorded losses. All four U.S. regions registered year-over-year decreases. Canada data for Q4-2023 GDP SHOWS https://www150.statcan.gc.ca/n1/daily-quotidien/240229/dq240229a-eng.htm?HPA=1 them returning to growth. JAPANESE INDUSTRIAL PRODUCTION https://www.meti.go.jp/english/statistics/tyo/iip/index.html disappointed in January, coming in -1.5% lower than a year ago. Meanwhile, RETAIL SALES https://www.meti.go.jp/statistics/tyo/syoudou/result/pdf/202401S.pdf in Japan rose +2.3% year-on-year in January, slowing slightly from an upwardly revised +2.4% gain in December. Meanwhile, TAIWANESE RETAIL SALES https://www.moea.gov.tw/Mns/dos_e/bulletin/Bulletin_En.aspx?kind=15&html=1&menu_id=6745&bull_id=16021 grew just +0.3% year-on-year in January, the lowest expansion since February 2022. But Taiwanese INDUSTRIAL PRODUCTION https://www.moea.gov.tw/Mns/dos_e/bulletin/Bulletin_En.aspx?kind=13&html=1&menu_id=6743&bull_id=16024 surged in January, up +16% from a year ago. India RELEASED https://www.mospi.gov.in/sites/default/files/press_release/PressNoteGDP29022024.pdf its Q4 GDP RESULTS https://www.mospi.gov.in/dataviz-quarterly-gdp-growth-rates beating both forecasts and the strong Q3 expansion, to be +8.4% larger than the same quarter a year ago. The Indian economic performance is a strong global highlight. It is impressive given how large it is, a famously difficult place to generate change. (But we probably should be a bit sceptical on this data. The Modi Government has a tight control over their stats, and an election is looming. Just saying ...) But there are never any contested elections in China. China's per capita gross national income declined in US dollar terms for the first time in 29 years in 2023, DATA https://www.stats.gov.cn/sj/zxfb/202402/t20240228_1947915.html released yesterday shows, pulling it further from the World Bank's threshold for a high-income country. The comparison with India will be causing some concern in Beijing now. China's solution to their woes? MORE STATE PLANNING https://www.chinabankingnews.com/2024/02/29/china-resorts-to-state-planning-to-stymie-housing-market-volatility/ and directed SOE activity. They seem a bit lost at the moment. The -1.4% decline in real German retail sales continued in January. But that seems to be the price they are prepared to pay to get INFLATION https://www.destatis.de/EN/Press/2024/02/PE24_078_611.html back to where they need it. In February it fell to +2.5%, its lowest since mid 2021. In between it peaked at almost +9%. In Australia, the January retail sales brought A MODEST BOUNCE https://www.abs.gov.au/statistics/industry/retail-and-wholesale-trade/retail-trade-australia/jan-2024, but not to a level that satisfied anyone. CONTAINER FREIGHT RATES EASED AGAIN https://www.drewry.co.uk/supply-chain-advisors/supply-chain-expertise/world-container-index-assessed-by-drewry last week, but remain very high for the usual climate (Panama) and security (Suez) restriction reasons. They are still almost +90% higher than year ago levels. BULK CARGO RATES https://tradingeconomics.com/commodity/baltic are rising now too, up a sharp +24% in the past week alone. The UST 10yr yield starts today at 4.25% and down -4 bps from this time yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today up +US$13/oz from yesterday at US$2045/oz. Oil prices are up +US$1 at just under US$79/bbl in the US while the international Brent price is now just over US$82.50/bbl. The Kiwi dollar starts today at just on 60.9 USc and little-changed from this time yesterday. Against the Aussie we are down marginally at 93.7 AUc. Against the euro we have firmed slightly to 56.4 euro cents. That all means our TWI-5 starts today at just over 70.3 and little-changed The bitcoin price starts today at US$62,275 and up +0.82% from this time yesterday. Volatility over the past 24 hours has been high at +/- 3.9%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again on Monday.

5m

Feb 29

Kia ora, Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news the New Zealand currency and interest rates have fallen after the RBNZ dovish no-change Monetary Policy Statement as markets removed the factors that had priced in some risk for a rise. Firstly in the US, MORTGAGE APPLICATIONS FELL AGAIN https://www.mba.org/news-and-research/newsroom/news/2024/02/28/mortgage-applications-decrease-in-latest-mba-weekly-survey last week and are now -12% below year-ago levels. Their benchmark 30 year loan interest rate is still over 7% which keeps this market quiet. The American MERCHANDISE TRADE BALANCE https://www.census.gov/econ/indicators/advance_report.pdf in January was little-changed at about -US$90 bln for the month. It is always less when services are included. The SECOND ESTIMATE OF Q4 US GDP https://www.bea.gov/news/2024/gross-domestic-product-fourth-quarter-and-year-2023-second-estimate confirmed the early estimate, adjusted an insignificant tick lower. The +3.2% expansion in Q4 came after the +4.9% Q3 expansion and +2.4% expansion for the year prior to that. By any measure that is a very good two year track record. They ended 2023 with an economy generating US$28 tln in economic activity, +US$1.5 tln more than at the same time a year earlier. (For perspective, that rise is about the same as the whole Australian economy for a year. And it is double the expansion of the Chinese economy.) US INVENTORIES https://www.census.gov/econ/indicators/advance_report.pdf seem to be in reasonable shape too, overall. But retail inventories crept up solely due to rising unsold car stocks and we should keep an eye on that In Hong Kong, a creditor of giant Chinese property developer Country Garden has PETITIONED https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0228/2024022800047.pdf a court for a winding up order. Country Garden's fall would be as big an earthquake as that of Evergrande. The implosion of the property development sector in the Middle Kingdom is not done yet. Authorities are working to encourage buyers back into the sector. Success seems far away at present, but a key enticement are HISTORIC LOW MORTGAGE INTEREST RATES https://economy.caijing.com.cn/20240221/4991059.shtml. EU SENTIMENT https://economy-finance.ec.europa.eu/document/download/8a026729-6720-4bd7-802e-3adcc660f3d3_en?filename=bcs_2024_02_en.pdf was broadly stable in February even if both consumer and industry sentiment is still running below their long term averages. However retail, construction and the services sector are all running at about their long term average levels. In Australia, their MONTHLY CPI INDICATOR https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/monthly-consumer-price-index-indicator/jan-2024 in Australia stood at 3.4% in the year to January, unchanged from the previous month and less than market forecasts of 3.6%. Still, the latest reading pointed to the lowest since November 2021. The UST 10yr yield starts today at 4.29% and little-changed from this time yesterday. The NZ Government 10 year bond rate is down a sharpish -9 bps at 4.82% on the changed OCR view. The NZX50 ended its Wednesday trade up +0.6% with a good afternoon session, bolstered by the removed risk of higher interest rates. THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today down a mere -US$1/oz from yesterday at US$2032/oz. Oil prices are little-changed at just over US$78/bbl in the US while the international Brent price is now just under US$82/bbl. But that masks considerable volatility over the past 24 hours. The OCR no-change has knocked back our currency. The Kiwi dollar starts today at just under 61 USc and down almost -¾c from this time yesterday. Against the Aussie we are down -½c at 93.8 AUc. Against the euro we are down almost -¾c at 56.2 euro cents. That all means our TWI-5 starts today at just under 70.4 and down more than -60 bps. But to be fair that just takes us back to where we were two and three weeks ago. The bitcoin price starts today at US$61,787 and up another strong +8.2% from this time yesterday. It is now back to where it was more than two years ago. Its record high was US$67,633 in November 2021 - although with the retreat this week in the NZD, the bitcoin price in our current is now over NZ$100,000. And at today's NZ$101,323 that is an all-time high. Volatility over the past 24 hours has been unsurprisingly very high as well at +/- 4.6%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

5m

Feb 28

Kia ora, Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news American data is weaker today, and China is on a sharp turn inward. But first we should note bitcoin's sharp rise in price. However the surge seems to have run out of steam as you read this. But it is enough to note that prices are back to November 2021 high levels. In the US, DURABLE GOODS ORDERS SLUMPED https://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf in January, primarily driven by sharply lower aircraft orders. That makes them -0.8% lower than the same month a year ago. A pattern of surges and slumps interspersed by 'no-change' months, has developed over the past year. However, non-defense capital goods orders actually rose slightly in January from December but these too were lower year-on-year. American RETAIL SALES https://www.redbookresearch.com/ at physical stores (on a same-store basis) were up +2.7% last week from the same week a year ago, not really enough to account for inflation. CONSUMER SENTIMENT https://www.conference-board.org/topics/consumer-confidence as measured in the Conference Board survey retreated in February, although they noted it is essentially range-bound. It is in a range that is lower than before the pandemic, but at about the same level as pre-GFC. The US Richmond Fed factory survey REPORTED https://www.richmondfed.org/-/media/RichmondFedOrg/region_communities/regional_data_analysis/regional_economy/surveys_of_business_conditions/manufacturing/2024/pdf/mfg_01_23_24.pdf a sluggish situation in February although expectations for better order levels rose sharply. But the service sector in the same district took a sharpish dip. However the Dallas Fed services survey for February REPORTED https://www.dallasfed.org/research/surveys/tssos/2024/2402 a notable improvement. The latest US Treasury bond auction for their 7 year Note again brought very good solid support, but the median yield rose from 4.05% A MONTH AGO https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240125_3.pdf to 4.27% TODAY https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240227_2.pdf. Across the Pacific, Japanese consumer price inflation was expected to slow in January, and that is WHAT HAPPENED https://www.stat.go.jp/data/cpi/sokuhou/tsuki/pdf/zenkoku.pdf, falling to 2.2% from 2.6% in December. But core inflation fell slightly less to 2.0% from 2.3%, and that is down from over 3% a year ago. They will be nervous that their long-run deflation tendency is not yet beaten. Taiwanese EXPORT ORDERS https://www.moea.gov.tw/Mns/dos_e/home/Home.aspx recovered from their December dip to be +1.9% higher in January than the same month a year ago. China has WIDENED ITS NATIONAL SECURITY LAWS https://english.news.cn/20240227/ef5739d82f654bc689ee0ab418ac8ccf/c.html to include anything Beijing claims is a 'secret', including company information within a foreign owned company. There are harsh penalties for finding out you have shared such information with company bosses who reside outside the country. Obviously the law is wider than just this, but that is one important aspect and it will cast an even darker pall over foreign investment plans. And through the new 'national security' laws in Hong Kong, which extend Beijing laws into the City, businesses there will be concerned too. The overnight GDP PULSE AUCTIONS https://www.globaldairytrade.info/en/gdt-pulse-results/ delivered lower prices for both WMP (down -4.2% from the last full GDT auction and down -3.4% from the prior Pulse event), and SMP (-2.6% and -2.0% respectively). These lower results will have surprised the derivatives market. The UST 10yr yield starts today at 4.29% and little-changed from this time yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today up +US$6/oz from yesterday at US$2033/oz. Oil prices are up +US$1 at just over US$78/bbl in the US while the international Brent price is now just over US$82/bbl. The Kiwi dollar starts today at 61.7 USc and unchanged from this time yesterday. Against the Aussie we are at 94.3 AUc. Against the euro we are still at 56.9 euro cents. That all means our TWI-5 starts today at just under 71.1 and little-changed. The bitcoin price starts today at US$57,114 and up a spectacular +7.1% from this time yesterday. It is now back to where it was more than two years ago. Volatility over the past 24 hours has been high at +/- 3.9%. Join us at 2pm this afternoon for full coverage of the RBNZ's February Monetary Policy Statement and OCR review. Financial markets don't expect any rate change, but of more interest is hearing how the RBNZ views the medium term inflation risks. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

4m

Feb 27

Kia ora, Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news ahead of tomorrow's closely-watched RBNZ OCR decision. First in the US, NEW HOME SALES https://www.census.gov/construction/nrs/pdf/newressales.pdf rose but by less than expected. The tame result continues a now-long trend of sales levels that are not really growing. Of concern in this market is that they now have over eight months of unsold supply at the current sales rate. 'High mortgage rates' are getting the blame. The February update to the DALLAS FED FACTORY SURVEY https://www.dallasfed.org/research/surveys/tmos/2024/2402#tab-results in America's oil patch turned from being negative to positive, both on the activity index and the outlook index. But both levels remain below their long term levels. A brighter new order level turned this around. Another very well-supported UST 2YR NOTE AUCTION https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240226_1.pdf brought rising yields, now at 4.64% pa (median) which was up from 4.31% A MONTH AGO https://www.treasurydirect.gov/instit/annceresult/press/preanre/2024/R_20240123_3.pdf. INDUSTRIAL PRODUCTION https://www.interest.co.nz/sites/default/files/2024-02/EDB%20Monthly%20Manufacturing%20Performance%20January%202024.pdf in Singapore shrank -5.7% in January from December, the second large fall in the past three months. From the same month a year ago it was up just +1.1%. In China, their equities markets are in a post-holiday lull. Prices are retreating. There are no scheduled listings and in fact no applicants cleared for stock exchanges’ review. Existing applications to list are being withdrawn. A heavy clamp is going on the private sector, in complete contrast to official speeches extolling the importance of the private sector. Investors notice the disparity. And investors know that home team interventions never last and are wary of having a stake in an essentially rigged market. Also in a lull are business expectations in China. STEEL REBAR PRICES FELL https://tradingeconomics.com/commodity/steel to their lowest level in nearly four months. We point out there interesting big trends, but that does not necessarily indicate that their whole economy is backsliding - it just explains why the growth impetus in the world's second largest economy is leaking away. The bulk of their SOE-led economy is still active and supporting their huge population and demand. In Australia, the scale of the discounts on CBD office buildings is GETTING SOME FOCUS https://www.afr.com/property/commercial/office-values-plunge-as-cbd-market-bottoms-20240216-p5f5kr. Values are still falling to entice buyers, and in Sydney insiders think they will bottom out at a -23% retreat. But those insiders are industry boosters, so you would be brave believing their "the bottom is close" talk. The depreciation is less in other main centers, they reckon. The UST 10yr yield starts today at 4.30% and up +5 bps from this time yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today down -US$8/oz from yesterday at US$2027/oz. Oil prices are up +50 USc at just on US$77/bbl in the US while the international Brent price is now just under US$81.50/bbl. The Kiwi dollar starts today at 61.7 USc and down -¼c from this time yesterday. Against the Aussie we are still at 94.4 AUc. Against the euro we are nearly -½c lower at 56.9 euro cents. That all means our TWI-5 starts today at just on 71.1 and -30 bps lower. The bitcoin price starts today at US$53,313 and up a solid +3.9% from this time yesterday. It is now back to where it was more than two years ago. Volatility over the past 24 hours has been moderate at +/- 2.6%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

4m

Feb 26

Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news China is having a tough time sharking off its housing blues. However in the week ahead, the Americans will release PCE data that will be closely watched. They will also release updates for the ISM Manufacturing PMI, the second estimate of GDP growth rate, durable goods orders, consumer sentiment, and housing sales data. There will be CPI inflation updates coming from Japan, Australia, and the EU. GDP growth for India and Canada will be updated. And factory PMIs for China, Russia, and Canada will out. And the RBNZ MPS AND OCR INTEREST RATE DECISION https://www.interest.co.nz/economy/126464/reserve-bank-could-easily-hike-official-cash-rate-again-coming-week-should-it will attract international focus on Wednesday afternoon. Locally, it is the key focus this week of course. But today we start first in China. They released OFFICIAL DATA http://www.mofcom.gov.cn/article/xwfb/xwrcxw/202402/20240203474139.shtml that showed foreign direct investment in January was down more than -11% from the same month a year ago. That is their biggest retreat since the GFC. And the more recent data is even worse, falling more than -20% from December. It wasn't the only retreat released in official data. China's NEW HOUSE PRICES FELL https://www.stats.gov.cn/sj/zxfb/202402/t20240223_1947806.html the most in almost a year in January with prices in 60 of their 70 largest cities retreating. For resales, this official data only showed two of the 70 cities in their survey with a month-on-month gain, none with year-on-year gains. For such pervasive declining prices to show up in official data probably means the situation is much worse, and it is now quite difficult to sell a house. Buyers have vanished, unwilling to buy a depreciating property. It is notable that China does not release official sales volume data. Recall that in February, the Chinese central bank chopped its 5 year MLF rate by a record -25 bps to its lowest ever. This is the rate on which home loans are based. They also cut the reserve ratio earlier in the month, another easing that might help their property sector. EU INFLATION EXPECTATIONS https://www.ecb.europa.eu/press/pr/date/2024/html/ecb.pr240223~4282400396.en.html are essentially holding at 3.3% for the next twelve months. The ECB would have been disappointed at that, and the fact that the "last mile" is proving very sticky. However, it is not a problem that they have alone. The German economy slipped into RECESSION https://www.destatis.de/EN/Press/2024/02/PE24_066_811.html in the second half of 2023 if you buy into the "two negative quarters" rule on GDP changes. The retreat is minor however and was as expected. In Australia, Rio Tinto has given THE GO-AHEAD https://www.mining.com/rio-tintos-board-gives-green-light-to-simandou/ for a big new iron ore mine. It is in West Africa. The IRON ORE PRICE https://tradingeconomics.com/commodity/iron-ore has held relatively high, encouraging miners, and Rio Tinto's decision is just one of many. But the accumulation worries some. Iron ore prices are not factoring in the wave of new supply, leaving it vulnerable to the same collapse that smashed battery metals like NICKEL https://tradingeconomics.com/commodity/nickel, some say. If that were to happen to iron ore, it would rock Australia. The UST 10yr yield starts today at 4.25% and down -1 bp from Saturday, down -5 bps from a week ago.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today down -US$3/oz from Saturday at US$2035/oz and up +US$25 from a week ago. Oil prices are still lower at just on US$76.50/bbl in the US while the international Brent price is still down to just under US$81/bbl. Both levels are -US$2 lower than a week ago. The Kiwi dollar starts today at just under 62 USc and little-changed from Saturday. But it up more than +¾c from a week ago. Against the Aussie we have settled back to 94.4 AUc. Against the euro we are slightly firmer at 57.3 euro cents. That all means our TWI-5 starts today at just under 71.4 and that is +60 bps higher than a week ago. The bitcoin price starts today at US$51,299 and up a minor +0.5% from this time Saturday. But it is down -1.9% from a week ago. Volatility over the past 24 hours has been low at +/- 0.7%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

4m

Feb 25

Kia ora, Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news that while all the market chatter is about the spectacular rise of Nvidia and the emergence of AI as a "new industry", the rest of the global economy seems to be generally expanding modestly. But first up, we should note it is a public holiday in Japan, the world's fourth largest economy, the Emperor's Birthday. In the US, new JOBLESS CLAIMS FELL https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20240386.pdf to near their record lows of under 200,000 last week and far below what was anticipated. Continuing claim levels fell too and there are now 2.1 mln people on these benefits out of a 161 mln employed labour force, a tiny fraction. Still no labour market stress to report. US EXISTING HOME SALES ROSE https://www.nar.realtor/newsroom/existing-home-sales-rose-3-1-in-january marginally back to an annual sales rate of 4 mln which it was last at in August 2023. (It peaked at 7.25 mln in 2005 so it remains modest and currently at the level first reached in 1975.) It's a market essentially in hibernation. Canadian RETAIL SALES https://www150.statcan.gc.ca/n1/daily-quotidien/240222/dq240222a-eng.htm?HPA=1 probably slipped in January after they reported a strong December expansion and taking overall 2023 sales volumes up +2.3%. Across the Pacific, the Bank of Korea kept its BASE RATE UNCHANGED https://www.bok.or.kr/portal/bbs/P0000559/view.do?nttId=10082584&menuNo=200690 at 3.5% during its February meeting. This was as expected. Korea's inflation rate is 2.8%. In China, vehicle shipments are projected to drop almost -16% in February from the same period last year, according to preliminary data RELEASED https://mp.weixin.qq.com/s/aHMMjGUFCbtH5-_dZF7dEw yesterday. Demand for electric vehicles is also slowing. China’s overseas investment in metals and mining as part of its Belt and Road Initiative surged by more than +150% in 2023, hitting US$19.4 bln with energy transition metals the main focus. Total Belt and Road investments now top +US$1 tln, this updated REPORT https://blogs.griffith.edu.au/asiainsights/china-belt-and-road-initiative-bri-investment-report-2023/ shows. Some preliminary PMIs for February are starting to come through and the first was from JAPAN https://www.pmi.spglobal.com/Public/Home/PressRelease/81a2c1006cde4d0f81fa97188fe691e5, showing its factory sector contracted more than expected, and its services sector expanded again, but by less than expected. Together they paint a picture of growth stalling in Japan. In the US https://www.pmi.spglobal.com/Public/Home/PressRelease/36cedd38091e42eda51ffea4468c4c03, there were rising expansions to report in their factory sector, to a 10 month high, even if still modest, and they had a slight easing in their services expansion. In GERMANY https://www.pmi.spglobal.com/Public/Home/PressRelease/364e4544a94046639310f0af48307a7e things contracted harder, but for the EU https://www.pmi.spglobal.com/Public/Home/PressRelease/0cc1e87a13544d93b96af49c670b5f72 overall their services sector is no longer contracting, helping keep things stable. In INDIA https://www.pmi.spglobal.com/Public/Home/PressRelease/8babb31103874f199abf1fc579a1ec49, they are in a quite different space with manufacturing expanding strongly, and their services sector doing even better. India has replaced China as a major source of global growth, bolstering the continuing expansion in the US. Australia SAID https://www.abs.gov.au/media-centre/media-releases/strong-growth-average-weekly-earnings average weekly ordinary time earnings for full-time adults was AU$1,888.80 in November (NZ$2030/week). The annual increase of +4.5%, or AU$81 a week, was the strongest since May 2013, other than a brief spike in average earnings early in the pandemic. There was another small decrease in CONTAINER FREIGHT RATES https://www.drewry.co.uk/supply-chain-advisors/supply-chain-expertise/world-container-index-assessed-by-drewry last week from the week before, but they remain unusually high on the insecurity same drivers around the canal choke-points. BULK CARGO RATES https://tradingeconomics.com/commodity/baltic have started to move modestly higher but are not outside 'normal' ranges. The UST 10yr yield starts today at 4.33% and up +1 bp from this time yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today down -US$8/oz from yesterday at US$2019/oz. Oil prices are +50 USc/bbl firmer at just over US$78.50/bbl in the US while the international Brent price is up to just under US$83/bbl. The Kiwi dollar starts today at just on 61.9 USc and up nearly +¼c from yesterday. Against the Aussie we are also +¼c firmer at 94.6 AUc. Against the euro we are little-changed at 57.2 euro cents. That all means our TWI-5 starts today at just over 71.3. The bitcoin price starts today at US$51,432 and essentially unchanged from this time yesterday. Volatility over the past 24 hours has remained modest at +/- 1.3%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again on Monday.

4m

Feb 22

Kia ora, Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with news markets are awaiting signals from the minutes of the late January Fed meeting. In the US, MORTGAGE APPLICATIONS FELL https://www.mba.org/news-and-research/newsroom/news/2024/02/21/mortgage-applications-decrease-in-latest-mba-weekly-survey rather sharply last week, down more than -10% from the prior week to be -13% lower than a year ago. A key reason for the sharpish pullback was an unexpected surge in mortgage interest rates which jumped +19 bps to 7.06% (plus points) for the benchmark 30 year fixed loan. That is their highest of 2024. These higher rates reflect the shift in market pricing as the chances of near-term Fed rate cuts recede. Another assessment of Fed rate trajectories will come this morning (8am NZT) when they release the minutes of the FOMC's January meeting. The next Fed meeting isn't until this time next month. (But there is an RBNZ one this time next week.) American RETAIL SALES https://www.redbookresearch.com/ rose +3.0% last week from a year ago at bricks & mortar stores in the Redbook survey. This is barely enough to keep up with inflation, a second straight week like this after nine weeks of significant volume growth. A hesitation was always on the cards. Sharply lower oil prices, and exports at a 14 month high have combined to deliver Japan A SHARPLY LOWER JANUARY TRADE DEFICIT https://www.customs.go.jp/toukei/shinbun/trade-st_e/2024/2024014e.xml. Those exports were on the basis of good demand from both the US and China. European CONSUMER SENTIMENT https://economy-finance.ec.europa.eu/document/download/daa0e687-bd92-4bd0-a502-ad22483178ec_en?filename=Flash_consumer_2024_02_en.pdf improved marginally in February even if it still remains quite negative - just less negative. In Indonesia, their central bank kept its policy rate UNCHANGED AT 6% https://www.bi.go.id/id/publikasi/ruang-media/news-release/Pages/sp_263324.aspx. In Australia, wages rose +0.9% in the December quarter, and +4.2% FOR THE FULL YEAR https://www.abs.gov.au/media-centre/media-releases/wages-rise-09-cent-december-quarter-2023, (marginally more than the CPI rise of +4.1%). That's its highest growth since 2008. The UST 10yr yield starts today at 4.32% and up +6 bps from this time yesterday.  Wall Street in its Wednesday trade is down -0.4% on the S&P500. Overnight European markets were very mixed again with Frankfurt up +0.3% and London down -0.7%. Yesterday Tokyo ended its Wednesday session down -0.3%. But Hong Kong rose +1.6% in their Wednesday trade while Shanghai rose +1.0%. The China Securities Regulatory Commission has imposed a RESTRICTION https://www.bloomberg.com/news/articles/2024-02-21/china-tightens-grip-on-stocks-with-net-sale-ban-at-open-close?srnd=premium-asia that prevents sales in the first and last 30 minutes of trading for prices that are lower, part of increasingly drastic measures to prevent the Chinese stock-market slump from extending into a fourth year.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today down -US$3/oz from yesterday at US$2027/oz. Oil prices are +US$1/bbl firmer at just under US$78/bbl in the US while the international Brent price is up to US$82.50/bbl. The Kiwi dollar starts today at just on 61.7 USc and unchanged from yesterday. Against the Aussie we are marginally firmer at 94.3 AUc. Against the euro we are still at 57.1 euro cents. That all means our TWI-5 starts today at just under 71.2 and little-changed. The bitcoin price starts today at US$51,382 and down another minor -0.4% from this time yesterday. Volatility over the past 24 hours has again been modest at +/- 1.8%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

3m

Feb 21

Kia ora, Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from Interest.co.nz. And today we lead with both the US and China are both back from holiday breaks - to lackluster prospects. But first, the GDT DAIRY AUCTION https://www.globaldairytrade.info/en/product-results/ earlier today resulted in little overall change (+0.5%), although the strengthening NZD did push the result in local currently lower (-1.1%). This auction did record a big drop in the cheddar cheese price (-7.6%) but a good rise for mozzarella (+5.3%). SMP also rose (+1.3%) but the key WMP price fell (-1.8%. Today's result does not interrupt the general trend of rising prices that started in September last year and is probably an inconsequential hesitation at this point. No farm gate payout prices are likely to be affected by this even if it is the weakest result since November. In the US, the Conference Board's index of LEADING INDICATORS https://www.conference-board.org/topics/us-leading-indicators slipped again in January. It has been slipping slightly for a while, but this update was the least in the series. The FT is POINTING OUT https://www.ft.com/content/4114454c-a924-4929-85f4-5360b2b871c6 that large banks have more commercial property bad debt than they have reserves for it. The steady discounting of commercial property values as interest rates rise is catching out even the majors now. Their analysis shows that the average reserves at JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs and Morgan Stanley have fallen from US$1.60 to 90 cents for every dollar of commercial real estate debt on which a borrower is at least 30 days late, according to filings to the FDIC. Canadian CPI INFLATION https://www150.statcan.gc.ca/n1/daily-quotidien/240220/dq240220a-eng.htm?HPA=1 fell to 2.9% in January from 3.4% in December. The Bank of Canada has a formal target to keep inflation at the 2% midpoint of a 1% to 3% range. The move lower is seen as a positive development in their battle against inflation. The Chinese central bank has surprised markets somewhat with its LOAN PRIME RATE MOVES http://www.pbc.gov.cn/rmyh/108976/index.html#LPR. They didn't change their one year rate, holding it at 3.45% when a -15 bps cut was expected. But they did cut their 5 year LPR by -25 bps when a -15 bps cut was expected. That is the biggest cut they have ever made to this rate. The five year rate underpins their home loan market. The one year rate is more of a reference for other consumer and business lending. These changes show that Beijing's worries about their failing property sector are front-of-mind. However, despite its boldness the moves met with yawns in the market. Prices for steel reinforcing bar (rebar) FELL https://tradingeconomics.com/commodity/steel in China yesterday, and sharply to their lowest level of the year. These buyers have not returned from their New Year break in a positive mood, it seems. The retreat isn't overly large but it does essentially wipe out the gains built up in the expectation of major new infrastructure stimulus. The UST 10yr yield starts today at 4.26% and down -7 bps from this time yesterday.  THE PRICE OF GOLD http://www.interest.co.nz/charts/commodities/precious-metals will start today up another +US$11/oz from yesterday at US$2027/oz. Oil prices are -US$1.50/bbl lower at just on US$77/bbl in the US while the international Brent price is down a bit less to US$81.50/bbl. The Kiwi dollar starts today at just on 61.7 USc and up +¼c and it’s highest in more than a month. Against the Aussie we are also firmer at 94.2 AUc. Against the euro we are still at 57.1 euro cents. That all means our TWI-5 starts today at just on 71.1 and up another +20 bps from yesterday. The bitcoin price starts today at US$51,608 and down a minor -0.6% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.8%. You can find links to the articles mentioned today in our show notes. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston. And we will do this again tomorrow.

4m

Feb 20