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 Australian business and consumer sentiment remains stunted.

But first, American retail sales last week as monitored for bricks & mortar stores on a same store basis, rose +4.6% from the same week a year ago, the best gain of the year and indicating demand is back and gains are now more than can be accounted for by inflation.

Following hot and dry weather in August, and in its first report since field sampling, the USDA lowered its estimates for corn and soybean yields. The outlook for wheat is unchanged and its price is falling on good harvests worldwide. American beef production levels are slipping and imports from Australia and New Zealand are rising, they say. They also lowered milk production forecasts for the US as cow numbers retreat. But they don't see imports rising either.

With the ending of pandemic support in the US, their poverty levels are rising back to previous levels. Their measures of what constitutes poverty is specific to the US and covers many factors on a variety of perspectives. But for a four person household with two children, it is an annual income threshold of US$29,700 or NZ$50,300 or NZ$24.15/hr.

In India, consumer price inflation eased from 7.4% in July (which was the highest since April 2022) to 6.8% in August which was a sharper improvement than expected. Food inflation fell from 11.5% (which was the highest since January 2020) to 9.94%.

There was also July industrial production data released by India and that rose +5.7% from the same month the prior year and right at the top of the range of increases over the past 12 months. It was also impressively above the expected +4.8% rise.

In China, there are resurfacing concerns about risks with their insurance sector. You may recall these were front-and-center in 2017, but they are back again now.

In Australia, the latest Westpac-Melbourne Institute survey of consumer confidence shows households are still very concerned about finances and cautious on spending. But they are less fearful of rate hikes. It is the cost of living and inflation that remain the key drags.

Business confidence is still low in Australia, even if the widely-watched NAB survey picked up a point in August. Still, it was the highest level since January. Business conditions strengthened because there was a broad uptick in sales, profitability, and employment. But the squeeze is going on with weaker forward orders, higher labour costs, and input costs rising faster too.

Meanwhile, the WTO says the US-China trade war decoupling between the two economic giants is gathering pace and spreading to the countries aligned with each superpower.

The UST 10yr yield starts today down almost -2 bps at 4.26%. 

The price of gold will start today at just on US$1912/oz and down -US$9 from yesterday.

And oil prices are up +US$2 from yesterday at just over US$88.50/bbl in the US and a ten month high. The international Brent price is now up over US$91.50/bbl.

The Kiwi dollar starts today -¼c lower from this time yesterday at 59 USc. Against the Aussie we are fractionally softer at 91.9 AUc. Against the euro we are also fractionally softer at 55 euro cents. The TWI-5 is marginally lower at 68.4.

The bitcoin price has bounced back sharply from this time yesterday, and is now at US$25,992, a net rise of +3.3% overnight. Volatility over the past 24 hours has been high at just on +/-3.2%.

You can find links to the articles mentioned today in our show notes.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston. And we will do this again tomorrow.