Kia ora,

Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the international edition from Interest.co.nz.

And today we lead with news we are seeing falls in some key commodity prices (like oil and copper), and a sharpish retreat in benchmark interest rates today. That is probably all due to rising risks in the Middle East.

But looking ahead, this short week we will be looking at the second estimate of the US Q3 GDP growth rate which will come on Friday and is widely expected to be very much better than the initial estimate. Their economy was expected to be slowing down by now; instead it is revving up. They will also release data for their PCE Price index, and personal income and spending, followed by durable goods orders and PMI survey data for October. We will also get American housing market sales data.

It will be a peak week for Q3 earnings reports, with releases by majors like Alphabet, Microsoft, Meta, Amazon, 3M, Coca-Cola, GM, and Spotify.

There will be central bank interest rate decisions this week from the ECB, Bank of Canada, and Turkey. And we will get Australia's Q3 inflation rate, some European data, and the GDP growth rate in South Korea.

Overnight, the US Chicago Fed's tracking of their national activity index moved up from a negative to a positive, but only just, suggesting the US is expanding at its long-run average now.

In Canada, retail sales stagnated in September, according to preliminary estimates. That follows a small decrease in August.

In Ottawa, their main banking regulator has told lenders to hold more capital against mortgages that have had their repayment terms extend beyond the original terms due to the stress of interest rate hikes. They are moving to contain risks building in the Canadian home loan system.

In Japan, their CPI inflation rate fell to 3.0% in September from 3.2% in August, the lowest level in a year.

In China, foreign direct investment fell -8.4% in the first nine months of 2023, a faster pace of retreat than the -5.1% fall in August and the -4.0% fall in the seven months to July. This is a retreat and disengagement that must be worrying the Beijing economic mandarins.

Foreign money managers are bailing on some of the biggest names in China’s technology sector as a global exodus from the nation’s equities deepens.

And staying in China, they held lending rates steady at the October fixing, as widely expected. The one-year loan prime rate, which is the medium-term lending facility used for corporate and household loans, was left unchanged at a record low of 3.45%; and the five-year rate, a reference for mortgages, was maintained at 4.2% for the fourth straight month. This decision came amid growing signs that the Chinese economy is stabilising.

China says it is on track to produce an all-time record high grain harvest, significantly easing food security fears.

Taiwanese export orders rose sharply in September from August, up almost +12% to US$51.4 bln. But they were down -15.6% from a year ago, the same year-on-year decrease in the prior month.

Staying in Taiwan, industrial production was little-changed in September from August, and now its least year-on-year shrinkage since August 2022. Retail sales came in +6.0% higher than a year ago, benefiting from a low base. But they also rose from August.

Indonesia’s central bank unexpectedly raised its benchmark rate by +25 bps to 6% late on Thursday after months of standing pat, as it looks to support the stability of the rupiah and guard against inflation.

Singapore's September consumer inflation is proving sticky at 4.1%, the same level for the past four months, although it is down from well over a 6% rate a year ago.

In Russia, their Federal State Statistics Service published a new demographic forecast for the Russian Federation on Friday night that predicts that Russia's current 146.5 mln population will decrease to 138.8 mln people by 2046 as war, low birth rates and emigration combine to shrink the country. Nationalists there also decry that the situation is much worse for ethnic Russians because it is very poor migrants and minorities who are keeping it from a much faster retreat.

In Australia, they are successfully going after tax-shifting, especially by the fossil-fuel industry. In a 'normal' year their tax office wins about AU$3 bln in recoveries from companies who haven't paid their correct taxes - usually with the advice of tax accountants. In the past year they recovered AU$6 bln+ from the likes of Rio Tinto and Ampol (the company that used to be known as Chevron AU/Caltex, and who now own Z Energy in NZ)

Globally, a UN agency for trade is noting that 'friend-shoring' is picking up speed more quickly now as big power rivalry unstitches years of trade integration.

The UST 10yr yield has fallen back sharply today after very briefly hitting over 5%. It is now at 4.84% and down a net -9 bps from this time Saturday. 

The price of gold will start today at US$1972/oz and down -US$10/oz from this time Saturday.

Oil prices have fallen -US$3 today to be now at just on US$85.50/bbl in the US. The international Brent price is now just over US$89/bbl. These are very similar level to where we were at the start of last week.

The Kiwi dollar starts today at 58.5 USc and up +20 bps from Saturday. Against the Aussie we are still at 92.2 AUc. Against the euro we have slipped slightly to 54.9 euro cents. That all means our TWI-5 starts today at just on 68.4, unchanged from Saturday but down -85 bps from this time last week. We are starting to get into territory where the lower exchange rate can itself be inflationary.

The bitcoin price starts today at US$31,277 and up a sharp +6.1% from this time Saturday with most of that coming within the past 24 hours. Volatility over the past 24 hours has been moderate at just over +/- 2.6%.

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

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

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