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 central banks may be increasingly happy with the tame data released today.

But first, today's dairy auction was a lame affair. Analysts had expected prices to rise +1.9% but in the event they fell -1.0%. Buyer demand is soft even as indications grow that the global milk supply may start falling. Nine of the past twelve dairy auctions have delivered price falls. Making them slightly worse in that prices fell -2.2% in NZD. The big loser today was the cheddar price - again, down a massive -10%. This is its lowest since December 2020 and is down a massive -39% since its peak in April 2022. That probably says a lot about China's foodservice industry. On its own this auction won't be changing farmgate milk payout prices, but it is adding to downside pressure.

Meanwhile American retail sales rose less than expected in June to be up +1.5% above year-ago levels. That obviously isn't more than inflation so they are dragging worryingly. Holding them up was another modest advance in car sales.

The US Redbook retail sales tracking of general merchandise (on a same-store basis) fell last week from the same week a year ago, and at -0.2% this is entirely consistent with the official stats. It is likely that the Fed officials will find this lower retail impulse "just what the doctor ordered' and be happy it is quelling inflation.

Also retreating is American industrial production in June. It was expected to show a +1.1% gain from the same month a year ago, but it actually recorded a -0.4% retreat.

US inventories are holding at historical levels in relation to sales, so no special pressure point here.

More positive was homebuilder sentiment in the US.

The overnight data was even more positive north of the border. Canadian housing starts came in with another strong result in June.

And CPI inflation in Canada fell more than expected, taking it down to just 2.8% year-on-year, and that fast progress is likely to take the wind out of any more central bank rate hikes there. It is back in their 1-3% target range for the first time in two+ years. However we should note that it is fast-falling energy costs that are pushing this rate down. Food cost growth remains high.

Join us later this morning for the release of the New Zealand Q2 CPI data. It is expected to come in at 5.9% which would be another miss to the downside from the RBNZ's earlier estimate of a 6.1% rate. It too is likely to feature much lower energy costs and sticky-high food cost inflation. Any significant variances from market expectations could have wide financial market implications - and perhaps that is being foreshadowed by today's retreat in the NZD.

The UST 10yr yield will start today at 3.80% and unchanged from this time yesterday. 

Wall Street has opened its Tuesday trading with the S&P500 up +0.8%. Upbeat earnings reports keep coming and encouraging equity investors. 

The price of gold will start today at US$1975/oz and up +US$20 from yesterday.

And oil prices are up +US$1.50 from this time yesterday at just on US$75.50/bbl in the US. The international Brent price is now at just under US$79.50/bbl.

The Kiwi dollar starts today down -½c from yesterday at just under 62.8 USc. Against the Aussie we are down -¾c to 92.2 AUc. Against the euro we are down -½c to 55.9 euro cents. That all means the TWI-5 is now down at 70.0 and a sharpish -70 bps lower from yesterday.

The bitcoin price has fallen in its recent yoyo pattern and now is at US$29,812 and down -0.8% from this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 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.