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 holiday edition from Interest.co.nz.

Today we lead with news that now the rules have been eased, Chinese travelers are rushing to book international trips.

But first up, American retail sales in the week before Christmas were good, being nearly +10% higher than the same week in 2021 on a same-store basis. That probably means there was real, inflation-adjusted growth.

However the residential real estate market in the US is showing no reals signs of recovery, with November pending homes sales down again, down -4% from October when no fall was anticipated. That puts them still -38% lower than year ago levels.

But away from housing, the factory sector is mixed. In Texas, their manufacturing surveys are weakish. But in the Mid-Atlantic states they show unexpected improvement, even if it was modest.

However, both districts also reported on their service sectors, here and here, and neither had outlooks that were particularly flash. Not bad, just blah.

Japanese industrial production dipped in November, but only down by -0.1% from the prior month. However this was the third straight month it retreated and has now turned negative on a year-on-year basis, down -1.3%. Machinery and other capital goods are the weak sector. Still, the forecast for December is positive, although less so for January.

And an influential but informal adviser to the Bank of Japan's governor says the unexpected decision to raise its ceiling on government-bond yields could be the first step toward a long-awaited monetary-policy normalisation, despite official statements to the contrary. After all, there is good reason to think that their inflation will remain above target in 2023

And staying in Japan, their police have broken the grip on some ransomware blocks, enabling companies to recover access to all their data without paying the ransom.

In China, the number of people intending to buy homes in the next three months has dropped to a six-year low as those who believe prices will fall outnumber those who think they will rise, according to the findings of a quarterly central bank survey.

The change in lockdown policies has sharply increased the demand for foreign travel there. But many countries are now racing to place restrictions on travelers from China. One flight to Europe reported that more than half the passengers had Covid when they landed in Milan. Let's hope Chinese travelers don't see this.

Internationally, ship insurers said they are cancelling war risk cover across Russia, Ukraine and Belarus, following an exit from the region by reinsurers in the face of steep losses. (Also here.) It may not get easier for the giant Russian gas exporter whose CEO said their exports are down -40% in 2022. Such admissions can have consequences.

In Turkey, the financial pressures are building and their currency has reached another record low. Their central bank has informally instructed its banks not to process fx transactions until next year. Turkey has an inflation rate of 84% pa.

The UST 10yr yield started today at 3.89%, and up another +4 bps from yesterday. 

And while we weren't looking, we should note that local wholesale swap rates are also racing higher again. The 2 year swap rate has raced up to 5.42% today. The one year swap rate is now over 5.50%. These are levels we last had in November 2008, fourteen years ago. 

The price of gold will open today at US$1806/oz and down -US$8 from yesterday.

And oil prices start today down almost -US$3 from yesterday's levels at just over US$78/bbl in the US while the international Brent price is just over US$83/bbl.

The Kiwi dollar opened today at 63 USc and up -+½ from this time yesterday. Against the Australian dollar we are up almost +½c too at 93.5 AUc. Against the euro we are up a similar amount at 59.4 euro cents. That all means our TWI-5 starts today at 71.4 and up +40 bps.

The bitcoin price is now at US$16,621 a mere -0.2% lower than this time yesterday. Volatility over the past 24 hours has again been modest at just under +/- 1.3%.

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

And 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.