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 China is struggling to attract new foreign direct investment.

But first, American new housing starts were expected to be a bit soft in June, but they fell more than expected, down -8.0% from May and down -15.3% below the June 2022 level. It was weak all round with single-family housing starts, which account for the bulk of homebuilding, dropped by -7.0% and starts for multi-unit homebuilding went down by -11.6%. Building consent levels retraced too.

But there was a minor uptick in new mortgage applications last week, up +1.0% from a week earlier, but they are still -21% lower than year ago levels. Perhaps the weekly gain related to the fall-back in the benchmark mortgage interest rate which spiked to over 7% the week before last but fell back to levels it has broadly been at since early June.

China confirmed that its foreign direct investment fell in the six months to June by -2.7%. The rise in June from May was only +US$13.7 bln, the lowest increment since the pandemic for that period.

That continuing weakness underscores the overall lackluster direction of their economy. Yesterday they had to issue a pledge to improve conditions for private businesses in an attempt to reassure the business sector they are serious about finding ways to rekindle their economic momentum. It is going to take more that Beijing talk however. Its recent moves to limit access to data, court documents, and academic journals has cast a pall over how investors assess the world's second largest economy. Also toxic have been raids on industry networks that serve business knowledge also in the name of 'national security'. None of this enhances investor confidence, and so it should be no surprise foreign direct investment is languishing.

In the EU, their consumer price inflation rate was confirmed at 5.5% in June, the lowest level since January 2022, mainly due to the decline in energy prices. However, the core rate, which excludes volatile food and energy, picked up to 5.5%. But any way you look at this it is far lower than the ~9% rate of a year ago. Meanwhile in the UK, their CPI inflation rate fell to 7.9% in June from 8.7% in May (and 9.4% a year ago). They may not be making the progress that their EU neighbours are, but markets cheered the direction anyway. Their core rate is now down to 6.9%. 

The UST 10yr yield will start today at 3.75% and down -5 bps from this time yesterday. 

Wholesale markets are building back a chance of another RBNZ OCR rate hike by the end of 2023, now a 50/50 chance in the latest pricing.

The price of gold will start today at US$1978/oz and up +US$3 from yesterday.

And oil prices are little-changed from this time yesterday at just under US$75.50/bbl in the US. The international Brent price is still just under US$79.50/bbl.

The Kiwi dollar starts today down -¼c from yesterday at just under 62.5 USc. Against the Aussie we are little-changed at 92.3 AUc. Against the euro we are still at 55.9 euro cents. That all means the TWI-5 has stayed down at 70.0, unchanged from yesterday.

The bitcoin price is still in in its recent yoyo pattern and now is at US$30,057 and up +0.8% from this time yesterday. Volatility over the past 24 hours has also been low at just over +/- 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.