Kia ora,

Welcome to Monday’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 seems to have managed to arrest its deflationary mood with solid consumer spending in their Lunar New Year holiday.

But first, in the week ahead, we get the important US CPI inflation rate on Wednesday, along with retail sales, producer inflation, the Michigan consumer sentiment index, and industrial production data this week.

In Japan we will get a Q4-2023 GDPO update and it will likely be more positive than the shrinking first estimate. In Australia, the NAB business confidence index will also come this week. Also, the inflation rate for India is due along with its industrial production data.

From China, the focus this week will be on monetary indicators including new yuan loans, car sales, and the house price index. They will also review their one-year medium-term lending facility rate.

In China over the weekend they reported February consumer prices and they rose by +0.7% from the same month a year ago, above market forecasts of an expected +0.3% rise and a turnaround from the sharpest drop in over 14 years of -0.8% in January. Seven of their past twelve months have reported zero inflation or deflation. The latest result was the first positive consumer inflation since last August, hitting its highest level in 11 months. This was due to better Lunar New Year holiday spending. Food prices declined the least in eight months. Beef prices fell but lamb prices turned up from the prior month. Milk prices are still falling however.

Meanwhile they still have producer price deflation. This sector is wallowing in -2.7% deflation, marginally more in February than January. A year ago their PPI ran at -1.4%.

Another large property developer is showing signs of struggle. And they aren't the only one. The issue is spreading into signs of stress in the local government bond market now.

Separately China's Ministry of Finance data shows that interest on debt obligations are rising fast for the Chinese government - in fact a jump of +7.8% in interest payments this year is a bigger relative rise than for their defense spending (+7.2%). If, as some expect, Beijing suffers a ratings downgrade this year from "A1", that cost will only grow.

Taiwanese exports are still expanding on a year-on-year basis, although not as fast in February as they recorded in January. After a longish run of decreases, this is the fifth month in the past six where exports have risen.

Japanese household spending fell more sharply than expected and continuing a run of retreats, this one the largest in six months. Japanese policy makers might be a bit worried about this latest data trend.

Across the Pacific and at the headline level, the American economy added +275,000 jobs in February, beating forecasts of +200,000 and higher than a downwardly revised +229,000 in January. But their unemployment rate ticked up as more people joined their labour force, and wage growth slowed.

Behind the headline numbers (and looking at actual rather than seasonally adjusted numbers), employer payrolls rose by +1.1 mln to 156.5 mln people now employed. That is +2.7 mln more than a year ago. The household survey, which includes self-employed people, rose +665,000 from the prior month to 160.3 mln, and up +602,000 from a year ago. The shift from self-employment to payroll employment continues.

American consumer debt rose by nearly +US$20 bln in January, following a +US$1.6 bln rise in the previous month and way above market expectation of a +US$9 bln rise. Revolving credit, like credit cards, increased by +7.6% on an annualised basis from the previous month. Non-revolving credit, typically auto and student loans, rose by +3.6% on the same basis).

According to the USDA's March World Agricultural Supply and Demand Estimates, the Chinese might be back buying soybean in larger volumes, suggesting the Chinese are struggling with expanding their local output. The same report reveals American beef imports are rising. And that American milk production is slowing.

Canada also released labour force data over the weekend. They added +40,700 jobs in February, following a +37,300 rise in January. This was double the forecasted +20,000 increase. February brought a notable bounce back (and more) of full-time positions, up + 70,600, while part-time jobs decreased by -29,900..

German industrial production rose +1.0% in January (in 'real' terms) from December but that still leaves it -5.5% lower than the same month a year ago.

The UST 10yr yield starts today at 4.08% and down -1 bp from Saturday. 

The price of gold will start today down -US$7 from Saturday at US$2179/oz and just off its record high. But that is a +4.9% rise for the week. Why is the gold price rising just now? Some think it is new demand out of China as investors there start to fret that the economic management by Beijing is leading down a not-so-good path.

Oil prices have stayed down at just over US$77.50/bbl in the US while the international Brent price is now just on US$81.50/bbl. Both are -US$2 lower than a week ago. Weakening demand out of China is getting the blame.

And here's something you might not have expected. Saudi Arabia is in recession. It's GDP shrank -3.2% in Q3-2023, and it has now followed that up with an even sharper -4.3% fall in -Q4-2024. MBS is no saviour. Aramco, which Saudi Arabia partially listed (10%) in 2019, has raised its dividend despite a retreat in energy prices and lower production, a boost for Riyadh as it faces a widening budget deficit.

The Kiwi dollar starts today at just on 61.8 USc and little-changed from Saturday. But it is up +¾c in a week. Against the Aussie we are firmish at 93.3 AUc. Against the euro we have remained at 56.5 euro cents. That all means our TWI-5 starts today at just on 70.5 and unchanged over the past four days.

The bitcoin price starts today at US$69,652 and up +1.2% from this time Saturday. That means for the week it is up +11%. Volatility over the past 24 hours has been modest at +/- 1.3%.

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.