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.

Today we lead with news commodity prices are buckling under the pressure of a global economic slowdown.

First up today, there was another dairy auction overnight, and another weak one and the second substantial fall in a row. Prices were down -4.6% in USD terms so between the two that is a drop of more than -8% and that takes prices back to where they were in January 2021. Making things worse, prices in NZD weren't absorbed as much because the NZD rose overnight. In local currency prices are down -3.4% from the prior event, and back to year-ago levels. The -4.4% retreat in WMP prices wasn't completely unexpected following the recent GDP Pulse event signal. But the -3.9% fall in cheese prices, and the -6.9% fall in SMP prices compounded the gloom. The overall shift lower will have analysts reassessing their new season payout forecasts.

Also underwhelming was the latest update for US retail sales. Last week's same-store survey has then only +8% higher than a year ago, barely matching American inflation.

But bringing a better economic attitude has been US industrial production in September. It rose much more than expected, up +5.3% (real) from the same month a year ago on a strong rise in the production of capital equipment, a healthy sign. Much higher mining output was also 'positive'.

Another better-than-expected indicator came from Canada where they reported very strong new housing starts in September, their best in a year.

In China, everything is on hold until the Party Congress is over. The tight control of all messaging just reinforces the rare but growing underground signs of pushback inside China. It is of no threat to Xi and his Beijing control, but it is an interesting development all the same.

German investor sentiment as recorded in their ZEW survey remains weak, but despite the building angst as they head into winter, it isn't getting worse. Germans can see a way through an energy shutoff from Russia and that is putting a floor on overall sentiment levels.

In the UK, the turmoil in their government and economy continues. Now its neighbours and friends are weighing in on the public policy debacle, and that now includes France and the US.

And we should note that giant French cement firm Lafarge has been hit with a huge American financial sanction for its "support" of the terror group ISIS in Syria. That follows similar French action. Lafarge owns the Holcim cement-making business in New Zealand.

Cement is one huge essential commodity. But production is falling in many countries now, including China. And it is part of a general fall in prices for key commodities underway as global economic growth slows. All the talk of a 'commodity super cycle' seems to have vanished.

The UST 10yr yield starts today at 4.02%, up +1 bp from this time yesterday. 

Wholesale markets are suddenly pricing in a +75 bps rate hike from the RBNZ on November 23 in a sudden shift and over the coming weeks that even seems to have upside potential.

The price of gold will open today at US$1650/oz. This is down -US$7 from this time yesterday.

And oil prices start today down -US$3.50 from this time yesterday at just over US$82/bbl in the US while the international Brent price is just on US$89/bbl. 

The Kiwi dollar will open today at 56.8 USc and up +¼c since this time yesterday. Against the Australian dollar we are up at 90.2 AUc and a +¾c rise. Against the euro we are also firm at 57.6 euro cents. That all means our TWI-5 starts today at 67.4, up +50 bps and near a three week high.

The bitcoin price is now at US$19,422 and down a mere -0.5% from this time yesterday. Volatility over the past 24 hours has however been quite modest at just +/- 1.0%.

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’ll do this again tomorrow.