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 there are signs of weaker economic activity everywhere.

But today we start with tough local news. The overnight dairy auction saw prices fall -4.7% in USD terms, down -6.6% in NZD terms as the value of our currency rose. The key WMP price was down -5.2%, although the foodservice ingredients fared a bit better mainly with lower reductions. After the recent Fonterra cut to farm gate milk prices, analysts will be wondering whether another trimming will be in the works - and it will throw into question next season's pay out level.

In the US, retail sales inched up +3.7% last week from year-ago levels on a same-store basis, but that is still far from covering inflation. So they fell in real terms, just not as much as they have done in recent weeks.

The number of job openings in the US in February slipped below 10 mln and that was far weaker than what markets were expecting. This is near a two-year low. It is being taken as a sign that their labour market slowdown is arriving. We will get the March non-farm payrolls data on Saturday (NZT) and that is still expected to deliver a +240,000 jobs gain, but perhaps some analysts will be rethinking this after the JOLTS miss.

February factory orders in the US stayed in negative territory, slipping -0.7% from January after the -2.1% slip the month before. That puts them only +1.7% higher than year-ago levels and far less than accounts for inflation.

Meanwhile the US Logistics Manager’s Index (LMI) fell to a record low of 51.1 in March, pointing to the weakest growth in the logistics sector since records began in 2016. 

Bucking the negative trends, Canadian building consents rose sharply and unexpectedly in February, up +8.6% from January. But as welcome as that is, it is still -17% lower than year-ago levels.

Things are not better in China. The end of their pandemic restrictions in January has made only a small dent in the country's tough job market, a quarterly survey by the People's Bank of China suggests. And conditions are much tougher for young workers, for whom the unemployment rate jumped 2.8 points to 18.1% in February. Overall households are prioritising saving over spending, although travel is an exception.

European producer prices fell at a sharp rate in February, down at an annualised -6%. That dragged their year-on-year change to +13.2% with most of that happening late last year.

As expected, the RBA kept its cash rate target unchanged at 3.60% rate. They see the US and Swiss banking problems will lead to tighter financial conditions, which would be an additional headwind for the global economy. But they are also battling very high local inflation, especially services inflation and the risks of cost-plus inflation remain high there. So they say they expect that some further tightening of monetary policy may well be needed to ensure that inflation returns to target.

International air cargo volumes fell in February from a year ago, even if they remained slightly higher than pre-pandemic levels. The fall was more evidence the global trade in goods is weakening, down -8.3% globally and down -7.4% in the Asia/Pacific region.

But international 'revenge' travel is up sharply from a year ago, up +90% with the surge largely accounted for by the Chinese. Still, overall this industry is nowhere near back to pre-pandemic levels, still lagging on that basis by -23%.

The UST 10yr yield starts today at 3.34%, and down another -9 bps from yesterday. 

The price of gold will open today at US$2021 and up +US$37 from yesterday or +1.9%. This is its highest since February 2022.

And oil prices up +50 USc at just over US$80.50/bbl in the US. The international Brent price is now just under US$85/bbl. It remains surprising that these prices have not kicked on higher given the supply moves by OPEC.

The Kiwi dollar is a little firmer against the USD and now at 63 USc. Against the Aussie we are +¾c higher at 93.4 AUc. Against the euro we are softish at 57.5 euro cents. That means the TWI-5 is now at 70.6 and only +10 bps firmer than this time yesterday.

The bitcoin price is little-changed again today, now at US$28,176 and up a minor +0.7% from yesterday. Volatility over the past 24 hours has been moderate at +/-2.1%.

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’ll do this again tomorrow.