Kia ora,

Welcome to Friday’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 that while Trump is playing Putin's puppet, his lieutenants are setting the stage for a new global bout of stagflation - higher tariff-induced costs for little or no economic expansion. Wall Street is starting to price in what is increasingly likely to lie ahead. The USD fell.

US jobless claims came in lower last week than the week before, with all the decrease accounted for by seasonal factors. Markets had expected an even lower level from those seasonal factors, so this result was a disappointment. There are now 2.2 mln people on these benefits, a rise, when a season decrease was expected. For most of 20025 this level has been tracking higher than in 2024.

The regional Philly Fed factory survey expanded in February, but at far less a rate than in January. A fall-off in the new order component explains most of the change.

Meanwhile, the Conference Board tracking of leading index metrics shows a larger fall-off than expected and a negative outlook.

Also lower (than a month ago) is the Atlanta Fed's GDP Now tracker.

And we should also probably note the -6% fall in the Walmart share price overnight. It is dawning on markets that the new public policy settings are fertile ground for stagflation - inflation with no real growth. Retailers like Walmart are in the front line of that, and their latest outlook really disappointed markets even as they reported improved current results.

Canadian producer prices rose rather sharply in January from December, and were +5.8% higher than year-ago levels. To be fair, some of this is base effect (January 2024 fell -3%) but the recent trend is higher too.

Taiwanese export orders fell in January from December and came in -3% below year-ago levels. Analysts had expected them to hold at last year's level. But to be fair, they did rise in local currency; it was the USD change that showed them dragging.

In the EU, the consumer mood is improving, largely around the expectation that ECB interest rate cuts will continue. Their sentiment tracking shows it at its best level in four months and this survey came in much better than observers were expecting. But despite all that, it is still net negative as it has been 'forever'.

China kept its February Loan Prime Rates unchanged at their record low levels.

In Australia, their employed workforce grew by +44,000 in January, above what was expected (+20,000), but less than the December gain (+60,000). But there was a virtuous twist to the January levels with a shift to full-time roles, with +54,000 more of them, and part-time roles shrank -10,000. Average weekly earnings rose +4.6% from a year ago. But high tax rates and inflation at 3.0% will mean most workers felt they just stayed even. (For perspective the NZ jobless rate is 5.1%.)

And staying in Australia, the SA State Government and the Federal Government have "seized control" of the Whyalla steelworks - essentially nationalising it. And they are having to tip in AU$2.5 bln to keep it afloat. Its British owner has had a very chequered history.

And we should probably note that key Aussie pillar bank NAB has seen its share price fall -15% in a week. CBA is down -6.5%, Westpac is down -11% and ANZ is down -8.0% over the same period. Aussie bank shares are being re-rated lower, and because they are very widely held in Aussie superannuation and KiwiSaver portfolio's savers will notice.

Container shipping freight rates fell -10% last week as the puff goes out of global trade, especially on trans-Pacific routes. These overall rates are now -26% lower than year-ago levels, even if they are still double pre-pandemic levels. But with weak trade out of China, these rates will likely fall much further, and quite quickly. Although they remain historically low, bulk cargo freight rates rose +16% last week, although remain -48% lower than year-ago levels.

The UST 10yr yield is at 4.50%, down -6 bps from yesterday at this time.

The price of gold will start today at just under US$2943/oz and up +US$15 from yesterday, and again close to its all-time high of US$2955/oz.

Oil prices are up +50 USc at just under US$73/bbl in the US and the international Brent price is unchanged at US$76.50/bbl.

The Kiwi dollar is now at 57.6 USc and up +50 bps from yesterday. Against the Aussie we are also up +10 bps at 90 AUc. Against the euro we are up +20 bps at 55 euro cents. That all means our TWI-5 starts today just over 67.2, but unchanged from this time yesterday.

The bitcoin price starts today at US$97,763 and up +1.7% from this time yesterday. Volatility over the past 24 hours has again been modest at +/- 1.4%.

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 on Monday.

foreign investors, both friends an foes, are quitting their exposure to the new Russified US.

But first up, the Redbook tracking of American retail sales shows they were up +6.3% last week from the same week a year go. This is a heady gain outside the seasonal shopping windows. Buyers may be trying to insulate themselves ahead of the inflation that will flow from impending tariffs. Last week's gain was twice what it was a year ago, and also higher than the same week two years ago. Some of this defensive "doom spending" is being done with higher credit card debt.

They aren't spending on new housing. American housing starts slumped -9.8% in January from the prior month and are also lower year-on-year. The rise we noted in December was an outlier over the past year, not sustained.

And they aren't spending on switching houses either. Mortgage applications fell by -6.6% last week from the previous week, the sharpest decline so far this year. Mortgage interest rates are staying close to the 7% mark - plus there is rising uncertainty over the future status of Fannie Mae and Freddie Mac. The new Administration wants to sell these two mortgage infrastructure behemoths to their billionaire supporters. Borrowers supported by such loans, common in the US, may be facinging an unwelcome future surprise. American 30 year fixed mortgages, only possible because of Fannie Mae and Freddie Mac, have an uncertain future.

There was a well-supported, but relatively small US Treasury 20 year bond auction earlier today and that brought a yield of 4.77%, down -9 bps from the median yield of 4.86% at the equivalent auction a month ago.

Foreign holdings of US Treasury paper is falling. December data was released overnight, showing total holdings are now US$8.5 tln, down from US$8.6 tln just before the election. Japan, the largest holder and only one holding more than US$1 tln, cut its exposure -5% from a year ago. China cut theirs -7% to its lowest level in more than 15 years.

And the more the US President talks up Russian propaganda points, the more unstable this is likely to become. The locals are worried.

Across the Pacific, Japan's core machinery orders fell -1.2% month-on-month in December, the worst reading in four months. The latest reading also reversed from a +3.4% rise in November. Markets had expected a slight +0.1% gain.

China’s new house prices in 70 cities fell -5.0% year-on-year in January, but that was an easing from a -5.3% drop in the previous month. It was also the smallest decline since last July. But prices in icon cities like Beijing are falling faster now. However Shanghai was an exception with prices there rising.

In Indonesia, as expected their central bank kept its policy rate unchanged at 5.75%. Inflation is under control there (under 1%) and their currency is stable, still at the same level it was in mid 2024.

In the UK, inflation is rising, hitting 3.0% in January, up from 2.5% in December in a jump that wasn't expected. A year ago it ran at 4.0%, so a fall from then.

The UST 10yr yield is at 4.56%, up +2 bps from yesterday at this time. The key 2-10 yield curve is steeper at +26 bps. Their 1-5 curve is steeper at +16 bps. And their 3 mth-10yr curve is also steeper at +23 bps. The Australian 10 year bond yield starts today over 4.58% and up +3 bps from yesterday. The China 10 year bond rate is now at 1.69% and down -1 bp. The NZ Government 10 year bond rate is now over 4.69%, up another +3 bps from yesterday.

Wall Street is marginally lower in its Wednesday trade. Overnight European markets all fell ranging from Frankfurt's -1.8% to London's -0.6%. Tokyo ended its Wednesday trade down -0.3%. Hong Kong was down -0.1%. Shanghai however rose +0.8%. Singapore ended up +0.2%. The ASX200 ended its Wednesday trade down another -0.7%, whereas the NZX50 ended down only -0.1%.

The price of gold will start today at just under US$2928/oz and down -US$3 from yesterday.

Oil prices are up +US$1 at just over US$72.50/bbl in the US and the international Brent price is now at US$76.50/bbl.

The Kiwi dollar is now at 57.1 USc and up +10 bps from yesterday. Against the Aussie we are also up +10 bps at 89.9 AUc. Against the euro we are up +20 bps at 54.8 euro cents. That all means our TWI-5 starts today just over 67.2, and up +30 bps from this time yesterday, also partly helped by a gain against the yen.

The bitcoin price starts today at US$96,136 and up +1.4% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.8%.

Prime Minister Christopher Luxon visiting India before China could be seen as an insult in China, Beijing-based New Zealander David Mahon says. But he says China's recently announced strategic partnership with the Cook Islands, through which NZ was kept in the dark, shouldn't be viewed as insult to, or provocation of, NZ.

Mahon, who is Managing Director of Mahon China Investment Management and has lived in China since 1984, spoke to interest.co.nz in a new episode of the Of Interest podcast.

Luxon, who before the 2023 election said achieving a free trade agreement with India would be a major strategic priority for a National government, is set to visit India next month. He's yet to visit China as Prime Minister, but is expected to do so this year.

"If the Prime Minister had gone to China and conferred upon it as a great power the respect it deserved in the last year or so of his tenure, it'd be fine. But it's almost a statement of a diplomatic insult not going to China before going to India," Mahon said.

He said potentially the prospects for NZ products in China over the next two to three years are very good, with China retaining a great need for protein, wanting to buy seafood, and NZ logs still selling reasonably well.

However, Mahon suggested after a good relationship with China for many years, highlighted by the 2008 Free Trade Agreement (FTA), NZ is now seen as "a country of diplomatic infidelity."

"And for most of my life, we've been the opposite of that. Under Helen Clark, John Key, Jim Bolger, we were the country that was respected. Now people are scratching their heads and saying, what's wrong with New Zealand? It seems to have lost its sincerity, its sense of loyalty."

The recent signing of a China-Cook Islands comprehensive strategic partnership, which the NZ Government was kept in the dark over, shouldn't be viewed by NZ as an insult or provocation from China, Mahon said. The Cook Islands is a self-governing state in ‘free association’ with NZ with its citizens having NZ passports.

"...what China is determined to do is to make sure that it retains this relationship with New Zealand, although New Zealand is struggling in many ways to hold up its end."

"We shouldn't be too peevish that they [the Cook Islands] want to do a deal with someone with more money than us," Mahon said.

"In the end, China is going to invest throughout the Pacific, where it can. Part of it is that it wants to express its influence."

The Cook Islands-China agreement reportedly includes plans for co-operation on seabed mining, the establishment of diplomatic missions and preferential treatment in regional and multi-lateral forums, but excludes security ties.

An attraction of the Cook Islands deal for China will "definitely" be minerals, Mahon said.

"If you go back to the technological revolution, which is really what's occurring in Chinese manufacturing, they need these minerals very much," said Mahon. "China is actually very poor in resources."

'China is full of Deep Seeks'

Meanwhile, Mahon said recent surprise around Chinese artificial intelligence (AI) company Deep Seek highlights westerners taking their eye off China and its burgeoning technology sector.

"China's full of Deep Seeks. There are companies in China, the names of which we just have never heard of, that are about to change major sectors that influence our lives."

So Deep Seek is like the first, I don't want to say shot across the bows because it makes a sort of military metaphor, but it is a flare, a signal."

"This is what China's been focused on in the last 10 years. Getting away from making nylon socks and teddy bears and cheap stuff and making really good technology, really sophisticated technology. And so this is what's going to come out of China now in waves and make all our lives cheaper in terms of buying stuff that's important to us," said Mahon.

"And it's going to be a major challenge to the major tech companies of the West, creating the kind of competition that markets run on. Innovation's driven by it. So this should be perceived as a positive thing."

In the podcast audio Mahon talks about these issues in more detail, plus this week's meeting between President Xi Jinping and Chinese business leaders, the "shameful scandal" of NZ immigration and visas "violating the spirit" of the FTA, China's relationship with the United States in the time of Donald Trump's second presidency, tariffs, trade war, and the "ghastly concept" of potential military conflict between China and the US, possibly over Taiwan.

"China doesn't want a war. China doesn't want to invade Taiwan. If China were to invade Taiwan, it would be out of
the global financial system within hours. China within six months would face a massive economic crisis," he said.

*You can find all episodes of the Of Interest podcast here.

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 inflation is still not beat and the new tariff wars are messing with when that might happen.

First up today, there was another dairy auction, and this one came in weaker than the derivatives markets had anticipated. Prices slipped overall by -0.6% in USD terms and by -1.5% in NZD terms. It was a much lower SMP price that was the surprise undershoot, down -2.5% from the prior event and last week's Pulse event. Cheddar cheese also took a -3.4% tumble, whereas the WMP price was only -0.2% lower than the last event, but it didn't fall as much as the derivatives market anticipated. Going the other way, there was a -2.2% rise in the butter price, taking it to almost matching its record high in June 2024. It is at its record high in NZD. 

Overall, of note today, "North Asia" (ie China) returned with renewed demand to be the top buyer, after largely sitting on the sidelines recently.

In the US, the New York region factory survey turned from a negative to a positive expansion in February, a continuation of an improving trend that started in early 2024 but one that has been volatile.

But their national survey of house builders turned more cautious in February, hurt by tariff-talk and the expected resulting inflation.

In Canada they reported January CPI inflation, and that came in at 1.9% and pretty much as expected. But the "trimmed mean" core rate came in at 2.7%, the one the Bank of Canada follows, above the December level of 2.6% and well above the expected 2.5% level. This is going the wrong way for them and they may now skip the expected March rate cut.

We should probably note that German business sentiment rose in February, ahead of this weekend's federal elections, on the hope that a new government won't get stuck in coalition paralysis. More broadly, EU business sentiment is rising too.

The Reserve Bank of Australia cuts its policy rate by -25 bps to 4.1%, much as expected by financial markets, citing progress on getting inflation down towards its target range. It was their first cut since 2020. But it was a hawkish cut, and post-election there may not be any more until the clear inflation pressures ease, especially those expected from the looming tariff war. Despite that, financial markets are still pricing in at least two more rate cuts in 2025.

The UST 10yr yield is at 4.54%, up +5 bps from yesterday at this time.

The price of gold will start today at just under US$2931/oz and up +US$33 from yesterday.

Oil prices are up +50 USc at just over US$71.50/bbl in the US and the international Brent price is now at US$75.50/bbl.

The Kiwi dollar is now at 57 USc and down -40 bps from yesterday. Against the Aussie we are down -30 bps at 89.8 AUc. Against the euro we are down -20 bps at 54.6 euro cents. That all means our TWI-5 starts today just over 66.9, and down -30 bps from this time yesterday and has been among the largest devaluers over the past 24 hours.

The bitcoin price starts today at US$94,789 and down another -0.7% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.1%.

Join us at 2pm this afternoon for full coverage of the RBNZ's Monetary Policy Statement. And before that, we will have the January REINZ results at 9am.

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.

Kia ora,

Welcome to Tuesday’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 today will be dominated by the RBA rate review, especially as US financial markets are on holiday (Presidents Day).

Meanwhile, Canadian housing starts rose in January from December and came in +3.7% higher than year ago levels. Montreal and Vancouver demand drove the increases.

Across the Pacific, the Japanese economy continues its good rebound with their growth rate beating estimates, and by quite a bit. Japan’s GDP grew by +0.7% qoq in Q4-2024, accelerating from an upwardly revised +0.4% expansion in Q3. This marked the third consecutive quarterly growth, on the back of a strong rebound in business investment. Year on year it is up +2.8% which was very much better than the +1.0% expected. This is very good for Japan, who has struggled to expand for a long time. And don't forget this is the world's fourth largest economy. (Japan is als one of those economies that looks better in PPP terms.)

Singapore's exports actually fell in January and by -3.3% - and that was much more than the -0.3% dip expected.

Chinese new vehicle sales slipped in January from December. Not only was it the usual seasonal dip, it was more than expected, and the year-on-year change also dipped slightly which is not something we have seen since the pandemic.

It was a similar story for Indian exports, which fell in January from December, to be -1.3% lower than the same month a year earlier. India is not a powerhouse exporter, with theirs only about 10% of China's, and less than Taiwan. They export at about the same level as Australia and Vietnam. Those weak exports meant its trade deficit widened.

At 4:30pm we will get the latest update to the RBA's cash rate target. Markets expect a -25 bps cut to 4.10% but you have to say the conviction in the market is not high. All three possibilities are still live; a cut, no change, or even a hike given their highish inflation levels. We will know soon enough.

The UST 10yr yield is at 4.49%, up +1 bps from yesterday at this time.

The price of gold will start today at just under US$2898/oz and up +US$15 from yesterday.

Oil prices are up +50 USc at just over US$71/bbl in the US and the international Brent price is unchanged at US$75/bbl.

The Kiwi dollar is now at 57.4 USc and unchanged from yesterday. Against the Aussie we are down -10 bps at 90.1 AUc. Against the euro we are up +20 bps at 54.8 euro cents. That all means our TWI-5 starts today just over 67.2, and down -10 bps from this time yesterday.

The bitcoin price starts today at US$95,470 and down another -1.7% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.0%.

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.

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 the messy international outlook continues but so far the changes are more in prospect than real.

First however, this will be a big week of data and policy releases. Not only will Australia review its policy rate tomorrow (a -25 bps cut is anticipated taking their cash rate target to 4.10%), our own RBNZ has its first monetary policy review of 2025 and it is widely expected they will deliver a -50 bps cut to 3.75%. China also reviews rates this week on Thursday, but no change is expected from them.

On Wednesday, there is another full dairy auction.

Canada and Japan will release January CPI data. And there will be many January PMI releases this week.

In data out over the weekend from China, banks lent a record +¥5.22 tln in new loans in January, far above the +¥990 bln in December and easily beating forecasts of +¥800 bln. It is a spectacular show of support by banks for the push by Beijing to juice up its economy via more debt.

Foreign direct investment in China plunged -99% over the past three years, Chinese government data shows, as their economic slowdown and concerns about their 'everything is national security' approach drove investors away. China only recorded a net inflow in 2024 of +US$4.5 bln and that is their lowest in more than 30 years. In two of the four quarters of 2024 there was in fact a net outflow.

Up from +1.8% in 2023, Singapore's economy grew +4.4% in 2024 on the back of stronger-than-expected rebounds in exports and tourism. This was an upward revision from the preliminary +4.0% rate reported by them earlier. By itself, Singapore's Q4 rose at a +5.0% rate.

Malaysia downgraded its growth in its Q4-2024 update to +5.0% from a year ago. This was due to weak progress in Q4 from Q3.

In the US, retail sales were +4.2% higher in January from a year ago, a slightly slower pace than in December (+4.4%). This official data backs up the Redbook survey we report weekly. But we should note that the good January data came despite a sharpish fall-off in car sales in the month. That fall-off contributed to seasonally adjusted retreat in January from December and one that was notably more than expected.

Business inventory data out for December actually shows lower levels, and their inventory-to-sales ratio improved unexpectedly. This shift might be due to public-policy uncertainty around tariffs.

With inventories lower than expected, it therefore won't be a surprise to know that US industrial production in January rose on a year-on-year basis, and by more than expected. But the January rise from December wasn't as strong. But at least it was a rise

It is Presidents Day in the US on Monday (tomorrow NZT), a Federal holiday, but only inconsistently observed by business and many states.

Across the border, Canada said its manufacturing sales rose, and for a third consecutive month in December.

Canada also released its Q4-2024 senior loan officer survey which revealed a sharpish tightening in credit conditions in the period.

The UST 10yr yield is at 4.48%, unchanged from Saturday at this time.

The price of gold will start today at just under US$2882/oz and down -US$6 from Saturday.

Oil prices are down -50 USc at just over US$70.50/bbl in the US and the international Brent price is still just under US$75/bbl.

The Kiwi dollar is now at 57.4 USc and unchanged from Saturday. Against the Aussie we are also unchanged at 90.2 AUc. Against the euro we are still at 54.6 euro cents. That all means our TWI-5 starts today just under 67.3, unchanged from Saturday but its highest since Christmas Eve.

The bitcoin price starts today at US$97,094 and down -1.6% from this time Saturday. Volatility over the past 24 hours has been low at +/- 0.6%.

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.

Kia ora,

Welcome to Friday’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 it is expected that the US will announce reciprocal tariffs today, although the phase-in time might be months. To be revealed. This will be seen as the formal start of a global trade war. New Zealand won't be any focus but it won't be immune. The tariffs will be on goods. But the retaliatory tariffs will likely come on services where the US runs large surpluses. Both will tend to drive countries away from US influence.

Every country is going to learn how to play hard-ball in a zero-sum struggle. None of this will be good for trade, or any sense of cooperation for mutual benefit.

Meanwhile, US initial jobless claims came in at 231,000 last week, almost exactly as expected. There are now just under 2.2 mln people on these benefits, quite similar to this time last year.

The expected easing in the rise in American producer prices didn't happen in January. They were up +3.5% in December and that was expected to ease to a +3.2% January rise. But in the end the pace of cost increases stayed unchanged at +3.5%. Although it is not a key metric, it is more data that will encourage the Fed to hold its settings and put off a rate cut. Tariffs are likely to make matters worse for them.

US household debt pushed on up through US$18 tln at the end of Q4-2024 in new data released today. That is 62% of US GDP, so compared with other countries, not a huge load. In fact it rose only +3.1% from a year ago, basically keeping pace with inflation.

There was a UST 30 year bond auction earlier today and that brought a median yield of 4.68%. That compared with the 4.87% at the equivalent eventa month ago.

Across the Pacific, Japanese producer priceswere expected to rise in January from December's 3.9% to 4.0%. In fact it came in at 4.2% for the year to January in a broad-based trend higher. And apart from the pandemic period, this is a ten year high for them.

It may seem an odd economic 'win' but EU industrial production fell -2.0% in December. This was marginally more than the November -1.8% drop, but very much less than the -3.1% fall expected. It was toughest in Austria, Italy and Hungary, all countries ruled by right-wing populists. So far they are not making their countries great again.

Container freight rates fell -5% last week to be +118% higher than pre-pandemic but -19% lower than the same time a year ago. Outbound freight rates from China brought the largest retreats. Bulk cargo rates remained near all-time low levels, but were unchanged over this past week.

The UST 10yr yield is at 4.54%, back down -9 bps from yesterday at this time.

The price of gold will start today at just under US$2913/oz and up +US$18 from yesterday.

Oil prices are down nearly -US$1.50 at just over US$71.50/bbl in the US and the international Brent price is now just on US$75/bbl.

The Kiwi dollar is now at 56.5 USc and up +20 bps from this time yesterday. Against the Aussie we are unchanged at 89.8 AUc. Against the euro we are down -10 bps at just on 54.2 euro cents. That all means our TWI-5 starts today just on 66.7, essentially unchanged from yesterday at this time.

The bitcoin price starts today at US$95,526 and virtually unchanged from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.5%.

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 on Monday.

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 the instability feared over the new US tariff approach is hitting their economy.

First up today, we need to note that US headline CPI inflation rose in January to 3.0% when no change from the December 2.9% was anticipated. Core inflation was expected to fall to 3.1% from December's 3.2%. But in fact it rose to 3.3%. Rents were a key factor. This has set financial markets on edge.

Although not as aggressive, this official data confirms the University of Michigan consumer sentiment survey that reported a sharp jump in consumer inflation expectations.

US mortgage applications rose slightly, almost all on refinancing demand. So it was driven by churn, rather than new demand. But overall levels remain very low; in the past two-plus years these levels have remained static, and down to levels last seen 25 years ago.

All this unwelcome data had a big effect on benchmark interest rates with the UST 30 year yield jumping +11 bps. Clearly the Fed is right to wait before cutting its policy rate. Markets aren't pricing any rate cut until December now. Wall Street equities turned negative after this news too. The USD firmed on risk aversion. None of this was liked by the US President who vented on social media. But behind it all are building fears about the effect of his very misguided tariff policies which everyone but him sees as sharply inflationary.

While all this was going on, there was a UST 10yr bond auction and that delivered a yield today of 4.56%, lower than the 4.63% at the prior equivalent event a month ago. Investor support isn't wavering but bids here were made before the CPI data release. There will be some large paper losses by these bidders now.

(And we should probably also note that with the new Administration kneecapping the Justice Departments monitoring and enforcement of the area, foreign lobbyists are pouring into Washington DC to plead their cases for special treatment. It's open slather.)

Across the Pacific, Japanese machine tool orders came in at an average level in January, up +4.7% from the same month a year ago, but nothing like the spurt in December.

In China, it won't be news to regular readers, but their property development sector woes are now in crisis territory. The fundamental problem has never been sorted and many companies can no longer hang on. They are going from the zombie phase to actual liquidation now.

India's industrial production is leaking growth and at a faster rate than expected. It was up +4.3% in December, down from +5.0% in November and well below what was anticipated. You can see why their recent Union Budget moved into stimulus mode, and the central bank cut its policy rate. India needs a boost to keep the expansion going.

Meanwhile, India's CPI inflation rate is easing, down to 4.3% in January from 5.2% in December. Food inflation fell sharply, but it is still at 6.0%.

In Australia, December home loan data revealed modest changes. The total number of new loan commitments for dwellings fell -0.4% in the December quarter while the value rose +1.4%. Owner occupier activity was positive, but investors pulled back. The number of new investor loan commitments for dwellings fell -4.5% in the quarter while the value fell -2.9%.

And staying in Australia, we should probably note the recently-retired NAB CEO, kiwi-Ross McEwan, has been appointed chairman of the board of Aussie heavyweight miner BHP. That is a long way up for an ex-ASB banker.

The UST 10yr yield is at 4.63%, up +9 bps from yesterday at this time.

The price of gold will start today at just under US$2894/oz and down -US$10 from yesterday..

Oil prices are down nearly -US$1 at just on US$73/bbl in the US and the international Brent price is now just under US$76/bbl.

The Kiwi dollar is now at 56.3 USc and down -30 bps from this time yesterday. Against the Aussie we are down -10 bps at 89.8 AUc. Against the euro we are also down -40 bps at just on 54.3 euro cents. That all means our TWI-5 starts today just on 66.7, down -10 bps from yesterday at this time, limited because we rose sharply against the yen.

The bitcoin price starts today at US$95,555 and again down -0.9% from this time yesterday. 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.

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 the USD is wavering (down -1.7%) as policy missteps especially on the impact of the trade war hostilities. Benchmark interest rates are rising as risk premiums rise. Estimates for US growth are getting downgraded, while estimates for US inflation are being raised. These latest shifts will have global echoes.

And in a shameless move, the US President has ended enforcement of the Foreign Corrupt Practices Act, saying bribing foreign officials is now a part of US diplomacy. Previous you could go to jail for that, and many people did. The lack of enforcement will probably only apply to Trump's supporters.

The US Fed boss Powell is testifying before Congress, newly hostile because Trumps troops are gunning for lower policy interest rates. He also pushed back on 'being rushed' on rate cuts. At the accusation the Fed is overstaffed, he countered that they aren't, but they are overworked.

Last week's American retail Redbook index rose +5.3% above year-ago levels, a slowing but still a notable rose.

Also at a good level is SME business optimism. But uncertainty is on the rise. This January survey by the NBIB was expected to rise from December, but it fell.

There was another large, but well-supported US Treasury three year bond auction earlier today and that went for a yield of 4.26%. This was slightly below the prior equivalent event a month ago at 4.29%. Fear is being priced in more than uncertainty.

The February USDA WASDE report has been released. It shows the US will likely produce more beef in 2025, and import levels will remain unchanged. But prices are rising they say on rising demand. They also so US milk production is in a declining phase with fewer cows milking. They see prices holding, in USD terms of course.

In Canada, December building permit levels rise sharply and by much more than expected. They were +11% more than in November and a massive +30% higher than in December 2023. Although this metric does tend to jump around a bit, there are some substantial gains here.

In India, their central bank has intervened in currency markets frying to stop the fall and speculative shorting of the rupee. It had ballooned out to almost 88 to the USD and the intervention brought it back to 87. However even that level is a notable devaluation. The RBI probably doesn't have the resources to fight market shorters.

In China, President XI is out visiting the regions, and emphasising the importance of food security. Beijing must be worried if they give it this much repeated exposure.

And yet another large property developer is throwing in the towel, not opposing its winding up.

The social-media-recorded pushback during the Covid lockdowns in China that "we are the final generation" is continuing to echo, and echo loudly there. After rising slightly in 2023, marriages fell sharply in 2024 and to their lowest since China's public records began in 1986. This means the public efforts to stop the sharp fall in births are not working. (And yes, if you try to follow the link to the data, you may well find yourself blocked. But it is the source data for this item.)

In Australia, the Westpac-Melbourne Institute consumer sentiment survey reported no improvement in January from the flat levels that have been around for the two prior months. But the NAB Business Sentiment survey is reporting that their responders are finding a more positive mood.

The UST 10yr yield is at 4.54%, up +5 bps from yesterday at this time.

The price of gold will start today at just under US$2904/oz and up +US$4 from yesterday.

Oil prices are up +50 USc at just on US$73/bbl in the US and the international Brent price is now just under US$77/bbl and back to week-ago levels.

The Kiwi dollar is now at 56.6 USc and up +10 bps from this time yesterday. Against the Aussie we are down -10 bps at 89.9 AUc. Against the euro we are also down -10 bps at just under 54.7 euro cents. That all means our TWI-5 starts today just on 66.8, essentially unchanged from yesterday at this time.

The bitcoin price starts today at US$96,409down -0.9% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.2%.

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.

Kia ora,

Welcome to Tuesday’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 of more signaled tariffs on imports into the US, specifically on metals. A new inflation surge seems inevitable, as does less trade and low growth - in other words we need to prepare for a new bout of stagflation.

But first, American consumer inflation expectations for the year ahead remained at 3% for a third consecutive month in January, according to the NY Fed national survey. This is far more sanguine than the University of Michigan survey we noted yesterday which reported a 4.3% year ahead level. The NY Fed survey noted that households now expect to pull back their spending in the year ahead, however.

The Musk takeover of US spending priorities is leaving many losers, including US farmers. 

In Canada, a survey by their central bank of about 30 significant financial "market participants" at the end of 2024 showed that those polled expect the Canadian 3% current policy interest rate still has another -50 bps of cuts to come, but that it will level out at 2.5% from mid-year for the next long period. This survey also showed an expectation of a +1.8% or +1.9% economic growth rate over the next two years, although the largest risk to that is from policy uncertainty in the US.

And staying in Canada, falling residential values are leaving some very tough positions for buyers who bought off the plan, and now find the contract price now far exceeds what a bank would value their purchase for a mortgage.

In India, the one-two public policy push to "go for growth" with tax cuts and a lower policy interest rate, isn't getting plaudits from financial markets. They have driven the Indian currency to a record low against the USD, although it has come off that in the past few hours. (But of course some of that is due to the overall strength of the USD.)

In the face of new US tariff threats, some targeted metals prices have risen. Essentially they are pricing in the higher prices American buyers will have to pay. Aluminium is at a two year high and running at long term high levels, steel comes in may varieties, but rebar steel hasn't moved much because that has China-focused demand. Other commodity-metals are flat, but specialty metal prices are rising. And copper is back near its all-time highs suddenly at just over US$10,000/tonne (NZ$17,750). These shifts higher will underpin global inflationary impulses that no-one can avoid.

And we should probably note that the new aggressive new US Gaza policies probably mean there will be no end to the risks of using the Suez Canal, extending its inflationary impact.

The UST 10yr yield is at 4.49%, down -1 bp from yesterday at this time.

The price of gold will start today at just under US$2900/oz and up +US$40 from yesterday. This will be a new record closing if it holds this level.

Oil prices are up +US$1.50 at just under US$72.50/bbl in the US and the international Brent price is now at US$76/bbl and back to week-ago levels.

The Kiwi dollar is now at 56.5 USc and down -10 bps from this time yesterday.  Against the Aussie we are down -20 bps at 90 AUc. Against the euro we are unchanged at just under 54.8 euro cents. That all means our TWI-5 starts today just on 66.8, down -10 bps from yesterday at this time.

The bitcoin price starts today at US$97,281 and up +0.7% slip from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.8%.

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.