Economy Watch

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 a slowing pace of the global economic expansion is leaving the debt overhang as a more serious problem in many countries.

But first up today there was another dairy auction, and on the face of it, it was a lackluster affair. Overall prices were up +0.6% in USD terms, a smaller rise than the +2.4% at the last event. This is consistent with the FAO monitoring. WMP prices were unchanged, but SMP and cheese both rose about +1.7%. However things were undermined in NZD. Overall prices dropped -2.0% in local currency as the NZD continues its puzzling rise. That means in local currency prices are down -15% over the past two months, compared to the equivalent -9% drop in USD. None of this shows were are getting on top of our deteriorating current account deficits.

Also falling away are US retail sales. Last week they rose less than +6% from the same week a year ago on a same-store basis. This comes at the start of the important year-end retail season and these results show they are no longer keeping up with inflation. Retail sales volumes are declining in the US.

Meanwhile, the American commercial real estate sector is facing some rejection by investors. Big and small investors are queuing up to pull money out of real-estate funds, the latest sign that the surge in interest rates is upending their commercial-property sector.

Also easing has been supply chain pressures, and by quite a bit. Their Logistics Managers Index (LMI) fell to only a modest expansion, the slowest since early in the pandemic (April 2020). Of note, managers are now making real progress in winding back inventory levels that had blown out during the supply chain shocks.

And confirming a slower pace, the American trade deficit in both goods and services in October wasn't as negative as expected. Their exports were up +13.6% year-on-year, while their imports were up +13.9% on the same basis. That added -US$10 bln to their year-on-year deficit, but it was less than markets had assumed, so the result has been ignored.

On the other hand, Canadian exports rose and their imports held unchanged allowing them to report a larger trade surplus in October.

In China, debt as a percentage of its economy hit a fresh high at the end of June, with local authorities borrowing heavily to hold together an economy weighed down by the central government's pandemic policy. Their debt now exceeds US$52 tln, or almost 300% of China's GDP. The same data pegs New Zealand at 218% and Australia at 232%. The US is 263% and Japan is 426%! (These debt levels are easier to sustain when their are essentially in local currency.)

German factory orders rose more than expected on October from September recovering somewhat from the prior month's retreat. But it still left them -3.2% below year-ago levels.

In Australia, their central bank raised its cash rate target by the expected +25 bps to 3.10% which is a ten year high. Banks have already responded with equivalent mortgage rate hikes. The RBA is on track for two more such rises in 2023 to 3.85% by May 2023 because both wages and inflation will probably leave them little option but to keep tightening.

The UST 10yr yield starts today at 3.56% and down -6 bps from this time yesterday. 

The price of gold will open today up at US$1771/oz and down -US$1.

And oil prices start today down -US$4.50 from this time yesterday at just on US$74.50/bbl in the US while the international Brent price is down to just over US$79.50/bbl. The Russia price cap is biting just as global demand softens, which will annoy producers and cheer consumers.

The Kiwi dollar will open today at 63.4 USc, and a little firmer than this time yesterday. Against the Australian dollar we are -½c firmer at 94.4 AUc. Against the euro we are at 60.3 euro cents and up slightly. That all means our TWI-5 starts today at 71.9 and up +30 bps overnight.

The bitcoin price is now at US$16,972 and down -0.4% from this time yesterday. Volatility over the past 24 hours has low at just +/- 0.7%. Overnight the JP Morgan boss called crypto tokens "pet rocks".

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.

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.

Today we lead with news 'good news' on the economic front is being viewed as 'bad' for investors.

First in the US, the widely-watched ISM services PMI rose to record a healthy expansion, any by more than expected. New orders and employment both improved in a clear sign the giant American economy doesn't seem to be heading for a slowdown yet. (But to counter than enthusiasm, their internationally-benchmarked Markit services PMI is recoding a small contraction, something it has done for 4 straight months now.)

But supporting the ISM view, American factory orders rose in October and by more than expected, and rose at a much faster pace than they did in September. It was their biggest rise in four months and they were more than +11% higher than year-ago levels, so more than inflation is at play here.

These improvements are confusing equity and bond markets. After last week's Powell guidance, markets had expected data to support the Fed's idea that the expansion pressures were waning and the central bank could ease back on their rate hikes. But this latest data is very expansionary and keeps the pressure on. The next Fed decision is doe on December 15 (NZT).

In Canada, they did expect a bounce-back in housing consents issued in October - but it didn't arrive. The fall-off was less than for September, but it was still a fall away.

In China, more big tier 1 cities are easing pandemic restrictions. There is clearly a revised approach to pandemic control underway there, and it comes as case numbers rise sharply. China faces only bad options having missed some good options by dismissing Western vaccines.

And those bad options are playing out in their economy; their services sector recorded a terrible November PMI, much worse than the official view. And car dealers report that their inventory levels are sharply higher.

Japan is in a much better state, even if their minor service sector expansion disappeared in November.

And India is in an even better state still, with their services sector expanding at about the same pace as the US.

In the EU, retail sales were slightly weaker than expected in October, their lowest in 10 months and dipping more than expected. Recession worries there are rising, and this data isn't helping.

In Australia, they reported that company profits fell an unexpected -12% in Q3-2022 from Q2, missing market expectations of a small growth, and following an upwardly revised +7.8% rise in Q2. This was the first decline in company profits since the fourth quarter of 2020, amid falling commodity prices. Inventories rose almost +8%.

And Australia's service sector contracted again in November, reinforcing the overall dour business mood there. Their construction sector is still contracting too, but less so in November than in October. Only their factory sector is showing any expansion.

The Reserve Bank of Australia reviews its rates again today, and another +25 bps riser is anticipated. They will next review again in February when a further +25 bps is likely too. To they will have raised rates by +50 bps at least in between the RBNZ reviews. In February, the RBA will then be at 3.35% and closing the gad on the RBNZ's 4.25%

The UST 10yr yield starts today at 3.59% and up +10 bps from this time yesterday. 

The price of gold will open today up at US$1772/oz and down -US$25.

And oil prices start today down -US$1 from this time yesterday at just on US$79/bbl in the US while the international Brent price is down to just over US$84.50/bbl. China is reducing petrol prices.

The Kiwi dollar will open today at 63.1 USc, and down a full -1c from this time yesterday. Against the Australian dollar we are -½c softer at 93.9 AUc. Against the euro we are firm at 60.1 euro cents and down more than -¾c. That all means our TWI-5 starts today at 71.6 and back to where it was in the middle of last week.

The bitcoin price is now at US$17,036 and virtually unchanged from this time yesterday. Volatility over the past 24 hours has modest at just +/- 1.3%.

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.

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.

Today we lead with news we are ending the year with some very mixed signals, and it isn't clear one way or the other whether the widely-expected recession will actually eventuate in 2023. Markets are no longer in 'fear' mode.

However, in China the pressure on property developers is never-ending. Now, to bail them out, Beijing has ordered its top four state-owned banks to issue offshore loans to help developers repay overseas debt. And to encourage buyers to return, mortgage interest rates for first home loans have been dropped by over one percentage point since the start of 2022. As of the end of November, the average first home loan rate in China stood at 4.17%.

In Japan, births among Japanese nationals totalled 798,500, according to official data for 2022, and down from +811,000 in the prior year. This is the first time the 12-month figure has dipped below 800,000 births. That is far below replacement levels and the Japanese population is shrinking fast now. Earlier, the Japanese population was forecast to shrink to less than 100 million people in 2053, but now there is a strong likelihood the milestone will be reached much sooner. Of course, this isn't just a Japanese 'problem'. It is equally true for South Korea, Italy and China

In Europe, producer prices are now falling, and quite quickly after a heady, uncontrolled run-up induced by Russia's invasion of Ukraine. They fell -2.5% in October from September (or falling at an annualised -30% rate), but they are still +31 higher than year-ago levels.

In the US, their labour market has again outperformed analysts’ expectations with a headline seasonally adjusted rise of +262,000 non-farm payroll jobs in November when a +200,000 was expected. The labour market expansion hasn't stalled yet. But as regular readers know, we also look at the raw, unadjusted data, and that shows payrolls actually rose +574,000 to 155 mln* and a new record high. That is +4.8 mln more employed than a year ago, and almost +2 mln more employed than the peak pre-pandemic. That is a lot of extra payroll cascading through the giant American economy. It is no wonder that some analysts think a softer landing is possible.

The same data shows that US hourly earnings rose +5.8% in the year to November, and weekly earnings were up +4.9%. Hourly earnings are rising at a faster annualised pace in November from October, up at the rate of +8.1% pa. Workers seem to be keeping up, and that demand-induced gain is consistent with a tight labour market.

Wall Street seemed under pressure after this data was released, now unsure whether the US Fed will ease back in the way that was signalled earlier in the week. Clearly wage-push inflation is a policy 'thing', and the much larger expansion of the overall workforce is providing the currency to sustain higher prices for longer.

That's not to say it’s all roses. It isn't. The Fed's Beige Book surveys show that businesses expressed greater uncertainty and increased pessimism for the American economy as prices and interest rates continue to rise.

Canada's labour market also turned in a better-than-expected result in November too. Total employment was little changed in November (+10,000), but that follows a big increase of +108,000 in October and the November data shows the prior month's result was not an outlier.

In Australia, it is becoming clearer that sharply higher prices for coal and natural gas (thanks to Russia's Ukraine invasion fallout), and continuing good iron ore prices, are delivering a substantial windfall tax-take for Australian states and their Federal government. They have a direct financial interest in raising carbon-emitting outputs. These increases, along with the ending of some substantial tax deductions available to miners, are enough to push their budget balances into surplus. That is a huge turn-around from what just last year seemed like persistent long-term deficits.

Meanwhile, global food prices eased slightly in November, continuing a downward trend since the peak in March. Prices for both meat and dairy contributed to the easing. Overall prices are -15% below their March peak, and now back to year-ago levels. But they remain +40% higher than their pre-pandemic levels, so the core pressure is still there.

The UST 10yr yield starts today at 3.49% and down -4 bps from where we left it Saturday. 

The price of gold will open today up at US$1797/oz. A week ago it was US$1753/oz, so a +US$44 gain since then, mostly exchange-rate induced.

And oil prices start today down -US$1 from this time Saturday at just over US$80/bbl in the US while the international Brent price is down to just over US$86/bbl. These are about +US$4 higher for the week as the US dollar sank.

The Kiwi dollar will open today at 64.1 USc, and up to it highest since August. Against the Australian dollar we are firmer at 94.4 AUc and an eleven month high. Against the euro we are firm at 60.9 euro cents and a two month high. That all means our TWI-5 starts today at 72.4 and a three month high.

The bitcoin price is now at US$17,013 and down -0.3% from this time Saturday. A week ago it was at US$16,496. Volatility over the past 24 hours has low again at just +/- 0.7%.

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.

The Reserve Bank recently increased the Official Cash Rate by a record 75 basis points as it tries to engineer a recession to fight the highest inflation in more than 30 years. But is bashing the economy into submission with its big, blunt monetary policy tool the best approach? 

To probe this and more I spoke with David McLeish, Head of Fixed Income at Fisher Funds Management, in the latest episode of our Of Interest podcast.

McLeish argues that monetary policy is largely focused on demand issues when supply issues are behind most of the current inflationary pressures. He also says he's quite optimistic about the alleviation of these inflationary pressures, arguing there are lots of reasons he can already point to as evidence monetary policy has done its job.

McLeish also explains why he's skeptical about whether inflation expectations set inflation, talks about the role of government fiscal policy in the current economic environment, the difficulty of setting interest rates by looking in the rear vision mirror for an economy that's six, 12,  or 18 months into the future, the distorted labour market, and much more.

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.

Today we lead with news all eyes are on whether the global economy is heading for a hard or soft landing.

In a closely watched speech yesterday, Fed boss Powell said the US Federal may scale back the pace of its interest rate hikes in December. "It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting". However, Powell added that the "terminal rate," is likely to be "somewhat higher" than the 4.6% indicated by in their September projections.

Markets are now sure the December 15 (NZT) rate change will now be +50 bps, rather than the 75 bps previously assumed. Their higher end point will probably keep pressure on the RBNZ to stay ahead of them.

Layoffs in the tech sector are starting to mount, and this has pushed the layoff data to nearly a two year high. Still, in the grand scheme, the numbers at 77,000 are really very low still.

US jobless claims came in lower than expected at just under 200,000 taking the total on these benefits to 1.26 mln and still +0.9% of their workforce. It was surprising that this labour market data didn't rise given the anecdotal job layoff reporting.

Analysts are still expecting payrolls to have grown just +200,000 in November, which will be the lowest level in nearly two years. This data will be released tomorrow morning.

The PCE inflation measure came in at 6.0% in October, its lowest of the year and another indicator price pressures are easing the in US. Meanwhile personal income rose faster, at a rate exceeding +8% pa, while personal spending rose even faster, at an annualised rate exceeding +9%. The core drivers of consumption are not showing any sign of stress yet.

All these labour market signals may be remaining upbeat, and point to a soft landing, but things have turned lower on the factory floor.

The widely-watched ISM PMI contracted in November, its first since May 2020. And the internationally-benchmarked Markit PMI is contracting too.

And American construction spending las fattened right off. But to be fair, it remains at a high level at +9% higher than year-ago levels.

In their housing markets, mortgage interest rates dropped their most in a month in November since 2008.

The FT is reporting that Blackstone is now limiting withdrawals at its US$125 bln property fund as investors rush to exit these exposures.

In China, Beijing is set to announce an easing of its pandemic quarantine protocols in the coming days and a reduction in mass testing, a marked shift in policy after anger over the world's toughest curbs fueled widespread protests.

Meanwhile, another factory PMI report shows China's manufacturing sector contracting, confirming the official data.

Trade activity is softening fast now. South Korean exports fell -14% in November from a year ago. That is a big move for a big exporter.

Japan's factory PMI slipped back into contraction in November.

And the downturn intensified in the EU.

In Australia we are seeing a deceleration rather than a contraction in their factory sector. But a separate local PMI already has them in contraction.

And with all this retreat in trade, as you would expect, container shipping rates are still falling fast, down another -5% last week alone to be -75% lower than year-ago levels and -15% lower than ten year averages. Outbound rates from China are the weakest. Bulk cargo rates are little-changed however.

International air cargo volumes are sagging again too, down -5.6% globally in October, down -8.0% in the Asia/Pacific region. Things would have been worse if it wasn't for the +10% rise in air cargo volumes out of North America.

But there is a recovery of sorts evident in passenger air travel, although it is still a massive -28% lower than pre-pandemic levels. Again, these global averages would be worse without the North American data that is almost back to pre-pandemic levels.

The UST 10yr yield starts today at 3.55% and down -22 bps on the Powell speech. 

The price of gold will open today up a USD-induced +US$49 to US$1802/oz.

And oil prices start today up another +US$2 from this time yesterday at just over US$82/bbl in the US while the international Brent price is up much less at just over US$87/bbl. These shifts are also induced by the falling US dollar.

The Kiwi dollar will open today at 63.7 USc, and up almost +1½c since this time yesterday. Against the Australian dollar we are +¾c firmer at 93.6 AUc. Against the euro we are also up +¼c at 60.7 euro cents. That all means our TWI-5 starts today at just over 72 and up +60 bps from this time yesterday to a three month high.

The bitcoin price is now at US$16,973 and up +0.7% from this time yesterday. Volatility over the past 24 hours has modest at just +/- 1.7%.

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 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.

Today we lead with news the global economy is losing momentum, just as regulators seem to want.

First, there has been a lot of economic data news out overnight, especially in the US. This starts with a raising of their Q3 economic growth rate in the second revision. It was expected to be raised by analysts, but the rise exceeded their estimates. Better consumption levels were the item diving the upside revision.

US mortgage applications resumed their downward slide last week even though mortgage interest rates eased off a bit.

Their housing markets remain in the doldrums, with October pending home sales falling another -4.6% from September to be down -37% from the same month a year ago.

The number of job openings eased by 353,000 to 10.3 million in October of 2022, roughly in line with market expectations, and suggesting demand for workers has started moderating, although the shift is very minor.

The private sector ADP employment report which is a pre-cursor to this weekend's non-farm payrolls report, disappointed analysts. It was expected to report an expansion in payrolls of +200,000 in November but only came up with +127,000. Analysts are expecting the non-farm payrolls to expand by +200,000 which would be much lower than the October +261,000.

There was mixed signals on American inventory levels. Retail inventories rose by almost +$20 bln in October from September (which was less than expected) and wholesale inventories rose +US$17 bln, which was more than expected. Both suggest their excess inventory problems are not easing.

American exports rose +9.9% year-on-year to October, but imports rose +12.4% on the same basis, pushing their merchandise trade deficit out to -$99 bln for the month.

Meanwhile the widely-watched Chicago PMI from their industrial heartland retreated rather sharply in November and by much more than expected. Apart from the 2020 pandemic shock, it is now at its weakest since the GFC.

This, and the expected US Fed Beige Book survey for November which is due out soon, are all expected to confirm that the Fed's rate hikes are having the desired effect of cooling the giant American economy. Chairman Powell is expected to acknowledge as much in a speech today, signaling that the heavy lifting is over for a while and that rate hikes from here will be more moderate and less frequent.

Across the Pacific, China's factories are slowing quickly now. The official PMI records a sharpening contraction, and that is compounded by a similar sharper contraction in their services sector. And it is unlikely to improve anytime soon. People in the Chinese city of Guangzhou clashed with riot police as authorities investigated more of those who have taken part in a string of protests against their pandemic restrictions. 

In India, there are definite signs of slowdown there too, although to be fair the pace of their expansion is still good, just not as good as it was earlier in the year. India has an inflation problem too, and that risks social pressures.

In the EU overall inflation is easing back, now at 10% in November and down from a record high of 10.6% in October. Market were forecasting 10.4% so this is an undershoot (although few Europeans would feel like that).

In Germany, their November employment data came in better than expected with rising employment levels and a jobless rate of only 3.0%. Germany certainly has its issues but their labour market is not one of them.

The UST 10yr yield starts today at 3.77% and up +4 bps. 

The price of gold will open today little-changed at US$1753/oz.

And oil prices start today up another +US$1.50 from this time yesterday at just over US$80/bbl in the US while the international Brent price is up much less at just over US$86.50/bbl.

The Kiwi dollar will open today at 62.4 USc, and up almost +½c since this time yesterday. Against the Australian dollar we are firm at 92.8 AUc. Against the euro we are also up +½c at 60.4 euro cents. That all means our TWI-5 starts today at 71.5 and up +50 bps from this time yesterday.

The bitcoin price is now at US$16,851 and up +2.7% from this time yesterday. Volatility over the past 24 hours has moderate at just +/- 2.2%. Meanwhile, the ECB said bitcoin is being artificially propped up and should not be legitimised by regulators or financial companies as it is more akin to gambling.

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.

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 the endless talk of a looming global recession seems to be just that, talk.

Retail sales in the US on a same-store basis were surprisingly firm last week, up more than +10% from year-ago levels. And while much of this will be inflation's effect, clearly not all, and there is real volume growth in these numbers. Wall Street is sanguine about prospects many big retailers too. There is a clear push to reduce inventories, which will help investor sentiment in this sector.

However, the latest consumer sentiment survey, this one from the Conference Board, sees levels slipping, and while they moving away from robust levels, they are now falling these are off mid-year highs. Prices are driving the sentiment there is an expectation a recession is ahead, they are clearly not there yet.

The Dallas Fed services index is still positive, but is is less so in November than October.

The Canadian economy expanded +0.7% in Q3 2022 from the previous quarter, a fifth consecutive quarter of growth, and taking the year-on-year expansion to +3.9% real which is reasonably impressive. Growth in exports, non-residential structures, and business investment in inventories were moderated by declines in housing investment and household spending. Exports increased +2.1%. This overall faster growth probably raises the chances of faster interest rate hikes there.

Retail sales in Japan barely rose in October from September to be up +4.3% from a year ago. This was less than analysts were expecting, a softness that is proving hard to shake.

In China, reprisals for daring to demonstrate over the past few days are building. Chinese police have begun leveraging the powers of the country’s surveillance state to go after those who participated in rare public displays of defiance over the government’s stringent Covid control policies. Reporters who covered the protests have been beaten up by police.

Consumer prices in Germany rose +10.0% in November from year-ago levels and that was less than the rise in October and lower than was expected. (On an EU-harmonised basis it was up +11.3% and also less than expected.) The surprise was that from October, November prices fell -0.5%. Perhaps this is the top for them? This latest relief is mostly to do with energy costs.

Some of this is coming through in the wider tracking of sentiment in the EU. While business sentiment worsened, the same was not the case for consumers, who actually can see the end of the severe price pressures in their inflation expectations for a year ahead. In these surveys, both investment expectations, and employment levels remain much better than you might expect given the seasonal and war pressures.

The UST 10yr yield starts today at 3.73% and up +2 bps. 

The price of gold will open today up +US$6 at US$1751/oz.

And oil prices start today up +US$1.50 from this time yesterday at just on US$78.50/bbl in the US while the international Brent price is up much less at just over US$84.50/bbl.

The Kiwi dollar will open today at 62 USc, and unchanged from this time yesterday. Against the Australian dollar we are little-changed at 92.6 AUc. Against the euro we are holding at 59.9 euro cents. That all means our TWI-5 starts today at 70.9 and little-changed from this time yesterday.

The bitcoin price is now at US$16,404 and up +1.4% from this time yesterday. Volatility over the past 24 hours has modest at just +/- 1.3%.

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.

With three months between the Reserve Bank's last monetary policy review of 2022 and first one of 2023, it will be watching "high frequency data" during the break closely, says Karen Silk, Reserve Bank Assistant Governor and General Manager of Economics, Financial Markets and Banking.

Speaking in a new episode of interest.co.nz's Of Interest Podcast, Silk, also a member of the Monetary Policy Committee responsible for making monetary policy, says if the Reserve Bank's current hawkish outlook is to moderate it needs to start seeing a slowdown in the level of household spending.

Thus the likes of electronic card transaction data, retail spending, credit card survey data, plus manufacturing and services data will be watched closely.

In the podcast Silk also explains why inflation forecasts from businesses are important to the Reserve Bank, how close the Reserve Bank came to making a 100 basis points increase to the Official Cash Rate last week (it went for 75), and why core inflation when volatile food and energy costs are stripped out is such a concern.

She also talks about what needs to happen in the labour market for the Reserve Bank to consider employment to be reined in from beyond what's deemed to be its maximum sustainable level, and more.

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.

Today we lead with news some policymakers are doubling down on their goals, while others are wavering.

But first in the US, the Dallas Fed factory survey fell as new orders retreated. Price growth eased while wage growth remained elevated. But their negative sentiment eased somewhat and future production indicators improved a lot.

But despite these clear signs American economic expansion has topped out, Fed officials are not easing up on their inflation-fighting rhetoric. Influential New York Fed President Williams said policymakers have more work to do to curb inflation, which remains “far too high” despite some recent improvement in supply chain challenges. “Further tightening of monetary policy should help restore balance between demand and supply and bring inflation back to 2% over the next few years,” he noted. His predecessor is also calling for holding the policy line. Both of them seem to suspect Powell may be vulnerable to pressure to ease present policy.

In China, officials there are also toughening it out; police were out in force to discourage protest gatherings in Beijing, Shanghai and Hong Kong. This comes as state-media doubled down on Beijing’s zero-tolerance approach to the pandemic, even as their own public health experts urge a rethink.

Hong Kong exports retreated again to be more than -10% lower than year-ago levels. That is six consecutive months of retreat.

In Taiwan, consumer sentiment dropped to a 13 year low in November as lower global trade and the geopolitical squeeze bites into family finances there. It is telling that sentiment is well below pandemic levels.

In Australia, retail sales in unexpectedly dipped by -0.2% in October from September when a +0.5% rise was expected on top of a +0.6% gain in September. This was the first drop in retail trade since December 2021, and comes amid cost of living pressures and rising interest rates. Department stores had the largest fall, down -2.4% in a month. Overall, year-on-year the rise eased to +12.5%. In November, some major retailers are reporting strong trading conditions.

And tomorrow, Australia will release its October CPI data and that is expected to rise to +7.5%, keeping pressure on the RBA which is showing signs of wavering commitments to fighting inflation.

And we should note that the price of rice is rising, now back approach a two-year high which was an all-time record high. Demand is rising, supply is falling especially from the US, and some key countries (like India) are restricting exports. Stocks in some large consumer countries are falling. The recent pullback of high global food prices may have only been temporary.

The UST 10yr yield starts today at 3.71% and up +2 bps. 

The price of gold will open today down -US$10 at US$1745/oz.

And oil prices start today up +50 USc from this time yesterday at just on US$77/bbl in the US while the international Brent price is just over US$84/bbl. But these levels are a recovery from a intra-day dip.

The Kiwi dollar will open today at 62 USc, and down -½c from this time yesterday. Against the Australian dollar we are little-changed at 92.7 AUc. Against the euro we are soft at 59.8 euro cents. That all means our TWI-5 starts today at 70.9 and down -40 bps from this time yesterday.

The bitcoin price is now at US$16,177 and down -2.2% from this time yesterday. Another large crypto platform has filed for bankruptcy protection. Volatility over the past 24 hours has modest at just +/- 1.8%.

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.

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.

Today we lead with news of growing and spreading unrest in China, even in some key cities.

But first, the Americans finished their Thanksgiving Day holiday, and then turned their attention to shopping. It looks like the huge Black Friday retail event won't have quite the impact it once did, but it will still be important and markets will react to retailer sales reports. Early indications are not auspicious. However online shopping has hit a record for the day in nominal terms at least.

As we forecast a few days ago, China has pulled the trigger on lowering its bank reserve ratio requirements (RRR) by -25 bps, effective from December 5th, releasing around CNY ¥½ tln in long-term liquidity (NZ$110 bln) in an attempt to boost economic activity. It follows a similar move in April. The RRR for big banks now stands at 11%, the lowest since mid-2007 while the weighted average ratio for financial institutions stands at 7.8%. Authorities also said they aim to "keep liquidity reasonably ample".

China's industrial profits were officially reported to be -3% less in October than a year ago, a slightly steeper decline than in September. However they say SOE profits rose +1.1%; while those in the private sector fell -2.1%. It is unclear how overall results could be down -3%, but these are results "for the new Era, with Chinese characteristics". For us the main takeaway is that even the official data is unusually weak. Don't forget that Chinese enterprises are built on heavy debt funding, so falling profits can cause a rather sudden rise in credit stress. And we must always realise that SOEs in trouble will be bailed out with even more debt. If it ever comes, the end could be spectacular, but we are probably a long way from that yet.

However, social unrest is boiling over from the endless lockdown pressures. It started when crowds took to the streets in Xinjiang's capital of Urumqi, chanting "End the lockdown!" and pumping their fists in the air, after a deadly fire on Thursday triggered anger over their prolonged lockdowns. And in Beijing, under a lot less covid pressure, some residents under their lockdown staged smaller-scale protests or confronted their local officials over movement restrictions placed on them, with some successfully pressuring them into lifting them ahead of schedule. And there were aggressive protests in Shanghai over the weekend as well. Now other cities are reporting unrest.

Singapore saw its industrial production rise in October from September, and by more than expected, but that wasn't enough to avoid a year-on-year dip.

Somewhat confounding expectations, Germany reported an improved economic expansion on their September quarter than earlier estimated. Consumer sentiment has stopped falling too, but it remains very weak. French consumer confidence improved too, but it is also very weak.

And Spain is pushing ahead with new wealth taxes and new taxes on banks and energy companies, although it is now clear that the amount they expect to raise is much less than earlier indicated, especially on energy companies.

In Australia, voters in Victoria went to the polls Saturday to elect a State Government. It was expected to be a close race but in the end it was an easy victory for the ALP. The Murdoch press had been going hard against Premier Daniel Andrews with some pretty wild accusations. It backfired rather spectacularly.

The Financial Times is reporting that property catastrophe reinsurance premiums are set to soar as several companies have been forced out of the market after another year of extreme weather. The January 1 renewals may see premiums up more than +30%, on top of inflation's adjustment. All this comes as reinsurers become wary of supporting the exposures of other fellow reinsurers. EQC seems to have locked in our 2023 cover. However we haven't heard how much more they will be paying.

The UST 10yr yield starts today at 3.69% and unchanged.

The price of gold will open today up +US$2 at US$1755/oz. This almost exactly the same as a week ago.

And oil prices start today down -50 USc from this time Saturday at just on US$76.50/bbl in the US while the international Brent price is just under US$84/bbl. These levels are -US$2 lower than a week ago.

The Kiwi dollar will open today at 62.5 USc, up almost +1c since this time last week. Against the Australian dollar we are little-changed at 92.6 AUc. Against the euro we are still firm at 60.2 euro cents. That all means our TWI-5 starts today at 71.3 and up +70 bps from this time last week.

The bitcoin price is now at US$16,536 and virtually unchanged from this time Saturday. Volatility over the past 24 hours has low at just +/- 0.6%.

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.