Economy Watch

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 that the big news is the 'no news' out of China where they left their benchmark interest rates unchanged, torn between defending the yuan, and shoring up their property sector.

But first in the US, the National Activity Index (NAI) produced by the Chicago Fed slipped negative in October even though the prior month was revised to a stronger expansion. It was the weakest reading in four months, and another indicator the giant American economy is slowing, although it was not the sharp decline some were expecting.

Still, commercial banks in the US have been tightening their lending standards recently, and this may have as much impact on their economic expansion as the Fed's own tightening.

One company really struggling is fake-meat heavyweight, Beyond Meat.

In Taiwan, they reported sharply weaker export orders for October (-6.3%), way weaker than they were expecting (-1%). Countering that however was a commensurate fall in the Taiwanese currency.

In China, they kept benchmark interest rates unchanged for a third straight month yesterday, holding off on cuts that could risk dragging down the yuan, though some question how long this will continue. Policymakers there are torn between defending a weak yuan and doing what is necessary to protect their property market from a sudden collapse.

And the recent surge in Covid infections, especially in some major urban centers, is now turning into a death 'surge'. Not large by international standards, but enough to bring into question whether their new looser policies will last, or whether they are about to go into some bigger lockdowns.

In Malaysia, their election has brought more confusion, with no clear winner and a mad scramble to build coalitions.

In Germany, they may be seeing a sharp pullback in inflation. Certainly their producer prices rose a lot less in October than expected, and far less than they rose in September. In fact, they fell in October from September and by more than -4%, and are now +35% higher than year-ago levels. This was the first month-on-month decrease since May 2020, and the largest month-on-month decrease in a very long time, and maybe since the 1950s.

While housing markets are cooling across the world with fewer transactions taking place, price declines have yet to begin in a number of countries. Home prices in Canada are now down -10% from the peak. Sweden is the latest to report sharp declines, down -14% with -3% of that in October alone. And peak-to-trough declines of as much as -20% are forecast for countries including the US, the UK and New Zealand.

The UST 10yr yield starts today at 3.82% and down -1 bp from yesterday. 

The price of gold will open today down -US$16 at US$1735/oz.

And oil prices start today down -US$1/bbl from this time yesterday at just on US$79/bbl in the US while the international Brent price is just over US$86/bbl. But these levels are an intra-day recovery from even lower levels.

The Kiwi dollar will open today at 61 USc and down -½c. Against the Australian dollar we are a tad higher at 92.5 AUc and its highest since April 2022. Against the euro we are +½c higher at 59.5 euro cents. That all means our TWI-5 starts today at 70.4 and little-changed.

The bitcoin price is now at US$15,964 and down -3.6% from this time yesterday and a two year low. Volatility over the past 24 hours has been moderate at +/- 2.2%.

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 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 economic weaknesses except in some key labour markets.

We follow American jobless claims, looking for early signs of labour market stress. But despite other weakish economic signals, this key sector isn't showing that yet. There were just 199,600 new claims last week, a very low level. There are now 1.237 mln people on these benefits, also historically low.

But there were weak signs continuing from their housing markets. New housing starts slipped again last month to be -8.8% lower than year-ago levels. Building consent levels -10% lower on that basis. But it is worth noting that both are still above pre-pandemic levels. And overall these October falls were less than was expected.

Also weak were the survey results from factories in the Philadelphia Fed region, primarily in Pennsylvania where a grim partisan election took place recently. It swung strongly to the Democrats, and that was despite their factories giving this survey a downbeat assessment, one taken right as votes were counted or immediately after.

But not quite so downbeat were factories in the Kansas City Fed survey. Here earlier declines in metrics slowed noticeably.

Meanwhile, the St. Louis Fed boss has called for more front-loading of the Fed's rate hikes, wanting it above 5% to get meaningfully on top of their inflation threat. The upper-bound of the Fed's current policy rate is currently 4%. Fed policy makers next meet on December 15, 2022 NZT

In China, Bloomberg is reporting that regulators there have told banks to report on their ability to meet short-term obligations after a rapid selloff triggered a flood of investor withdrawals from fixed-income products. The unscheduled regulatory queries coincided with the biggest decline in China’s short-term government bonds since mid-2020. The slump, spurred by a shift toward riskier assets including stocks, prompted retail investors to pull money from wealth-management products, fueling a spiral of price declines and accelerating withdrawals. Losses also spread to top-rated corporate bonds, stoking a record surge in yields this week.

In the UK, their "Autumn Statement" is a tough one, recognising that they are already in a deep recession essentially from own-goals, and that their jobless numbers will likely rise by another +500,000 soon. They unveiled £55 bln of tax rises and spending cuts, which they hope will lead to a "shallower downturn" with "fewer jobs lost" that the track they are currently on. Living standards are about to be rest sharply lower there.

Australia added +32,000 jobs in October and their jobless rate dipped to 3.4% from 3.5% in September. Better yet, there were +47,000 new full time jobs, and a fall of -15,000 part-time jobs here. These better-than-expected and solid labour market results will likely mean the RBA will add another +25 bps to their official rate in early December, taking it to 3.10%. Markets have priced in slightly less than that prior to this jobs data release.

And locally, Fonterra has announced it has finally sold its Chilean Soprole business, for about NZ$1 bln.

Container shipping rates continued their fast fall last week, down another sharp -7% from the prior week to be more than -70% lower than year-ago levels and are now -30% lower than five-year averages. It is still rates out of China, and now especially to Europe, that are driving this collapse. It is now almost just a third of the price to ship from Shanghai to Rotterdam, than it is to ship from Rotterdam to New York. That is highly unusual. Bulk freight rates are back to their pre-pandemic levels.

The UST 10yr yield starts today at 3.78% and up +6 bps from yesterday. 

The price of gold will open today down -US$17 at US$1759/oz.

And oil prices start today down -US$2/bbl from this time yesterday at just under US$82/bbl in the US while the international Brent price is just under US$89.50/bbl.

The Kiwi dollar will open today at 60.9 USc and down -½c. Against the Australian dollar we are firmer at 91.5 AUc. Against the euro we have slipped back slightly more to 58.9 euro cents. That all means our TWI-5 starts today at 69.9 and down another -20 bps.

The bitcoin price is now at US$16,672 and up +1.4% since 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.

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 lackluster data is starting to spread.

But first, American mortgage applications ticked up slightly, breaking its recent set of lower levels. And mortgage rates decreased as signs of slower inflation pushed Treasury yields lower. The 30-year fixed rate saw the largest single-week decline since July, dropping to 6.9%.

Meanwhile, retail sales in the US surged +1.3% month-on-month in October, the strongest rise in eight months, after a flat reading in September and beating market forecasts of an expected +1% gain. The overall rise was largely driven by car sales which were also up +1.3% as supply chain constraints continued easing. That helped juice petrol sales too.

But those good October results are unlikely to continue. Major retailer Target forecast a surprise drop in holiday-quarter sales, blaming surging inflation and "dramatic changes" in consumer behaviour for a drop in demand for everything from toys to home furnishings. Their shares have taken a beating.

And American industrial production was lackluster in October as well, slipping month-on-month when a rise was anticipated, and now only +3.3% ahead on a year-on-year volume basis. Good but not as good as expected. It is no surprise then that business inventories rose again are now +18% higher than a year ago. They aren't really out of line on an historical perspective, but this can't continue much longer.

Canada reported consumer inflation levels for October overnight and they came in at 6.9% and matching the prior month.

The UK also reported their October inflation rate, but this jumped to 11.1% and higher than the 10.7% expected, and even after the impact of their costly Energy Price Guarantee.

Going the other way, Chinese new house prices fell -1.6% in October house prices from a year ago, according to official data. That is their largest retreat since 2015. Only ten of their 70 largest cities reported any gain from a month ago, 19 from a year ago. For resales, the official data says only five of the 70 cities reported any gains from a month ago, only six from a year ago. One dropped as much as -11% year-on-year in this official record.

November car sales in China are reported as weak too.

Japanese machinery orders were also weak. Japanese machinery orders fell -3.3% in September from a month ago, ending the quarter on quite a weak note and contributing to their GDP slip. However, they are expecting a strong rebound in Q4 and the October data kicks that off. However, the sub-sector machine tool order levels in October didn't show an increase from September, so the official forecast effect is yet to show up.

In Australia, their Wage Price Index for Q3-2022 came in stronger than some expected, reaching a decade-high +1.0% from Q2 and up +3.1% from a year ago. By New Zealand standards, these aren't as high (ours was +3.7%), but for them they haven't seen increases like this since 2012. At these levels, real wages are falling fast. All eyes there now turn to their October labour market data due out later today.

Despite popular belief, Australians pay more personal income tax as a share of government revenue than almost any other advanced economy except Denmark, with the lion’s share coming from higher income earners. That is why the IMF is urging it to aggress bracket-creep in its latest review.

Meanwhile Aussie department store retailer David Jones say sales have increased by more than +50% in the first 20 weeks of the year, with its Sydney flagship store and CBD locations performing well ahead of expectations.

The UST 10yr yield starts today at 3.72% and down -12 bps from yesterday in another big retreat.

The price of gold will open today little-changed at US$1776/oz. This is up +US$5 from this time yesterday.

And oil prices start today down -US$1.50/bbl from this time yesterday at just under US$84/bbl in the US while the international Brent price is just over US$91/bbl.

The Kiwi dollar will open today at 61.5 USc and and a minor slip. Against the Australian dollar we are marginally firmer at 91.2 AUc. Against the euro we have slipped back to 59.1 euro cents. That all means our TWI-5 starts today at 70.1 and down -30 bps.

The bitcoin price is now at US$16,499 and down -2.6% since this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.0%. Contagion from the FTX debacle has now hit the Winklevoss twins.

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 tomorrow.

The Covid-19 pandemic has been a really challenging time, the likes of which we haven't experienced since World War Two. And it's against this backdrop that the Reserve Bank is waging its fight against the highest inflation since the 1980s, Kiwibank Chief Economist Jarrod Kerr says.

Speaking in a new episode of interest.co.nz's Of Interest Podcast, Kerr says he expects the Reserve Bank to increase the Official Cash Rate by 75 basis points to 4.25% when it reviews the OCR for the last time in 2022 on November 23.

"It is an aggressive move but the war on inflation is far from over," Kerr says. "The deceleration back towards price stability is going to take some time."

By the time the Reserve Bank is next scheduled to review the OCR, on February 22 next year, Kerr expects to see a significant slowdown in household consumption, further signs of a slowdown in global economic growth, and "hopefully" a slowdown in inflation.

"By the end of next year I think enough will have been done that we'll actually be in a situation where central banks, including the Reserve Bank, will start to ease monetary policy into 2024. So more hikes, more pain near term, a cash rate of 5% which sees mortgage rates staying around current levels if not a little bit higher. And then hopefully by the end of next year, the war on inflation will be won and we'll see central banks starting to reduce interest rates," says Kerr.

In the podcast he talks in detail about the inflation picture including core inflation, the labour market and why the Reserve Bank wants to see a rise in unemployment, plus the role of government fiscal policy. Kerr also discusses just how disruptive the Covid-19 pandemic has been to the economy, when the world last witnessed shocks of this magnitude with war-time settings such as closed borders and disrupted supply chains, and the changes this has wrought on the economy.

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 that markets are ignoring weak Chinese data and focusing on the positives.

But first, there was another dairy auction earlier today. However this one isn't about the auction prices - which rose +2.4% in USD terms. It is really all about the exchange rate, because in NZD, the auction prices fell -3.1%, and in local currency that means prices have now fallen for four consecutive auctions and wiping out all the good September rises. Year-on-year prices are down -7% on that basis and down -18% in USD terms. Analysts may give up on some of their 2022/23 season pay-out forecasts now. The NZD has risen +5.6% since the prior auction. Prices in USD rose +3.1 for both SMP and WMP, but to have just broken even they needed to rise about +10% and back to those September levels.

In the US, retail sales last week rose only about the CPI inflation rate from year-ago levels, so that is a noticeable slowing of sales volumes heading into their holiday shopping seasons.

Gradually, some of the heat is going out of American producer price inflation too. It was up +8.0% in October from a year ago, but only up at an annualised rate of +2.5% on October from September. "Core' rates rose even less on that same basis. Perhaps 'transitory' is arriving, finally.

Perhaps the heat is going out of American factory stresses, but not everywhere. The New York "Empire State factory survey" rose in November to record a better expansion, with activity and employment indexes high. But new order levels were unmoved. This survey is coming out of a three-month dip.

American consumers are loading up on more personal debt, after many years of relative restraint - and especially credit card debt. US household debt climbed at the fastest annual pace since 2008 in the third quarter, with credit-card balances surging even as the interest rates that lenders charge to consumers hit a multi-decade high. Households added more than US$350 bln in overall debt last quarter, taking the total to US$16.5 tln.

Canada reported that their house prices continued their slide for an eighth month in October as buyers and sellers adjusted to an environment of higher interest rates. Prices are now down more than -10% from their peak and lower than year-ago levels.

The Japanese economy unexpectedly contracted -1.2% on an annualised basis in Q3-2022, missing market forecasts of +1.1% growth and shifting from an upwardly revised +4.6% expansion in Q2. This Q3 result was their first contraction in a year.

China's industrial production rose +5.0% year-on-year in October according to their official dat, less than market estimates of a +5.2% increase and after a +6.3% growth in the prior month.

But electricity production barely reached year-ago levels (+1.3%), so unless the Chinese are undergoing a large productivity gain, it is hard to see how these official figures are what is really going on in their factories.

Chinese retail sales fell, according to official data, slipping -0.5% year-on-year, hurt by foodservice sector which dropped more than -8%. In fact, without car sales, the decline would have been almost -1%. Even after all this the fall was -¥202 bln (NZ$50 bln) in the October month alone.

We should note that not only did Chinese President Xi meet with his US counterpart in what was a positive exchange, he also met with the leaders of Australia and South Korea, also positively. And the background wolf-warrior talk suddenly was dialled back. China's alignment with Russia isn't working out for them, and trade is more promising with countries it previously tagged as rivals.

In Germany there was something of a surprise in consumer sentiment. While it is still deeply negative, it was recorded as much less so in a widely-watched November survey. The 'improvement' certainly took analysts by surprise. Perhaps perceptions that the Ukraine war might not drag on unresolved for many years are helping.

The UST 10yr yield starts today at 3.84% and down half the 6 bps it rose yesterday. 

The price of gold will open today little-changed at US$1771/oz. This is back up +US$2 from this time yesterday.

And oil prices start today little-changed from this time yesterday at just on US$85.50/bbl in the US while the international Brent price is just over US$92.50/bbl.

The Kiwi dollar will open today at 61.7 USc and +¾c stronger. In fact, that is an almost 3-month high. Against the Australian dollar we are unchanged at 91 AUc. Against the euro we are also firmer, up +½c at 59.5 euro cents. That all means our TWI-5 starts today at 70.4 and up +40 bps.

The bitcoin price is now at US$16,938 and up +3.0% since this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.8%.

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 on 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 that is generally down-beat today.

The global economic outlook is even gloomier than projected last month, the IMF told G-20 leaders, citing a steady worsening in PMI surveys in recent months. It blamed the darker outlook on tightening monetary policy triggered by persistently high and broad-based inflation, weak growth momentum in China, and ongoing supply disruptions, and food insecurity caused by Russia’s invasion of Ukraine.

In the US, consumer inflation expectations for the year ahead increased to 5.9% in October from 5.4% in September. This comes after three consecutive months of a slowdown. Driving the rise was the expectation that petrol prices would rise further. But expectations about year-ahead price changes rose for food and for rent both remained very high. The RBNZ will release the results of its own survey of consumer expectations later today.

Also later today, the REINZ will release its October house price data and it is expected to be deflationary.

In China, the 16-point rescue of their property sector we noted yesterday is now official. It will be a costly affair, and there is no evidence it will actually stop falling house prices there. However, the currency markets liked the intervention, and the yuan has stopped falling.

In South Korea, we should keep an eye on a growing bond crisis there. Even AAA rated companies are having trouble raising debt financing. And an SOE tried to renege on a debt repayment, triggering a focus on the issue. Seoul's national government has stepped in to bring some order, but damage to these markets is impacting them as well, with CDS (credit default swap) premiums for sovereign South Korean debt now well over 60 bps and doubling in two months. (NZ CDS spreads are just over 20 bps.)

India's retail price inflation eased to 6.8% year-on-year in October, down from September's five-month high of 7.4%, helped by slower rises in food prices and a strong base effect. Still, the reading came in slightly above market expectations, and remained above the central bank's unusually wide 2%-6% target range

The latest data for EU industrial production is for September and that overnight data came in very much better than anyone expected, up +4.9% from a year ago and nearly double what was expected and the annual expansion in the prior month. The rise from August was also strong.

In Australia, flash flooding is causing extreme stress in rural NSW, with evacuations ordered in a number of centers. The impacts on the Australian east coast rural economy will be huge.

Perhaps there is somewhere in here we can note that since April 2022, the US central bank has reduced the size of its balance sheet by more than -US$¼ tln.

The UST 10yr yield starts today at 3.87% and up +6 bps in Wall Street's Monday trade. 

The price of gold will open today at US$1769/oz. This is down -US$2 from this time yesterday.

And oil prices start today -US$2 lower than this time yesterday at just on US$86/bbl in the US while the international Brent price is just over US$93/bbl. OPEC has trimmed its forecast for demand growth in their product, the fifth time in a row they have done that in 2022. It says supply is in surplus.

The Kiwi dollar will open today at 61 USc and marginally softer. Against the Australian dollar we are also softer at 91 AUc. Against the euro we are still at 59 euro cents. That all means our TWI-5 starts today at 70 and unchanged.

The bitcoin price is now at US$16,438 and a mere -0.7% lower than this time yesterday. Volatility over the past 24 hours has been low at under +/- 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 on 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 that away from the headline political shifts, the global economic signals seem to be dimming further.

In the week ahead, the most important American economic releases include retail sales, producer prices, and housing data. Investors will be also keeping an eye on earnings reports from big retailers and the state of the crypto market after the weekend FTX bankruptcy. All this comes after their mid-term election results become clearer, and with a surprising good outcome for the incumbent President.

Elsewhere, in the spotlight will be inflation rates from Japan, India, UK and Canada. Also, we will get more German economic sentiment data, Q3 GDP growth rates from Japan, and industrial production, retail sales, and fixed investment data from China. And don't forget our own REINZ data for October will be released tomorrow.

But first in the US, the widely-watched University of Michigan consumer sentiment survey fell in November to its lowest level since July and by slightly more than expected. The current economic conditions index sank sharply and the expectations gauge tumbled too. Meanwhile, inflation expectations increased marginally for both the year ahead and the next 5 years. Of course, since this survey there have been elections and a moderating of a key inflation measure which have both energised financial market optimism.

That same survey reports about four in five consumers now describe buying conditions for homes as bad, a record in data going back to 1978. In fact, mortgage rate rises show no sign of slowing.

The American Federal Budget repair continues. In October, the first month of their new budget year, they posted a deficit of -US$88 bln, about half the level of the same month a year ago. That was because tax collections for a swelling workforce and stronger company earnings were up +12%, and spending was down -9%. By any measure this is impressive.

Meanwhile, giant crypto platform FTX has been placed into bankruptcy, and Twitter's mercurial new boss has warned that it too faces bankruptcy - after he paid US$44 bln for the firm, and then promptly moved to wreck it. For sure it needed repair, but the toxic way he handled the takeover has pushed it close to the edge. FTX was also hacked. Masters-of-the-Universe tech moguls (and narcistic recycled Presidential candidates) look vulnerable these days.

The spreading tech-sector layoffs should be watched closely. The numbers involved are large, large enough to impact their overall labour market.

China has labour market issues too. We all know that their economic slowdown is stubbornly extending. And we know that their jobless rate is surprisingly high with the official level over 5%. But what might surprise is that their youth jobless rate is approaching 20%. A growing number are university graduates. A shackled private sector can no longer absorb the numbers coming on to their market and the risks of great social unease is high as a consequence.

Normally at this time of year we report of the huge Chinese retailing event, "11/11" or 'Singles Day'. It went off as normal, but for the first time ever, none of the large platforms (Alibaba, JD.com) released specific results, rather saying trading was "in line with last year".

And China is reportedly working on a new sweeping rescue package for its troubled property development sector. It's not public yet but Bloomberg claims to have been briefed and they say it includes "16 measures" that range from addressing the liquidity crisis faced by developers to loosening down-payment requirements for homebuyers. Developers’ outstanding bank loans and trust borrowings due within the next six months can be extended for a year, while repayment on their bonds can also be extended or swapped through negotiations, they were told.

India's industrial production rose by +3.1% in September from a year earlier, reversing a revised -0.7% decline in the previous month and easily beating market expectations of 2.0% growth.

But not so positive was an unexpected fall in new car sales in India. They rose more than +9% in September from August to 307,000. But in October they fell to 291,000, and although that is much higher than year-ago levels, that base for both months was weak.

In Europe, a fall in Germany's industrial production, and a retreat in the UK's overall economic activity is generating rising talk of a winter economic recession there. It has been expected since the start of the Russian invasion, but the reality of it is closer now - even if it probably won't be as deep as originally feared. But some think the economic storm will be fierce, and be global.

At the ASEAN meetings in Cambodia, the full rivalry between the China Bloc (including Russia, Myanmar, Laos, etc.) and a varying grouping led by the US, was on display, especially around freedom of navigation issues in the region. The heightened levels of distrust only seemed to deepen.

In Australia, the giant hack of the records in their Medibank Private company, and the subsequent ransoming of personal details on the dark web, has brought an official claim that the hackers are known Russians: REvil. Security experts believe cybergangs are scaling up their attacks and changing their behaviour as they gain a form of protection from Russian President Putin.

Meanwhile, Sydney’s housing auction clearance rate sank to 61% as almost one-quarter of homes scheduled for auction last week were withdrawn, in a sign that rising borrowing costs and growing uncertainty are biting the east coast-dominated residential market.

The UST 10yr yield starts the week at 3.81%. 

The price of gold will open today at US$1771/oz. This is up +US$5 from this time Saturday but down -US$4 for the week.

And oil prices start today +0.50 USc firmer than this time Saturday at just on US$88/bbl in the US while the international Brent price is just over US$95/bbl.

The Kiwi dollar will open today at 61.2 USc. For the week it has revalued by +3.1%; over the past month by an impressive +9.5%. Against the Australian dollar we are little-changed at 91.3 AUc. Against the euro we are also little-changed at 59.1 euro cents. That all means our TWI-5 starts today at 70. This broader measure is up only +0.4% for the week, but up +5.4% over the past month.

The bitcoin price is now at US$16,561 and down -1.4% since this time Saturday. And volatility over the past 24 hours has been modest at +/- 1.5% with the light volumes returning after the prior four days of instability and highish volumes.

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 tomorrow.

New Zealand ought to move from an "ad hoc" immigration policy disconnected from other public policy settings to a long-term government policy statement to assist with infrastructure and other planning, Productivity Commission Chairman Ganesh Nana says.

Speaking in the latest episode of interest.co.nz's Of Interest Podcast, Nana says the government's formal response to the Productivity Commission's inquiry into NZ's long-term immigration settings is expected before Christmas. Among other things the inquiry, completed earlier this year, recommends a government policy statement requiring governments to set a clear strategic direction for immigration policy.

Nana notes the level of immigration influences the overall population, the requirement for infrastructure including transport networks, hospitals, schools, energy requirements, early childhood needs, and regional development. At the moment there's a "disconnect" between immigration settings and these other areas, and a disconnect between workforce training and skills development and labour market policy, Nana argues.

He also wants to see a longer-term focus for immigration rather than the "ad hoc adjustments" currently made every few months or years. This ought to have a timeframe of at least 10-years.

In the podcast he talks about these issues in detail, plus how often the government policy statement could be revised, the idea of holding a referendum on the population size we want, the recent slowdown in population growth and decline in areas such as Auckland and Wellington, the impact on natural resources and land use, why the population size isn't the answer to productivity or wellbeing, what he'd like to hear during election year, what the Treaty of Waitangi means to immigration, and more.

"Migration is always going to be part of our population story," Nana says.

"The world is going to be a lot different and if we continue to plan on the past we will be disappointed. I think we've got an opportunity to set our own path, and our own trajectory in terms of population, in terms of migration and population growth. Let's do that openly and explicitly rather than stumble into the rather large population growth we had pre-Covid."

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 energised by some key American data.

First up today, there has been a surprise improvement in the US CPI inflation rate. And that has induced some sharp market reactions. Their rise in consumer prices slowed for a 4th month to 7.7% in October, the lowest since January, and below forecasts of 8%. It is down from 8.2% in September.

Equity markets took off higher. Bond yields dived. And the US dollar retreated as risk appetites swelled. Markets are signaling a landscape change on this data, which seems a bit of an over-reaction.

However, the change between September and October is below +5%, so that indicates that recent improvements are better than the year-on-year headline numbers. "Core inflation" was up even less. Markets are betting the Fed will be pleased, and that the next rate hike from them won't have to be as high a +75 bps. Markets have now priced in a +50 bps December hike.

Meanwhile, US jobless claims rose marginally last week to +205,000 and taking the number of people on these benefits to 1.26 mln. While that is still near historic lows, it is a noticeable rise and maybe an indication the heat is going out of their tight labour market. Certainly there is now a steady stream of daily job cut announcements coming out of the tech sector. They will probably spread from there. The question is, how fast and how hard. But there are no alarming signs just yet and clearly today Wall Street is betting it will be minor.

In Canada, a liquidity crunch has hit a large private mortgage investment fund. Real estate lender Romspen Investment has halted all withdrawals and redemptions as increasing numbers of borrowers fail to make scheduled payments. It is a C$2.8 bln fund. It might be a canary moment in the Canadian housing market.

China's banks extended ¥615 bln (NZ$142 bln) in new yuan loans in October, down from ¥2.47 tln (NZ$568 bln) in September and below market expectations of ¥800 bln. It was the lowest level in new bank loans since December 2017, as credit demand weakened and the economic outlook darkened further amid persistent pandemic curbs and a deepening property sector debt crisis. Their central bank has promised aggressive policy accommodative to support growth, but capital flight and a weakening yuan could limit its moves. Household loans, including mortgages, fell by -¥18 billion in October, from ¥650 bln in September, while corporate loans dropped to ¥462 bln from ¥1.92 tln.

Things may not get any better in China. Covid cases continue to surge in Guangzhou and the daily new case count is approaching the level at which Shanghai shut down earlier this year, when the daily new cases crossed 4000. Beijing cases are also increasing, as are cases in Chongqing. So three of the China's largest and most important cities are now dealing with their worst outbreaks in months. What would happen if all three were locked down hard like Shanghai was, at the same time?

In a somewhat confusing signal, overnight China’s top leaders reinforced the need to stick with the contentious Covid-Zero policy while urging officials to be more targeted with their restrictions so as to avoid damage to the economy. But the very fact they are thinking of the economic consequences will probably cheer local markets when they open later today.

The presidents of the US and China will meet at the G20 in Bali on Monday. The leaders of the world's two largest economies will discuss issues such as tensions surrounding Taiwan, nuclear war risks and "fair trade", as they seek to manage competition that has become more fierce than ever. Australia's prime minister is also likely to meet them both.

In Australia, consumer inflation expectations rose to 6% in November, up from 5.4% where they had been anchored for the prior two months.

Global container freight costs fell faster last week, down -9% in a week, to be -70% lower than year-ago levels. And it is now well below five year averages. Rates out of China fell even faster. However, bulk cargo rates eased higher over the past week.

The UST 10yr yield started today at 3.84% and down a massive -33 bps from this time yesterday. 

The price of gold will open today at US$1750/oz. This is up +US$36 from this time yesterday and back near its early October levels.

And oil prices start today a marginal +50 USc firmer than this time yesterday at just on US$86.50/bbl in the US while the international Brent price is just over US$93.50/bbl.

The Kiwi dollar will open today at 60 USc and back up +1c since this time yesterday. Against the Australian dollar we have slipped slightly to 91.2 AUc. Against the euro we are a bit firmer at 59 euro cents. That all means our TWI-5 starts today at 69.5 and +30 bps higher than this time yesterday.

The bitcoin price is now at US$17,802 and has recovered a net +4.6% since this time yesterday. But in between it got down as low as US$15,554 before making something of a comeback. And volatility over the past 24 hours has been extreme again at just on +/- 7.7% with continuing instability.

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 sharp dive in crypto prices, especially bitcoin, has induced a risk-off tone in markets today.

And financial markets are bracing for tomorrow's release of American CPI data. They expect it to stay high with the headline rate at 8% which will trigger another outsized Fed rate hike on December 15 (NZT). That is currently priced in at +60 bps, with their policy rate expected to top out at over 5% in mid 2023. The risks are to the upside however, unless inflation comes down soon.

American mortgage applications fell again last week, but this time the retreat was small. But from year-ago levels they remain down more than -40%. Their benchmark 30-year interest rate rose to 7.14% plus points.

US wholesale inventories rose barely in September from August as firms work to control the recent run-up, but they remain +24% higher than year ago levels so there is more to go to get them back under control. The inventory-to-sales ratio remains elevated in the perspective to 2021 levels, but on a longer term perspective isn't unusual.

However, there are increasing reports of substantial job layoffs underway in both the tech and finance industries in the US. The economic slowdown the Fed is trying to engineer might be underway.

US election outcomes are too close to call this morning. It will take a while for the dust to settle. But there hasn't been a big swing either way, which is unusual in US mid term elections.

China's annual consumer inflation eased to 2.1% in October from year-ago levels and down from 2.8% in the prior month on the same basis. That was below the expected 2.4% and is the lowest since May. Food prices jumped +7.0% however led by a big jump in pork prices (+9% in October from September). Prices for beef and lamb were little-changed. Prices for milk were little-changed too.

China's producer prices fell -1.3% in October which was the first drop in factory gate prices since December 2020, reflecting disruptions to output and weak domestic demand amid strict pandemic curbs as well as falling commodity prices. Production materials declined -2.5%. Declining producer prices were a feature of the 2012-2017 period when China was building its industrial power. But this latest retreat comes as that international advantage seems to be fading.

China is throwing ¥250 bln (NZ$35 bln) into "bond financing" for struggling property developers. It’s a lifeline for many, and is hard to see as a real commercial transaction.

The UST 10yr yield started today at 4.17% and up +3 bps from this time yesterday. 

The price of gold will open today at US$1714/oz. This is down -US$3 from this time yesterday.

And oil prices start today -US$4 lower than this time yesterday at just on US$86/bbl in the US while the international Brent price is just under US$93/bbl.

The Kiwi dollar will open today at 59 USc and down -1c since this time yesterday. Against the Australian dollar we have stayed firm at 91.5 AUc. Against the euro we are almost -½c softer at 58.8 euro cents. That all means our TWI-5 starts today at 69.2 and -70 bps lower than this time yesterday.

The bitcoin price is now at US$17,023 and falling so may be different when you hear this. It is down almost -17% since this time yesterday and is at its lowest in two years. And volatility over the past 24 hours has been extreme at just on +/- 10.6% with serious market instability. 

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.