Economy Watch

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 data is a bit shaky today and the way forward less clear and uncertainties rise.

American mortgage application levels fell less than expected last week, but that still takes them to their lowest level since 1998. This trade survey shows the benchmark 30 year fixed mortgage interest rate rose to 7.16% plus points, their highest since 2001.

So it is no surprise that new home sales fell -11% from year ago levels. It is small comfort that this fall is less than expected. The prior month rise was clearly just an outlier and the downward trend remains. Building consent levels stabilised however, even if at a low level.

Rising imports and soft export levels took their merchandise trade deficit to -US$99.6 bln. While that may not be great for them, their import engine sustains the core of global international trade. Their overall deficit will run at about -3% of GDP this year.

Also not great, their wholesale and retail inventory build, in current dollars, remains up at +25% and +22% year-on-year. These are largely unchanged levels, but problematic all the same. Inflation and supply-chain issues are a part of it, but it clearly can't continue at this level and we are seeing signs of a pullback reaction in the regional factory surveys now.

The US Treasury auctioned US$45 bln of five year bonds today and as usual this was well supported. In fact, the resulting 4.19% yield was lower than the 4.23% at the prior equivalent event a month ago, which is an unusual leveling out. But to be fair, it has run up quite quickly so far in all of 2022.

The Bank of Canada raised the target for its overnight rate by +50 bps to 3.75% which was less than the +75 bps expected. Still, it was the sixth consecutive rate hike, pushing borrowing costs there to their highest since 2008. They also signaled that their policy rate will need to rise further to weigh against inflation but they are near the end of that process, they said. However, their preferred measure of core inflation has not shown meaningful evidence of easing yet. Overall Canadian inflation is running at 6.9% and growth is expected to slow to +3.25% this year and less than +1% in 2023.

In China, parts of the city of Wuhan is again under lockdown as omicron cases start to spread there.

Singapore's industrial production stalled again in September in an unexpected pullback because a modest rise was expected after a set of recent months that were weak.

In the UK, their recent political and financial turmoil has brought a very sharp rise in the yield demanded by investors for their Government debt. The UK 7 year bond tendered today yielded 3.76%. Two months ago when this same bond was offered it yielded 1.96%. Bad policy has real cost. And they are expecting to have to issue huge amounts of new debt as a consequence.

The Australian CPI inflation rate climbed more than expected to 7.3% in Q3 from 6.1% in Q2, above market forecasts of 6.9%. This was the highest level since Q2 1990, boosted by higher prices for new housing construction, automotive fuel, and food. Prices for food rose the most since Q4 1983, up 9.0%. The RBA looks like it has called this completely wrong, even if they do now see Aussie inflation peaking at 7.75%.

The UST 10yr yield starts today down -7 bps at 4.02%. 

The price of gold will open today at US$1667/oz. This is up +US$13 from this time yesterday.

And oil prices start today +US$3 firmer than this time yesterday at just under US$88/bbl in the US while the international Brent price is just over US$94/bbl. But natural gas prices continue to fall as it becomes clearerr that Europe will have more than enough supplies for this winter. And Germany is on target to avoid using any Russian gas.

The Kiwi dollar will open today at 58.3 USc and up almost a full +1c from this time yesterday. Against the Australian dollar we are marginally softer at 89.8 AUc. Against the euro we are a little firmer at 57.9 euro cents. That all means our TWI-5 starts today at 68.2, and +40 bps firmer than yesterday.

The bitcoin price is now at US$20,773 and another strong +3.9% rise from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.2%.

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 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 Australia gets "the Budget we need" rather than the one that just papered over their issues.

But first, American retail sales are holding, up +8.2% from a year ago on a same-store basis last week.

But US consumer sentiment is not holding. The widely-watched Conference Board survey has it dipping after two months of gains.

And nor is the next regional Fed factory survey, this one from the Richmond Fed in the mid-Atlantic states region. They are continuing to report weaker conditions as they have done most of the year, with little supply-chain relief.

In China, their slowdown is expected to push the state budget to a -US$1 tln deficit. That would be -5.5% of GDP and similar to the American one.

In Japan, most banks and insurers face currency losses from their giant holding of US Treasuries. They are no longer buyers. In turn, that is putting upward pressure on US yields for these benchmark bonds.

The Ifo Business Climate indicator for Germany edged lower to 84.3 in October, the weakest since May 2020, compared to an upwardly revised 84.4 in September. Still, this new level was not as bad as expected. Winter recession is coming and Europe's biggest economy will contract by -0.6% in the fourth quarter, Ifo forecasted. In the face of all their pressures, that is a pretty creditable result.

The volatile economic situation is changing the landscape of who has bragging rights for the world's largest economies. In 2021 the top five were the US, China, Japan, Germany and the UK (or France on a PPP basis). In 2022 this set is the US, China, Japan, Germany and India. But lurking behind them is an unlikely contender. California is rising fast and is overtaking Germany in late 2022. Just a few years ago, California ranked #7. Much has been written about California's supposed demise and a "flight to Texas". It turns out that was just invented partisanship. The move is the other way, in fact.

Australia released its October mini-Budget and it seems to have been a major change. This is the first Budget from their new Labor Government. Huge amounts of 'pork' from the Morrison/Frydenberg Government have been removed (-AU$22 bln), and they have benefited from rising tax revenues. There seems to be a wholesale change of emphasis underway. Winning sectors include renewable energy, the environment, foreign aid, and a commitment to build an extra 1 million new houses. Losing sectors include the construction industry with some very large projects deferred (-AU28 bln), government consultants (-AU$3.6 bln), and potentially, households, because tax increases loom for some and the claim little can be done for them to fight inflation, especially energy inflation. It is a Budget that is getting grudging support as "the Budget we need" after years of perceived mismanagement. Financial markets will pass their judgement later today.

The UST 10yr yield starts today down -14 bps at 4.09% in a volatile mood. 

The price of gold will open today at US$1654/oz. This is up +US$4 from this time yesterday.

And oil prices start today fractionally firmer than this time yesterday at just under US$85/bbl in the US while the international Brent price is just under US$92/bbl.

The Kiwi dollar will open today at 57.4 USc and up +½c from this time yesterday. Against the Australian dollar we are marginally softer at 90 AUc. Against the euro we are little-changed at 57.7 euro cents. That all means our TWI-5 starts today at 67.8, and +30 bps firmer than yesterday.

The bitcoin price is now at US$19,998 and a strong +3.6% higher than this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.

The resumption of overseas tourism isn't merely a matter of flicking a switch with everything then returning to how it was.

Rebecca Ingram, Chief Executive of Tourism Industry Aotearoa, says the industry, dramatically impacted by the Covid-19 pandemic with the border closed and domestic travel restricted for periods of time, continues to face major challenges.

Speaking in the latest episode of interest.co.nz's Of Interest Podcast, Ingram says there's no understating the impact of the last couple of years.

"This restart we're going through at the moment, it's really not just flicking a switch. You can't just shut something down for a couple of years and then hope that it will turn back on just the way it was," says Ingram. "So it's very difficult out there at the moment. People are having to make lots of choices with imperfect information."

While the industry is feeling quite hopeful about the upcoming summer, flight connectivity isn't back where it was pre-Covid, and the industry lost 72,000 workers. Ingram says tourism businesses are recruiting for everything from beauty and massage therapists for spas and hotels, to mechanics for rental car companies right across the country.

And in a world where climate change and net-zero carbon emissions is on the agenda, there's also debate about the types and volume of tourists New Zealand should be targeting.

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 going south.

Global credit risks are rising as the triple threat of rate rises, Europe’s energy crisis and China’s stuttering property market and political changes all show no sign of easing. Good corporate profits can't mask any of these threats to credit markets.

Also, we should watch out for global commercial property valuations and sales activity. Rising yields and p/e ratios make this sector increasingly vulnerable to a slump.

We are less than ten days away from the next US Fed rate review. Markets are pricing in a full +75 bps (and a bit more) for that meeting, plus another +125 bps and taking their official rate to 5.0% by March 2023 and it is assumed it will level out at that point for the rest of the year. That is a rapid-fire set of increases expected and already priced in. The big question now is, when to slow down? (Markets have priced in a New Zealand OCR at 5.5% by August 2023.)

The early 'flash' PMI result for the US paints a "challenging" picture for business conditions there. New order intakes were weak and their factory sector slipped unexpectedly into a minor contraction. But it is their giant services sector that is their main problem, shifting sharply lower into a real contraction. Still, it is not as low as this survey recorded in August. Getting the blame for this contraction are company moves to rein in their fast rising inventory levels, something analysts have been signaling as likely for six months.

Canadian retail sales didn't slip away as much as expected; in fact they rose in August after a slip in the prior month.

While we were holidaying, Chinese President Xi Jinping sealed his bid for a precedent-breaking third term while his deputy and several other top officials got the boot and 'retired'. 'In' is a hardline group. There are no women again this this core group (again), and for the first time in 25 years no women in the wider Politburo. Also conspicuously missing are leaders with economic experience. Along with Premier Li, the central bank chief was another key economic official demoted.

These are changes that have spooked investors. There is a rush by foreign investors to quit exposures to China now; the Hong Kong equity market was in full panic mode yesterday and ended down more than -6%. The Shanghai markets tumbled -2%.

Burnishing Xi's coronation, their official stats reported the Chinese economy rose +3.9% in Q3-2022, exceeding the market consensus of +3.4% and picking up from a meagre 0.4% growth in Q2. But it improved even though retail sales rose at just a +2.5% rate, the least in 4 months, and export growth was at a 5-month low. Further, their jobless rate hit its highest since June at an official 5.5%.

One reason the GDP data came in stronger than expected is that industrial production beat estimates, up 6.3% in September alone, in an unexpected spurt. If true, that is surprisingly strong given all the other weak data in this category. Electricity production fell -0.4% in September.

We'll leave you to draw your own conclusions about how credible the reported rising economic growth is among all these falling data points.

Further, real estate investment fell hard (down -8.0%). And house prices also fell at a faster pace with 50 of their 70 largest cities positing declines.

Buyers are shunning residential real estate 'investment' in most Chinese cities now. Local authorities are raising emergency funding to complete stalled projects, but buyers remain suspicious of what they will get. Some cities are trying to entice them back with sub 4% mortgage interest rates. In fact one city is now offering 3.7% mortgages. There is not a lot of evidence it is working yet.

Prices for iron ore and copper are falling, mostly based on weaker prospects in the Chinese economy. And despite war disruptions from Russian supply, neither are aluminium nor nickel prices going anywhere either. Sanctions should have raised prices for these key commodities, but it isn't happening. The reason is weak demand, especially from China.

Taiwan retail sales rose +7.5% in September from a year ago, good for them but it was less than the strong August rise.

Taiwanese industrial production however retreated in an unusual move lower, down -4.8% from year-ago levels.

As widely expected, Japan's government and central bank intervened in the currency market over the weekend to support a falling yen, The yen soared the most against the US dollar since March 2020 on the intervention, rising +2.7% in just a few hours. It was an intervention timed for the final few hours of trading in the US on Friday, so it should hold things until today, at least. It is estimated to have cost US$37 bln in those few hours.

Japanese inflation came in at 3.0% in September, unchanged from August and holding near an 8 year high. Food prices were up +4.2%. Electricity costs were up 21% and generating a surge in home battery storage demand. Without food and energy costs, 'core' inflation there was only 1.8% however.

Japan's giant economy is still expanding on rising output and new order growth although some of this improvement isn't as fast as it was. Inflation is still an issue for them, but being a high-tech economy is providing extensive resilience.

In Europe, their PMI's are retreating however, although the contraction is minor at this point. The UK contraction is similar.

Tomorrow, Australia releases its September CPI data. It is expected to rise to 6.9% from 6.1% in August. But analysts like at CBA reckon it will be over 7%. At that level, the RBA may not be as sanguine about how they have handled monetary policy so far.

Australia's factory sector is still expanding, just a little slower, but their services sector has slipped into a contraction in October.

The UST 10yr yield starts today little-changed at 4.23% but it is quite volatile. 

The price of gold will open today at US$1650/oz. This is down -US$8 from this time yesterday.

And oil prices start today down -50 USc from this time yesterday at just on US$84.50/bbl in the US while the international Brent price is just on US$91.50/bbl.

The Kiwi dollar will open today at 56.8 USc and down -¾c from this time yesterday. Against the Australian dollar we are little-changed at 90.2 AUc. Against the euro we are also down -¾c at 57.6 euro cents. That all means our TWI-5 starts today at 67.5, and -60 bps lower than yesterday.

The bitcoin price is now at US$19,292 and -0.9% softer than this time yesterday. Volatility over the past 24 hours has also been low at just +/- 0.9%.

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 that both China and Turkey seem to be wandering off in the belief that economic management doesn't involve behavioural aspects or consequences.

But first, US jobless claims fell to 178,000 last week taking the total number of people on these benefits to just on 1.2 mln and unchanged from the prior week at a record low. So still no evidence yet of any rising American labour market stress. You may recall that that they peaked in 2020 at over 23 mln.

US existing home sales fell again in September, and apart from the pandemic, are now running at a ten year low. High mortgage interest rates are getting all the blame. But at the same time, sellers are withdrawing as well, so supply is tight, leaving a competitive market for those who want to buy.

American may not be buying housing, but they have rediscovered the travel bug. Most large airlines there are reporting record revenues in the September quarter and they are returning to profitability as consumers continue to prioritise spending on travel.

The Philadelphia Fed factory survey in the heartland Rust Belt region was weak again in October but no more so than for September. New orders were weak in this region, but hiring was still difficult. And although firms are not optimistic about the next six months, they are still committing increased investment for capital expenditure.

In China, Section 9 of the Party Congress report on "Improving the People's Wellbeing and Raising Quality of Life", includes new language about regulating wealth accumulation - "keep income distribution and the means of accumulating wealth well-regulated" it said. An article in The Beijing News that quotes a labour researcher discussing this language says that "a few people accumulated wealth too quickly ... This problem remains to be solved" and that appears to have caused some investor anxiety. (H/T BB)

Taiwanese export orders fell in September as expected, down -3.1%, but that was not as sharp a fall as analysts had pencilled in. But weak demand from mainland China is hurting this data, where these orders were down -19% year-on-year. Compared with almost all other regions they were up more than +15% on the same basis.

Japanese policymakers made fresh threats of intervention after the yen tumbled past the key psychological level of 150 to the US dollar, keeping investors on high alert in case Tokyo steps into markets again to support the fragile currency. Rumours are swirling that the Bank of Japan is in a new round of emergency bond buying.

In Australia, their jobless rate remained steady at 3.5% in September as the number of employed people increased by just +900, and unemployment increased by +8800. Their participation rate was unchanged at 66.6%. We don't get our September labour force data until Wednesday, November 2, 2022.

In Victoria, the state government will revive the State Electricity Commission, reversing two decades of outsourcing energy generation to the private sector. But that is only if they are re-elected on November 26, which at this time seems highly likely.

Global container shipping costs fell another -3% last week. That takes these costs down to below pre-pandemic levels with the benchmark Shanghai to Los Angeles route now under US$2500/ctnr. This emblematic of the sudden fall away in the China-US trade. Global bulk cargo rates were little-changed.

The UST 10yr yield starts today sharply higher again at 4.22%, up another +11 bps from this time yesterday. 

The price of gold will open today at US$1636/oz. This is up +US$6 from this time yesterday.

And oil prices start today up +US$1.50 from this time yesterday at just under US$85/bbl in the US while the international Brent price is just over US$91/bbl. 

The Kiwi dollar will open today at 57 USc and about +½c firmer than this time yesterday. Against the Australian dollar we are little-changed at 90.3 AUc. Against the euro we are +¼c firmer at 58.2 euro cents. That all means our TWI-5 starts today at 67.9, and up +40 bps from yesterday.

The bitcoin price is now at US$19,167 and virtually unchanged from this time yesterday. Volatility over the past 24 hours has however been modest at just +/- 1.1%.

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.

Remember, Monday is a public holiday in New Zealand, Labour Day.

Kia ora. I'm David Chaston and we’ll do this again on Tuesday.

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 bond rout is gathering pace. 

The US 10-year Treasury yield, the benchmark for borrowing costs worldwide, has risen to 4.11%, the highest since October 2008, with investors fretting about the prospects of a recession from aggressive central bank actions to tame inflation. Minneapolis Fed President Neel Kashkari was the latest policymaker to warn that the American central bank might need to lift its policy rate above 4.75% if underlying inflation continues to accelerate.

In the US, the widely-watched Beige Book review of the US economy by the Federal Reserve regional members paints a picture of a "modestly expanding" economy, with some wide regional variations. Retail activity is flat they noted, but factory activity is expanding. Employment continued to rise at a modest to moderate pace they noted, and although price growth remained elevated, some easing is showing up in a number of regions.

American new housing starts came in lower in September than for August, but remained at around the 1.5 mln annual rate level they have been since April. Residential building consents rose slightly, and completions remained stable as they have for the past five years.

US mortgage applications however dipped yet again last week, extending the long string of declines that basically stretch back to the start of 2021 with only occasional gains. But what is rising relentlessly are their mortgage interest rates, now up to 6.94% plus points. American residential housing has lost its 'investment' status. It is back to fulfilling its primary function of just being 'shelter'.

Today's UST 20yr bond tender was a well-supported event for the US$12 bln on offer despite no Fed involvement. The median yield was 4.32% today, up a sharp +57 bps from the 3.75% at the prior equivalent event a month ago.

Canada's September CPI inflation rate came in at 6.9%, and sticking close to the 7% level recorded for August. But it is down from the recent peak of 8.1% recorded in June. Their producer prices are rising faster at +9.0% in the year to September although this is lower than the August +10.2% rise. Raw material prices are falling quite quickly there now and that will increasingly flow through to future PPI results.

China data and economic news is still locked-up so as not to distract from the Party's big meetings. Investors in Hong Kong and Shanghai don't seem impressed however - not that Beijing really cares.

The overall EU inflation rate for September was released overnight coming in at +10.9% with the frontline states facing Russia being hit the hardest, and France, Spain and Italy keeping the overall rate restrained.

The UK also reported its September inflation rates and it was sticky at +10.1%.

Adding to global inflation pressure, we should note that the price of lithium is rising again, even if other non-precious metals slip away.

The UST 10yr yield starts today sharply higher at 4.11%, up +9 bps from this time yesterday.

The price of gold will open today at US$1630/oz. This is down -US$20 from this time yesterday.

And oil prices start today up +US$1.50 from this time yesterday at just over US$83.50/bbl in the US while the international Brent price is just on US$90.50/bbl. 

The Kiwi dollar will open today at 56.6 USc and -20 bps softer than this time yesterday. Against the Australian dollar we are up at 90.4 AUc and another small rise. Against the euro we are also firm at 57.9 euro cents. That all means our TWI-5 starts today at 67.5, and marginally up from yesterday.

The bitcoin price is now at US$19,179 and down -1.3% from this time yesterday. Volatility over the past 24 hours has however been low at just +/- 0.9%.

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.

There's no silver bullet law that parliament could pass to cover off all the good and bad aspects of the crypto and blockchain industry, according to an adviser to the parliamentary select committee running a cryptocurrency inquiry.

Speaking in the latest episode of interest.co.nz's Of Interest Podcast, MinterEllisonRuddWatts partner Jeremy Muir discusses a wide range of crypto-asset related issues.

A leading lawyer for cryptocurrencies, digital tokens and coins, non-fungible tokens (NFTs), and other blockchain projects, Muir is one of two special advisors to the finance and expenditure committee for its crypto inquiry.

"Our role now is to write a report that will be delivered to the committee. It has been taking time because it's a very fast moving space, so as soon as you write one thing something else comes along. But we are nearly done, that will be delivered shortly. Then the next stage will be for the politicians and the select committee officials to write their report, which will then be tabled [in the House] together with our advisers' report," Muir says.

"The thing to note, and this will certainly be reflected in our report, is that because this is a very fast moving area, there is not necessarily a great advantage to being a fast mover when it comes to writing new laws," says Muir. "New laws may become out of date almost instantly, or they will be compared to new laws in other jurisdictions perhaps favourably, perhaps unfavourably. But it is a real chess game to decide when it is actually helpful to do so."

"We will certainly be counselling as part of our report that there isn't a single easy fix, there isn't a single crypto act which will make all of the scams and problems go away whilst also encouraging innovation in the industry," Muir says.

In the podcast Muir also discusses the New Zealand blockchain scene, the Financial Markets Authority's attitude to the industry, NZ regulatory gaps, overseas regulations, stablecoins, and the "battle brewing over the future of money."

Kia ora,

Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.

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 financial markets are all awaiting the New Zealand Q3-2022 inflation data, due out at 10:45am NZT today. This will set the scene for where fixed home loan rates are headed, and upcoming policy move by the RBNZ.

But first, overnight the factory survey in the State of New York showed business activity declined "modestly" in October. New orders, unfilled orders, and shipments were all little changed from last month. Delivery times held steady, and inventories inched higher. Their labour market indicators pointed to a small increase in employment and the average workweek. Input price increases picked up, while the pace of selling price increases held steady. Looking ahead, firms there do not expect business conditions to improve over the next six months.

Freight shipments across the whole of the US rose +4.8% in September from a year ago but fell -2.9% from August. Having said that, road freight activity is still quite high in the US, certainly higher than pre-pandemic levels. This data supports the contention that the general US economy is expanding with building activity. After a volatile recovery phase following the pandemic shock, growth metrics are now starting to settle down. The Atlanta Fed's GDP Now tracker has their Q3 expansion at +2.8%. More traditional models have it lower at half that level. US Q3 data will be released on October 28, NZT, a week from Friday.

China is in full hagiographic mode these days as their Party Congress dominates everything. But people in the West shouldn't be too smug about that. It was only weeks ago that the UK was also in full hagiographic mode over their monarch. Both are uncritical worshiping, worthy of some religious cults. Both 'opium of the people'.

In China, their new policy direction is setting back their economic "opening up" drives, probably by decades. Companies assess the political risks now outweigh the economic gains. The Russian experience isn't helping. International trade as a glue between political systems is losing its adhesion. The old adage 'security trumps economics every time' is being proven again when stresses are elevated.

In Japan, industrial production came in stronger than anticipated in August, a boost they weren't expecting.

In Australia, spreading flooding is quickly turning their positive grain outlook darker. It may take the top off what was going to be a record harvest.

The UST 10yr yield starts today at 4.01%, down -1 bp from this time yesterday. 

The price of gold will open today at US$1657/oz. This is up +US$12 from this time yesterday.

And oil prices start today up +US$1 from this time yesterday at just under US$85.50/bbl in the US while the international Brent price is just under US$91.50/bbl. Soft demand and record production saw natural gas prices fall today. The softer demand seems to relate to autumn temperatures being warmer than expected. That will also mean more will be exported to Europe to back up their requirements. Germany is now more certain it will get through this winter pretty much unscathed from the Russian gas cut-off.

The Kiwi dollar will open today at 56.4 USc and up more than +¾c since this time yesterday. Against the Australian dollar we are still at 89.5 AUc. Against the euro we are little-changed at 57.3 euro cents. That all means our TWI-5 starts today at 66.9 and up +40 bps.

The bitcoin price is now at US$19,512 and up +1.9% from this time yesterday. Volatility over the past 24 hours has however been modest at just +/- 1.4%.

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 first from China.

In a 105-minute speech overnight, (here and here) Chinese President Xi highlighted the challenges and risks faced by his country and warned party members to brace for “dangerous storms” ahead. But by rallying around him, he promised they would be able to ride out those storms and guide the country to “incomparable glory”. He set a 27 year goal for China to dominate all aspects of global activity.

Away from political fantasy and more immediately, Chinese inflation data for September was released late on Friday. This was as expected at 2.8% and a small rise. The Chinese also reported that producer prices rose at only +0.9% in September from a year ago, a very low rate and mirroring the struggles the Chinese economy currently faces.

We were expecting China to release its September export and trade results, but it seems they have been delayed a day so as not to clash with the Party Congress's opening speech..

The central bank of Singapore tightened its monetary policy on Friday, the fifth time it has done so since October last year.

Across the Pacific, American retail sales were unchanged in September from August, but were +8.6% higher than the same month a year ago, only just keeping pace with inflation. It was a result that missed analysts' expectations, but is was car sales that drove the miss. Other than that, it beat expectations.

Business inventories rose quickly again, even if not as fast as expected. This is a growing problem as overall there is now +US$376 bln more in inventories than a year ago, or +18% more. However, it is fair to note that the stocks-to-sales ratio is just back to where it was a year ago.

It is also fair to note that the latest American consumer sentiment survey, this one from the University of Michigan, shows consumers are happier about their present situation, even if they are more concerned about the future prospects. This was a better result than expected.

In the UK, their new prime minister has threw her finance minister (and friend) under the bus late Friday and scrapped her radical tax plan, all in an effort to save her position. It isn't clear yet whether the u-turn will be sufficient. It is up to her party members to decide that. Financial markets have already decided it isn't enough and she should resign, although that seems unlikely at this time.

Then over the weekend, the Bank of England said clearly that they will respond to the public policy turmoil with sharply higher policy rates if the British Treasury can't get things back under control. The UK Government will release its revised-revised plan on October 31. Their central bank will respond on November 3. They are on a bit of a knife-edge there.

Elsewhere in Europe we might look at their inflation rate and worry that could possibly be our prospect. Open democracies, of which there are many in Europe, are really struggling with the inflation pressures that flow from the war on Ukraine. Inflation ranges from over 20% on the war's front lines in the Baltic states, to just 7% in "far away" Malta. Germany is over 10%, France is just +6%. The inflationary pressure are very real, and more than just for fuel now.

But how are the iconic autocrats handling these pressures?, you know, the ones with know-all tough-man presidents who don't think the laws of economics (supply & demand) don't apply to them, of if they do, they can bend them to their will. Well Hungary has September inflation at over +20% now and rising fast. Turkey has it over 80% and still rising. Autocracy isn't out-performing democracy in the economic management arena.

Autocrats are poor decision makers. The Q3 filings at the US Federal Election Commission shows that Donald Trump raised US$24 mln in the period, but to do that it cost $22 mln in fundraising expenses. The high-cost, low-margin fundraising came as Trump’s legal problems mounted.

The UST 10yr yield starts today at 4.02%, unchanged since Saturday but up +14 bps in a week.

The price of gold will open today at US$1645/oz. This is up +US$2 from this time Saturday, but down -US$55 in a week.

And oil prices start today unchanged from Saturday at just on US$84.50/bbl in the US while the international Brent price is just over US$90.50/bbl. A week ago these prices were US$91.50/bbl and US$97/bbl respectively, so a -7.6% fall in a week.

The Kiwi dollar will open today at 55.6 USc and unchanged. Against the Australian dollar we are still at 89.5 AUc. Against the euro we are at 57.2 euro cents. That all means our TWI-5 starts today at 66.5 and very little-changed from week-ago levels - or even two weeks ago.

The bitcoin price is now at US$19,139 and down -1% from this time Saturday. Volatility over the past 24 hours has however been very low at just +/- 0.5%.

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.