Economy Watch

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 the fight against inflation is making little progress in the US.

First up, the American inflation rate fell less than expected in September although the shifts were minor. It came in at 8.3% in August and was expected to fall to 8.1% last month. But in the end it came in at 8.2%. The key takeaway is that they aren't making any progress yet getting it down. Their 'core' rate was unchanged at 6.2% from a year ago. Month-on-month, the rate actually rose.

Clearly the Fed has more work to do to change the trajectory, and markets are assuming it will continue to fight inflation as its #1 threat. The next Fed hike is now expected to be another +75 bps. The US Treasury 10yr bond yield roared above 4% on the news, but it has settled back under since.

Their benchmark 30 year fixed rate mortgage rose to 6.92% pa, plus points of +0.8%, hitting the 7% mark for the first time in more than 20 years.

New US jobless claims rose last week to just under +200,000, a six week high even if historically still very low. But the number of people on these benefits fell to just on 1.2 mln, a new records low. Their insured unemployment rate is now down to under 0.8% of their 155 mln employed workforce, the lowest ever in a record that goes back more than 50 years.

The US Congressional Budget Office says the American federal budget deficit was -US$1.377 tln in fiscal year 2022, about half of prior year’s deficit of -US$2.776 tln. They say tax revenues were +21% higher and outlays were -8% lower than they were in the 2021 fiscal year. That means the 2022 deficit came in at -5.6% of US GDP, far lower than the prior two disastrous Trump years of -14.9% and -11.9% of GDP. They expect the much better economic management will continue. 

One direct echo of the high US CPI data was heard in Japan. Their currency fell to a 32 year low, and markets are assuming their central bank will act again to restrict the devaluation.

In Japan, producer prices rose to a five month high, rising +9.7% in September from a year ago, and blowing past the market consensus of +8.8%. This was the 19th straight month of producer inflation and the highest since April. Elevated commodity prices made worse by the yen’s rapid decline drove the rise. Given that Japan is the world's third largest economy, on a global scale this data is pretty significant.

Later today we are expecting both consumer and producer price data from China. There the changes are expected to be modest and low, primarily because their economy is in a stall, held back by pandemic lockdowns that seem to be spreading.

Just how hard the domestic economy is suffering can be seen from Chinese excavator sales data for September. They were down almost -25% from a year ago, but export sales rose almost +75% over the same period.

China's lockdowns, as grim as they are, might have more public-health sense than we give them credit for. Bloomberg is pointing out that since emerging in late 2021, the highly transmissible Omicron strain of SARS-CoV-2 has splintered into a dazzling array of subvariants that are now driving fresh waves of cases around the world. The proliferation of such a diversity of variants is unprecedented, and pits numerous hyper-mutated iterations against each other in a race for global dominance. That’s turbo-charged Covid, making it one of the fastest-spreading diseases known to humanity, and further challenging pandemic-mitigation efforts in a global population already weary of frequent booster shots, testing and masking. An un-locked-down China would face an enormous public health threat.

In Australia, their October inflation expectation rate came in at 5.4%, unchanged from September. It been moderating since June, so "consumer expectations therefore appear to be responding to significantly tighter monetary policy", they say.

One place you can see a sharp response is in the sales of new homes. They home building lobby group says new home sales declined by 15.7% in the three months to September, compared to the previous quarter. That is quite a pullback.

Globally, freight rates for containerised cargoes are still falling fast, especially in the China trade (Shanghai to Los Angeles was down -13% in a week). They were down another -6% last week alone and are now much lower than five-year average rates. Bulk cargo rates slipped as well.

And we should note that in Victoria, people in several towns have been told to leave immediately as swollen rivers threaten communities in what authorities have called a “significant flood emergency”.

The UST 10yr yield starts today at 3.94% and up +4 bps since this time yesterday. (At one brief point earlier it hit 4.06%). 

The price of gold will open today at US$1665/oz. This is down another -US$6 from this time yesterday.

And oil prices start today +US$1.50 firmer than this time yesterday at just on US$88/bbl in the US while the international Brent price is just over US$93.50/bbl.

The Kiwi dollar will open today at 56.3 USc and a +¼c higher than this time yesterday. Against the Australian dollar we are firmer too at 89.5 AUc. Against the euro we are a little softer at 57.5 euro cents. That all means our TWI-5 starts today at 66.9 and unchanged.

The bitcoin price is now at US$19,149 and a mere +0.3% firmer than this time yesterday. Volatility over the past 24 hours has however been moderate at just +/- 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 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 markets remain glued to the car-crash that is happening in UK financial markets, even if the global implications are limited.

Separately, US mortgage applications fell -2.1% last week in an extended downward trend. They are a massive -40% lower than the same week a year ago. That is largely because mortgage interest rates keep on rising, topping 6.8% last week and the highest since 2006.

The American producer price index went up +0.4%in September from August, the first increase in three months. Year-on-year it is up +8.5% which is a lesser rise than for August.

The release of the US Fed minutes, always keenly awaited, has brought no ructions in financial markets today, so far at least. The document itself reveals that their policy makers have judged that the cost of too little action outweighs costs of too much - the American version of a 'least regrets' policy.

Japan's machinery orders had their biggest single-month fall in six months in August, falling almost -10% from July even though they are up almost +3% from the same month in 2021. The global economic slowdown and a weaker yen both are weighing on local corporate spending now.

Japanese machine tool orders rose again in September however, up +4.3% from a year ago and up +8.2% from August. Export demand remains quite positive for this leading sector.

The Korean central bank raised its base rate by +50 bps to 3.0% yesterday, matching market estimates. High inflation and a weakening currency are burdening their economy. This was the 8th increase in borrowing costs since the Bank of Korea lifted the base rate for the first time in August 2021.

China is solely fixated on their Party Congress this week. One good thing is that air quality has improved in Beijing as steelmakers shut down to ensure blue skies for the event.

In Hong Kong, they are straining to maintain its local currency peg to the US dollar. The city’s de facto central bank has intervened dozens of times since May as the Hong Kong dollar hit the weak end of its HK$7.75 to HK$7.85 trading band on an increasingly hawkish US Fed..

In India, August industrial production data delivered an unwelcome surprise. It fell -0.8% when a +1.7% rise was expected. This is a very large miss.

Indian CPI inflation rates rose in September, according to official data, and are now running at 7.4%. It is the third month where it has risen and is back to levels they had in 2020.

In the UK, turmoil in their financial markets has intensified after the Bank of England insisted its emergency bond-buying scheme would come to an end this week. The cost of their government borrowing over 10 years briefly surged to its highest level since 2008, as investors demanded enhanced returns to lend to a country now in a bad financial and trust crisis.

The UST 10yr yield starts today at 3.90% and up +1 bp since this time yesterday. 

The price of gold will open today at US$1671/oz. This is down -US$10 from this time yesterday.

And oil prices start today down another -US$2.50 from this time yesterday at just under US$86.50/bbl in the US while the international Brent price has fallen a bit more to be just over US$91/bbl.

The Kiwi dollar will open today at 56 USc and -½c lower than this time yesterday. Against the Australian dollar we are another +¼c higher at 89.3 AUc. Against the euro we are little-changed at 57.8 euro cents. That all means our TWI-5 starts today at 66.9 and down about -20 bps.

The bitcoin price is now at US$19,099 and only -0.4% lower than this time yesterday. Volatility over the past 24 hours has been low 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.

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 IMF is warning the worst of the current economic turmoil is yet to come.

However first in the US, retail sales last week on a same store basis fell away noticeably from the same week a year ago. Inflation can barely explain the 'growth' in this latest survey.

But American consumer inflation expectations for the year ahead moderated again for a third consecutive month, now at 5.4% in September, the lowest in a year, and down from 5.7% in August. The long-run average inflation expectation is 3% so there is still a long way to go to get these down from elevated levels, but five-year-ahead expectations are only 2.2% pa. Their median home price growth expectations declined marginally to just 2%, its lowest reading since June 2020. And expectations for the cost of medical care is also seen slowing but to a still-high 9.2%. On the other hand, consumers expect prices to rise faster for petrol.

US central bank policies do seem to be working on getting these expectations reset. But consumers remain unhappy with them (which is par for the course). Nobody likes their medicine, even when it seems to be working.

In China, their September data shows they pumped out a lot of bank debt to support their economy, in fact twice as much as analysts were expecting and a new record high. This comes as authorities are supporting a slowing economy that is being hit by a property crisis and an unfortunate resurgence of pandemic cases.

In the UK they too are pumping out vast additions of central bank support as their financial crisis extends.

In Australia, business sentiment fell in September even as business conditions improved. The NAB business confidence index fall was the lowest reading since June, amid concerns over rising interest rates and a gloomy global outlook. Sentiment fell in retail, wholesale, transport, recreation & personal services, and finance, business & property sectors. Meantime, business conditions rose, being above their pre-COVID peak, with sales surging while both profitability and employment were unchanged but stayed elevated.

The IMF says the world's economy is seen expanding +3.2% (real) this year, in line with its July forecast, but expects it to grow at a slower +2.7% in 2023, down from 2.9% earlier predicted, according to their latest update of their World Economic Outlook. All this while global inflation is expected to run at a massive +8.8% this year. The 2022 forecast is actually a brave position to take given what others are suggesting. But even they say, "In short, the worst is yet to come, and for many people 2023 will feel like a recession." China's stumbles are a key headwind for the global economy, they say.

The UST 10yr yield starts today at 3.89% and unchanged again. 

The price of gold will open today at US$1681/oz. This is up +US$13 from this time yesterday.

And oil prices start today down -US$2.50 from this time yesterday at just under US$88.50/bbl in the US while the international Brent price has fallen a bit more to be just over US$93.50/bbl.

The Kiwi dollar will open today at 56.5USc and a full +1c higher than this time yesterday. Against the Australian dollar we are +¼c higher at 89.1 AUc. Against the euro we are +½c higher at 57.8 euro cents. That all means our TWI-5 starts today at 67.1 and up about +90 bps.

The bitcoin price is now at US$19,169 and a mere -0.1% lower than this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 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 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 wars and holidays are the features of today's roundup.

First up today, it is a Federal holiday in the US, Columbus Day (which is morphing into Indigenous Peoples' Day in a growing number of States and communities). But many businesses there don't treat it as a day-off - and that includes the stock exchanges.

Nor the currency markets of course, and the US Dollar is rising again and at a 20 year high. It is now +20% higher than a year ago. This is a sharp headwind against the on-shoring movement which is happening due to logistics pressures. It is also a sharp headwind against profits of American companies that have substantial international operations. It will only help countries hurt by a rising greenback if the domestic US economy stays healthy and imports more. So far, that has been the case. The domestic US economy remains the engine of the global economy.

In Canada, it is their Thanksgiving Day holiday.

In Ukraine, Russia is lashing out with indiscriminate bombing of population centers, using terror tactics in reaction for its invasion failures. This angry change is driving up the cost of wheat, with worries that that Russia could suspend the safe grain trade corridor from Ukrainian Black Sea ports that was agreed to in an UN-brokered deal. Prices have risen +15% in a month.

In England, their central bank expanded its support of pension funds at the heart of their bond-market crisis even as borrowing costs jumped. It is a clear sign that stress in the British financial system isn't going away.

In Sweden, they handed out the Nobel Prize in Economics to, among others, Ben Bernanke, the former US Fed boss. It is for research he did in helping build policy responses that protect jobs in economic crises. They were used widely in the 2020 pandemic emergency.

In Australia, the AiGroup services PMI fell rather sharply, from a moderate expansion (53.3) to a contraction (48). The increasingly uncertain economic environment is dragging on their service industries. All services activity indicators have worsened in the last month. Lower consumer and business confidence following repeated interest rate rises and persistent inflation were major factors in the fall-off. The indicators for sales, new orders, and selling prices all fell, while input prices continued their upward march adding to inflationary pressures which is boosting nominal turnover levels.

And staying in Australia, the OECD's chief economist has come out in favour of their Stage 3 tax cuts going ahead, on the basis that they will tackle the issue of bracket creep. He told the ABC. “This is important. High inflation means that people are getting pushed to high-income brackets even when the real income does not warrant that,” he said.

The UST 10yr yield starts today at 3.89% and unchanged.

The price of gold will open today at US$1668/oz. This is down -US$27 from this time yesterday.

And oil prices start today down -US$1.50 from this time yesterday at just on US$91/bbl in the US while the international Brent price has risen to be just under US$96.50/bbl.

The Kiwi dollar will open today at 55.6 USc and a -½c lower from this time yesterday. Against the Australian dollar we are marginally firmer at 88.3 AUc. Against the euro we are -¼c softer at 57.3 euro cents. That all means our TWI-5 starts today at 66.2 and down about -30 bps.

The bitcoin price is now at US$19,154 and -1.8% lower than this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 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 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 China has become the handbrake on the global economy now, delivering a string of weak economic data.

And, first up there has been something of a surprise from the Middle Kingdom. The Caixin China General Services PMI plunged to a minor contraction in September after a solid-to-good expansion in August. This was the first contraction in services activity since May, and came as the amid the severity of the COVID outbreaks in many areas across the mainland built. It was however a faster retreat than was expected. New orders shrank for the first time in four months; while employment dropped for the ninth month running, with the rate of job shedding the steepest pace since May and backlogs grew for the second month in a row. Export orders expanded slightly, however, following an improvement in some foreign markets.

The private Caixin result comes after the official services PMI also fell but was recording a small expansion still in September. It has been a while since the Caixin results have reported worse levels of activity than the official surveys.

China's week-long holiday is ending and it is clear many people were staying at home this year. Travel data reflects that with activity down -36% compared to last year - which itself wasn't a strong event either.

And residential real estate sales have often been strong in this period too, but early reports suggest they could be -38% lower this year than the same period a year ago.

China's foreign exchange reserves were expected to fall to US$3 tln in September, a -US$55 bln retreat. But they didn't actually fall that hard, only declining -US$26 bln to US$3.029 tln.

Taiwanese exports dived in September, down -5.3% when a +1.5% rise was expected. This is a big and maybe important miss.

The giant US economy added more jobs than expected in September even if the gain was the lowest in 18 months. The headline gain was +263,000 when a +250,000 gain was expected. Holding it back was a -41,000 fall in Government workers. Apparently schools are finding it very difficult to recruit teachers in the charged political environments in many communities. But as regular readers will know, we also look at the raw data that is not seasonally adjusted. That shows overall payrolls rose +431,000 in September and taking the paid workforce to 153 mln.

The jobless rate fell to 3.5%. Their participation rate rose to 62.3%. Average weekly earnings rose +4.8% pa but at a +7.8% pace in September from August.

By any measure this represents a tight American jobs market. And the US central bank will know it can keep targeting inflation on the back of a resilient labour market that shows no sign of being hurt by that press. In fact the 'real' +431,000 rise in employment will bring even more spending impetus to the American economy. Rising wages do to. So the Fed isn't easing up on the rate rises any time soon.

The prospect of another +75 bps hike has equity and bond markets retreating as they revalue their asset holding to reflect the lower P/E ratios this implies.

Data out on American consumer debt shows that it grew by +US$32 bln in August from July, a much faster +8.3% pa rate than was expected. American now owe US$4.7 tln in this type of debt, or 21% of their annual economic activity (GDP).

This coming week will start the Q3 earnings season reports. It is expected to be a pretty lackluster affair, with expected earnings gains to be only +2.2% overall, down from the Q2 +9.9% reported. Tech sector earnings are expected to be even lower at under +1%. That means equity market news is expected to be dominated by as many underachievers as overachievers and that will depress market enthusiasm and momentum over the coming three weeks.

In Canada, they also delivered a positive employment report, a bounce-back in September from their August slip. They added both full- and part-time jobs with their participation rate rising to 64.7%, wages rising +5.2% pa, and their jobless rate falling to 5.2% which is 'average' for them, but it is below pre-pandemic levels.

German retail sales fell -4.3% in 'real' terms in August, the retreat they were expecting. In nominal terms, like every other country reports, they rose +5.4% due to the effects of inflation.

In Switzerland, Credit Suisse has come under scrutiny in recent weeks as investors speculate over its financial health. But it has initiated an almost US$5 bln share buy-back to bolster its claim that fears are overblown. From this and other actions, the markets have responded with a sharp +23% rise in its share price recently. In CHF its a +16% rise.

The crisis of high and rising food prices seems to have passed - well, passed its extreme levels anyway. Overall prices are almost back to year-ago levels now with another but smaller retreat in September. However, year-ago levels were high on an historic basis, but the trend is now lower. Dairy and meat prices are generally holding. It is a sharp retreat in vegetable oil prices that is driving overall prices lower. Bothe Canada and Australia are having outsized production years, helping the situation significantly.

The UST 10yr yield starts today at 3.89% and up another +1 bps from this time Saturday. 

The price of gold will open today at US$1695/oz. This is down -US$5 from this time Saturday.

And oil prices start today up +US$1 from this time Saturday at just under US$92.50/bbl in the US while the international Brent price has risen to be just under US$98/bbl.

The Kiwi dollar will open today at 56.1 USc and a bit softer from this time Saturday. Against the Australian dollar we are little-changed at 88.1 AUc. Against the euro we are also unchanged at 57.6 euro cents. That all means our TWI-5 starts today at 66.6 and little-changed.

The bitcoin price is now at US$19,508 and a very marginal +0.3% above this time Saturday. Volatility over the past 24 hours has been low at just over +/- 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.

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 we are ending the week waiting in a risk-off mood where commodity currencies like the NZD are being hit ahead of the key US jobs report and inflation-averse central bank officials.

Last week there were +167,000 new jobless claims in the US, a small rise, leaving 1.229 mln people on these benefits, and remaining near an all-time low level.

Separately, almost -30,000 job cuts were reported for September, and even though it is a three month high it is only a very small rise in the context of the size of their labour force (153 mln).

Labour market data is front-of-mind in markets today because we are awaiting the September non-farm payrolls report which will be released this time tomorrow. It is expected to report an expansion of +250,000 new jobs, and more for private-sector payrolls.

China may be on holiday, but they remain active in international bodies. They have successfully convinced the UN Human Rights Council ((UNHCR) to not debate (even talk about) Xinjiang abuses, and it is not the first time their views have prevailed. It reinforces the fact that most UN countries are not democracies, and are increasingly siding with anti-democratic forces. As the lender of choice for many countries over the past decade, Beijing now has the power to cut them off, lend more or forgive some of their debts. Debt is a powerful weapon.

It can cut both ways. Overseas money continues to flow out of Chinese stocks and bonds as a rapidly cooling economy and interest rate shifts drive investment to other destinations. Foreign investors' holdings of Chinese bonds fell for a seventh straight month in August, dropping by -US$150 bln to NZ$870 bln. This bond market outflow, the biggest in data going back to 2015, comes as the world's second-largest economy suffers a dramatic loss of momentum.

EU retail sales came in weak. These are reported on a volume basis, ignoring the effect of inflation, and they were down -1.3% from the same month a year ago. Germany led the fall; they held little-changed in many other larger countries in the bloc

German factory orders fell sharply in August in new data out overnight. They were down a troubling -2.4% from July, down -4.1% from the same month a year ago.

But neither data stopped Germans buying new cars. They rose +14% in September, driven by a rush to buy EVs. The move away from ICE to EV cars is a very fast-developing worldwide trend, a transition happening very much faster than anyone predicted.

Overall, the IMF is gloomy about the global economy's prospects in their October assessment.

Global passenger air travel seems to be recovering very strongly. August international travel volumes are more than double the level of a year ago and are now at 80% of their pre-pandemic levels. Asia-Pacific levels are lagging however because of Chinese restrictions. Elsewhere, it is in full recovery mode.

Global air cargo volumes dipped in August, but are being called 'resilient' because they are only -3% lower than pre-pandemic levels. Cargo volumes in Europe are the laggard here. In the circumstances, this is actually a positive report; trade is holding up.

There were more big falls in shipping freight rates for containers by sea last week, down another -8% in the week alone and putting the spotlight firmly on the struggling trade to and from China. Overall, these freight rates are now lower than the five-year average pre-pandemic. That is a very fast retreat, down -68% in a year.

Meanwhile freight rates for bulk cargoes are rising and at two month highs, and while they are far lower than year ago levels, they are running at about pre-pandemic levels.

The UST 10yr yield starts today at 3.81% and up another +5 bps from this time yesterday. 

The price of gold will open today at US$1712/oz. This is down -US$3 from this time yesterday.

And oil prices start today unchanged from yesterday at just under US$87.50/bbl in the US while the international Brent price has risen to be just on US$93.50/bbl. The OPEC announcement of a sharp supply cut seems to have had little price impact so far - which is somewhat surprising. Analysts are still expecting that to happen, but it is interesting that markets aren't pricing it in.

The Kiwi dollar will open today at 56.6 USc and another -½c lower than this time yesterday. Against the Australian dollar we are unchanged at 88.2 AUc. Against the euro we are a tad softer at 57.7 euro cents. That all means our TWI-5 starts today at 66.9, and -30 bps lower than this time yesterday.

The bitcoin price is now at US$20,087 and down -0.9% from this time yesterday. Volatility over the past 24 hours has been modest again at just under +/- 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 on Monday.

Six years after Auckland Council passed the Unitary Plan, with scope for increased housing densification to boost supply and improve affordability, what impact has it had?

Quite a bit according to University of Auckland Associate Professor of Economics Ryan Greenaway-McGrevy.

Speaking in the latest episode of interest.co.nz's Of Interest Podcast, Greenaway-McGrevy talks about a recent paper he co-authored on the impact of upzoning on Auckland housing construction, plus a range of other housing related issues.

Greenaway-McGrevy explains why he believes Auckland leads the world when it comes to upzoning, the impact of the Unitary Plan on residential building consents, and where Auckland's at with housing affordability and rents.

He also discusses land prices versus land costs and explains why he supports the concept of a land tax.

We also talk about the Medium Density Residential Standards following 2021's Resource Management (Enabling Housing Supply and Other Matters) Amendment Act, and what these could mean for cities and towns around New Zealand, including Christchurch where the Christchurch City Council voted against the new housing intensification standards.

This is a second version of this podcast correcting a bad upload earlier.

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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 OPEC has sided with Russia and approved an outsized production cut of 2 mln bbd in a bid to raise oil prices sharply.

But first, the US services sector continues to expand at a healthy clip, according to the widely-watched ISM survey for September. New order flows remain strong. This was enough to cause bond yields to rise. However the ISM survey was a much more positive survey than the internationally-benchmarked Markit one which says the sector is improving but not really expanding.

We get a US non-farm payrolls report on Saturday and the expectation is that another +250,000 new jobs will have been created in September. Today the ADP Employment Report said their survey points to +208,000 new private sector jobs. They see the US services sector expanding at a moderate pace, but the manufacturing sector shedding jobs at a minor pace.

Last week, American mortgage applications resumed their downward track, mainly because mortgage interest rates continue to push higher. Their benchmark 30 year fixed rate is now up to 6.75% plus points, its highest level in sixteen years.

The US trade deficit is also on a lower track. It came in at -US$67.4 bln in August in data out today, and its lowest since May 2021. Exports are holding but imports are falling.

Interestingly, the Atlanta Fed's GDP Now real time monitoring suggests that American economic activity has been picking up to a healthy +3% pa rate over the past few weeks.

Canada reported a smaller trade surplus for August, at about half its expected level. In their case, exports fell more than imports.

But Canada also reported building permit levels for August and they were very much higher than expected, driven by multi-family units

Japan reported its September service sector activity and that improved to a good expansion after a brief dip in August.

Australia reported a small rise in retail sales in August from July, but not by enough to be more than inflation. However, year-on-year it is, with this retail activity up more than +19% on that basis. The August result would have been better if sales in Victoria and Queensland had been better, and if clothing and cars had been better. Outside of those, the August expansion was pretty good, especially for household goods and department store retailing.

And Australian regulator ASIC is suing Harvey Norman and Latitude Finance for promoting “no deposit” and “interest-free” payment methods that saddled some customers with an extra $537 in fees.

The UST 10yr yield starts today at 3.76% and up +13 bps from this time yesterday. 

The price of gold will open today at US$1715/oz. This is down -US$7 from this time yesterday.

And oil prices start today up +US$1.50 from yesterday at just under US$87.50/bbl in the US while the international Brent price has risen to be just over US$93/bbl.

OPEC+ (which includes Russia) made deep cuts to its oil output targets, double what was expected, curbing supply in an already tight market despite pressure from the United States and others to pump more. The US is especially unhappy with the size of the cut. This cut is spurring a rise in oil prices that have dropped from US$120 three months ago.

The Kiwi dollar will open today at 57.1 USc and nearly -½c lower than where we that this time yesterday. Against the Australian dollar we are soft at 88.2 AUc. Against the euro we are firm at 57.9 euro cents. That all means our TWI-5 starts today at 67.2, and little-changed since this time yesterday.

The bitcoin price is now at US$20,274 and up another +1.4% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 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 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 OPEC has sided with Russia and approved an outsized production cut of 2 mln bbd in a bid to raise oil prices sharply.

But first, the US services sector continues to expand at a healthy clip, according to the widely-watched ISM survey for September. New order flows remain strong. This was enough to cause bond yields to rise. However the ISM survey was a much more positive survey than the internationally-benchmarked Markit one which says the sector is improving but not really expanding.

We get a US non-farm payrolls report on Saturday and the expectation is that another +250,000 new jobs will have been created in September. Today the ADP Employment Report said their survey points to +208,000 new private sector jobs. They see the US services sector expanding at a moderate pace, but the manufacturing sector shedding jobs at a minor pace.

Last week, American mortgage applications resumed their downward track, mainly because mortgage interest rates continue to push higher. Their benchmark 30 year fixed rate is now up to 6.75% plus points, its highest level in sixteen years.

The US trade deficit is also on a lower track. It came in at -US$67.4 bln in August in data out today, and its lowest since May 2021. Exports are holding but imports are falling.

Interestingly, the Atlanta Fed's GDP Now real time monitoring suggests that American economic activity has been picking up to a healthy +3% pa rate over the past few weeks.

Canada reported a smaller trade surplus for August, at about half its expected level. In their case, exports fell more than imports.

But Canada also reported building permit levels for August and they were very much higher than expected, driven by multi-family units

Japan reported its September service sector activity and that improved to a good expansion after a brief dip in August.

Australia reported a small rise in retail sales in August from July, but not by enough to be more than inflation. However, year-on-year it is, with this retail activity up more than +19% on that basis. The August result would have been better if sales in Victoria and Queensland had been better, and if clothing and cars had been better. Outside of those, the August expansion was pretty good, especially for household goods and department store retailing.

And Australian regulator ASIC is suing Harvey Norman and Latitude Finance for promoting “no deposit” and “interest-free” payment methods that saddled some customers with an extra $537 in fees.

The UST 10yr yield starts today at 3.76% and up +13 bps from this time yesterday. 

The price of gold will open today at US$1715/oz. This is down -US$7 from this time yesterday.

And oil prices start today up +US$1.50 from yesterday at just under US$87.50/bbl in the US while the international Brent price has risen to be just over US$93/bbl.

OPEC+ (which includes Russia) made deep cuts to its oil output targets, double what was expected, curbing supply in an already tight market despite pressure from the United States and others to pump more. The US is especially unhappy with the size of the cut. This cut is spurring a rise in oil prices that have dropped from US$120 three months ago.

The Kiwi dollar will open today at 57.1 USc and nearly -½c lower than where we that this time yesterday. Against the Australian dollar we are soft at 88.2 AUc. Against the euro we are firm at 57.9 euro cents. That all means our TWI-5 starts today at 67.2, and little-changed since this time yesterday.

The bitcoin price is now at US$20,274 and up another +1.4% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 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 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 heat is going out of some of the global pressure points - and equity markets like that.

But first there was a dairy auction overnight, and not an especially good one. Overall prices were down -3.5% in USD terms and down -1.2% in NZD terms. Leading the fall was WMP with a -4.0% fall. We are lucky we have a depreciating currency because that has limited the retreat. There was also a large retreat in the butter price (-7.0%), but every component fell. This was a surprise in terms of the signals from the derivatives market, but the intervening Pulse events have signalled that WMP might be soft, and it was. This events decline ended the prior two price rises. Overall prices are back to where they were in August.

American retail sales last week rose to be +12.3% higher than the same week a year ago. This data is on a same-store basis and is the strongest result since the end of August. Some of this increase will be inflation of course, but not all of it.

Meanwhile, pressure on the US job market seems to be easing. The number of job openings there dropped to 10.1 million in August, the lowest since June 2021. That is down from a downwardly revised 11.2 million in July. The all-time record level of 11.9 million was in March 2022.

As expected, new orders for US manufactured goods were flat in August from the prior month following a -1.0% fall in July on that basis. Excluding aircraft orders, there was a small rise, but it was orders for consumables that were the strongest. Year-on-year these overall orders are up +12.8%.

The American logistics LMI rose in September, but that isn't necessarily a positive signal. It was fueled by high levels of inventory and the associated levels of cost and utilisation holding them. On the other hand, transportation metrics continue their slowed pace.

In Europe, new September data out overnight shows that pressure on producer prices there isn't letting up, rising an extreme +5% in the month to be +43% higher than a year ago. These are higher level than they recorded in August.

Late yesterday, the Aussie central bank turned dovish, raising their policy rate by only +25 bps when markets expected a full +50 bps rise. Only +25 bps is priced in at present for their November review. But markets now expect them to keep raising their rate well into 2023. Their new current policy rate is 2.60%. Markets now expect that to top out at 3.50% in the middle of next year. That is now a much longer hiking cycle that previously expected.

Aussie building consents raced higher in August on the back of a strong recovery in consents for rental apartment buildings. It was a much more aggressive rise than anyone expected.

Meanwhile, housing finance fell in August. Mortgage approvals are now almost -20% below their peak at the start of the year. This latest data on turnover and prices, available up to September, points to more weakening to come. 

Later this morning, we will report on the Barfoot's September sales results. These come after CoreLogic pointed out the fall in prices nationwide is gathering steam. And this afternoon, the RBNZ will announce its decision on the OCR level. It is widely expected to rise +50 bps to 3.50%.

The UST 10yr yield starts today at 3.63% and down -2 bps from this time yesterday. 

The price of gold will open today at US$1722/oz. This is up another +US$30 from this time yesterday to a three week high.

And oil prices start today up +US$3 from yesterday at just under US$86/bbl in the US while the international Brent price has risen to be just under US$91.50/bbl.

The Kiwi dollar will open today at 57.5 USc and nearly +½c higher than where we that this time yesterday. Against the Australian dollar we are up +¾c at 88.4 AUc. Against the euro we are down -¾c at 57.5 euro cents. That all means our TWI-5 starts today at 67.2, and little-changed since this time yesterday morning.

The bitcoin price is now at US$19,998 and up +2.7% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 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.