Economy Watch

Kia ora,

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

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

Today we lead with news the global economy is slowing amid 'a gloomy and uncertain outlook'.

The IMF lowered its growth forecasts for the global economy to +3.2% in 2022 from +3.6% in its April review, while the outlook for inflation was revised higher due to a surge in food and energy prices as well as lingering supply-demand imbalances. The American economy is seen growing +2.3% this year (down from -3.7% seen in April) and China's GDP is now expected to expand +3.3%, compared to +4.4% early.

Even though they say "the outlook has darkened significantly" they are still forecasting 2022 growth and that might surprise some bears, but the fact remains that global economic activity is still expanding in the major economies, and that is expected to continue even into 2023.

American retail sales rose at as fast a clip last week as we have seen for the past four weeks, and certainly far more than can be accounted for by inflation.

But new home sales in the US tailed off rather sharply in June and slipping below the 600,000 annualised rate for the first time since the March 2020 pandemic pullback.

And American consumer sentiment dipped again in July, according to the Conference Board survey. The decrease was driven primarily by a decline in the Present Situation Index—a sign growth has slowed at the start of Q3. The Expectations Index held relatively steady.

But it is not all gloom. The Richmond Fed's regional July surveys were both indicating improvements in their mid-Atlantic states region. The factory survey rose from its June negative mainly because of the heady rises in new investment in both production equipment and software. And those are expected to rise from here as are shipments of goods. Things weren't quite as positive for their services sector.

Across the Pacific, South Korea reported its Q2 GDP. That showed a pick-up in economic growth to 2.9% from the year-ago period and well above analyst estimates. A rebound in private consumption and government spending offset the decline in exports and private investment.

Economic news out of China has been eerily and unusually absent today. Their usual sources are all focusing on political news, what President Xi is doing or saying. But to be fair, they are winding down for their summer holiday break, even if the weather there is unusually hot at present. But the sudden disappearance of news about their property sector crisis is notable.

In Singapore, even though industrial production was still slightly ahead of year-ago levels in June that masked a sharpish fall away between May and June that is worth keeping an eye on.

The EU countries, bracing for further cuts in Russian gas supply, approved an emergency plan to curb demand after striking compromise deals to limit the reductions for some small countries.

In Australia, punishing Chinese tariffs have decimated what was Australia’s most lucrative export market for wine. Sales slumped from AU$1.1 bln two years ago to just AU$25 mln now. That has forced them to find other markets, and they are with sales to the rest of the world rising quickly, up +AU$400 mln. But the Chinese punishment means that their yields fell -14% from 2020 to 2022.

The UST 10yr yield starts today at 2.79% and down -2 bps from this time yesterday. 

The price of gold will open today at US$1718/oz in New York which is down -US$2 from this time yesterday.

And oil prices are little-changed at just over US$95/bbl in the US, while the international Brent price is now at just over US$100/bbl.

The Kiwi dollar will open today almost -½c weaker than this time yesterday at 62.3 USc. Against the Australian dollar we are also softer at 89.8 AUc. Against the euro we are firmer at 61.6 euro cents. That all means our TWI-5 starts today at 71 and a -20 bps below this time yesterday.

The bitcoin price is again lower than this time yesterday, down by another -4.3% to US$20,925. Volatility over the past 24 hours has been high at just over +/-3.7%.

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 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 investors are now betting that the US Fed will need to cut rates in 2023, and that is twisting the global bond market. The Fed is widely expected to raise rates +75 bps on Thursday, so these signals are confusing as markets struggle to make the transition.

In the US, even though the Chicago Fed's National Activity Index was unchanged in June from May - and still recording a moderate expansion - the Dallas Fed's more current July survey is only expanding with "modest growth" and gives more evidence of an economic slowdown in the US factory sector.

There was another US Treasury bond auction overnight, this one for the 2 year maturity and raising US$49 bln. It was well supported with the median yield achieved at 2.95% and marginally less than the 3.00% at the prior equivalent event.

China said the number of new births in several Chinese provinces hit the lowest in 60 years and their experts now expect the country's population to start to shrink before 2025.

And staying in China, they said they will launch a real estate fund to help property developers resolve their crippling debt crisis, aiming for a war chest of up to US$44 bln in a bid to restore confidence in the industry.

Hong Kong exports sank in June, down -6.4% from the same month a year ago and extending a run of depressing results for them. Hong Kong is now but a shadow of its former vibrant self as all their economic data now seems quite weak.

Taiwanese industrial production went right off the boil in June with only a trivial (for them) +0.7% rise year-on-year. But their retail sales took off, up a quite remarkable +22% year-on-year.

Singapore reported its June CPI inflation rate at 6.7% and well above the 6.2% expected and also well above the 5.6% rate in the March quarter.

In Germany, a closely-watched Business Climate indicator fell in July to its lowest in over two years and below market expectations as higher energy prices and the threat of a gas shortage are weighing on their economy that is on the cusp of a recession. Germany's gas network regulator warned that if gas through the Nord Stream 1 pipeline continued to be pumped at only 20%, the country would need to take additional measures to reach the 90% of storage capacity set as a target to avert winter rationing.

The UST 10yr yield starts today at 2.81% and up +6 bps to start their week. 

The price of gold will open today at US$1720/oz in New York which is down -US$7 from this time yesterday.

And oil prices are little-changed at just under US$96/bbl in the US, while the international Brent price is now at just over US$100/bbl. These prices are a little less than +US$1 higher than this time yesterday

The Kiwi dollar will open today marginally firmer than this time yesterday at 62.7 USc. Against the Australian dollar we are softer at 90.1 AUc. Against the euro we are little-changed at just over 61.3 euro cents. That all means our TWI-5 starts today at 71.2 and a minor +10 bps above this time yesterday.

The bitcoin price is sharply lower than this time yesterday, down by -4.1% to US$21,859. Volatility over the past 24 hours has been moderate at just under +/-3.0%.

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 bond investors are pricing their yields for a sharp slowdown coming soon with some key yields getting more inverted. Attention is shifting to what the US Fed will announce on Thursday.

But first up, Japan reported June CPI inflation at the end of last week with their headline rate now at 2.4%, down fractionally from 2.5% in May, but still above the Bank of Japan's target of 2%. It's been above that target for three consecutive months now. And it's been seven years since they have had inflation like this although that was because of a GST hike. Excluding that, it's been 32 years.

In China, the central bank said there were NZ$1.6 tln of bonds issued in June, taking their total issuance to NZ$33.7 tln. That is about 125% of annual Chinese economic activity, just for this official debt. Much of this new issuance will be just to keep the lights on, rather than investing for future gains.

In Russia, they slashed their official interest rate by -150 bps. Earlier in the year it was raised fast to weigh against a spike in inflation. Now it is being cut hard to try an invigorate a war-damaged economy with sinking demand.

Globally, the 'flash' business activity surveys were out over the weekend for most major economies and they paint a somber picture.

The American one reported a contraction in July, all due to services activity. The factory sector is still expanding at the same rate as in June, but the services sector took an unexpectedly retreat. The decline was the sharpest since the initial stages of the pandemic in May 2020. Separately, new export orders fell for a second successive month but new local orders are still expanding making the combined new order inflow the weakest in the past two years.

With little other major economic data around, the unexpected contraction in the giant US services sector had an immediate impact on equity and bond markets on Wall Street on their Friday.

Weaker growth in new orders was also a feature of the Japanese flash PMI for July. But at least both their factory and service sectors are still expanding there.

In Europe, their factory PMI slipped into a minor contraction while their services sector is still expanding in July - but only just. But none of this will be much of a surprise given the invasion from the east. Perhaps you could say it is quite resilient in the circumstances, that they are not yet in a major contraction.

A lot of the EU result is due to the pressure Germany is under with both their factory and services sectors contracting now. The French services sector is a bright spot.

Data for Canadian retail sales in May was strong, and a bright spot in the weekend releases. Year-on-year increases are impressive and far more than inflation can account for. But of course this data is quite dated now.

In Australia, the big general insurer there, IAG, has reported that natural perils and rising costs will push up premiums by up to +9% for house and car cover. This comes as their shareholder funds shrink as provisions and reserves need to be raised, and it missed profit guidance to investors. Since mid April which was before the latest flooding on the Australian eastern seaboard, its share price has fallen -20% and investors worry about what the climate will do to its business.

And we should note that over the past week, the iron ore price has fallen -8%, copper is flat, but it had already fallen -27% since early June. Nickel fell almost -30% from early June. Wheat is down more than -30% since mid June. Soybeans are down -15%. Only coal is holding its new high price. Aluminium is down -15% from early June. And crude oil is down -18% from that early June peak.

The UST 10yr yield starts today at 2.75% and unchanged from Saturday but back to mid-April levels. A week ago this was at 2.93%. Market attention is squarely on Thursday's US Fed announcements where a +75 bps rate hike is universally expected. The UST 2-10 rate curve is marginally flatter today, now at -22 bps and their 1-5 curve is slightly more inverted at -17 bps. Their 30 day-10yr curve is now at +61 bps and little-changed from Saturday. 

The price of gold will open today at US$1727/oz in New York which is up +US$3 from this time Saturday. It is also up +US$16 from this time last week.

And oil prices are little-changed at just under US$95/bbl in the US, while the international Brent price is now at just over US$99.50/bbl. These prices are almost exactly the same as this time last week.

The Kiwi dollar will open today marginally firmer than this time Saturday at 62.5 USc. Against the Australian dollar we are also a little firmer at 90.3 AUc. Against the euro we are unchanged at just over 61.2 euro cents. That means our TWI-5 starts today at 71.1 and this is -60 bps lower than this time last week.

The bitcoin price is little-changed from this time Saturday, down by just -0.9% to US$22,788. Volatility over the past 24 hours has been moderate at just on +/-2.1%.

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.

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

We've heard a lot over recent years about jobs and professions where people could be replaced by machines and other forms of technology. Accounting features prominently in this.

In the 2017 television programme What Next?, psychologist Nigel Latta suggested that over 20 years the number of accountants in New Zealand would plummet from 17,669 to just 19, with humans being replaced by robots and algorithms.

Rick Jones, the New Zealand Country Head for accounting industry body CPA Australia, experienced a prompt response to the Latta programme from CPA members.

"It feels like yesterday that that show was on," Jones told interest.co.nz in the latest episode of our Of Interest Podcast. 

"I remember watching it on a Sunday evening. And then I got to work on Monday morning and had a couple of phone calls, quite early from new members who had just joined CPA Australia as an accounting professional body member. They referenced that programme, and they said, 'look, I'm not sure this is the right path for me' [as] a direct result of the Nigel Latta shows. So it was really interesting that immediately there was a short-term response," said Jones.

Jones fielded additional enquiries that week from people "genuinely worried about accounting as a viable profession," wondering whether they were on the right path, and whether automation would take over their role. The TV programme certainly created a stir in the accounting industry. Some hit back at Latta, including Xero Chief Product Officer Anna Curzon via this Linkedin post.

But in the time since concerns about automation haven't gone away.

"It still gets talked about on a daily basis with employers and with the profession. There are some roles that automation and software have taken over, but what we have seen is a whole lot of new roles have been created. So the demand for accountants and accounting roles has never been greater, but the role of the accountant is evolving and technology is actually an enabler," Jones said.

He speaks about this at length in the podcast, as well as about the challenges of attracting young people to the accounting profession in a dynamic, and changing world.

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 central bank actions to lean harder against inflation got more pointed today. And that has moved bond markets especially.

But first, US jobless claims inched higher again last week and now 1.45 mln people are on these benefits, well off their all-time lows of a month or so ago, but still historically very low.

The Philadelphia Fed factory survey for July is now showing retreating conditions. They report on a heartland manufacturing area and the fall away in new orders will be of a special concern. The price pressures are easing but they still remain high from an historical perspective. On the 'plus' side, the jobs and current activity categories of this survey remain quite positive.

Nationally and more generally, the Conference Board leading index remains off the boil, but only minorly and little changed in July from June, and is still historically very high.

As expected, Japan reported a larger trade deficit in June from the higher cost of oil. But the deficit wasn't as large as some had feared. However, the more important news here was the unexpected strength in Japanese exports, reinforcing that there is strong global demand for Japanese high-tech machinery. Exports rose more than +19% in June from a year ago, the 16th straight month of gains.

Even though the Bank of Japan is seeing higher inflation of +2.3% core, and up from 1.9%, and they are watching commodity prices rise, they have left their ultra-loose monetary policy settings unchanged for a 78th straight month. They downgraded their 2022/23 growth forecast from +2.9% to +2.4%.

In China, HSBC has become the first foreign lender to install a Chinese Communist Party committee within its investment banking subsidiary in the country.

The European Central Bank has turned suddenly active. They raised their three key interest rates by +50 bps, the first increase since 2011 and ending eight years of negative rates, in an attempt to bring inflationary pressures under control. This was double what was anticipated. They also said that further normalisation of interest rates will be coming soon. And they started a new bond purchase scheme to help more indebted member states to cap the rise in the borrowing costs "and limit financial fragmentation".

The South African central bank also surprised markets with an outsized rate hike. +50 bps was expected but they delivered +75 bps to 5.5%.

In Australia, there are growing calls to shut their border with Bali to keep the foot & mouth disease out. Fear of what it will do there is rising fast. Returning surfers seem to be the primary risk.

Container shipping costs fell again last week and are now -24% lower than a year ago. The biggest retreats are for the China trade. The Baltic Dry index is going sideways.

The UST 10yr yield starts today at 2.92% and down -11 bps from this time yesterday. 

The price of gold will open today at US$1714/oz in New York which is up +US$13 from this time yesterday.

And oil prices are down -US$2.50/bbl at just under US$96.50/bbl in the US, while the international Brent price is now at just over US$100.50/bbl.

The Kiwi dollar will open today a little softer at 62.1 USc. Against the Australian dollar we are nearly -½c softer at 90.1 AUc. Against the euro we are also softer at just under 61 euro cents. That means our TWI-5 starts today at 70.9 and -20 bps lower from yesterday.

The bitcoin price is lower from this time yesterday, down by -3.2% to US$22,807. Volatility over the past 24 hours has been high at just under +/-3.5%.

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 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 many global indicators are coming in quite weak today.

First, American existing home sales dropped -5.4% in June from May to an annual rate of 5.12 mln in June and a two year low and well below market forecasts of a 5.38 mln sales rate. It is the fifth consecutive month of retreat as tougher affordability continues to take a toll on potential home buyers. The median price for all housing types was US$416,000 (NZ$668,000), a record high and up more than +13% in a year. Total unsold inventory rose sharply, up almost +10% from May to 1,260,000 units.

It will be no surprise then that mortgage applications are falling. Last week they slid more than -6%, indicating that the June housing activity drop has continued into July, because this was the third consecutive weekly fall in mortgage applications - and the largest of them. The mortgage interest rate rose last week, after a few weeks of declines, and this won't help affordability or sales.

There was a well-supported UST 20yr bond auction earlier today and that brought a median yield of 3.33% which was actually lower than the 3.41% at the prior equivalent event a month ago.

Canada's inflation rate came in at 8.1% which was higher than May's 7.7% but well below the expected 8.4%. Analysts will need to start expecting these rises to be tamer than they had suddenly come to expect. To be clear, they are still unusually high, and this Canadian rate is a 39 year high, but some of the impetus is leaking away now. In May the annualised mon-on-month rate was 17% - in June it is back to just over 8%. Energy costs account for much of the leveling out.

China reviewed is Loan Prime Rates today, but left them both unchanged.

Some suppliers to Chinese real estate developers are refusing to repay bank loans because of unpaid bills owed to them, a sign that the loan boycott that started with homebuyers is starting to spread. Hundreds of contractors to the property industry complained that they can no longer afford to pay their own bills because developers still owe them money.

Separately, China is reporting large declines in road freight caused by renewed virus restrictions.

Meanwhile, Taiwanese export orders continue to recover strongly in June after the short and unexpected April drop.

German producer prices rose at a +7.2% annual rate in June from May, far less than the year-on-year +33% rise - and a clear indication the heat is going out of their producer price pressures.

The EU reported a deep and serious dive in consumer sentiment in July, driven by high energy and inflation costs, the war situation, and now unrelenting climate stress. Confidence sunk to an all-time low for a series that began in 1985.

Meanwhile the EU told member states to cut gas usage by 15% until March as an emergency step after Russia warned that supplies sent via the biggest pipeline to Europe could be reduced further and might even stop.

In Australia, the Westpac-Melbourne Institute Leading Economic Index declined by -0.2% from a year earlier in June, after a -0.1% fall a month earlier and pointing to the third straight monthly retreat.

Australia is about to renew its commitment to its 2-3% flexible inflation target and that could underpin a doubling of the official interest rate in coming months. A renewed focus on that is getting wide support, as a review of the RBA's performance gets underway.

Even though there are currently no direct flights from Bali to New Zealand, the Government is stepping up protections against the Foot & Mouth Disease outbreak there with enhanced border monitoring and controls. Australia faces a grave risk from this outbreak, and via there this is where our FMD risk will come.

The UST 10yr yield starts today at 3.03% and up +2 bps from this time yesterday. 

The price of gold will open today at US$1701/oz in New York which down -US$10 from this time yesterday.

And oil prices are down -US$1.50/bbl at just under US$99/bbl in the US, while the international Brent price is now at just over US$102.50/bbl.

The Kiwi dollar will open today little-changed at 62.2 USc. Against the Australian dollar we are a little firmer at 90.5 AUc. Against the euro we are also firmer at 61.2 euro cents. That means our TWI-5 starts today at just over 71.1.

The bitcoin price is virtually unchanged from this time yesterday, up by +0.1% to US$23,553 but another one-month high. Volatility over the past 24 hours has been moderate at just under +/-2.9%.

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 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 BA.5 Covid risk is rising 'significantly' and threatens how our economy will operate.

But first up today, we need to report another weak dairy auction. It was down -5% in US dollar terms and down -6.3% in NZ dollar terms. The falls were led by SMP which was down -8.6% followed by WMP which was down -5.1% from the prior event two weeks ago. These reductions are compounding now; in the ten events since the start of March there have been eight with losses and the net fall is now -23%. That is doing to change minds when it comes to pay-out forecasts, and especially as the retreats for SMP and WMP have been at the sharp end. Somewhat unusual has been the recent firming of the NZD, and that can only be a 'bad thing' for pay-out forecast estimates.

In the US, early data for last week's retail sales were stronger than the usual positive levels.

There were also a string of quite positive earnings reports out today, and that has juiced up Wall Street equities.

American data on housing starts wasn't so flash. Their housing sector has been cooling amid soaring prices and mortgage rates. New building consents also fell, but they are still high compared to pre-pandemic levels. Housing completions remained high.

China's holdings of American government debt have fallen below US$$1 tln for the first time since 2010, with concerns about the risk of Russia-style sanctions possibly accelerating a long-term financial decoupling driven by political tensions. The tally stood at US$981 bln at the end of May, shrinking by almost -US$23 bln from April and dropping -9% over six straight months of declines. Overall foreign holders of US securities now total US$7.4 tln, up +3.8% from year-ago levels.

China released data overnight that showed it citizens are prioritising saving over spending as the economic risks seem to be growing.

Those risks include sudden lockdowns as a result of their national pandemic policies. More than 20 provincial-level regions in China have reported locally transmitted COVID-19 cases in the latest round of outbreaks, and unlike the previous round, cases are found in some inland and small cities, posing challenges to the country’s epidemic control efforts.

In India, their currency is now at its weakest level ever against the US dollar. It has lost about -7% of its value against the greenback this year, a victim of higher energy prices and economic uncertainty. This stress is promoting it to try and ditch the USD for certain imports, especially with pariah states like Russia. (It still wants to be paid in USD for its exports however.) The rupee is also near historic lows against the NZ dollar although current levels have been around since the GFC.

The Turkish lira is in the same boat. And the rise in Turkish inflation just keeps on going.

The rising American interest rates are putting extreme pressure on many emerging market economies.

In Australia, plans to wind up its pandemic taskforce have been shelved as new variants of the virus sweep the country. Indoor mask wearing is now a new recommendation as the BA.5 variant imposes a 'significant' new threat to public health there. Sickness absenteeism is rife, limiting how companies can operate. New Zealand is facing the same threat.

The UST 10yr yield starts today at 3.01% and up +5 bps from this time yesterday. 

The price of gold will open today at US$1711/oz in New York which unchanged from this time yesterday.

And oil prices are up +US$2/bbl at just on US$100.50/bbl in the US, while the international Brent price is up even more at just over US$104/bbl.

The Kiwi dollar will open today up more than +½c at 62.3 USc. Against the Australian dollar we are little-changed at 90.2 AUc. Against the euro we are also little-changed at 60.8 euro cents. That means our TWI-5 starts today at just under 71.

The bitcoin price rose again from this time yesterday and by +6.7% to US$23,510 and a new one-month high. Volatility over the past 24 hours has been very high at just under +/-4.9%.

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 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 markets are struggling to make sense of a global economy buffeted by many unusual forces.

First, Russia has formalised its shutdown of oil and gas supplies to Europe and that is diving a scramble to activate other sources.

Then in the US, Apple and Google say that they will slow their hiring intentions, signals that are more 'news' than 'substance', but ones that are reverberating in markets. Microsoft is making job adjustments too, but plans a new hiring increase.

And US home builders are glum, seeing demand leak away as house prices have to rise on rising costs, and buyers afraid of higher mortgage interest rates. This is despite new home sales running ahead of pre-pandemic levels - just not at the unusual level they enjoyed during the pandemic.

Canada's June housing starts came in slightly better than expected but slightly less than for May. And they were -1.6% lower than year ago levels.

In China, the city of Beijing is issuing NZ$25 bln of helicopter 'coupons' to try and lure diners back to restaurants. Beijing is just one of 20 cities attempting the restart move.

These are necessary because of a sharp turn to risk-off consumer sentiment. Banks have been told to limit trading in gold as customers rush for the safe haven.

And staying in China, it is easy to draw apocalyptic conclusions from the regional bank failures in Henan Province. But it turns out there are others going bad too, the most recent in Inner Mongolia. A series of failures could create a chain reaction that would be hard to stop, especially as their big banks are also highly leveraged, and their local government is heavily in debt. China has faced down these sorts of threats before, but the balances at risk are much higher now and harder to control - harder when the economy is misfiring. Respected observer/critic Minxin Pei says a debt reckoning might be imminent, one that will have global repercussions. Let's hope not.

Singapore delivered better than expected export results for June with a +9.0% gain over year-ago levels.

Here's something you don't see every day. A listed company posted a profit of $200 mln in 2021, and will post a profit of $3 bln in 2022, a more than 10x rise. The company is Whitehaven Coal (WHC) on the ASX. Record high prices and limited global supply for its product has seen its share price rise from US$2.12 a year ago to $5.90 today. To be fair, their share price was higher in 2011, but it seems to be countering the ESG pressures, making those who counter-invested at the start of the ESG move win outsized gains.

The States want in. Queensland has already instituted a windfall profits 'royalty' on such miners. NSW is now considering the same.

The UST 10yr yield starts today at 2.96% and up +3 bps from this time yesterday. 

The price of gold will open today at US$1711/oz which is +US$2 firmer than this time yesterday.

And oil prices are up +US$3.50/bbl at just over US$98.50/bbl in the US, while the international Brent price is up even more at just over US$102.50/bbl.

The Kiwi dollar will open today back down to yesterday's level at 61.6 USc after a temporary spurt higher on the CPI news. Against the Australian dollar we are down to 90.3 AUc. Against the euro we are also down at 60.7 euro cents. That means our TWI-5 starts today at just under 70.6.

The bitcoin price rose from this time yesterday by +4.5% to US$22,033 and a one-month high. Volatility over the past 24 hours however has been very high at just under +/-4.8%.

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

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

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

Kia ora,

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

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

Today we lead with news China seems to be inching toward an economic reckoning.

But first up today, all eyes will be on the New Zealand CPI inflation rate for the June quarter, which will be released at 10:45am today. It was 6.9% in March and today's consensus expectation is that it will have risen to 7.1%. Variations from that may well shift financial markets. Check back with us then; we will have full coverage.

Meanwhile, China has reported bad economic activity levels for the June quarter, worse than the poor ones expected. And remember, these are the official data. GDP fell -2.6% in the June quarter from the March quarter, and that undermined the year-on-year expansion to just +0.4%, well below the expected +1.0% and miles lower than the March level of +4.8%. China's goal of a 2022 expansion of "about 5½%" is now lost. The upcoming Party Congress is likely to be a dour affair with a dark economic shadow hanging over it (the date for this Congress hasn't been set yet).

China's weak GDP result is after they reported asurprise rise in retail sales for June. the +3.1% year-on-year increase for June easily beat market estimates of a flat reading and shifting from a -6.7% drop in May. The latest figure marked the first increase in retail trade since February, as consumption recovered following a drop in pandemic lockdown restrictions.

After sliding all year, China says its electricity production rose sharply in June, up +1.5% from year ago levels after May was down -3.3% on the same basis. June's coal production, used mainly to fire up electricity generators, was up +15%. 

China is scrubbing social media of any references to the growing mortgage boycott there. No one is suggesting this movement is enough to undermine their banking system yet, but it is a rare indication of widespread discontent over how their economy is putting pressure on homeowners. It does have a chance of being big - China's middle class has more than 70% of its personal wealth tied up in housing. Over the weekend, a banking regulator told their banks to lend to complete projects.

US June retail sales came in better than expected as our weekly monitoring had suggested. They were up +1.0% from May and up +8.9% from year-ago levels on an actual basis. Much will be price increases however.

Business inventories rose +1.4% in May from April to be almost +18% higher than year-ago levels. The Inventory/Sales ratio is creeping up now to be higher than year-ago levels, so you can see why managers are taking action on that front.

Still, factory data can still surprise on the positive side, and that is what we got from the New York factory survey for July. It bounced back unexpectedly, with increases in new orders, production activity, and employment. But even after those gains, firms grew more pessimistic, thinking it is down from here.

A more broad, national industrial production measure, this one for June, recorded a +4.2% gain year on year but that was lower than for May.

Businesses may be a little less optimistic, but somewhat surprisingly, consumers are picking themselves off the mat. The widely-watched national University of Michigan consumer sentiment survey rose in July from June. It is still very low, but an improvement was not anticipated.

Also still negative, but improving more than expected, was the Canadian senior loan officer survey.

And that is despite a retreating housing market there.

In Australia, where infections and deaths are again rising sharply, the new pandemic wave has seen their new Government backtrack and re-introduce support payments for workers forced to isolate. These payments, which ended on June 30 and entitled workers to get up to AU$750 for each seven-day quarantine period, will be restored and extended until September 30. 

We should also note that the new pandemic wave is hitting New Zealand as hard as anywhere, with up to 30% of workers isolating at many companies. That will make customer service very difficult in the coming weeks and test the tolerance of many customers. Mask complacency is rife making the spread very difficult to stop.

Back in Australia, shareholder objections might have put the kibosh on ANZ's ambitions to buy MYOB. But the bank does look likely to be the winner in the race to buy Suncorp Bank. That would add AU$85 bln in banking assets to its existing AU$678 bln. After that, it would still leave ANZ as the #4 'big bank' at 67% the size of market leader CBA.

A review of some key commodity prices shows inflation isn't likely to be driven higher from these. Copper is down -28% since the start of the year with most of the fall since early June, nickel has now lost all its 2022 gains, iron ore is now lower than its 2022 start. Aluminium is similar. The oil price is still higher than when Russia invaded Ukraine, but is back a lot since early June. Even the wheat price is retreating and has given up all its invasion premium. If inflation stays high, it won't be because of these core commodities. "Transitory" still has a chance of being right.

The UST 10yr yield starts today down at 2.93% and unchanged from Saturday. 

The price of gold will open today at US$1709/oz which is +US$4 firmer than this time Saturday. And that is -US$34 lower than this time last week.

And oil prices are little-changed at just under US$95/bbl in the US, while the international Brent price is just over US$98.50/bbl. A week ago these prices were US$103 and US$106/bbl respectively.

The Kiwi dollar will open today at 61.6 USc. A week ago it was at 61.9 USc. Against the Australian dollar we are little-changed at 90.7 AUc. Against the euro we are also little-changed at 61.1 euro cents. That means our TWI-5 starts today at just under 70.8 and up a mere +20 bps from this time last week.

The bitcoin price rose from this time Saturday by +0.6% to US$21,077. A week ago it was at US$ 21,598. Volatility over the past 24 hours however has been modest at just under +/-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.

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 there are some indications popping through that inflation pressures might be topping out.

But first, American jobless claims rose last week to a bit more than expected, at +241,000 new claims for the week, to put 1,327,000 on these programs and no longer at a record low level.

And their producer prices rose more than expected, like yesterday's CPI, but these costs are rising faster than the consumer set. They were up +11.3% in a year, nearly back at the March 2022 +11.6% level again. But just like the CPI, costs other than for energy are rising slower now, up +6.4% and an eight month low.

And there are indications the American petrol price pressure is past its peak. Average prices nationwide are down -8.2% over the past month in a consistent declining trend now. If this continues, it will show up in CPI and PPI data quite soon.

In China's cities, their economic slowdown is weighing on households. Middle-class consumers are feeling anxious and making painful cuts to their household budgets. Their savings rate is suddenly rising sharply as spending is curtailed. With tough lockdowns hanging over their heads, most Chinese households who can are choosing to save, and that is making life tough for policymakers trying to restart a very sluggish economy. Helicopter money in these situations is less of an option because such moves are less likely to be spent. For those who can't save they may help, but their prospects now look much tougher.

The mortgage boycott is a rising trend there too and with the regional bank run pressure, it is piling pressure on policymakers. Rumours are swirling now. The upcoming Party Congress will have these darkening shadows over it and they won't be appreciated.

On top of the property wreck, the consumer hesitancy is raising Chinese bond market stress which is now as bad as it has ever been. And as if this not enough, heatwaves and floods are as bad this year as they have ever been (although that is not just a Chinese problem - although as the world's largest emitter, they are a primary cause).

Singapore reported no growth in the June quarter from the March quarter, a weaker-than-expected result. That means their economy grew +4.8% over the last 12 months, far less than the expected +5.2%, so a big leakage in momentum there.

And Singapore tightened its monetary policy yesterday, its fourth such move since October and an off-cycle move for them as they saw inflationary pressure rising on the back of Russia's invasion of Ukraine. Singapore targets its exchange rate to achieve price stability rather than an interest rate.

The Australian employed workforce rose by +88,000 in June, a bit more than half full-time jobs, and a surprising number were part-time. That took their unemployment rate down from 3.9% to 3.5% (a record low for them) and involved a small uptick in their participation rate. This lower than expected jobless rate will put pressure on the RBA to act harder and sooner. (The last time NZ reported its jobless rate, it was 3.2% in March. We get our June data on Wednesday, August 3, 2022. They are unlikely to change much given the strong jobs market here.)

Globally, freight rates for shipping containers were marginally softer last week, continuing the easing trend. Bulk cargo rates eased too.

The UST 10yr yield starts today down at 2.96% and a +5 bps rise from yesterday. There is less talk today of a +100 bps Fed hike in July, now more like +75 bps. 

The price of gold will open today at US$1711/oz which is -US$29 lower than this time yesterday.

And oil prices are -US$1.50/bbl lower at just under US$93/bbl in the US, while the international Brent price is just on US$96.50/bbl.

The Kiwi dollar will open today -½c weaker from this time yesterday at 61.1 USc. Against the Australian dollar we are firmer at 90.8 AUc. Against the euro we are little-changed at 61.1 euro cents. That means our TWI-5 starts today at just on 70.6 and little net change.

The bitcoin price from this time yesterday by +3.4% to US$20,549. Volatility over the past 24 hours however has been moderate at +/-2.6%.

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

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

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