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.

And today we lead with news the American rich get insulated from legal scrutiny, while the US economic data loses its shine.

First in the US, their services sector expanded slower in January than expected, according to the widely-watch ISM survey. It is still a good expansion, just with lower new order flows and business activity than they have had over the past five months. And the internationally benchmarked S&P/Markit version essentially told the same story, although that one had a faster retreat.

We get the US labour market report for January on Saturday. The precursor ADP Employment Report showed a rise of +183,000 private jobs in January, better than the +150,000 expected. The good momentum was based on customer-facing payrolls; the business services and production sectors shrank in the month. Tomorrow’s non-farm payrolls are expected to rise by +170,000 in January.

Announced job cuts were modest in January.

We should perhaps note that as part of the revenge purges of US government agencies, the FBI white-collar crime division has been virtually closed down. Not only are ethics out the door, corporate and financial activities that are illegal won't be investigated by them. Even national security cases are on the back burner. It open slather.

But US initial jobless claims rose slightly more than expected with 240,000 more claims added last week. Seasonal factors had suggested this level should have fallen slightly. There are now 2.25 mln people on these benefits, well above the 2.1 mln at this time last year.

US mortgage interest rates were little-changed last week, although now just shy of 7%. And mortgage applications moved little, still bumping along the low levels that have existed for the past five years.

As is usual in the US, vehicle sales fell sharply in January from December, but this year the retreat was it bit more pronounced than last year. Prior to that, sales 'usually' rose. Having noted that, they were up +4.9% from January 2024, although the 2025 level is still -4.9% lower than in January 2020 and just before the pandemic.

Later today, the Reserve Bank of India will release the results of its monetary policy review and is widely expected to cut rates by either -25 bps or -50 bps, maybe to 6%. They have a new governor who is de-emphasising inflation control and re-emphasising growth. He was appointed by PM Modi for that shift. Currently inflation is running at 5.2% and the 4% goal is no longer a priority.

As widely anticipated, the Bank of England cut its policy rate for a third consecutive time, taking it down to 4.50%. No surprises here and this time it was a unanimous decision.

Australia's merchandise trade surplus fell in December and November's surplus was revised lower, both to levels less than markets expected. The December result was the smallest trade surplus since last September, as exports rose less than imports.

The pullback on global trading volumes are showing up in container freight rates. They fell another -3% last week with general softness. They are now below year-ago levels, but still +130% higher than pre-pandemic. Trans-Atlantic rates outbound from the US are very low. Bulk cargo rates remained very low, still at about the level that prevailed more than 50 year ago.

The UST 10yr yield is at 4.44%, up +2 bps from yesterday at this time. 

The price of gold will start today at US$2850/oz and down -US$16 from yesterday and from its record high record high.

Oil prices are down -US$1.50 at just on US$71/bbl in the US and the international Brent price is now US$74.50/bbl.

The Kiwi dollar is now at 56.7 USc and down -20 bps from this time yesterday. Against the Aussie we are down -20 bps at 90.3 AUc. Against the euro we are up +10 bps at just on 54.7 euro cents. That all means our TWI-5 starts today just on 67, and down -10 bps from yesterday.

The bitcoin price starts today at US$96,526 and down -1.4% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.5%.

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

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

Kia ora. I'm David Chaston. And we will do this again on Monday.

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

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.

And today we lead with news it remains unclear what happens next after the chaotic round of US tariffs on their closest trade partners, and then their unexpected suspension.

But first up this morning, we can report a strong dairy auction result, with prices up +3.7% in USD terms and up +4.0% in NZD terms. The key WMP price was up +4.1% in USD terms and is now sitting much higher than the anticipated US$4000 level. There were a couple of key factors at play today. First, despite rising NZ production, the volume of product on offer was down, and along with lower US and Australian milk production, there is a supply squeeze. And secondly, there was strong pre-Ramadan buying although not so much from China as anticipated. Where each component has landed can be checked in our dual-currency charts that also interleave the Pulse results for SMP and WMP as well. There are some new high benchmarks achieved today, especially the WMP price in NZD.

And, yes, the strength of this auction will have analysts reassessing their payout forecasts. But they will probably hold back because of where we are in the season. However, the base is now quite strong.

US job openings fell by -556,000 to 7.6 million in December, to a lot less than anticipated and indicating a definite cooling of the American labour market. Clearly employers were uncertain about how the post-election landscape would play out. And this came well before the aggressive purging of Federal government jobs now underway.

Perhaps worse, new orders for manufactured goods sank -0.9% in December from November, extending the revised -0.8% drop in the previous month, and firmly below market expectations of a lesser decline. It was the sharpest monthly drop since June.

But retail sales were up +5.7% last week from the same week a year ago on a same-store basis and that was an improvement. However you have to wonder whether this rise was motivated by buying ahead of expected price rises flowing from the signaled tariff increases.

Surging inventory levels has seen the US Logistics Manager’s Index jump in January from December to its fastest expansion of the logistics since June 2022. Underlying growth and the uncertainty surrounding trade regulations, particularly the tariffs on Mexico, Canada, and China, drove the defensive inventory moves.

On the trade war front, the US delayed its tariff imposition in both Mexico and Canada by a month, but China set in motion is retaliation, a mixture of its own countervailing tariffs especially on coal, oil and natural gas, plus major 'investigations' of Google, Nvidia and Intel. It also banned exports of some key minerals. But analysts thing there is more symbolism here than hard penalties. They are being saved for later in the game.

In Canada, consumer boycotts may have a bigger effect than official retaliation. Other major economies are also readying their retaliation, including Japan and the EU. If all of them act in unison, the impact of just these five big trading blocs will be substantial for the US (and themselves of course).

China thinks it can win the trade war with the US just by letting the yuan sink. In fact, all currencies vs the USD are falling. That way imports become cheaper for US buyers, and US exports become more expensive (and less attractive) to overseas customers. It is lose-lose for the US. Trump is fighting natural market forces with unnatural tariffs.

Join us at 10:45am this morning when we will report the Q4-2025 unemployment rate. Markets expect it to have risen to 5.1% from the Q3 4.8%. Any variance from that will have implications for the February OCR review due on the 18th of this month.

The UST 10yr yield is at 4.52%, unchanged from yesterday at this time.

The price of gold will start today at US$2840/oz and up +US$23 from yesterday and another new record high.

Oil prices are virtually unchanged again at just on US$72.50/bbl in the US and the international Brent price is now US$76/bbl and a tad firmer.

The Kiwi dollar is now at 56.2 USc and up +20 bps from this time yesterday. Against the Aussie we are down -20 bps at 90.3 AUc. Against the euro we are up +10 bps at just on 54.4 euro cents. That all means our TWI-5 starts today just on 66.9, and up +20 bps from yesterday.

The bitcoin price starts today at US$99,502 and up another minor +0.6% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.2%.

We should finally note that tomorrow (Thursday, February 6, 2025) is a public holiday in New Zealand and there won't be a Breakfast Briefing edition. It will return on Friday.

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

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

Kia ora. I'm David Chaston. And we will do this again on Friday.

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

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.

And today we lead with news Trump's tariffs are bringing the same level of global uncertainty back as we had from China's pandemic. This time however, officials in charge lack the credibility or the instinct to change policy for the common good, or the courage to withstand the nutters. In fact, the nutters are in charge of this latest mess.

However their tariff policy took a jerk overnight with the US announcing a one month delay to the start of them against goods from Mexico. Meanwhile, Canada released the list of products that they will hit with counter-tariffs for US products. Probably more importantly, there is widespread evidence Canadians are already boycotting US products, tariffs or not. That will have a more immediate impact that official actions.

But the effects have yet to show up in the data, and there was a lot of PMI data out today for surveys that pre-dated the tariff news.

The ISM factory PMI for the US rose to a modest expansion in January from a downwardly revised small contraction in December. This was a better result than expected and is the first expansion in the factory sector by this survey after 26 consecutive months of contraction. New orders increased at a faster pace and that drove the change.

Separately the globally-benchmarked S&P/Markit factory PMI came in with a similar recovery recorded, and slightly better than the ISM one.

In Canada, their factory expansion slowed slightly in January. But it is still at a level higher than either of the US surveys.

Although the internationally-benchmarked China Caixin factory PMI slipped to a no-expansion/no-contraction state in January, the underlying data did feature a rise in new orders. Prices eased and at their fastest pace since July 2023. Looking ahead will be difficult now given the unknowable impacts of the impending tariff war.

The Singapore Manufacturing PMI for January slipped to a marginal expansion but it was the 17th consecutive month of expansion, even if it was the weakest in three months. Slower increases were recorded in new orders, new exports, factory output and employment.

EU inflation in January rose marginally, to 2.5% from 2.4% in December. What is interesting about this is that it is the first where energy prices weren't the restraining factor they were in 2024. But it is the 3.9% rise in services costs that is keeping this elevated.

EU PMIs were contracting for their large economies, expanding in the smaller ones. Overall the contraction was less in January than December.

And the S&P Global Australia Manufacturing PMI was revised higher to 50.2 in January from a flash of 49.8, and compared to 47.8 in December. It's their first expansion in the manufacturing sector in a year, as output returned to growth. New orders fell at a softer rate and employment levels increased, supporting the clearance of backlogged work.

Retail sales in Australia fell by -0.1% in December from November, the first such retreat in nine months, though the drop was milder than the forecasted -0.7% contraction. The result points to weakening consumer spending, fueling expectations that the RBA may start cutting interest rates at their February 18 meeting. Year-on-year, retail sales only rose 3.0%, barely more than inflation's 2.5%.

And staying in Australia, building consent levels were essentially unchanged in December from November to be more than +12% higher than in the same month in 2023. For all of 2024, they were +4.7% higher than in 2023. Despite those gains, the powerful construction lobby is calling for a "$12 billion injection into infrastructure" to have the taxpayer subsidise its activities.

CoreLogic reported that Australian house prices and sales activity were weaker than usual in January. They had a -0.2% price dip in January, the same as December and the fourth consecutive monthly decline. Annual price growth has continued to slow, dropping below +4% now.

The UST 10yr yield is at 4.52%, down -2 bps from yesterday at this time. 

The price of gold will start today at US$2817/oz and up +US$18 from yesterday and back to a record high.

Oil prices are virtually unchanged again at just on US$72.50/bbl in the US and the international Brent price is now US$75.50/bbl and also holding.

The Kiwi dollar is now at 56 USc and down -40 bps from this time yesterday. It fell -60 bps lower during the day but recovered some of that. Against the Aussie we are down -20 bps at 90.5 AUc. Against the euro we are down -10 bps at just under 54.3 euro cents. That all means our TWI-5 starts today just on 66.7, and down -50 bps from yesterday.

The bitcoin price starts today at US$98,885 and up a minor +0.8% from this time yesterday. Volatility over the past 24 hours has been high though at +/- 3.9%.

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

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

Kia ora. I'm David Chaston. And we will do this again tomorrow.

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

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.

And today we lead with news about the start of a tariff trade war, a reprise of a 1930s effort, also started by the US, and one that ended badly for everyone.

The week ahead was supposed to be basically about jobs, both here and in the US with our HLFS data for December out on Thursday, and the US non-farm payrolls report out for January on Saturday. But Trump's imposition of 25% tariffs on Canada and Mexico, and 10% tariffs on China will no doubt dominate the news with its consequences.

However there will be other economic data news coming, including key Wall Street earnings reports, January PMIs, central bank decisions from India and the UK, and China's financial markets will return to work after their CNY break on Wednesday. Also, Chinese buyers may be back at Wednesday's GDT dairy auction on Wednesday, which will be an important event after last week's sharp run-up in the WMP price at the Pulse event.

And don't forget, this will be an interrupted week with a public holiday in New Zealand on Thursday, Waitangi Day. So Friday is likely to be a day many people also take off to get a four-day weekend. (But not us, of course.)

The big news over the weekend was the US imposing 25% tariffs on its neighbours Canada and Mexico. Worryingly, these mean the US has unilaterally broken its (Trump-imposed) CUSMA (or NAFTA 2.0) trade treaty obligations. And more of an issue for any country contemplating making a treaty with the new US Administration is that the basis for these new tariffs are essentially jingoistic and trumped-up, that pretend anecdotes are "common sense" when they are just raw self-servicing prejudice.

Mexico and Canada hit back immediately. Canada also imposed a 10% tariff on their oil exports to the US. China is going through the WTO dispute process.

An easy way to keep an eye on US inflation is to watch the daily US petrol price. As at today it is US$3.10/gal. We will check back regularly to watch how tariffs impact that. Of course demand will impact that too.

How will this affect New Zealand? Here are some early thoughts.

Earlier the alternate US inflation measure, "the one the Fed watches", their personal consumption expenditures price index, rose +0.3% in December from November, the highest gain in eight months, but it was the rise expected. That means their year-on-year PCE inflation came in at 2.6% and it’s highest in seven months by this measure. The new tariffs are likely to mean higher inflation, something Trump acknowledged in a Fox interview.

There were no surprises in any of the income, consumption, or savings data in the PCE release. This may turn out to be the low point in their inflation cycle.

The January Chicago PMI recovered from the weak December result on the back of better new order inflows and higher production levels. But it remains in deep contraction territory. The outlook responses in this regional survey weren't very bright.

In Canada, apart from the new tariffs from the US, they are wrestling with what the 25 year 'extreme' difference means between their policy interest rate, 3.00% and the US Fed's "4.25% to 4.50%". In market terms that is a 140 bps discount the Canadians carry. It has been thought that +/-100 bps is in the comfort zone for financial markets, so we may start to see reactions and implications. There could be lessons for other economies, although Canada may be facing extra pressures from the tariffs.

Japanese industrial production rose in December from November and that limited the year-on-year decrease to less than expected.

Japanese retail sales rose +3.7% in December from the same month in 2023, up from a +2.8% gain in November, and better than market expectations of a +3.2% rise. This is the 33rd straight month of expansion in retail sales and the fastest growth since June 2024. Rising pay levels are getting the credit for the expansion.

In India, a new Union (national) Budget has cut income taxes (see pages 28 and 29), in the hope it will arrest the cooling of their economic activity by enhancing domestic demand. Those earning about NZ$24,000 pa will pay no tax, and the tax bands above that have been indexed higher. They will still run a deficit of -4.4% of GDP if they can maintain a +6.8% growth rate. They will pay for the tax cuts by restraining their spend on updating their infrastructure. India also cut tariffs.

In Argentina, their central bank cut its policy interest rate by -300 bps to 29% on Friday NZT, as inflation eased again. But annual inflation in Argentina was still at 118% in December, the softest increase since July 2023, down from 166% in November.

EU inflation expectations rose to 2.8% in the ECB's December survey, taking it back to early 2024 levels. In the ECB MPS, they noted there is still more work to do to quash these expectations. Actual EU inflation ended 2024 at 2.7% and it too is rising.

Aussie producer prices rose +3.7% in December from a year ago, but even if that is high, it was their slowest rise since early 2021.

The UST 10yr yield is at 4.54%, up +3 bps from Saturday at this time. 

The price of gold will start today at US$2799/oz and down -US$10 from Saturday and off its all-time high.

Oil prices are virtually unchanged at just on US$72.50/bbl in the US and the international Brent price is now US$75.50/bbl and holding the Saturday retreat.

The Kiwi dollar is now at 56.4 USc and down -40 bps from this time Saturday. Against the Aussie we are down -10 bps at 90.7 AUc. Against the euro we are little-changed at just under 54.4 euro cents. That all means our TWI-5 starts today just on 67.1, and down -10 bps from Saturday.

The bitcoin price starts today at US$98,142 and down a sharp -6.5% from this time Saturday. Apparently isolationism and tariffs are not good for crypto. Volatility over the past 24 hours has been moderate at +/- 2.1%.

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

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

Kia ora. I'm David Chaston. And we will do this again tomorrow.

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

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.

And today we lead with news of some all-time high benchmarks that are impressive.

The first estimate of Q4-2024 GDP was out earlier today and it came in at a +2.3% growth rate, less than the +3.1% in Q3. It was also lower than most market analysts had anticipated. Consumption came in at the 3% level, the trade deficit had no material impact, but it was the -1.0% fall in investment activity that capped the result. For all of 2024, the US economy grew +2.8%. That all means that the US economy grew by a nominal +US$1.46 tln in 2024. (To put that in perspective, the NZ economy probably shrank to US$238 bln and that total economic activity here for the year represents just 15% of their growth, 1/125th of their total economic activity in one year.) No-one else comes close either. Per capita, nominal US GDP rose +4.1% in 2024. Across all these factors, 2024 was the best year ever for them.

That is the third year in a row that US growth has outstripped China's who is now falling behind in absolute terms. The EU is an also-ran with virtually no expansion. Japan and India are still in the game however.

US initial jobless claims fell back sharply on an actual basis because of seasonal effects, to 227,000, and that was a larger fall than those seasonal trends would have indicated. There are now 2.18 people on these benefits, almost exactly the same level as a year ago. No special labour market stress is showing in this data tracking.

But there was a sharp, and unexpected fall in pending home sales for December, down -5.0% from a year ago and down at a slightly faster rate from November. The still-high home loan rates are getting the blame from the industry, but they would say that wouldn't they?

As expected, the ECB cut its policy rates by -25 bps with the main one now 2.90%. It was its fifth consecutive cut.

The January update of the EU business sentiment survey reveals a pickup in confidence, a rise in inflation expectations, and an improvement - and a rather sharp one - in in their expected jobless rate.

And we should note that the South African Reserve Bank cut it policy rate by -25 bps too, to 7.50%.

Global container freight rates fell -2% last week as the pre-tariff rush faded. But they remain +137% higher that per-pandemic. The US adventure in Panama may now pose a new threat to shipping risks. Bulk cargo rates fell -18% and are now down near all-time lows.

Global passenger demand for air travel reached an all-time record high in December, leaving the pandemic hesitation behind it. Apparently we don't care about the climate implications enough to curb our wanderlust.

The UST 10yr yield is at 4.53%, down -2 bps from yesterday at this time.

The price of gold will start today at US$2788/oz and up +US$7 from yesterday to bump up near its all-time high.

Oil prices are down -50 USc at just under US$73/bbl in the US and the international Brent price is now at US$77/bbl.

The Kiwi dollar is now at 56.5 USc and unchanged from this time yesterday. Against the Aussie we are down -10 bps at 90.7 AUc. Against the euro we are little-changed at just under 54.3 euro cents. That all means our TWI-5 starts today just on 67, and down -10 bps from yesterday.

The bitcoin price starts today at US$105,710 and up +3.6% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.5%.

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

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

Kia ora. I'm David Chaston. And we will do this again on Monday.

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

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.

And today we lead with news markets are all quiet ahead of the US Fed monetary policy review and results will be announced at 8am NZT. Markets do not expect any rate change, but given the aggressive start to the Trump Administration, markets will be watching for any Fed reaction. It seems unlikely to come today however.

US mortgage applications were a little softer last week through the Washington swamp burp, down -2%. And the benchmark 30 year interest rate stayed just above 7% and little changed as lenders assessed the risk implications.

Both wholesale and retail American inventory levels fell in the latest accounting out overnight.

But as expected, the American trade deficit rose sharply in December as traders rushed to beat the aggressively-signaled tariffs threatened by the incoming Administration. That is entirely consistent with what we had reported for trans-Pacific freight rates. In fact exports fell rather sharply too with buyers fulling back on the risk of capricious American actions. And imports jumped - in fact they were +15% higher than the same month a year ago. The biggest increases were for food, industrial supplies and capital goods; imports of vehicles actually fell. Substituting these for local supply, which seems to be the plan, will probably create distortions that will be inflationary.

Global air cargo demand ended 2024 on a high too, with a surge in international air cargo to and from North America.

The Fed will be watching for the actual inflationary reactions, but they may not show up for a few months yet. But by the time they do show up, the impulse may be embedded already. They have a tough watch-wait-react conundrum ahead of them - well aware that if they get it wrong, Trump will blame them.

In Canada, they have already announced their rate decision earlier today, and as expected they cut by -25 bps to 3.00%. They face the same pressures from their neighbour, but from the other side. They are in the unique position of not having a friendly neighbour any more. They also signaled that they will no longer reduce their balance sheet, so the end of their qualitative tightening program. From here on, their balance sheet will be set to grow at the same rate as their economy. 'Normalisation' is returning at a much higher level that pre-pandemic. Back then they had a balance sheet of C$117 bln. They are 'normalising' now at C$280 bln.

In Russia, after some successful 2024 central bank moves to keep a lid on inflation, producer prices are taking off again, up +7.9% in December. The Kremlin-pressured back-tracking on those moves is having the anticipated effect, and they are heading into a period of high inflation again.

In Australia, there were some mixed signals in the Q4 CPI data released there yesterday, along with their Monthly Inflation Indicator for December. The Q4 CPI rate fell to 2.4% from 2.5% in Q3, and slightly better than expected. Underlying inflation fell to 3.2%. But the month inflation indicator rose to 2.5% in December, up from 2.3% in November and 2.1% in October, and actually the highest in four months, so tracking the "wrong way". Markets however focused on the "good" quarterly result, anticipating this will open the door for a RBA rate cut on February 18. But you have to wonder if that is actually how Bullock & Team see it.

Markets have reacted very little to the Aussie CPI data, signaling that all the risks are priced in. Politically, some think a February RBA rate cut could mean an April federal election there.

The UST 10yr yield is at 4.55%, down -1 bp from yesterday at this time awaiting the US Fed decision.

The price of gold will start today at US$2752/oz and down a minor -US$6 from yesterday.

Oil prices are up +50 USc at just over US$73.50/bbl in the US and the international Brent price is now at US$77.50/bbl.

The Kiwi dollar is now at 56.5 USc and down -10 bps from this time yesterday. Against the Aussie we are up +20 bps at 90.8 AUc. Against the euro we are little-changed at just under 54.3 euro cents. That all means our TWI-5 starts today just under 67.1, and also little-changed from yesterday.

The bitcoin price starts today at US$101,997 and down a minor -0.3% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.4%.

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

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

Kia ora. I'm David Chaston. And we will do this again tomorrow.

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

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.

And today we lead with news US equity markets have made a comeback from yesterday's tech rout. But it isn't a full comeback yet in the tech space. In addition, general economic sentiment is more sober about the 2025 prospects.

But first, last week's US retail sales were up +4.9% from the same week a year ago.

However, new orders for manufactured durable goods fell -2.2% in December from November, following a downwardly revised -2% drop in November and far below market expectations of a +0.6% rise. Year on year, the December month was -3.8% lower than in 2023 and that dragged the full year result lower. Basically it held until December, and then there is this unexpected drop.

Also at a level less than expected and less than the prior month is the January survey results from the Conference Board for consumer sentiment.

The regional Richmond Fed factory survey remained soft in January, and their services sector survey softened too.

And the Dallas Fed services survey also 'moderated' in January.

Things are likely to get more uncertain. Brutal dawn raids are underway on undocumented workers, and the Whitehouse has stopped almost all Federal assistance programs. At the same time, access to the OMB website that can give details on this action has been disabled. Confusion reigns. Most at risk is funding for education, disaster aid, and housing. All up, it is a war on "poor people" in support of billionaires. The US Labor Board has been eviscerated. All foreign aid is halted too as the US gifts the world to China's influence, backed up by bullying of other nation's leaders. US public policy has suddenly become an ethical wasteland.

There was a slightly less-well-supported UST 7yr bond auction today and that brought a median yield of 4.41%. That was less than the 4.49% yield at the prior equivalent event a month ago.

In China, the Spring Festival migration is underway, and they expect a mammoth 9 billion trip events over the period. It will also be a test of their facial recognition tracking system (or "ticket verification system".)

In Malaysia, inflation seems well contained. But there is a 'but'. Their PPI fell -0.4% year-on-year in November, but it rose +0.5% on the same basis in December. While both levels are low that is a month-on-month rise of +0.8%, which is on top of a quite fast month-on-month rise in November. On a producer basis, they need to keep an eye on this momentum

In Australia, the December NAB business sentiment survey remained negative, but a little less so. The same survey shows businesses think conditions are positive, and a little more so.

And staying in Australia, we should probably note that the ATO, their federal tax authority, is now targeting landlords for undeclared income. They think more than AU$1 bln is being undeclared. The NZ IRD is running a similar campaign. Both have new data-matching capabilities. But what makes the Aussie effort interesting is that because they have a means-tested age pension program, it is a magnet for hiding income so that a claim on it qualifies. It is a vulnerability that doesn't apply in New Zealand. Aussies at risk will not only have to pay back the under-declared rental income, plus interest, plus penalties, but they will also then have to pay back the super they weren't entitled to, plus interest, plus penalties. It will be a very expensive tax dodge for them.

Later today, there will be an important release in Australia on their inflation levels. They will disclose both their Q4 level, plus their monthly December level. Both are expected to ease to about a 2.5% level from 2.8% in Q3. Some think to 2.2%. An under-shoot will encourage the RBA to move by reducing their 4.35% cash rate target. But a hold (or a rise) will likely put that off the table. The RBA next reviews its policy rate on February 18.

The UST 10yr yield is lower at 4.56%, up +2 bps from yesterday at this time. 

The price of gold will start today at US$2757/oz and up +US$24 from yesterday.

Oil prices are up +50 USc at just over US$73/bbl in the US and the international Brent price is now at US$77/bbl.

The Kiwi dollar is now at 56.6 USc and down -20 bps from this time yesterday. Against the Aussie we are up +10 bps at 90.6 AUc. Against the euro we are also up +10 bps at 54.3 euro cents. That all means our TWI-5 starts today just on 67.1, and unchanged from yesterday.

The bitcoin price starts today at US$102,256 and a +2.5% partial bounceback from this time yesterday. Volatility over the past 24 hours has been modest, also at +/- 2.5%.

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

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

Kia ora. I'm David Chaston. And we will do this again tomorrow.

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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.

And today we lead with news Wall Street is reassessing its valuation basics, and there is a general pullback across the board. It started with questions about an AI valuation bubble, but is extending to others now. "Risk-off" is the mood today.

But first, yesterday's reporting of China's official PMIs for January all took a step lower, now recording virtually no expansion. This was weaker than expected. Their factory PMI fell into a contraction state (49.1), while their services PMI retreated to only a weak expansion (50.2). It wasn't the result policymakers there would have wanted given they have been trying to stimulate their economy for more than three months now. It that effort is working, the core must have been quite compromised.

Chinese industrial profits were reported to be -3.3% lower in the year to December than the same period in 2023. But perhaps there are some reason to be positive for December alone, they were +7.0% higher than the same month a year ago - and that might have been their best December on record. Hard to tell how much Beijing stimulus was part of that late effort however. However, the January PMIs probably mean they have got off to a weak start in 2025.

China's tax take grew +1.3% in 2024 following a 6.4% rise in 2023. The sharp slowing followed slowing domestic demand and a slump in their property market, all consistent with the overall economic challenges they have.

Bloomberg is pointing out that current commercial real estate activity in Hong Kong is crystalising some very large losses. This re-rating will have loud echoes in many places. It is one of Hong Kong's worst slumps in history, with no end in sight. Average prices of office buildings, shopping malls and other properties have fallen more than 40% from their highs in 2018, eroding the value of the collateral backing many bank loans. Defaults are also rising as more property owners and developers run into severe cash flow difficulties.

None of these China-based news data items will be helping the Spring Festival mood in the business sector.

In the US, the Dallas Fed's Texas manufacturing survey picked up pace in January to its highest since October 2021. New orders hit their highest since April 2022, while capacity utilisation and shipments also rose.

Meanwhile, there was also a rise in new home sales in the US in December, taking them back to mid-range for any 2024 month.

And the Chicago Fed's National Activity index improved in December. All this gritting economic activity bodes well for the 2024-Q4 GDP result due out on Friday.

The UST 10yr yield is lower at 4.53%, down -9 bps from yesterday at this time. 

Wall Street is down sharply today with the S&P500 down -2.0% to start its week. 

The price of gold will start today at US$2733/oz and down -US$37 from yesterday.

Oil prices are down -US$2 at just over US$72.50/bbl in the US and the international Brent price is now under US$76.50/bbl.

The Kiwi dollar is now at 56.8 USc and down -30 bps from this time yesterday. Against the Aussie we are unchanged at 90.5 AUc. Against the euro we are down -20 bps at 54.2 euro cents. That all means our TWI-5 starts today just on 67.1, and down -30 bps from yesterday.

The bitcoin price starts today at US$99,190 and down -5.5% from this time yesterday. Volatility over the past 24 hours has been high at +/- 3.8%.

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

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

Kia ora. I'm David Chaston. And we will do this again tomorrow.

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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.

And today we lead with news that we will be watching for China holiday demand signals, and watching how the US Fed handles new sharp political interference.

Also, this week will bring a slew of big economic announcements in many places, but not China which is starting its Lunar New Year week-long holiday after their PMI data is released (later today). Elsewhere it will be a big week of central bank policy reviews, capped by the US Fed, although they are expected to deliver no rate change. However both Canada and the ECB are expected to cut rates by -25 bps. Sweden (-25 bps?) and Brazil (no-change?) will also be meeting.

We will also get GDP results for the US (+3%?) and many key countries in the EU. Australia will release its Q4 CPI result. And of course the Wall Street earnings season results will continue.

But first, the early 'flash' release of the globally-benchmarked S&P/Markit PMI for the US for January shows that their factory sector is back expanding with a small gain to a 7-month high. But there was a notable pullback in their services sector, still expanding but quite a bit slower than in December. So the composite PMI is at a nine-month low. (In January 2024 is was even, neither expanding nor contracting. In January 2023 is was contracting.)

US existing home sales were up +2.2% in December from November to an annualised rate of 4.38 mln units, the most since February 2024 and despite mortgage interest rates over 7%. But in a long term perspective, this level is still very low, similar to what they had in the mid-1990s

There was an update to the University of Michigan sentiment survey for January out over the weekend, and it was revised lower. But the inflation tracking in this survey was unchanged at 3.3%, an eight month high.

Across the Pacific, Japanese inflation jumped to 3.6% in December from 2.9% in the November, the highest level since January 2023 and well above the 3.2% level expected. Food prices were a notable driver, up 6.4%. Their core inflation rate climbed to a 16-month high of 3%, in line with market estimates.

This bolstered the case for the Bank of Japan to raise its policy by +25 bps to 0.5% at their review on Friday, and that is exactly what they did.

Meanwhile the Japanese factory PMI contracted a bit more in January than the very minor contraction in December. But their services PMI expanded more in January than in December, and by much more than expected.

Singapore's central bank loosened its monetary policy on Friday, it’s first such move in more than four years. Rather than interest rates, their monetary policy centers on exchange rates, via the S$NEER, allowing the Singapore dollar to rise or fall against the currencies of major trading partners to stabilise prices.

In China, we should remind readers that their week-long 'Spring Festival' holiday will start tomorrow, Tuesday, January 28 and run until Monday, February 3, 2025. Only after that will they be back to normal. Chinese New Year is on Wednesday January 29, which ushers in the Year of the Snake.

In India, their January PMIs show 2025 beginning with the private sector slowing and services losing steam. Having noted that, the expansion there is still very strong. But inflation pressure, especially in their services sector, is rising, suggesting growth at this level is creating distortions which will take the edge off it for most people.

In Europe, their January PMIs showed they "returned to growth". That came with the combination of their factory sector contracting less and their services sector expanding more.

Australia's factory PMI contracted noticeably less in January, and now is barely contracting at all. New orders rose, but prices rose faster too. Their service sector however expanded at a slower pace in the month.

And staying in Australia, Westpac is pointing out that tax cuts there are not boosting consumer spending in the way expected. Three quarters of these cuts are being used by households to either pay down debt or increase savings.

The UST 10yr yield has held 4.62% unchanged from Saturday at this time. 

Reporting of Wall Street's Q4 earnings is well under way and is off to a strong start. Both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises are above their 10-year averages. As a result, the index is reporting higher earnings for the fourth quarter today relative to the end of last week and relative to the end of the quarter. In addition, the index is reporting its highest year-over-year earnings growth rate for Q4 2024 in three years. So it is no surprise that the S&P500 is near its record high.

The price of gold will start today at US$2771/oz and down -US$5 from Saturday, but up +US$55 for the week.

Oil prices are holding at just over US$74.50/bbl in the US and the international Brent price is now under US$78.50/bbl.

The Kiwi dollar is now at 57.1 USc and down -10 bps from this time Saturday but still near a one month high. Against the Aussie we are unchanged at 90.5 AUc. Against the euro we are also unchanged at 54.4 euro cents. That all means our TWI-5 starts today just on 67.4, the same as they were on Saturday, but up +60 bps for the week.

The bitcoin price starts today at US$104,928 and down -1.4% from this time Saturday. Volatility over the past 24 hours has been quite low at +/- 0.5%.

Monday is the Auckland Anniversary holiday and most businesses in the northern half of the North Island are closed. It is also Australia Day. 

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

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

Kia ora. I'm David Chaston. And we will do this again tomorrow.

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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.

And today we lead with news we are living in a new world of imposed distortions. Ethical politics or business dealing is out the window. Trust is being replaced by force. It is hard to see how this will end well. After all, business relies on trust, honesty and integrity. Without it, why would you make a deal? The result can only be higher risk premiums.

First, the annual Davos meetings are underway, and today they were dominated by US Presidential bluster where we claimed he would force interest rates down, force the oil price down, and force other countries to "put America First". He also threatened any country who challenged the American FANGs with taxes on their activities in their own countries. Billionaires don't see the need to pay taxes - their fair share, or any share - to anyone.

US jobless claims fell back sharply from last week's big seasonal increase. But the fall was not as much as seasonal factors would have anticipated. On a seasonally-adjusted basis they rose. There are now 2.24 mln people on these benefits, which is actually the highest since the last Trump Administration. (Interestingly, the new US-DOL leadership 'hid' this data, shifting it to a 'new' location.)

In the regions, the December factory survey from the Kansas City Fed revealed a further contraction. New order levels were low, and despite improved manager sentiment, they actually don't expect new order levels to rise much.

In Canada, retail sales rose much more than expected in December, their best December rise since 2019, and the biggest any-month gain since May.

Japan said its exports rose +2.8% in December from a year ago, meaning that eleven of the past twelve months recorded export growth. Only nine of the past twelve recorded import growth.

And all eyes turn to the Bank of Japan and their expected +25 bps rate hike, later today.

A rise in South Korean business sentiment in January comes after authorities there reported a quite soft Q4-2024 GDP growth outcome.

Singapore's CPI inflation was up +1.6% in December, the same as November and slightly more than the +1.5% expected.

Taiwanese retail sales rose +2.9% in December with a modest performance. But Taiwanese industrial production surged +20% in December from the same month a year ago which itself wasn't especially soft.

In China, they are directing insurers to buy equities, a move designed to put a floor under the pressure on those markets.

After 'peaking' in October at their long-run average, the EU consumer sentiment survey has slipped to be more net-negative since. But the latest January 2025 survey essentially held the December level to be almost 2 percentage points better than year-ago levels.

In Turkey, their central bank claimed overnight that inflation there is under control at 44% and heading in the right direction. So it cut 2.5% from its policy interest rate taking that benchmark down to 45%.

Driven by rates out of China, container shipping freight rates fell a sharpish -11% last week, although they are still 140% higher than pre-pandemic levels. The Baltic Dry index for bulk cargoes fell a sharp -16% in the past week, now at the very lower end of its long-run average level since 1969.

The UST 10yr yield is up at 4.65% with a +4 bps rise from this time yesterday.

The price of gold will start today at US$2757/oz and down -US$1 from yesterday.

Oil prices are down down -US$1 at just over US$75.50/bbl in the US and the international Brent price is now under US$78.50.

The Kiwi dollar is now on 56.8 USc and up +20 bps from this time yesterday and more than a one month high. Against the Aussie we basically unchanged at 90.3 AUc. Against the euro we are up +10 bps at 54.5 euro cents. That all means our TWI-5 starts today just on 67.2 and also essentially unchanged from yesterday. A fall against the Yen offset the USD rise.

The bitcoin price starts today at US$106,275 and up +2.6% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.8%.

Monday is the Auckland Anniversary holiday, and Australia Day, so the newsflow will be light. But we will have continuing regular service on Monday.

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

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

Kia ora. I'm David Chaston. And we will do this again on Tuesday – Monday is a public holiday in much of New Zealand.

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