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 of deliberate chaos being constructed in Washington DC with a much higher prospect of a US Federal Government shutdown likely. Authorised funding expires later today / Friday, US time. Financial risks are sharply elevated today, and markets are pricing these in.

Elsewhere, US jobless claims fell sharply last week and by more than can be accounted for by seasonal factors. There are now a bit less than 1.9 mln people on these benefits.

The PhillyFed survey of factories in America's traditional rust belt turned very negative, the worst result since April 2023. Soft demand was behind this shift. Optimism about the future took a hit too.

The Kansas City Fed's equivalent survey in its region wasn't so negative, but it wasn't positive either. Optimism was a bit better there however.

American existing home sales in November rose, but to be fair it is still stuck in the very low range it has had post-pandemic which is even lower than the post-GFC range, and back to levels first seen in 1995. So the November rise in that perspective is kind of irrelevant, no matter what the industry peak body says.

The US Conference Board leading index tracking rose in November. Higher building permits, high equity prices, rising average hours worked in manufacturing, and fewer initial jobless claims boosted the November result. But the December result will no doubt take a hit from the current Washington shenanigans.

The final estimate for US Q3-2024 GDP raised the expansion to +3.1% and extending the good run they have had since mid-2022. The US economy delivered US$29.4 tln of economic activity in the past year, with the expansion of +US$1.4 tln and the most ever. And that describes what is at risk from bad policy.

Elsewhere there were many central bank rate reviews.

In Japan, the Bank of Japan held its key short-term interest rate unchanged at 0.25%, keeping it at the highest level since 2008. That was what financial markets expected. But the vote was split 8-1, with one board member wanting a +25 bps increase. Essentially they are waiting to see how destabilising the incoming American Administration will be. But the bank boss seems to have turned dovish in the circumstances, and that turn moved markets.

In Taiwan, they kept their policy rate unchanged at 2%

In the Philippines, they cut their rate by -25 bps to 5.75%.

In Sweden, they cut by -25 bps to 2.5%.

In Norway, they held at 4.5%.

In England, they held unchanged at 4.75% with a split 6:3 vote with the dissenters wanting a cut. This is a pause as inflation starts to rise there again.

In something of a surprise, Australian inflation expectations rose to 4.2% in December, ending their encouraging falls that started in September. It is not a result either the RBA or the Australian Treasury would have wanted.

Container freight rates rose +8% last week but to be fair that was only because of a +26% rise in teh China-to-USWC route and a +17% rise in Chin-to-New York as traders raced to get ahead of the impending tariff threat. Other routes saw small declines. Bulk cargo rates fell another -7% last week to be less than half what they were a year ago and back to levels last seen in July 2023.

Many mineral commodities are retreating in price in expectation 2025 will be tough, with copper down -2%.

The UST 10yr yield is now at just on 4.59%, up a very sharp +19 bps from this time yesterday as markets digested the Fed's move and the deliberate mess being created by the incoming President.

The price of gold will start today at US$2592/oz and down -US$42 from yesterday.

Oil prices are down -US$2.50 to be just on US$69.50/bbl in the US while the international Brent price is now just under US$73.

The Kiwi dollar starts today just on 56.5 USc and down -60 bps from yesterday. Against the Aussie we are down -40 bps to 90.3 AUc. Against the euro we are also down -10 bps to 54.5 euro cents. That all means our TWI-5 starts today at just on 67.1 to be down another -25 bps from yesterday at this time.

The bitcoin price starts today at US$100,994 and down -3.1% from this time yesterday. Volatility over the past 24 hours has been high at +/- 3.1%.

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 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 all markets have been waiting for the US Fed decision.

And as expected, they have cut their key policy rates by -25 bps with the targeted range now 4.25%-4.50%. Progress on taming inflation gets the main credit from them. As we publish, Chairman Powell has yet to hold his press conference, so more about their thinking will be revealed then. But this move takes their rollback to -100 bps since August, and back to the level they had at the start of 2023. A slower pace of cuts are expected in 2025.

Meanwhile US mortgage applications slipped slightly last week, ending a run of five straight weeks of gains to be +6% higher than year-ago levels and a bit more activity on the purchase side.

US housing starts however unexpectedly fell in November and by -1.8% to an annualised rate of 1.3 million units, the lowest in four months. Only in one month since the pandemic has it been this low. American consumers may say they are feeling more optimistic, but they aren't showing it in their housing markets.

Japanese exports rose in November and by more than expected to be at the upper end of the monthly range in 2024. It was a rise that beat expectations. But imports fell, and by much more than expected, to a three-month low, and about the average level in 2024.

In Malaysia their exports also rose much more than expected, and like Japan their imports, which were also expected to surge, didn't. Obviously not every country can have rising exports and falling imports but those that do count themselves 'winners' in the international trade arena. For Malaysia however, this is a rare monthly result, a small balance for a long period when imports exceeded exports.

The Indonesian central bank kept its policy rate unchanged at 6% in a meeting late yesterday.

In Hong Kong, major builder New World Development, which recently posted a large and unusual loss, is reportedly trying to renegotiate its loan obligations with banks. Not a great sign for them, and indications China's property sector woes are impacting Honk Kong directly now (rather than juts Chinese companies listed in Hong Kong).

And in Australia, a major builder there, APH Holdings, has gone under. This notable because it too is Chinese-owned.

Staying in Australia, ASIC is suing crypto company Binance Australia Derivatives for consumer protection failures. More than 500 retail clients of Oztures Trading, trading as Binance Australia Derivatives, were denied important consumer protections after being misclassified as wholesale clients, ASIC alleges in documents filed in the Australian Federal Court.

And still in Australia, their Mid-Year budget update by the federal government shows a slightly smaller deficit in the 2024-25 financial year than what was presented in May, but larger deficits over the next three years. All up, that is a cumulative deficit increase of A$22 bln.

In Brazil, their currency, the real, depreciated to a record low of 6.16 to the USD, as mounting fiscal concerns, inflationary pressures, and political uncertainty drove an investor loss of confidence. Investor confidence has been shaken by fiscal measures deemed insufficient to stabilise Brazil’s rising debt trajectory, as President Lula’s tax breaks and modest spending cuts prioritise growth over fiscal discipline. The central bank aggressively tightened monetary policy, raising the interest rate to 12.25% from 11.25%, with two further hikes signaled.

The UST 10yr yield is now at just on 4.40%, up +1 bp from this time yesterday.

The price of gold will start today at US$2634/oz and down -US$7 from yesterday.

Oil prices are back up +US$1.50 to be just on US$71/bbl in the US while the international Brent price is now just on US$74.

And the IEA says coal consumption hit a record high in 2024, led by China and capping a 30 year surge. They also say this is probably 'peak-coal' and that the transition to renewables. But that is not certain, because India's use is rising fast. In the meantime, Australia is set to become the fourth largest producer by 2027, surpassing the United States and Russia.

The Kiwi dollar starts today just on 57.2 USc and down -40 bps from yesterday. That makes it the lowest level in more than two years. Against the Aussie we are down -20 bps at 90.7 AUc. Against the euro we are also down -20 bps to 54.6 euro cents. That all means our TWI-5 starts today at just on 67.35 to be down -25 bps from yesterday at this time. And that is also more than a two year low, since October 2022.

The bitcoin price starts today at US$104,225 and down -2.5% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.1%.

Today is the final day our Auckland office is open in 2024. It will be our holiday service until then. Our daily and weekly free email newsletters are taking a break until then. But our databases and rate tables will continue to be updated as changes are reported. And this podcast will continue through the holiday period. We wish you all a fun, safe, and relaxing break.

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 commodity prices are facing some headwinds, and that may get worse as trade prospects dim and the de-risking from China builds.

Today's full dairy auction brought lower prices from both last week's Pulse event, and the prior week's full event. But the dips were largely as expected and foreshadowed in the derivatives market. In the event, overall prices were -2.8% lower than the last full event, but with the NZD weaker, in NZD the decline was just -0.7%. Today's retreat doesn't interrupt the 2024 rising trend so it seems unlikely any farm gate pay out forecasts will be adjusted because of this.

Demand from China was lighter today, but that may just because they have already built their requirements for their upcoming CNY holiday season.

US retail sales as monitored by their Redbook survey were a healthy +4.8% higher last week than the same week a year ago.

And November retail sales as reported by their official data were up +3.8% from the same month a year ago, the best gain of 2024. And that was driven by strong car sales. Business inventories remain at very manageable levels, so not building stress there.

Meanwhile US industrial production actually slipped in November, down -0.9% from a year ago, although there were signs of stabilising in the November month. Factory production actually rose, undermined by both mining and utility production.

For a second event in a row, demand for the latest US Treasury bond eased again. This 20 year auction was still well supported, just not as much as usual. The median yield at 4.62% was actually slightly higher than the 4.60% at the prior equivalent event a month ago. While that night seem insignificant, it reverses the recent pattern of falling yields at these Treasury fund-raising events.

Canada's November CPI inflation rate came in at 1.9%, pretty much as expected. Their central bank will be happy with that, because it allows them to continue to unwind their policy rate which is at 3.25% and next reviewed at the end of January.

Across the Pacific, we should note that Nissan and Honda have begun merger talks.

In China, new official data shows that capital flight by foreign investors reached a record level in November as the de-risking trend rose to a new urgency. And international airlines are also pulling back on their China routes.

One of the things to come out of the recent Central Economic Work Conference is that Chinese leaders reportedly agreed to raise their budget deficit to -4% of GDP in 2025, its highest on record. (For reference, the New Zealand equivalent is -2.4% of our GDP. In the US, it is -6.3%.) They are holding on to an economic growth target of around 5%.

Singapore's exports rose more than expected in November, up +3.4% and a better-than-expected comeback after their weak October result. Imports also rose, by +2.8% on the same basis.

And we should probably note that there was a general easing of commodity prices generally overnight, not just dairy products.

The UST 10yr yield is now at just on 4.39%, down -1 bp from this time yesterday.

The price of gold will start today at US$2641/oz and down -US$10 from yesterday.

Oil prices are down -US$1 to be just on US$69.50/bbl in the US while the international Brent price is down almost -US$1 to be just over US$72.50.

The Kiwi dollar starts today just on 57.6 USc and down -20 bps from yesterday. Against the Aussie we are up +20 bps at 90.9 AUc. Against the euro we are also down -20 bps to 54.8 euro cents. That all means our TWI-5 starts today at just on 67.6 to be down -20 bps from yesterday at this time.

The bitcoin price starts today at US$106,952 and up les that +0.1% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.3%.

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 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 analysts are now starting to estimate the costs to the US economy of some upcoming tariff policy.

But first, the S&P Global American services PMI rose in December to its strongest expansion since March 2022. But their manufacturing downturn deepened with manufacturers reporting falling output and higher prices. New factory orders fell sharply, extending the decline to a sixth consecutive month. The divergence makes the services sector jump look like a sugar-rush, one that could come with a hangover.

The December factory survey in the New York region reflects the factory pullback - although that is from an unusually strong November.

A New York Fed study of whether large tariff hikes protect US firms has found the opposite in a detailed survey. This is no surprise to economists, and they suggest that the next round is also likely to hurt American firms further. Further own-goals for American manufacturing are on their way. Others say it will shrink US GDP by -1%. That would be a US$300 bln hit.

North of the border, Canadian housing starts came in particularly strong in November, and surprisingly so.

And Canadian house prices are on an extended uptrend, boosted by more sales activity as interest rates come down there.

But in a surprise political move in Canada, their Finance Minister has suddenly resigned, "throwing its economic agenda into a tailspin". Disagreement on how to frame Canada's policies when Trump comes to power in the US seems to be at the heart of the matter.

Across the Pacific in Japan, their November PMIs revealed that their factory sector is now barely contracting (an improvement from October), and their services sector is now expanding faster. They had their strongest rise in private sector activity in the past three months. So perhaps it is no surprise to know that machinery orders are on the rise, after a lean period.

China’s new house prices in 70 cities shrank by -5.7% year-on-year in November, following the steepest decline in over nine years of 5.9% in the previous month. This marked the 17th consecutive month of decreases, suggesting that Beijing’s extended attempts to mitigate the prolonged downturn in the property sector, such as reducing mortgage rates and slashing home buying costs, have yet to have the effect they are looking for. Prices for second-hand houses were even weaker.

China’s industrial production rose +5.4% in November from the same month a year ago, mildly exceeding market estimates and October's growth rate of +5.3%. The expansion was due to a good +6.0% rise in manufacturing. At the same time electricity production only rose +0.9% in the same basis, so that does undermine somewhat the validity of the industrial gains. And that low gain does match the 'headwinds' narrative they have been talking about. Their industrial production data seems to ignore that, and their weak PMIs. Something's not quite right.

China's retail sales rose by +3.0% year-on-year in November, slowing from a +4.8% growth in the previous month and below market expectations of a +4.6% gain. This marked the weakest growth in retail activity since August. But compared with many other countries, this 'weak' expansion is better than inflation.

The Indian PMI for December recorded an improving factory sector, and a services sector that is still expanding fast.

India exports in November however fell to their lowest level since October 2022, down -5.2% from the same month a year ago. India is not much of a trading nation relative to the size of their economy, so the rise in economic activity is all about internal demand. However, imports surged +28% on that same year-on-year basis, and to an all-time record high.

It might seem a tad ironic for a major oil producer, but Iran is proposing sweeping closures of public facilities, a move officials attribute to icy winter temperatures and the need for energy management while the country suffers massive shortages due to infrastructure failures. “Iran is on the brink of a 40% blackout in just 18 days,” said one local analyst.

In Europe, Moody’s unexpectedly downgraded France’s credit rating from Aa2 to Aa3, citing concerns over deteriorating public finances amid political instability. For reference, Moody's rates New Zealand and Australia, each separately Aaa (although perhaps they will review ours after Thursday's GDP result).

In Australia, financial system regulator ASIC is suing HSBC Australia alleging failures to adequately protect customers from scams.

And AML regulator AUSTRAC is taking Entain to court over "serious" money laundering compliance breaches in its gambling/betting operations. Entain operates the TAB in New Zealand.

The UST 10yr yield is now at just on 4.40%, little-changed from this time yesterday.

The price of gold will start today at US$2651/oz and up +US$4 from yesterday.

Oil prices are down -50 USc to be just on US$70.50/bbl in the US while the international Brent price is down almost -US$1 to be just over US$73.50.

The Kiwi dollar starts today still just on 57.8 USc and up +20 bps from yesterday. Against the Aussie we are up +10 bps at 90.7 AUc. Against the euro we are also up +10 bps to 55 euro cents. That all means our TWI-5 starts today at just on 67.8 to be up +20 bps from yesterday at this time.

The bitcoin price starts today at US$106,866 and up +3.7% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.2%.

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

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 of a large number of key new releases to end the year.

It might be the final full week before the summer holidays (in New Zealand), but there will be a lot going on and a lot to follow. Here of course it is the week when corporates and the government release their 'bad news' stories in the hope people are distracted. Then the REINZ will release its November data. And there will be a full dairy auction on Wednesday morning. Thursday will bring our Q3 GDP, expected to confirm we have been in recession.

But there is not a lot on the card from Australia this week, other than a consumer sentiment survey from Westpac which we need to keep an eye on.

Globally, the big set piece will be the US Fed's monetary policy review on Thursday NZT. A -25 bps cut is expected there. And that comes in the middle of a large raft of important US data updates. China has a good chunky set too. Japan will chime in with its own, including their rate review where now, no change is anticipated. There are other central bank reviews as well, from Sweden (uncertain), Norway (no change), Indonesia (-25 bps), Taiwan (no change), Thailand (no change) and the Philippines (-25 bps). Russia is also expected to push its policy rate up by +200 bps to 23%. Canada and the EU will have their own key data releases.

In the meantime we start the week with global interest rates on the move up and the US rate inversions have now vanished. Except in China where there is a rush on for the safety of Government bonds which is driving down yields to record lows. And positive-sloping yield curves are returning.

As we noted, the US Fed is expected to cut rates by -25 bps at its December meeting next week on Thursday NZT, bringing the benchmark range to 4.25%-4.50%, and a full percentage point drop since September. Economists anticipate slower cuts ahead, with only three reductions projected for 2025. Those cuts may be delayed if inflation remains above the Fed's target.

As the Trump team prepares for the transition, its anti-regulation focus is coming into view. They are seeking candidates to eliminate or eviscerate the FDIC (sought by big banks), and rid themselves of car-crash reporting (as sought by Elon Musk). The billionaire sharks are going after consumer protections.

Canadian manufacturing sales were up strongly in October, their best growth spurt in nearly two years. That made them +1.4% higher than the same month a year ago. While that isn't quite besting inflation, the recent moves up will be encouraging them.

Across the Pacific, Chinese banks extended just ¥580 bln in new yuan loans in November, less than half the same month a year ago, and nearly half of what was expected. This is the lowest new lending for a November since 2012. The decline took place despite the aggressive monetary stimulus measures from the PBoC in late September in an attempt to halt the property market downturn. There have also been much higher levels of local government debt issued in that time too. Poor credit demand in China is saying a lot about Beijing's management of their economy and its prospects.

President Xi and his top team have been meeting in their big set-piece Central Economic Work Conference, and what is glaringly obvious from this so far, is that they don't know what to do, and financial markets are sensing that with their pullbacks.

But it sounds like they are preparing to cut both key policy rates and their reserve requirement ratio in 2025, according to a report here.

EU industrial production is still in its decline phase, now stretching to 18 consecutive months. It will be little comfort to them that the October decline was smaller than the prior month.

In Australia, a report suggest that auction clearance rate in Sydney have fallen sharply over the weekend to be just on 50%, a long way lower than the about-80% level of just a few weeks ago.

The UST 10yr yield is now at just on 4.40%, up +1 bp from this time Saturday. But that is quite a move for the week, up +26 bps.

The price of gold will start today at US$2647/oz and down -US$11 from Saturday.

Oil prices are firmish but still just over US$71/bbl in the US while the international Brent price is still just on US$74.50. 

The Kiwi dollar starts today still just under 57.6 USc and unchanged from Saturday, but down -70 bps from a week ago. Against the Aussie we are unchanged at 90.6 AUc. Against the euro we are up +10 bps at 54.9 euro cents. That all means our TWI-5 starts today at just on 67.6 to be unchanged from yesterday, and down -40 bps from a week ago.

The bitcoin price starts today at US$103,011 and up +1.5% from this time Saturday. A week ago it was at US$101,044. 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 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 cost cutting and raising prices are key themes in US business at present - sure to challenge the Fed's policy path.

First in the US, there was an outsized jump in the number of people making initial jobless claims, +310,000 for the week. That pushed up the number of people on these benefits to 1.94 mln. Employers now seem emboldened to cut staff before the holiday season with the incoming Administration likely to be very permissive on employment policies.

US producer prices also came in higher than expected, rising in November from October, and from year-ago levels, but more than expected, up from +2.6% year-on-year in October (which was also the November expectation) to +3.0%. Inflation isn't beat.

Canadian building consents were expected to fall back in October from the big September jump - and they did, although not by as much as expected.

Key data from India came in pretty much as expected. Their November consumer inflation rate was 5.5% and a small reduction, and their October industrial production rose +3.5%, also a slowing. Food prices are rising much more than the overall level, but they are responsible for the most of the decline in the November rate.

China's vehicle sales jumped by almost +12% to 3.3 million units in November from a year ago, accelerating sharply from a +7% rise in October. Beijing incentives seem to be working as intended, although they might be at the cost of spending in other sectors.

China intends to ramp up economic support next year including measures to boost domestic consumption, as it braces for a fresh trade war with the U.S., a closely watched leadership meeting signaled on Thursday.

At their annual Central Economic Work Conference, which sets the tone for the coming year's agenda, China's leaders pledged to "implement more proactive macro policies" and "expand domestic demand". Their statement listed supporting consumption and investment as top priorities for the economy next year. It is bracing for a fresh trade war with the US, and starting the adjustment now.

As expected, the ECB cut its policy rates by -25 bps overnight, the fourth time this year, on a more favourable inflation outlook - their disinflation "is well on track".

Meanwhile the Swiss central bank cut their policy rate by double that - by 50 bps - in an unexpectedly large cut. This marks the fourth straight rate reduction and the steepest since January 2015, bringing borrowing costs to their lowest since November 2022, returning them to just 0.5%.

In Australia, their employment rose by +35,600 in November from October, up +334,500 in a year. That is a +2.1% annual rise. Monthly, full-time employment rose +52,600 while part-time employment fell -17,000. These gains were enough to push their jobless rate down from 4.1% to 3.9%, and unexpected improvement. (New Zealand's jobless rate was 4.8% in September.) For some, this is a good-news-is-bad-news item because it probably pushes back an RBA rate cut even further. The ASX200 fell on the news.

Meanwhile, Australia's population rose +2.1% in the year to June, adding +552,000 and taking the total to 27.2 mln. Victoria, Queensland and Western Australia all rose faster than the national average. Victoria grew the most, up +165,000 to just shy of 7 mln. NSW was next, growing +143,000 to 8.5 mln. 

Bulk cargo freight rates fell another -5% last week from the prior week. And container freight rates were largely unchanged last week. Meanwhile, air cargo volumes grew almost +10% in October from the same month a year ago. International airfreight rose more than +10%, with Asia/Pacific volumes up more than +13%.

The UST 10yr yield is now at just on 4.31%, uup +7 bps from this time yesterday.

The price of gold will start today at US$2681/oz and down -US$33 from yesterday.

Oil prices are down -50 USc to just on US$69.50/bbl in the US while the international Brent price is up +50 USc to now just under US$73/bbl. Following OPEC, the IEA is warning of a potential supply overhang in 2025 as demand remains modest and energy efficiency rises.

The Kiwi dollar starts today at just under 57.9 USc and down -10 bps from this time yesterday. Against the Aussie we are down -30 bps at 90.6 AUc. Against the euro we are down -10 bps at 55.1 euro cents. That all means our TWI-5 starts today at just over 67.7 to be down another -10 bps from yesterday.

The bitcoin price starts today at US$101690 and up +1.1% from this time yesterday. Volatility over the past 24 hours has been high 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 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 Australia has been assessing their exposure risks to upcoming Trump tariffs - and they are nervous.

But first in the US, their November CPI rate came in without any surprises. It rose for a second consecutive month to 2.7% in November from 2.6% in October. But the rise is partly influenced by low base effects from last year. Core inflation, without food and energy, was stable at 3.3%. Food prices rose +2.4% and rents +4.7% (which will please landlords, like The Trump Organisation). Petrol costs fell -8.1%.

For a fifth straight week, US mortgage applications rose, and by +5.4% from the week before, driven by a surge in refinancing (loans for new homes actually fell), putting them +4% higher than year-ago levels. At the same time, mortgage interest rates dipped, but it was a minor move.

Another very well-supported UST 10yr bond auction this morning delivered a median yield of 4.19%, down from 4.29% at the prior equivalent event a month ago.

As expected, the Bank of Canada cut its key interest rate by -50 bps for a second consecutive time in its December meeting, to 3.25% and make -175 bps of cumulative rate cuts from this cycle’s peak of 5%. Still, rhetoric from policymakers suggested that there will not be any more outsized rate cuts next year, and officials dropped the statement that borrowing costs are due to be lowered should their base case hold. The sharp interest rate cut followed data showing that the Canadian GDP grew an annualised +1% in the third quarter, below the central bank’s projections, and shrank on a per capita basis, and growth in the fourth quarter poses the risk of also missing forecasts.

In Japan, producer prices rose +3.7% in November from a year ago, higher than in October and exceeding market estimates of +3.4%. It was the 45th straight month of producer inflation, marking the highest figure since July 2023. These pressures will eventually show up in consumer prices. And that in turn will encourage the Bank of Japan to raise its +0.25% policy interest rates. They next review it on Thursday, December 19, 2024, when a +25 bps rise is anticipated by financial markets.

In China, Reuters is reporting that officials are open to let the value of the yuan slide in 2025 as a way to push back against the expected Trump tariffs.

In Malaysia, retail sales rose +7.1% in October from the same month a year ago, rising from a +5.5% rise in the previous month. It was the strongest growth in retail sales there since June. Malaysian CPI inflation is running at +1.9% pa.

In Australia, their policymakers have been reviewing their risks from upcoming Trump tariffs. They found direct risks were low - in fact very low. But indirect risks were unusually high and cited some startling analysis from the BIS. (See graph 6.) The more China is affected, the more Australia is.

The UST 10yr yield is now at just on 4.24%, unchanged from this time yesterday.

The price of gold will start today at US$2713/oz and up +US$20 from yesterday, and a two-week high.

Oil prices are up +50 USc to just under US$70/bbl in the US while the international Brent price is unchanged at just under US$72.50/bbl. OPEC has cut its forecasts for global oil demand growth in 2024 and 2025.

The Kiwi dollar starts today at just under 58 USc and unchanged from this time yesterday. Against the Aussie we are down -10 bps at 90.9 AUc. Against the euro we are unchanged at 55.2 euro cents. That all means our TWI-5 starts today at just over 67.8 to be down -10 bps from yesterday.

The bitcoin price starts today at US$100,588 and up +6.0% from this time yesterday. Volatility over the past 24 hours has been high at +/- 3.6%. 

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 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 the expected glow following the Chinese stimulus signals is surprising in its absence. Markets have turned quite sceptical and the Chinese bond yields have sunk sharply.

But first up today, we can report that the overnight GDT dairy Pulse auction brought slightly lower prices for SMP and WMP, but that the fall in the NZD maintained the results in NZD. SMP fell -1.5% from the prior week's full auction (in USD), and WMP fell -1.6% on the same basis. But in that same week the NZD fell -1.3%, so call it quits in NZD. Although they will have noticed this overnight event, the analysts are unlikely to alter their farmgate payout forecasts based on this recent activity, although the ones who still have forecasts lower than the Fonterra mid-point will be feeling a little safer.

Also overnight, the Redbook index of US retail activity there rose only +4.2% from the same week a year ago, a much lesser rise than the +7.2% gain the previous week. In fact it was the least gain since March. A bit of a levelling off, it seems.

But jumping a lot is the latest survey of small business sentiment. The NFIB Small Business Optimism Index jumped in November to the highest reading since June 2021,and well above what was expected. It is also the first time in 34 months that the reading is above the 50-year average of 98. The election result is said to be the reason for this rise.

The latest USDA WASDE report points out new restrictions of cattle imports to the US from Mexico because of an outbreak of screwworm (NWS) and the ban may be long-lasting. US imports of beef from other sources (including Oceania) are likely to rise. They also note that US milk production will likely turn up on higher milk prices.

There was another very well supported US Treasury 3 year bond auction earlier today, and that resulted in a median yield of 4.07%, very similar to the 4.09% at the prior equivalent event a month ago. No risk-rise signaled here.

In Japan, machine tool orders rose +3.0% in November from the same month a year earlier, slowing from +9.3% growth in October. Local orders were up +5.0%. The larger export order set was up only +2.2% as orders from China dragged.

China's export growth underwhelmed in November. It rose +12.7% in October and an +8.5% rise was expected in November (some thought +10%) due to front-loaded US demand ahead of 2025 tariffs. But in fact the gain was 'only' +6.7% from a year ago. Imports actually fell, a signal about their internal economic activity. Chinese imports from New Zealand are down -8.6% so far in 2024.

Interestingly, China's stimulus announcements have barely registered in international markets yet. Markets do expect them to cut rates and raise spending, but the feeling seems to be that this will just help them stay little-changed. So far it has been a very underwhelming event.

In Australia, the November NAB business confidence index fell to -3 from a near two-year peak of +5 in the prior month, falling below its long-term average. We haven't seen such a big one-month negative shift since the pandemic. And relief from their central bank doesn't seem about to happen.

As expected, the Reserve Bank of Australia kept its cash rate target at 4.35%. "Taking account of recent data, the Board’s assessment is that monetary policy remains restrictive and is working as anticipated. Some of the upside risks to inflation appear to have eased and while the level of aggregate demand still appears to be above the economy’s supply capacity, that gap continues to close." Analysts say this signals they remain confident they will get inflation back under control with the current policy rate and settings. Taking a while, however.

And we should perhaps note that coffee prices have surged to their highest level since 1972, driven by low production affected by drought in some parts, excessive rainfall in others. It is similar with chocolate (cocoa) prices, heading back to their unusual March peaks.

The UST 10yr yield is now at just on 4.24%, up +5 bps from this time yesterday. The China 10 year bond rate is at 1.88% and down a very sharp -8 bps and to a new record low.

The price of gold will start today at US$2693/oz6 and up +US$24 from yesterday.

Oil prices are up +50 USc to just over US$69/bbl in the US while the international Brent price is unchanged at just on US$72.50/bbl.

The Kiwi dollar starts today at just under 58 USc and down -80 bps from this time yesterday. Against the Aussie we are unchanged at 91 AUc. Against the euro we are down -40 bps to 55.2 euro cents. That all means our TWI-5 starts today at just under 67.9 to be down -50 bps from yesterday.

The bitcoin price starts today at US$94,850 and down -3.3% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.9%.

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.

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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 China has dropped the word "prudent" as it changes tack in its approach to economic support. Commodity currencies, including the NZD, got a boost from the shift

But first, US consumer inflation expectations for the year ahead increased to 3% in November from 2.9% in October which was the lowest since October 2020. Inflation expectations also increased for the three-year-ahead (2.6% vs 2.5%) and the five-year outlook (2.9% vs 2.8%).

The same survey shows increasing confidence their pay will increase, driven by those without any college education.

Across that Pacific, Japan's Q3-2024 GDP expansion was revised up, which was a surprise even if it was only a minor gain. The growth was still small however.

China’s annual CPI rate fell to 0.2% in November from 0.3% in the prior month, missing market forecasts. China's producer prices dropped by -2.5% year-on-year in November, following a 2.9% fall in the previous month and a softer decline than market expectations of a -2.8% fall.

Meanwhile, the Chinese Politburo met and told the People’s Bank of China to adopt a “moderately loose” strategy for monetary policy in 2025. The Central Economic Work Conference is about to meet. The move marked an aggressive shift from the previous “prudential” stance since 2011. Along with wording that indicates more fiscal stimulus, they also said they will directly support property and equity markets next year. They are going all-in on new stimulus to try and move their economic needle.

Taiwanese exports continue to rise aggressively, up +9.7% in November from the same month a year ago. We get China's November export data later today and it is also expected to show a sharp rise from a year ago, although that may only to try and beat upcoming tariffs from the US.

In India, the rupee dropped to nearly 85 to the USD and a record low as evidence of fresh capital outflows magnified the impact of dovish monetary policy and signs that their economy is slowing more than expected.

Meanwhile, they are about to change out the Governor of their central bank.

Also in India, the close ties between corruption-accused Gautam Adani and Prime Minister Modi were on full display yesterday.

In Australia, new data out yesterday shows the median weekly earnings of those in full-time employment rose +6.3% to AU$1700/week (AU$88,400 per year). For women the rise was faster, up +6.5%, for men slower, up +5.2%. In 2022, men had a +18% pay advantage over women. By 2024 this had shrunk to +12%. That current advantage is worth AU$191/week (AU$9,900 per year).

The UST 10yr yield is now at just on 4.20%, up +5 bps from this time yesterday.

The price of gold will start today at US$2636/oz and up +US$36 from yesterday.

Oil prices are aup +US$1.50 to just over US$68.50/bbl in the US while the international Brent price is now just on US$72.50/bbl.

The Kiwi dollar starts today at 58.8 USc and up +50 bps from this time yesterday. Against the Aussie we down -30 bps to 91 AUc. Against the euro we are up +40 bps to 55.6 euro cents. That all means our TWI-5 starts today at just under 68.4 to be up +35 bps from yesterday.

The bitcoin price starts today at US$97,373 and down -2.4% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.6%.

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 central bank rate cuts are expected this week - from some, but not all. And Shayne Elliott may be about to end his time at ANZ.

But first in the week ahead, most eyes will be on the American Consumer Price Index, Then tomorrow (Tuesday) the RBA will review its cash rate target, and is expected to make no change a 4.35% and staying above the RBNZ's 4.25%. Central banks in Canada and the EU as well as Switzerland will review as well. The Canadians are expected to cut by -25 bps, the ECB by -50 bps and the Swiss by -25 bps. Inflation data from India is due too. In China, they deliver CPI, PPI, trade data, and New Yuan Loans data. Back in Australia, we will follow their November labour report and the NAB business confidence report. And perhaps we will get our own REINZ real estate market report for November at the end of this week (although no actual date is set yet).

Over the weekend, the headlines say the US economy added +227,000 jobs in November, compared to upwardly revised +36,000 in October which was heavily influenced by Boeing strikes and the disruptions caused by Hurricanes Helene and Milton. The November rise was above market expectations of +200,000. Employment trended up in health care, leisure and hospitality, government, and social assistance while the retail trade lost jobs. Meanwhile, the jobless rate inched up to 4.2%. (This move probably raised the chance of a -25 bps rate cut at the Fed's next meeting, next week, and taking the lower bound top 4.25%.)

Looking behind these headlines, total employer payrolls rose to 160.6 mln, a +525,000 rise from October and a +2.2 mln rise from a year ago. This is a significant swelling of employer payrolls. More broadly, their household survey has the employed workforce at 161.5 mln (which includes the unincorporated self-employed). But that survey is not growing in 'actual' terms even if it is in seasonally-adjusted terms.

Average hourly pay is up +4.0% in November from a year ago. Average weekly earnings were up +3.7% as overtime worked slipped. These are better gains than expected.

This overall bullish labour market report was reinforced by the University of Michigan sentiment survey for December which rose for a fifth consecutive month to its highest level since April. Current conditions sentiment drove this. But rather than a sign of strength, this rise was primarily due to a perception that purchasing now would enable buyers to avoid future price increases. Consumers see inflation trouble ahead.

So perhaps they bought more using personal debt? Total American consumer debt jumped +$19.2 bln in October, when a +$10 bln rise was expected. It accelerating from a downwardly revised +$3.2 bln rise in a month earlier. This marked the fastest pace of growth since July, equating to an annual growth rate of +4.5%, up from just +0.8% in September. Revolving credit, including credit card debt, saw a notable +14% increase, the largest since February, following a smaller +1.4% gain in September. Meanwhile, non-revolving credit, which includes car and student loans, grew by just +1.1%, up only slightly from +0.5% the prior month

Canada also released employment data for November overnight. Their employment rose +54,000, almost all of it full-time jobs. But their jobless rate rose to 6.8% and a seven year high, as more people entered their labour market as their participation rate rose.

India reviewed its policy rate late Friday and made no change, although they did cut their reserve ratio for liquidity support reasons.

In China, home loan interest rates are being driven down into the 3% range (depending on borrower financials) and there is talk that they may fall below that in coming months. There is widespread 'news talk' about how their housing market (and land sales to developers) are recovering, but the real evidence is yet to emerge.

But their logistics index indicates improvements in their overall economic activity, reaching a seven year high.

In Australia, media reports suggest that Shayne Elliott will step down this week as CEO of ANZ, after nine years in the role.

The OECD has released its latest update of its Economic Outlook. While it doesn't specifically cover New Zealand, it does point out in a release note that tensions are creating headwinds for international trade in both advanced and emerging markets, and it will probably get worse. They have a rather stunning chart about trade policy uncertainty, here.

The UST 10yr yield is now at just on 4.15%, unchanged from Saturday. 

The price of gold will start today at US$2633/oz and little-changed from this time Saturday, and down -US$25 in a week.

Oil prices are another -50 USc lower at just over US$67/bbl in the US while the international Brent price is now just over US$71/bbl. A week ago these prices were US$68.50 and US$72.50 respectively, so down a -US$1.50 since then.

The Kiwi dollar starts today at 58.3 USc and unchanged from this time Saturday but down almost -1 from this time last week. Against the Aussie we down -10 bps at 91.3 AUc. Against the euro we have also held 55.2 euro cents. That all means our TWI-5 starts today at just on 68 to be unchanged from Saturday and down -60 bps in a week. We are approaching a six month low, primarily driven by the surging USD.

The bitcoin price starts today at US$99,796 and down -1.2% from this time Saturday. Volatility over the past 24 hours has been low at +/- 0.9%.

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.

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