Economy Watch

Kia ora,

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

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

Today we lead with news the US expansion rolls on, pushing back the timing of when interest rate normalisation will happen.

US CPI inflation came in lower than expected for May, slowing to 3.3%, the lowest in three months. In April it was 3.4% and forecasts for May were 3.4%. While this rise was lower than the past three months it is a higher rate than the October to February period. And it is above the Fed's target.

Then the US Federal Reserve kept the federal funds rate unchanged at the 5.25% to 5.5% range, as expected. Still, the Fed officials projected only one interest rate cut this year and four cuts in 2025, emphasising their intention to maintain higher borrowing costs for a longer period to get inflation back into range.

While all this was going on, US mortgage applications surged almost +16% in the first week of June, the sharpest weekly increase since January 2023. This is a rebound from the -5.2% drop in the last week of May and fully erases the slumps from the two prior weeks.

India's industrial production rose +5.0% in April from a year ago, little-changed from recent growth levels. The heady rises of late 2023 seem to be past them now with a more orderly expansion in play. India's passenger vehicle sales had been falling over the past few months after a heady rise and were only +4.3% higher in May than a year ago.

India's CPI inflation eased to 4.7% in may from 4.6% in April. But food price inflation hardly changed at 8.7%, a worrying sign for them.

China's CPI rate slipped -0.1% in May from April, to be just +0.3% higher than a year ago. Observers were expecting a stronger price gain than that, although not by much more. Low demand seems to be keeping prices close to deflation again. Beef prices were particularly soft, down -3.6% in the month to be almost -13% lower than a year ago. Lamb prices were down -1.2% in May from April, down -7.5% in a year. These are far softer than overall food price changes (-1.0%) for the year). Milk prices were unchanged in May, down -1.7% for the year. Meanwhile, producer prices are still languishing in deflation, but less so. They were down -2.5% in April from a year ago, easing to -1.4% in May.

Meanwhile, Japanese producer price inflation is rising, up +2.4% in May from a year ago, a nine month high.

The Bank of Japan is about to consider gradually reducing its Japanese government bond holdings, taking a step toward normalising not just interest rates, but the quantitative side as well. They are in the middle of a sea-change shift in monetary policy.

The EU has decided to hit EV imports from China with new anti-dumping tariffs taking them to almost 50% for some models. The concerns about the impact of Chinese "over-capacity" are spreading globally now. As you might expect, China isn't happy with this move.

The UST 10yr yield is now at 4.30% and down -10 bps from yesterday. 

The price of gold will start today up +US$16 from yesterday at US$2329/oz.

Oil prices are up +50 USc at US$78/bbl in the US while the international Brent price is just over US$82/bbl. However whether they will remain up at these levels seems uncertain. The world faces a ‘staggering’ oil glut by end of decade, the IEA warned overnight.

The Kiwi dollar starts today +½c firmer at just over 61.9 USc and jerked around by the two big US forces. Against the Aussie we are slightly softer at 92.8 AUc. Against the euro we are little-changed at 57.3 euro cents. That all means our TWI-5 starts today at 71.2, and up another net +20 bps from yesterday.

The bitcoin price starts today at US$69,157 and a bounce-back of +3.6% from this time yesterday. Volatility over the past 24 hours has still been moderate at just on +/- 2.4%.

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.

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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 that will all be overshadowed tomorrow by two key pieces of US data, their CPI and the Fed monetary policy decisions.

Today, the American Redbook retail indicator came in +5.5% higher than year-ago levels, continuing its track well above inflation and showing a positive retail impulse in the world's largest economy.

And the NFIB Small Business Optimism Index rose in May to its highest in five months. So again, no real stress signs there.

Canadian building consent levels came in much better than anyone expected in April. The total value of building permits increased by 20% month-on-month, the most since May 2020, after a -12% decline in March. Residential permits were up by 21%. That means they are +30% higher than year-ago levels, a surprisingly strong surge.

And staying in Canada, their government is proposing an effective hike in their capital gains tax (by raising the 'inclusion rate' from 50% to 66%), a move that business interests say would hurt investment. But the IMF is now saying that is probably just scaremongering. The IMF wants Canada to go further, also raising its 9% GST rate while raising a related tax credit to shield the poor.

In Japan, their machine tool orders were up +4.2 in May from a year ago. While this isn't spectacular, it looks like there is a trend reversal underway from the previous twenty-one months of declines.

In Hong Kong the dollar cost of China's security embrace of the once-great financial center is starting to become clear. They are coming up to five years of falling commercial real estate values as the shift out gathers pace. Bloomberg is reporting that those real-estate value losses now exceed -US$270 bln (-NZ$440 bln). Of course, no-one knows where it will settle, but the funk is deepening faster at present, not slowing down.

Values are being market down over the past few days on their major stock exchanges too. Over the past month the Shanghai stock exchange has fallen -4%, the Hong Kong exchange is down -5%. Sentiment is certainly leaking away in China's investment community. And China-linked commodity prices are easing lower too, especially mineral prices. Copper, iron ore, and rebar steel are all lower, as are soybeans, for example. The imminent visit from the Chinese Premier (not President Xi) has the aura of representing a fading force in the international trading world.

Meanwhile, India, despite a projected slowdown this year, will continue to be the world's fastest-growing large economy, according to the World Bank's latest Global Economic Prospects report.

Australian business sentiment isn't improving either. In fact, business confidence there fell back into negative territory in May as conditions continued to gradually soften, suggesting the subdued economic activity seen in the Q1 GDP data has continued into Q2. Business conditions slipped just below average with trading conditions and profitability easing.

The overnight dairy Pulse auction had prices retreating somewhat from last week's good full GDT event. But the lower levels probably aren't significant at this stage.

The UST 10yr yield is now at 4.40% and down -7 bps from yesterday. 

The price of gold will start today back unchanged from yesterday at US$2313/oz.

Oil prices are still at yesterday's level of US$77.50/bbl in the US while the international Brent price is just over US$81.50/bbl. But they have been volatile in between.

The Kiwi dollar starts today at just on 61.4 USc and up about +20 bps from this time yesterday. Against the Aussie we are up more than +¼c at 93 AUc. Against the euro we are also another +¼c firmer at 57.2 euro cents. That all means our TWI-5 starts today at 71, and up +20 bps from yesterday.

The bitcoin price starts today at US$66,780 and down a rather large -4.7% from this time yesterday. Volatility over the past 24 hours has still been high at just on +/- 3.0%

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 the EU parliamentary election jolt has everyone's attention.

But first in the US, in the four months December to March, consumer inflation expectations held steady at 3%. Then in April they rose 3.3%, and this latest NY Fed survey shows them easing somewhat to 3.2%. They were unchanged at the three-year horizon at 2.8%, and increased at the five-year horizon to 3.0% from 2.8%. So its a mixed picture where these expectations are holding higher than where they need to be.

In a well supported 3 year US Treasury bond auction (US$140 bln was bid for the US$58 bln available), the median yield achieved was 4.59%, and that was marginally higher than the 4.55% at the prior equivalent event a month ago.

Wall Street is in a bit of a lull at present as they await the combination of the May CPI result and the US Fed monetary policy meeting outcomes.

In Canada, consumer sentiment is beginning to improve, especially after their central bank made a cut to its official interest rate last week

In Europe, like many others, markets are recoiling at the EU parliamentary election results. And even more so, 'surprised' by the French reaction of calling a snap national election. But to understand both, you need to know that the EU parliamentary election featured low turnouts, some very low. That allowed motivated extreme parties to make some spectacular headline gains. But it wasn't all one-way traffic. Macron is gambling that a normal turnout in national elections will overwhelm the right-wing votes with more normal voting patterns as voters who sat out the EU version are 'shocked' into returning. We'll see.

In Australia, major supermarket Coles has imposed limits of how many eggs customers can buy after hundreds of thousands of chickens have been destroyed after bird flu was found at five large poultry farms. Prices are likely reflect these shortages, although the normal 'don't panic' notices have been issued.

The UST 10yr yield is now at 4.47% and and up +4 bps from yesterday. 

The price of gold will start today back up +US$20 from yesterday at US$2313/oz.

Oil prices have risen +US$2.50 from yesterday and are now at just on US$77.50/bbl in the US while the international Brent price is just over US$81.50/bbl. So they are back to week-ago levels.

The Kiwi dollar starts today at just on 61.2 USc and up less than +¼c since this time yesterday. Against the Aussie we are little-changed at 92.7 AUc. Against the euro we are +¼c firmer at 56.9 euro cents. That all means our TWI-5 starts today still at 70.8, and up +20 bps from yesterday.

The bitcoin price starts today at US$70,043 and up +0.6% from this time yesterday. Volatility over the past 24 hours has still been low at just on +/- 0.7%.

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 the IMF is starting to worry that the US expansion could become unsustainable unless it is matched by national productivity gains.

But first we should note that it is a public holiday in Australia today.

However all eyes this week will be on Thursday (NZT) when the US Fed will opine on where they think inflation is going and their expected policy rate track. This will be in their dot-plot. Earlier in the same day, the US releases its May CPI data, a crucial piece of their puzzle. US PPI data comes on Friday.

But China also releases its CPI data this week, on Wednesday, followed on Thursday by their important new yuan loans data.

Then Japan will weigh in on Friday with its interest rate policy update.

But over the weekend in the US, markets were anticipating a 'good' rise in non-farm payroll jobs of +185,000. But in fact this headline number was up +272,000. Even more impressive, hourly pay was up +5.3% from a year ago, weekly wages up +5.6% on the same basis.

But as regular listeners know, we also look at the 'actual' data. There are now +917,000 more people on employer payrolls in May than in April. Overall there are now 161.3 mln people employed, although that is little-changed from April. So all the gain is a shift from the unincorporated self-employed on to employer payrolls. That may be why the pay gains are well above inflation.

Whatever way you slice it, it is a pretty good result, and markets are assuming the Fed will look at this and see pressures that are unlikely to quell inflation. The bond and FX markets reacted, but the equity market went quiet at unchanged levels (although they may argue this gain was already priced in).

The March rise in American consumer debt levels was a pretty modest +US$6.3 bln from the prior month and April was expected to catch-up with a +US$11 bln but still-modest rise. But in the event, April consumer debt levels only rose +US$6.4 bln again, up just +1.5% from a year ago. There is no evidence here that Americans are stretching themselves further with additional debt obligations.

Meanwhile American household net worth rose +3.3% or +US$5.1 tln to more than US$160 tln at the end of March 2024 from December 2023. The value of household equity holdings increased +US$3.8 tln, while the value of real estate held by households rose by +US$900 bln. In complete contrast, American household liabilities were up only +US$100 bln to US$20.6 tln. There is a huge amount of overall resilience here. (We are not suggesting this is evenly spread, because clearly it isn't.)

Canada also released labour market data over the weekend. Their payrolls rose +27,000 and more than the +22,000 expected. But it was all part-time jobs that rose and by +62,000, and full-time jobs shrank -36,000. Their jobless rate rose to 6.2%. They are probably not happy with this outcome but at least their central bank has cut its official interest rate and that may bring some relief to employment in the rest of 2024.

Perhaps proving important context to the zooming container freight rates, exports from China soared +7.6% year-on-year in May and beating market expectations of a +6% rise. It was also up from a +1.5% rise in the previous month. It's the steepest rise in outbound shipments since January, fueled by a lower base from last year and sustained overseas demand. The big export destinations were ASEAN countries (+9.7%) and South America, especially Brazil (+26%). Elsewhere little-change or decreases. China's imports were weak however, virtually unchanged from a weak May a year ago.

China's foreign exchange reserves rose to US$3.23 tln in May from US$3.2 tln in April and above market forecasts. Their gold reserves were unchanged at 72.8 mln troy ounces, an unusual pause because they had risen for 18 consecutive months. But the rise in the gold price saw the value of their holdings rose to almost US$171 bln.

In India, their central bank held its policy rate unchanged at 6.5% and said inflation's pressure at 4.85% is not changing much. Their policy target is a very generous 2%-6%. But food prices are rising and were up +8.7% in April from a year ago. Given their heat and water stress levels, food price pressure is an economic consequence they will struggle with.

In the EU, their GDP rose its most in Q1-2024 since Q3-2022, but to be fair the annual growth from a year ago was only +0.5% for the EU, slightly less for the Euro Area (+0.4%).

The IMF is pointing out that growth without sufficient productivity improvement is a problem for the world's financial stability, especially when the largest economies drag the chain on productivity. They seem to be pointing to the US on this, and that their expansions won't be sustainable without the commensurate improvements in productivity.

World food prices were up only marginally in May but are still running below the levels of each of the past three years. Global food security seems ok and at prices that are affordable (even if there are pockets of real stress and distress). Dairy prices are one area prices are rising and they have been for eight straight months. Meat prices are low and relatively stable.

The UST 10yr yield is now at 4.43% and down -1 bp from Saturday after the US non-farm payrolls surprise. 

The price of gold will start today down -US$10 from Saturday at US$2293/oz and down -US$83 from Friday.

Oil prices have been retreating slightly over the weekend and are now at just on US$75/bbl in the US while the international Brent price is just under US$79.50/bbl. A week ago these prices were +$2 higher back then.

The Kiwi dollar starts today at just on 61 USc and little changed from Saturday. Against the Aussie we are unchanged at 92.8 AUc. Against the euro we are marginally softer at 56.5 euro cents. That all means our TWI-5 starts today still at 70.6, and also little-changed from this time last week.

The bitcoin price starts today at US$69,632 and up +0.9% from this time Saturday. Volatility over the past 24 hours has also been very low at just on +/- 0.4%.

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.

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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 global trade is facing a tough challenge in containerised freight costs.

But first, initial new US jobless claims actually fell modestly last week to +195,000 (although the seasonally adjusted level rose). There are now 1.67 mln people on these jobless benefits. All this is a tiny 1.1% of their workforce and unchanged in a year.

But all eyes are now on tomorrow's non-farm payrolls report when a rise in +185,000 is expected, and a continuation of the high levels of employment.

The reported level for job cuts was very similar to the very low April level, so not special signs of stress there.

A strong labour market would drive demand, including for imports and that is what we are seeing. May US imports were higher than in March, although the gain was modest. And there was a modest gain in exports as well. Although the US deficit in both goods and services is running higher than 2023 levels it is far lower than 2022 levels. For calendar 2024 it will come in just over 3% of their total economic activity, a decrease from 2023.

US banks are starting to raise deposit rates for savers to retain and grow their funding. But, as Bloomberg is pointing out, they are also back raising funds by collateralising their mortgage books. Readers with memories of the GFC might be surprised to know how much collateralised mortgage obligations (CMOs) have risen. These are on top of other mortgage-backed securities. One to watch.

Separately, it is starting to look like the US bird flu outbreak in parts of the US will be more serious for their dairy industry that initially hoped. It is likely that milk production declines will have an international echo.

Despite lingering price pressures, the ECB lowered its three key interest rates by -25 bps overnight as earlier signaled and expected, marking a shift from nine months of stable rates. Inflation has retreated by more than 2.5 percentage points since September 2023. The main refinancing operations rate was lowered to 4.25%, the deposit facility rate to 3.75%, and the marginal lending rate to 4.5%. Because it was well signaled there has been little market reaction. However they gave no clue about where their policy rates are headed from here.

This came as German factory orders did not bounce back in April from the March dip, as was expected. There has been no interruption to the now long-established downtrend there.

EU Parliament elections are currently underway. Results won't be known until early next week, but nationalist and far-right candidates are expected to make gains.

Many countries released trade data overnight and this included Australia late yesterday. Their exports dipped in April, but their import demand unwound rather heavily especially for consumer-related products. From that, their trade surplus rose.

China's April trade data will be released later today and rising levels of exports (+6%?) are expected. It is a surge that may other countries worry about because of it is driven by "excess capacity" and "dumping" arising from lower domestic demand.

And staying in China, their housing industry is probably not going to drive any economic activity there for a long time. China has moved to bar housing construction in some areas in its latest attempt to shrink a mountain of unsold homes that is weighing on prices. The new restrictions stop local authorities from selling land usage rights to developers in cities with unsold housing inventories that would take three years or more to clear -- a criterion that more than 40% of major cities meet. And that in turn is going to hurt local authority revenues hard.

Container freight rates rose another +12% last week from the week before in an increasing jump in the cost of global trade. These freight costs are now +180% higher than year-ago levels. Ther same culprits are at work - security, canals, and capacity. Outbound from China is the main pressure point. Inbound to China costs are falling and are just one seventh of the outbound rates. Bulk cargo rates are little-changed however, and still very low, near where they were first 30 years ago.

The UST 10yr yield is now at 4.28% and down another -1 bp from yesterday. 

The price of gold will start today up another +US$19 from yesterday at US$2379/oz.

Oil prices are up +$1.50 at just on US$75.50/bbl in the US while the international Brent price is now just under US$79/bbl and a smaller rise.

The Kiwi dollar starts today marginally firmer from yesterday at just over 62 USc. Against the Aussie we are still at 93 AUc. Against the euro we are marginally firmer at 57 euro cents. That all means our TWI-5 starts today at just on 71.2, unchanged from yesterday and still its highest since late February.

The bitcoin price starts today at US$71,007 and down -0.9% from this time yesterday. Volatility over the past 24 hours has also been modest however at just on +/- 0.7%.

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.

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The Australian Government's a Future Made in Australiainitiative could attract skilled migrants and potentially investment and entrepreneurs from New Zealand, and ultimately be a catalyst for a much more sustainable future, says Kylie Walker, the CEO of the Australian Academy of Technological Sciences & Engineering.

In last month's budget, Prime Minister Anthony Albanese's government unveiled a Future Made in Australia, saying this would invest A$22.7 billion over a decade to "build a stronger, more diversified and more resilient economy powered by clean energy, in a way that creates secure, well paid jobs and delivers benefits to communities across the country."

Speaking in the latest episode of interest.co.nz's Of Interest podcast, Walker says a key aim of the initiative is to boost Australia's economy complexity, a measure of the knowledge in a society as expressed in the products it produces, by upskilling and moving up the value chain.

"Obviously, we can't do everything, but we can absolutely do more than just digging up [natural resources such as minerals] and selling them off and then buying them back again in more technologically sophisticated forms. We know that those critical minerals are absolutely necessary for the ongoing electronics revolution, as well as for the clean energy future globally. So we can, for example, process our iron ore, or it can be used in or [turned] into green iron, at least, so that it can be used in green steel. And we have the minerals to make batteries for electric vehicles, for example. We have extraordinary batteries technology. Some of our researchers and developers in that space are amongst the best in the world. And so it seems to me, putting these two kind of natural assets at either end of that development spectrum together, that there ought to be a way to move us a little bit further along the value chain," Walker says.

To this end there'll be a need for skilled workers, especially in STEM (science, technology, engineering, and maths).

"Around 48% of professional occupations were in shortage across Australia last year, and that's up from 39% the year before. There's a similar shortage in the technical and trades occupations in Australia. So we are both going to have to train new people domestically as a matter of priority, and in addition to that, rely on skilled migration. And, you know, I think traditionally it's probably reasonable to assume some of that skilled migration might come from New Zealand," she says.

There should also be a role for private sector investment, research, development and ideas. Much of the earmarked government investment takes the form of tax incentives, but also includes a range of funding mechanisms.

"One of the other focus areas that we've got simultaneously with this Future Made in Australia push is, of course, building capacity in the global region. And there is a huge place, a huge part to play for New Zealand, for Pacific island nations and other near neighbours like Indonesia, in collaborating to research and commercialise those developments, particularly in the technology and engineering spaces, and to do that for mutual benefit, so that we build the capacity for the entire region," says Walker.

Ultimately, Walker hopes in 20 or 30 years, a Future Made in Australia can be looked back on as a catalyst for a more sustainable future.

"And I mean that both in terms of economically sustainable and societal wellbeing, and in terms of environmentally sustainable. I think if we do this really well, we can build a more circular economy, we can reduce our waste as well as our emissions. We can see small scale manufacturing and pop up factories all over the place. There are some really, really interesting and pretty great technologies coming up where, for example, a micro-factory the size of a shipping container can take glass and fabric being recycled from a building site and turn it into a new material to use in a new building on the same site. I'd like to see huge and widespread adoption of renewables [energy]. And I'm hoping that when we look back, we see not only that resilient infrastructure within Australia, but a booming export market for those products as well, ranging right through from the energy and the fuels, through to those slightly value added up the chain minerals exports, green agricultural exports as well, and a range of other stuff which, frankly, you and I haven't heard of because it probably hasn't been invented yet."

In the podcast Walker also talks about where a Future Made in Australia comes from, what's behind it, what needs to happen for Australia to become a renewable energy superpower, green hydrogen, mining, critical minerals, concerns about a Future Made in Australia picking winners and benefiting billionaires, its national interest framework, research and development, and how Australia can get along in a world of rising geopolitical tensions between the United States and China.

*You can find all episodes of the Of Interest podcast here.

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Kia ora,

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

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

And today we lead with news some central banks have started to cut policy rates, others are contemplating long holds or even rises.

But first, US mortgage applications fell a sharpish -5.2% in the last week of May from the prior week to be -13% lower than the same week a year ago, itself a weak level.

And the US ADP employment report disappointed too, indicating private payrolls rose +152,000 in May, and less than the +175,000 expected and the +188,000 rise in April. This is the precursor report for this weekend's May non-farm payrolls report when a +188,000 increase is anticipated. There may be downside expectations growing now. The ADP report said pay was up +5.0% over the past year indicating American workers are staying well ahead of inflation's rise.

US vehicle sales rose in May to an annual rate of 15.9 mln which is +2.5% higher than year-ago levels and that was better than expected, and higher than in April.

But the news that dominated markets overnight was the unexpectedly strong rise in the US ISM services PMI. The expansion it recorded was strong (53.8) and a sharp rebound from the minor contraction they reported in April. Further, this survey was backed-up, and more, by the S&P/Markit services sector survey which came in even stronger (54.8). New order growth in both surveys drove the expansions. And these new readings completely overshadowed the ISM factory survey hiccup (which you may recall was not matched in the S&P/Markit factory survey which was actually showing a positive expansion).

Markets reacted to the ISM services sector gains reported, especially Wall Street equities. They liked that the expansion is apparently broad-based.

Also worth a note is that a major carmaker is now building hydrogen fuel-cell vehicles in the US, as a hybrid with an electric battery. It's only emission is water vapour. Generally Americans have been reluctant to buy fast-depreciating EVs. It will be a test now for the appetite for fuel-cell cars.

Meanwhile in Canada, their services sector returned to a modest expansion and away from the prior contraction.

And the Canadian central bank came through with its expected rate cut, a -25 bps reduction to 4.75%. Markets expect the ECB will make similar signals, and also a -25 bps rate cut to 4.25%. We'll see. If so, these signal a new trend of major central bank rate cuts, led by this Canadian one. But will the US move? And Japan may increase, and possibly Australia too. So the trend isn't broad yet. The US decides on June 13 (NZT) and markets expect no cut presently. Japan decides on June 14, and Australia next on June 18.

Interestingly, the Canadian rate cut has not brought expectations it will revive their housing markets.

The private Caixin services PMI for China came in better than expected for May and a bit better than the official services PMI. Meanwhile the Japanese services PMI has risen in its final version from its flash result. It too is a similar and good expansion.

Meanwhile, Japanese pay rose +2.1% in April from a year ago, and well above the expected +1.7% gain.

In India, their PMIs for May (factory, services) both revealed slowdowns in their expansions on weaker order levels. But to be fair, both are still strong expansions, just less so.

And perhaps we should note that Prime Minister Modi's embrace of Indian billionaires prior to the election actually ended badly for him at the polls - and unexpectedly so. Other populist politicians who embrace billionaires should probably take note - but of course they won't.

In Australia, yesterday's release of quite weak Q1 GDP growth has brought fears of stagnation there. GDP per capita has fallen by -1.6% since mid-2022. But financial market traders pushed back the timing of rate cuts to July next year after “material” revisions in GDP data indicated household finances were actually stronger than many feared.

The UST 10yr yield is now at 4.29% and down another -4 bps from yesterday. 

The price of gold will start today up +US$23 from yesterday at US$2353/oz.

Oil prices are up +50 USc at just on US$74/bbl in the US while the international Brent price is now just under US$78.50/bbl and a slightly larger rise.

The Kiwi dollar starts today marginally firmer from yesterday at just under 61.9 USc. Against the Aussie we are almost another +¼c firmer at 93.1 AUc. Against the euro we are marginally firmer at 56.9 euro cents. That all means our TWI-5 starts today at just under 71.2, up more than +20 bps from yesterday and its highest since late February.

The bitcoin price starts today at US$71,624 and up almost +1.4% from this time yesterday. Volatility over the past 24 hours has been modest however at just on +/- 1.2%.

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.

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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 of some unexpected outcomes.

The overnight dairy auction belied the futures market again somewhat, delivering modest rises across the board, probably because European production is sagging a bit more than expected. Demand from China was not strong, but other regions picked up the slack. Overall prices were up another +1.7% on top of the last auction's +3.3%. SMP rise +3.0% and WMP rose +1.7%. However with the NZD on the rise at the same time, the change in local currency was negligible (+0.3%). Still, overall price levels are back to where they were in October 2023.

This is all a bit of an outlier because commodity prices are generally retreating, both food and metals. The copper price is one making a rather fast reversal.

In the US, their Redbook index tracking retail sales on a same-store basis was up +5.8% last week from the same week a year ago.

Also up were US factory orders and by a bit more than was expected to be +3.4% more than year-ago levels in April. You may recall that the two US PMIs reported quite different tangents yesterday. Well this seems to suggest that the S&P Global/Markit version which indicated rising orders and an expanding sector is more confirmed than the negative ISM one.

The more up-beat mood was bolstered by a rise in the Logistics Managers Index. It jumped in May on the back of stronger shipments activity. This indicator has now expanded in 9 of the last 10 months and for the last six months in a row.

Meanwhile the April US JOLTS survey reported the number of job openings declined by -296,000 from the previous month to just under 8.1 mln, the lowest level since February 2021. So the upcoming weekend release of the US non-farms payrolls for May will have an edge to it.

Unexpectedly, it seems that Modi magic has faded for Indian voters. The ruling BJP isn't getting the landslide election result exit polls suggested. They will still be able to form a government but it will be a coalition with a somewhat chastened result that saw them lose their majority.

Elections are about to start in the EU next, and all eyes are on an expected swing to populists and far-right parties.

The UST 10yr yield is now at 4.33% and down another -7 bps from yesterday. 

The price of gold will start today down -US$18 from yesterday at US$2330/oz.

Oil prices are down -50 USc at just on US$73.50/bbl in the US while the international Brent price is now just over US$77.50/bbl and a new four month low.

The Kiwi dollar starts today unchanged from yesterday at just under 61.8 USc. Against the Aussie we are another +¼c firmer at 92.9 AUc. Against the euro we are marginally firmer at 56.8 euro cents. That all means our TWI-5 starts today at just on 70.9, unchanged from yesterday.

The bitcoin price starts today at US$70,644 and up almost +2.0% from this time yesterday. Volatility over the past 24 hours has been modest however at just on +/- 1.8%.

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.

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 weaker US data has halted the bond selloff.

But first, the actual number of US initial jobless claims rose marginally last week, and the number of people on these benefits was actually unchanged from the prior week at 1.7 mln although that was a small increase from year-ago levels.

However, Q1-2024 GDP was revised lower to +1.3% in their second estimate, from +1.6% in the first and this was more of an adjustment than was expected. The main change was due to less consumer spending that originally estimated.

Both retail and wholesale inventories rose in April, but the changes were in fact very small. And the US continues to be a magnet for imports with a larger trade deficit. However some of this will be markets reacting to impending tariff rises and may be temporary. But their trade deficit as a proportion of total economic activity is little-changed.

US pending home sales fell sharply in April, down a whopping -7.7% from March in a dive that surprised analysts. It was the largest retreat since February 2021. Only a small -0.6% correction from a good march was anticipated. Getting the blame was the impact of "escalating interest rates" throughout April dampened home buying, and that left more inventory in the market.

Canada said weekly earnings in March were +4.2% higher than a year ago, a slight slowing of the pace in February when they rose +4.3%.

Taiwan also reported Q1-2024 GDP growth overnight and that came in much better at +6.6% higher than year-ago levels. And you will notice that is better than China's equivalent +5.3% in the same period.

In Australia, there was a small rise in residential building consent levels in April from March (+1.3%) but also lower when seasonally adjusted for Easter. Markets weren't expecting that dip. Year-on-year however, these consent levels are more than +13% higher.

And staying in Australia, major bank NAB is forecasting Perth residential prices to zoom almost +14% higher in 2024. That is the high outlier; Sydney is expecting a +4.5% rise, Brisbane almost +9%, but Melbourne will be the laggard at +2.5% in 2024.

Already high container freight rates rose another +4% last week to push them more than +150% higher than year-ago levels. The same drivers are at play; security risks, canal disruptions, and now plus the rush to beat new US tariffs on some Chinese goods. It is outbound from China rates that are being most affected. However, bulk cargo rates are immune to these rises, unchanged again this week and still at their long-run average levels.

The UST 10yr yield is now at 4.56% and down -7 bps from yesterday. 

The price of gold will start today unchanged from yesterday at US$2343/oz.

Oil prices are down -US$2 at just on US$77.50/bbl in the US while the international Brent price is now under US$82/bbl.

The Kiwi dollar starts today marginally firmer from yesterday at just under 61.3 USc. Against the Aussie we are -¼c lower at 92.2 AUc. Against the euro we are also marginally softer at 56.5 euro cents. That all means our TWI-5 starts today at just under 70.6 and little-changed.

The bitcoin price starts today at US$69,480 and up +3.0% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.

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 on Monday.

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