Economy Watch

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 metals prices eye a boost from the Chinese housing rescue.

But first in the week ahead, it will be one dominated by the RBNZ's Wednesday Monetary Policy Statement, one that itself comes about a week before the new Government's first full Budget - and that too is likely to have a key influence on monetary conditions. No-one is expecting any change to the OCR, but signals for when it will be cut will be keenly awaited.

In the US we will get advance PMIs for May, durable goods orders, and new and existing home sales for April. China (today), South Korea and Turkey also have rate decisions dues this week. And inflation rates will be released for Canada, the UK, and Japan. Sentiment surveys will be released in Australia and the EU, along with retail sales data in Canada.

Wall Street has just booked a strong set of earnings reports. Most S&P500 companies have reported now (93%), and they have reported a +5.7% rise in profit growth, matching the outsized gains in Q2-2022 that was off the back of the prior pandemic weaknesses. Almost 80% of these companies came in with better than expected earnings-per-share, and 60% better than expected revenues. These sort of outcomes help explain why both the Dow and the S&P500 are at record highs. And why many investors don't think these equity markets are over-valued. But we should note that PE ratios ae higher than long-term averages now.

In China, industrial production growth recovered in April after a disappointing March to be back yo the expansion level in the prior three months. But this is the only 'good news' in yesterday's data dump from the Middle Kingdom.

Their retail sales rose by only +2.3% year-on-year in April, down from +3.1% in March and missing market forecasts of +3.8%. That is quite a miss.

Electricity production slipped in April from March to be up only +3.1% in the year. That is a long way lower than the +8% rise in the year to December. If 3.1% is a proxy for GDP, they are not on track to achieve Beijing's growth targets.

Prices for new dwellings fell their most since July 2015. Prices for resales fell even more. The depth of their property sector retreat is laid in the official information. It is no wonder they are considered a wholesale state intervention in the sector.

To clear away the drag that their property market has created, Beijing has taken some 'drastic moves'. The central bank has removed its lower limit banks can charge for home loan rates, nationally. It has cut interest rate benchmarks for housing-related lending by -25 bps.

And it has allocated ¥300 bln (NZ$42 bln) for lending aimed at buying by local authorities for unsold housing for "social purposes". They said the ¥300 bln of central bank cash will translate into an estimated ¥500 bln of credit overall.

And we should keep an eye on what is happening to China's Agriculture minister. He was in charge of their food security program, and has suddenly fallen out of favour, receiving the standardised accusation of 'corruption' from Beijing authorities.

More generally. the UN says India’s growth will rise in 2024 to +6.9%, from the 6.2% they estimated in January, driven by strong public spending and growing private consumption. The other big mover is Brazil, up to an expected +2.1% in 2025 from a January estimate of +1.6%. The US is still expected to expand +2.3%, Japan by +1.2%, China by +4.8% and the EU by +1.0%. Australia is +1.6%. New Zealand is ignored by this UN review.

The EU released its final April CPI rate which came in at 2.6% for the bloc, 2.4% for the Euro Area. Both were little-changed from March but sharply lower than a year ago. In April 2023 the EU rate was 8.1%, the Euro Area was 7.0%. Getting rid of dependence on Russian oil and gas has not been at the cost of higher inflation. But we should observe that the range is wide across the bloc between countries. Denmark recorded at 0.5% annual inflation rate in April, whereas Belgium 4.9% and they are less than 700 kms apart.

We should note that the social tensions in New Caledonia are echoing in the nickel market because there is an important mine there. It is the world's third largest producer, and may help explain why France isn't taking any backward steps. Global nickel prices have risen more than US$2000/tonne, up +11.3% over the past week over supply fears. It is a key ingredient for making stainless steel.

The UST 10yr yield is now at 4.42% and unchanged from Saturday but down -8 bps from this time last week. 

The price of gold will start today down -US$4 from Saturday at US$2415/oz. That is up US$45 for the week and just off it's all-time high. Silver has shot up too, up +12% over the past week.

Oil prices are still up at US$79.50/bbl in the US while the international Brent price is still just on US$83.50/bbl. Both are a bit more than +US$1 higher than a week ago.

The Kiwi dollar starts today down -10 bps from Saturday at just over 61.3 USc. That is up almost +120 bps in a week. Against the Aussie we are still up at 91.7 AUc and a new one month high. Against the euro we are also firm at 56.5 euro cents. That all means our TWI-5 starts today just on 70.4, unchanged from Saturday and up +80 bps in a week.

The bitcoin price starts today at US$66,732 and down a mere -0.2% from this time Saturday. And up +10.6% from this time last week. Volatility over the past 24 hours has been low however at +/- 0.8%.

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 the ECB is warning investors aren't taking geopolitical risks into account nearly enough.

But first in China, we are getting reports that Beijing is developing a plan to save their housing markets and SOE developers by having the state buy huge numbers of unsold properties to boost demand. It is a sign of desperation. What wouldn't go wrong? Millions of properties partly occupied are surely likely to give an enhanced sense of rot in the sector, while enriching the developers. The future for such a policy looks bleak indeed.

Under the proposal, local state-owned enterprises would be asked to help purchase inventory from distressed developers at steep discounts using loans provided by state banks, Bloomberg reported on yesterday. Hong Kong shares of developers who will benefit from the "market clearing" zoomed again yesterday.

In the US, housing starts rose in April from March but are still lower than year-ago levels, and that year-ago standard is not high. Previously we have seen stronger residential building consent levels but they are falling on a prior month- and prior year-basis too. The new home construction sector is falling back into line with the general real estate resale market with tepid demand at best.

But that weakness is not reflected in their labour market. The actual number of jobless claims fell last week to 197,000 which was a slightly smaller fall than expected. It is interesting how expectations for rising labour pressure seemed to have turned around.

And the real state of retailing in the US can be tracked by the activity of their largest retailers - and the largest is Walmart. They said Q1-2024 sales levels were strong, growing far more than inflation.

Most serious analysts see the US economy expanding by +2% in 2024. But the AtlantaFed's GDPNow model reckons it is expanding nearly twice as fast as that, currently running at a 3.6% expansion, real.

In one region, the US Philly Fed factory survey turned from a minor positive to a minor negative in May, basically because of a pullback in new orders. But also intriguing is the holding high of survey perceptions of business conditions. They seem confident about the future, very confident.

Industrial production in the US was little changed in April, taking seven of the past twelve months as expansions, five as contractions. But most of the expansions, as small as they have been, are in the more recent half. And that has eaten into the year-on-year deficit, so it is now only -0.4%.

In its latest Financial Stability Review, the ECB says investors are likely to be jolted by negative election surprises in 2024 that will weigh on financial stability. They reckon investors are blind to the sudden shifts in sentiment that geopolitical tensions can drive. And the extra spending they are having to do on the security from is likely to put future strain on European public finances they noted.

In Australia, the April labour force data saw the jobless rate rise to 4.1% from 3.9% in March. (NZ was 4.3% in March.) That means 593,000 of their 14.9 mln labour force are without work. Full-time employment fell by -6100, part-time employment rose by +44,600. It was tougher in NSW where full-time employment fell -16,300 and part-time employment only rose +13,100.

We have previously noted that financial markets had started pricing in a chance of interest rate rises from the RBA. A lowish chance, admittedly. But now we can note that they seem to have abandoned those bets - even though the consensus seem to be that the short-term Aussie Budget won't be especially inflation-friendly.

More globally, the copper price has breached US$11,000 and an all-time high and now we are into the crazy world where short sellers are being squeezed, and having to buy their way out of the frenzy which bids up the price further.

You may recall we reported a sharp rise in bulk cargo freight rates last week. Well, it was temporary and they have now fallen back to the prior week's level now. But containerised cargo rates are still rising as fast as they did last week, up another +11% this week and are now double year-ago levels. All this is driven by outbound-from-China rates roiled by the persistent Canal and security problems.

The UST 10yr yield is now at 4.38% and up +2 bps from this time yesterday. 

The price of gold will start today down -US$10 from yesterday at US$2379/oz.

Oil prices are up +US$1 today to just under US$79/bbl in the US while the international Brent price is up +50 USc, now just on US$83/bbl.

The Kiwi dollar starts today with a slight easing from yesterday at just on 61.2 USc. Against the Aussie we are up at 91.6 AUc and a new one month high. Against the euro we are unchanged at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2 and little-changed from yesterday.

The bitcoin price starts today at US$64,946 down a very minor -0.2% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.6%.

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 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 financial markets are in a risk on mood today.

First, the April US inflation rate brought no surprises, coming in as expected at 3.4%, a dip albeit a small one, from March's 3.5%. But it still qualifies as 'sticky' - there have been nine lower readings in the past twelve. Their 'core' rate fell to 3.6%, also as expected. Airfares and rent remain the key components keeping inflation up in the US. Petrol prices rose a very minor +1.2% over the year. (The other measure we use has them up +2.0%. Either way, petrol is not pushing up inflation there.)

The apparent slowing of inflation is bring debate and market bets on when the Fed will cut its policy interest rates. The Fed itself of tempering expectations, but markets aren't waiting. Yields on US benchmark bonds are falling in secondary markets, equity prices are rising in anticipation (and to record highs), and the US dollar is weakening as a risk-on mood envelopes markets today.

Meanwhile, the official data for US retail sales were up +4.0% in April from a year ago on an 'actual' basis, and now showing 'real' gains above inflation. (But when you seasonally adjust this data and correct for varying holiday periods, the gain isn't that high.) Meanwhile, American business inventories are not rising, in fact posted a small dip in March. They don't currently have an excess inventory problem.

US mortgage applications were little-changed last week from the prior week, to be -14% lower than the same week a year ago. Benchmark mortgage interest rates fell -bps to 7.08%, mortgage brokers report.

China left its 1-yr Medium Term Lending Facility rate unchanged at 2.5% yesterday.

Indian exports fell sharply in April from March, and were only +0.8% higher than a year ago. Presently, India is not a powerhouse exporter or participant in global trade. April merchandise trade exports of US$35 bln in the month is barely more than Australia's.

The EU delivered some better economic results overnight with March quarter economic activity expanding (GDP was +0.4% higher in the quarter than the same quarter a year ago, 'real'.) Although they may seem low to us, they are 'good' for them in the current circumstances.

Their Spring forecasts out overnight see a "gradual expansion amid high geopolitical risks", anticipating growth rising to +1.0% this year and +1.6% next. Industrial production is rising recently, cutting into the prior declines. But they are making hard work of it getting this key indicator to rise on a year-on-year basis.

And staying in Europe, we should note an assassination attempt on the newly-elected nationalist firebrand Slovak prime minister. He has been a pro-Russian, anti- democracy lightning-rod, the subject of large street demonstrations since his election. It is the king of spark that in the past has kindled wider, broader consequences.

Argentina's central bank cut its benchmark interest rate -1000 bps to 40% from 50%, marking the sixth adjustment since December due to a slowing inflation rate, bringing the rates to the lowest since June 2022. The monthly inflation rate slowed for the fourth straight month to 8.8% in April from 11% in the previous month and below market forecasts of a 9% gain.

In Australia, the rate of gain in their wage pay slipped to 4.1% in the March quarter. That is the first time that gain rate has fallen since Q4-2020 and it may suggest labour market pressures are starting to ease there.

Standard & Poor's has been looking at the 2024 Aussie budget. They are concerned about 'structural spending pressures' that won't ease in futute. They are also worried about the broader issue of weak productivity and “how effective spending programs such as Future Made in Australia are in allocating resources”.

The UST 10yr yield is now at 4.36% and down -9 bps from this time yesterday. 

The price of gold will start today up another +US$34 from yesterday at US$2389/oz, a move essentially driven by the falling greenback.

That same move has boosted oil prices today which are up +50 USc to just on US$78/bbl in the US while the international Brent price is now just on US$82.50/bbl.

The Kiwi dollar starts today with a broad-based, across-the-board rise, up almost a full +1c from yesterday at just on 61.3 USc and its highest level in eleven weeks. Against the Aussie we are up at 91.5 AUc and a one month high. Against the euro we are +½c higher at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2 and up +60 bps from yesterday, and its highest since mid March.

The bitcoin price starts today at US$65,097 and up a spectacular +6.3% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.2%.

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 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 about the latest and pre-election Aussie Budget delivered overnight.

But first, the American retail Redbook Index rose +6.3% last week from the same week a year ago, suggesting buoyant trading in physical stores, gains well ahead of inflation. It is not only the strongest gain of 2024, you need to remember that it is on the back of a rising 2023 which itself was rising strongly in 2022.

Their SME sentiment index rose in April, slightly recovering from a 12-year low in March and better than the forecasts which assumed it would slip again.

Meanwhile, factory prices rose more than expected in April, up +2.4% from the same month in 2023. But this is about average over the 15 year history of this data tracking (excepting the pandemic distortions, of course). But if there is a cloud it is that the month-on-month rise seems slightly elevated.

American household debt rose +3.8% in Q1-2024, just marginally more than the CPI inflation rate over the same period of +3.5%. And this excess brought a small, but noted, rise in delinquencies. As you might expect, mortgage debt rose less than inflation (+3.3%) given their hibernating residential property markets. Car loan balances rose at inflation's level. Student loan balances fell, the only sector to recede. But credit card balances zoomed higher, up a concerning +13% over the year and the basis of the rise in delinquencies. Total consumer debt (including mortgages) is now US$17.7 tln. That is about 65% of US GDP and near the lowest share since these records started in 2005. Back before the GFC it was over 100%.

The American CPI inflation rate gets updated tomorrow and financial markets seem parked up until this data is known. Markets currently expect a very minor improvement, down to 3.4%. Variations from that or the "core rate" expectation could well be market-moving.

US Fed boss Powell was speaking overnight in The Netherlands, but he had the same message again - that inflation is stickier than the central bank wants to see and that rate cuts from them are some way off. But he also repeated that it is very unlikely that their next move will be a hike.

In China there are some signs elements of stress are spreading to insurers now. Several insurance companies have chosen to pay higher interest rates on their capital bonds rather than exercise an option to redeem them early, a sign they are facing solvency problems. Policymakers are focusing on the wider stress points, but still basically about their troubled property markets.

In Germany, their widely-watched ZEW Indicator of Economic Sentiment rose more than expected in May to its highest since February 2022. Improving economic conditions in the EU and China have contributed to a better outlook, analysts say. Expectations for domestic consumption, as well as the construction and machinery sectors, have brought substantial improvements in sentiment.

But today it is all about the Australian Budget, delivered overnight. With the Australian economy the weakest it has been in 23 years, their Treasurer has handed down his third Federal Budget delivering its second consecutive surplus, and setting the Government’s agenda as they head into an election cycle. That election is due in May 2025, so this Budget has to be seen as the last major policy setting before then, that could deliver results before polling. Initiatives such as the "Future Made in Australia" program were at the forefront. Not only is this Budget 'political' (including "tax cuts for all" and a $300 rebate for household power bills), the reviewing media assessments are highly politicised as well.

The surplus announced of +AU$9.3 bln this year is off the back of generous company tax receipts – a pleasant surprise after the -AU$1.1 bln deficit forecasted in the Mid-Year Economic and Fiscal Outlook in December. However, this will swing into a -AU$28 bln deficit in 2024-25 (-1.4% of GDP), with larger deficits in the years following than previously forecasted.

And following up yesterday's note, the copper price is now officially up at an all-time high, US$10,977/tonne.

The UST 10yr yield is now at 4.45% and down -4 bps from this time yesterday. 

The price of gold will start today back up +US$20 from yesterday at US$2355/oz.

Oil prices have fallen -UA$1 to just on US$77.50/bbl in the US while the international Brent price is now just on US$82/bbl.

The Kiwi dollar starts today marginally firmer than yesterday at just over 60.3 USc. Against the Aussie we are also a tad firmer at 91.2 AUc. Against the euro we are little-changed at 55.8 euro cents. That all means our TWI-5 starts today just on 69.6 and up +10 bps from yesterday, partly on a weaker yen.

The bitcoin price starts today at US$61,251 and down -2.4% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.

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.

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 China seems to be on the cusp of bringing back its traditional stimulus play to bolster its misfiring economy.

But first up today there is more evidence US inflation isn't cooling as the Fed would want. A respected survey by the NY Fed shows that consumer inflation expectations for the year ahead increased to 3.3% in April, the highest since November, from 3% in each of the previous four months. These year-ahead price expectations rose across the board.

Canadian residential building consent levels were expected to fall in March after an unusually strong start to the year. A -4.5% pullback was expected. But in the end the retreat was much larger, down -11.7% from the February level and down almost -15% from the same month a year ago.

Indian inflation seems to be stable, but it is running high at 4.8%.

In China, we are getting new promises of "opening up". Sadly for them this is just a replay of a tired meme and is unlikely to bring the benefits promised like of the many earlier "opening up" promises made of the past decade (which got them to the current funk).

They need to something necessarily big. And something big seems to be coming. They are readying a ¥1 tln sale of very long bonds (NZ$230 bln) to fund a stimulus program. It may not be the only bond issue for that purpose.

Australia's closely-watched NAB business confidence index stood at +1 in April, holding steady for the second straight month while staying below its long-run average. Weak sentiment in retail, wholesale, and mining offset improvements in recreation, personal services, construction, and manufacturing. But the main feature is the lackluster current conditions.

All eyes will be on the Australian Federal Budget to be released later today, but actually not until about 9:30 pm (NZT). The expectation is that it will report a +AU$9 bln surplus.

We should note that the copper price rose sharply again overnight, now back up to US$10,500/tonne and the peak and all-time high last reached last in February 2022. (It is likely to spike copper theft again. Be warned.) There is no evidence this bull-run is anywhere near over yet. As is usual, it will attract speculators because of the confluence of bullish demand (especially from China) and tightening supply. The sky-high regulatory costs of starting new projects has discouraged miners for years who turned to consolidation until that pressure eases.

The UST 10yr yield is now at 4.49% and down -1 bp from this time yesterday. 

The price of gold will start today down -US$25 from yesterday at US$2335/oz.

Oil prices have risen slightly to just over US$78.50/bbl in the US while the international Brent price is now just on US$83/bbl. Both are minor net +50 USc/bbl gains.

The Kiwi dollar starts today little-changed from yesterday at just under 60.2 USc. Against the Aussie we are also unchanged at 91.1 AUc. Against the euro we are little-changed at 55.8 euro cents. That all means our TWI-5 starts today just on 69.5 little-changed from yesterday.

The bitcoin price starts today at US$62,739 and up +1.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 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 generally modest and uninspiring economic data.

We start today with updates from China.

Their April CPI came in +0.3% higher than a year ago, low but not as low as expected and not deflation yet (which they had from October to January). In the circumstances they will be ok with this. But both been and lamb prices fell and quite sharply, not only from a year ago, but from March as well. Milk prices fell as well although by lesser amounts.

Meanwhile, Chinese producer prices fell and at a slightly faster rate than the -2.3% expected, down -2.5% from a year ago.

Also much lower than expected is new bank lending. This activity was far less than in March and far less than what was expected. To be fair, there is usually a retreat in April from March, but just barely achieving the April 2023 level will have been quite a disappointment, especially as Beijing is on record encouraging lending (especially to property developers). The analysts expected lenders to heed the signals, but it seems they ignored them. Overall credit came in with a rare contraction. And the April new yuan loan level is near the trough of levels we have seen since late 2017.

Foreign direct investment fell a sharp -56% on the year in the first quarter of 2024, according to official Chinese data. It rose +US$12.5 bln in March from February 2024, much lower than the +US19.7 bln rise in the same period in 2023, and the +US$21.5 bln in the year prior. Global business are still reluctant to invest in an economy grappling with weak internal demand, and veering into Party controls of business operations. Foreign companies made just US$10.3 bln in net direct investments lower than during the same period last year. It is a falling trend that started by Shanghai's COVID lockdown.

China's vehicle sales grew by +9.3% in April from the prior year to 2.36 million. This follows a +9.9% March increase. Sales of new energy vehicles jumped by 33.5%. But we can also see this current overall sales level is only at the April 2018 level, so the 'growth' only underscores how weak it has been recently. But for car sales, they don't have this on their own.

The coming week will bring updates on China's industrial production, retail sales, fixed asset investments, the house price index, and the unemployment rate for April. None of these are expected to show anything but modest changes or real improvements.

In Japan, household spending there dropped in real terms by -1.2% in the year to March, compared with market forecasts of a -2.4% fall, after a -0.5% decline in the prior month. It was the 13th straight month of declining personal expenditure, dragged by weak spending on housing, fuel, electricity & water charges. In contrast, expenditure for food, transport & communication, and education all rose.

Across the Pacific in the US, the widely-watched consumer sentiment survey by the University of Michigan fell in May and by more than expected. The driver was the expectation that future inflation will rise again and that unemployment and interest rates may all be moving in an unfavourable direction in the year ahead. But we should also note that May often delivers pessimist results in this survey and the current level is +14% higher than a year ago. Since June 2022 the trend has been rising and the latest result is not out of trend.

Global wheat prices rose to their best level since August after the important May USDA updated production and demand estimates. Rising production in the US, China, Australia and Canada is offset by falling output in the huge Russian regions, Ukraine, and the EU. Global corn and rice output is expected to rise. American beef production is expected to be lower as herds are rebuilt in 2024/25. And they have raised their forecast milk price.

Canada delivered its best jobs report in April since the start of 2023 with an increase of +90,400 new jobs in the month with a broad-based rise. But full-time positions increased by +40,100 while part-time jobs rose by +50,300. There are now 20.5 mln people employed in their workforce with a jobless rate of 6.1%.

Indian industrial production rose +4.9% in March, which was less than the expected +5.1% rise and lower than the February +5.6% rise. 

The Australian federal budget will be released tomorrow (Tuesday) May 14 and more "pre-budget announcements" are being released. A big one over the weekend was that they will spend more than AU$11 bln on social housing initiatives to try and get on top of their housing crisis for low income people.

The UST 10yr yield is now at 4.50% and unchanged from Saturday. 

The price of gold will start today down -US$8 from Saturday at US$2360/oz. It is on the rise again, mainly on Chinese demand, and heading back toward its mid-April all-time high. For reference it was US$2300 a week ago, so up +3.0% in the past seven days.

Oil prices have fallen slightly to just under US$78/bbl in the US while the international Brent price is now just under US$82.50/bbl. These are both the same levels of a week ago.

The Kiwi dollar starts today little-changed from Saturday at just under 60.2 USc. A week ago it was at exactly the same level. Against the Aussie we are also unchanged at 91.1 AUc. Against the euro we are unchanged at 55.9 euro cents. That all means our TWI-5 starts today just under 69.6 unchanged from Saturday but marginally firmer from a week ago.

The bitcoin price starts today at US$61,614 and up +1.9% from this time Saturday. Volatility over the past 24 hours has been low at just under +/- 1.0%.

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.

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 that there is a surprise renewed jump in global shipping freight rates underway again.

But first, new US jobless claims rose last week. The headline seasonally adjusted rate "surged" to +231,000 and up from +209,000 the prior week. But the actual number of new claims was only 209,000. It rose too, but it is too soon to conclude this is a new trend. There are 1.75 mln people on these benefits, which is a decrease from lasrt week. But it is up from 1.66 mln a year ago. The current level is tiny compared to their employed workforce of 161 mln people.

But the headline "surge" has had echoes in currency and bond markets today.

There was a UST 30yr bond auction earlier today successfully raising US$25 bln (so much smaller than yesterday's 10 year event). It was heavily supported with median yields slipping to 4.59% from 4.61% at the prior equivalent event a month ago. We are no longer reporting rising yields.

China's exports rose to a three month high in April, but basically only back to the general monthly level of the past year. The rise looks good only in the perspective of the past two months. Overall their exports rose +1.5% from the same month a year ago. But this masks some quite big moves. Exports to the US fell -1.0%, to the EU they were down -4.8%. To Japan down -9.2%. to New Zealand they were down -2.0% and Australia down -7.7%. But they rose +21% to Brazil, +20% to Vietnam, +7% to Malaysia although to be fair the dollar values of these increases were not high. Interestingly Chinese exports to Russia slipped -1.9%, and to India were little-changed.

Overnight, the Bank of England maintained its key bank rate at 5.25%, as expected. However, two committee members preferred to reduce the rate by -25 bps, compared to only one member in the prior meeting. Further, officials revised down their inflation forecast and raised the growth outlook. Those projections foresee a decline in their policy rate to 3.75% over the next three years.

There was an unexpected rise in global freight rates for containerised cargoes last week, up +16% in the week, principally on outbound rates from China. These rates are now a massive +80% higher than the same week a year ago. The rise will affect other trade routes globally. Meanwhile, bulk cargo rates rose +30% last week as well although they are "only" 57% higher than year ago levels. It is not clear why rates have jumped in the past week so suddenly but it may relate to renewal of time charter rates after the first flush of increases after the Panama and Suez Canal stresses that just are not easing.

It is cold nationwide this morning. After yesterday's Transpower warning, we should note that as we write this, electricity prices are only marginally elevated indicating a normal situation so far, and not the extreme stress we saw two days ago.

The UST 10yr yield is now at 4.46% and down -3 bps from yesterday. 

The price of gold will start today up +US$19 from yesterday at US$2333/oz.

Oil prices have risen +50 USc at just under US$79/bbl in the US while the international Brent price is unchanged, now just under US$83.50/bbl.

The Kiwi dollar starts today up +¼c from yesterday at just under 60.3 USc. Against the Aussie we are softish at 91.1 AUc. Against the euro we are little-changed at 55.9 euro cents. That all means our TWI-5 starts today just under 69.6 and again marginally firmer from yesterday.

The bitcoin price starts today at US$61,901 and down -1.1% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.

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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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 market-moving data is scarce today but investors should be reading the latest US CBO update.

First, there was only a modest rise in consumer debt in March, up a mere +1.5% and substantially less than the rise analysts were expecting. Stepping back for a longer term trend view, Americans have been growing their consumer debt appetite at slowing rates since 2012. This is quite different to the assumption many jump to.

US mortgage applications actually rose +2.6% last week from the prior week, recovering from the -2.3% decline in that earlier week. But they remain -17% lower than year-ago levels. Maybe one reason last week's level was higher was because benchmark interest rates actually fell, the first reversal in more than a month.

In yet another very well supported US Treasury bond auction, this one for their 10 year Note, the median yield came in at 4.42%, and actually lower than the 4.47% at the prior equivalent event a month ago.

New estimates from the US Congress Budget Office make clear the cost of extending the Trump 2017 tax cuts will likely exceed US$5.8 tln and are the single largest contributor to the swelling American federal deficits. (It is seven times more than their annual defence budget, more than three times their Health & Human Services budget.)

Across the Pacific, Taiwanese exports rose in April by a modest +4.3% amount, the sixth consecutive monthly rise, but far less than the stellar rise in March. There was disappointment all the same because they were expecting another +15% rise.

German industrial production fell as expected in March following the surprisingly good February result. But it is still -3.3% lower than a year ago in real terms. But continuing its comeback was their construction sector.

In Sweden, their central bank cut its policy rate to 3.75%, which involved the -25 bps reduction analysts were expecting. They say inflation is now approaching the target while economic activity is weak. It is their first cut since 2016, following the tightening campaign that started two years ago. They said that if the outlook for inflation stays lower, their policy rate will be cut two more times during the second half of 2024.

Perhaps we should note that Elon Musk's X-Prize competition, the largest ever science competition with US$50 mln to the overall winner, has shortlisted 20 finalists in the carbon removal category, one of whom has a New Zealand connection.

The UST 10yr yield is now at 4.49% and unchanged from yesterday. 

The price of gold will start today down a minor -US$2 from yesterday at US$2314/oz.

Oil prices have changed little at just under US$78.50/bbl in the US while the international Brent price is now just under US$83.50/bbl.

The Kiwi dollar starts today little-changed from yesterday at just on 60 USc. Against the Aussie we are +¼c firmer at 91.3 AUc. Against the euro we are little-changed at 55.9 euro cents. That all means our TWI-5 starts today just under 69.5 and again marginally firmer from yesterday.

The bitcoin price starts today at US$62,573 and down -1.2% from this time yesterday. Volatility over the past 24 hours has been very low at just under +/- 0.5%.

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.

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 the positive global economic news rolls on, despite the best efforts of some regional forces to risk everything with crazy adventures.

First, today's dairy auction brought a welcome, if small, rise. And it is maybe more than it looks given the signals from the derivatives market and the recent GDT Pulse events all pointed to softness. Recent global tensions may have played a part. Turkey suspended all trade with Israel and that included their regionally important dairy trade. Middle East buyers were prominent overnight. Overall prices rose +1.8% from the prior event in USD terms but were little-changed in NZD terms. The important WMP price rose +2.4%, butter was up +2.1% and cheddar cheese impressed with a big +8.0% gain. Perhaps we need to see these shifts as part of the global rise in overall commodity prices recently as the world's major economies build some upward momentum.

In the US, one measure of American economic optimism among investors declined sharply in May, but there seems to be big disconnect between 'opinions' (everyone has one), and behaviour. For example, retail spending at bricks & mortar stores was up +6.0% last week from the same week a year ago, a trend that has built to its highest level since the end of 2022. Equity prices are rising still.

And the US logistics industry is on the rise with a solid April expansion.

Meanwhile the latest UST 3 year bond tender was very well supported, and a feature today was that yields rose much less from the prior even that we have seen in a while. Today's event brought a 4.55% median yield, not too different to the 4.49% we saw in the prior equivalent event a month ago. This is only one tender, but perhaps the rising demand is finally suppressing the upward yield trend. They have a lot of funds to raise but investors are showing they have an even faster-growing appetite for this paper.

Across the border there was also a positive surprise. Their closely-watched Ivey PMI jumped to its highest level in two year, recording an expansion only currently matched by India.

Japan is on a roll. Their services PMI for April has come in at a strong level (54.3), outpacing the US (51.3), China (52.5), and the EU (53.3). Only India (60) tops them among the world's largest economies.

In Europe they also surprised on the upside. Retail sales surged (for them) in March to be up +2.0% in volume (real) terms from the same month a year ago, and far better than what was anticipated.

In Australia, or more importantly Western Australia, their state government has launched a AU$5,000 incentive to vacant property owners to bring them onto the long-term rental market for Western Australians to lease.

Overall in Australia, retail sales are disappointing. In the March quarter they fell, making this the fifth of the past six quarters of retreat in retail volumes.

Yesterday, the Reserve Bank of Australia held its monetary policy positions and rate, and issued guidance that you could take any way. The most you can say is that they remain vigilant to the risks of higher inflation. Pretty lame really. More here.

For those of you anxious about coffee prices (the main media is just picking up on the April rise), be assured current prices are retreating as fast as they rose with good supplies re-entering markets from Brazil and Vietnam.

The UST 10yr yield is now at 4.46% and down -3 bps from yesterday. 

The price of gold will start today down -US$9 from yesterday at US$2316/oz.

Oil prices have risen a minor +50 USc to just under US$78.50/bbl in the US while the international Brent price is now just under US$83.50/bbl.

The Kiwi dollar starts today little-changed from yesterday at just under 60.1 USc. Against the Aussie we are firmer at 91 AUc. Against the euro we are unchanged at 55.8 euro cents. That all means our TWI-5 starts today just under 69.4 and marginally firmer from yesterday.

The bitcoin price starts today at US63,355 and up +0.4% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 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.

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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 global service sector is in reasonable shape, helping generate new impetus to the world's economy. Equity markets are rising the wave.

In China, their private Caixin services PMI brought some good solid news. It was little-changed in April from the expansion in March, but now the 16th straight month of expansion of services their services sector. This private survey reports a faster expansion than the official version. Of special note is that new business grew the most in nearly a year and the fastest since May 2023. Foreign sales rising the most in ten months.

According to the combined factory and services PMIs, the Eurozone expanded its fastest in a year in April. In fact their services expansion was faster than either China, Japan or the US. Their new business volumes rose for a second successive month and at the quickest pace since May last year.

Only India is expanding faster among the major global economies.

In Australia, the Melbourne Institute monthly inflation monitor for April found an increase in monthly inflation, although annual inflation continues to decline. Annual changes in the cost of living also fell for most household types.

And Aussie job ads rose in April somewhat unexpectedly and halting a longish retreat. In fact they were almost +3% higher in the month from March. Better, the rise was broad-based, except for healthcare. However these levels are still -6.6% lower than a year ago, and as good as the recent rise was, in fact it is trending at a flat level.

All eyes will be on the RBA at 4:30pm today (NZT) and their monetary policy review. They have a history of occasionally acting differently to what markets expect so there is some market pricing tension about what they will come up with. The main 'risk' is that they will be more hawkish than expected, given their sticky inflation levels.

It is very noticeable that some key mineral prices are on the rise again. That includes zinc, nickel, tin, lead, aluminium, and copper. A rise in global demand is behind the broad recent increases. There are some tighter supply points too, as is usual in the transition.

The UST 10yr yield is now at 4.49% and down -2 bps from yesterday. 

The price of gold will start today up +US$24 from yesterday at US$2325/oz.

Oil prices have stayed down at just under US$78/bbl in the US while the international Brent price is now just under US$83/bbl.

The Kiwi dollar starts today unchanged from yesterday at just over 60.1 USc. Against the Aussie we are softer at 90.7 AUc. Against the euro we are little-changed at 55.8 euro cents. That all means our TWI-5 starts today just on 69.3 and and unchanged from yesterday.

The bitcoin price starts today at US$63,094 and down -1.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.

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.

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