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 the American labour market data for April seemed to have something for everyone.

But first, in the coming week it will be relatively quiet, especially on the US data front. But the Q1 earnings season is in its final weeks and still includes some major reporting. Elsewhere we will get set-piece central bank announcements from Sweden, England, Brazil and Malaysia, and of course from Australia tomorrow. China's CPI and PPI will also be released, but not until Saturday.

New analysis shows that American labour productivity is rising and at its quickest rate since the the 1990s, and in 2023 that was its highest pace in half a century. It is too soon to credit AI, so this could be a new and important trend. Rising productivity is an essential precursor for rising standards of living.

But over the weekend, the US reported that their economy added only +175,000 jobs in April, on the headline, seasonally adjusted basis, the least since October and a deceleration compared to the upwardly revised +315,000 jobs added in March. It fell short of market expectations for a +243,000 increase. This data underscores a significant slowdown from the brisk pace observed in the first quarter and trails behind the average monthly gain of +242,000 jobs over the preceding 12 months. But between the two months combined the 'slowdown' is quite small.

But in fact, on an 'actual' basis employer payrolls rose +803,000 to 158.0 mln and a record high. On a household basis, including the unincorporated self-employed, they rose +234,000 to 161.6 mln and showing the continuing shift from self-employment to company payrolls that we have observed in prior 2024 months. Either way, there are actually significantly more people employed that the headline levels suggest. Full time jobs rose, part time job levels shifted lower.

But the American labour force is growing slightly faster than these employed levels show so the jobless rate ticked up, very slightly admittedly, to 3.9% and although that is similar to last month it is at the upper range of what they have had since August 2023. (The New Zealand jobless rate was 4.3% in March 2024.)

Average weekly earnings rose +3.9% in April from a year ago, lower than the March level of 4.1%, so there are signs of less labour market pressure. (US CPI is 3.5%.)

And we should not forget that labour market data is a lagging indicator.

A leading indicator is a metric like the PMIs. And the ISM services PMI for April turned negative, dropping sharply to a contracting 49.4 in April from an expanding 51.4 in March. This is their first contraction in the services sector activity since December 2022, and it surprised markets who had expected a continuing expansion. But before we get too carried away, we should note that the new order component remained expansionary, so this overall drop might be just a blip.

The internationally-benchmarked US Markit services PMI is still showing an expansion, albeit a slower one.

So despite the headlines of a labour market and service sector undershoot, the markets liked the implications. Risk appetites returned with the S&P500 rising, bond yields falling, and the USD easing. Basically markets now feel US rate hikes are less likely as inflation pressures are easing - just as the US Fed itself seemed have suggested. The expectations of one 2024 rate cut late in the year are creeping back.

American vehicle sales came in slightly higher in April and the highest monthly sales rate since December, now at 15.7 mln, up +0.5% from the rate in the same month a year ago. For perspective, it reached an all time high of 21.7 mln units in October 2001 and a record low of 8.5 mln in April 2020.

In China, their publicly traded companies took a net profit hit for the first time in five years in 2023, as the protracted property sector slump bled into other industries. The roughly 5,200 non-finance companies listed in mainland China logged a combined net profit of NZ$655 bln last year, according to DZH data. This amounts to a -3% or -NZ$20 bln overall retreat. In Q1-2024 the decline swelled to -5% on that basis.

China returns from its "Labor Day" week of holiday, today. And there are no real signs their property market has bottomed out, as some claim. In fact, banks' mortgage books are now shrinking, undermining claims the market is stabilising.

Global real estate services provider CBRE first-quarter profit beat analysts' estimates for Q1-2024, helped by higher leasing demand at a time when commercial property sales remain under pressure from elevated interest rates. Their revenue rose +7%.

In Australia, eyes are turning to tomorrow's rate review by their central bank. No change is expected, but it will be closely followed for signals of the recently talked about rate rise possibility.

The UST 10yr yield is now at 4.51% and little-changed from Saturday. 

The price of gold will start today up a minor -US$1 from Saturday at US$2301/oz.

Oil prices have stayed down at just under US$78/bbl in the US while the international Brent price is still just over US$82.50/bbl.

The Kiwi dollar starts today slightly softer from Saturday at just over 60.1 USc. Against the Aussie we are still at 91 AUc. Against the euro we are also little-changed at 55.9 euro cents. That all means our TWI-5 starts today just on 69.3 and down -10 bps from Saturday.

The bitcoin price starts today at US$64,262 and up +4.0% from Saturday and basically back to where it was a week ago. 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 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 OECD sees a world economy in recovery and about to expand at an increased rate, despite the many challenges. It is a perspective of resilience.

But first in the US, jobless claims held at a two month low ahead of tomorrow's April non-farm labour market report. There were +189,000 new claimants last week taking the total to 1.76 mln and that is it’s lowest since October.

The very low levels of job cuts reported in April fell from the prior month.

Markets expect non-farm payrolls to have expanded +243,000 in April when they are released tomorrow.

Although they fell in March from February's record high, American exports are essentially holding at a high level and were unchanged from a year ago on goods and services basis.

The American March factory order data was released overnight and that showed another increase, a second consecutive one and up +1.6% from the prior month which was itself up +1.2% on that basis. However these levels are still running -0.9% lower than a year ago.

China remains on holiday. One feature of this year's extended Labour Day break is the return of Chinese making international trips. Japan is the focus this week, but that will spread as Chinese travellers regain their appetite for seeing the world.

Meanwhile, their real estate sector is making no progress toward recovery. It remained very weak in April with major developers’ sales tumbling -45% year on year and holding new very low month-on-month levels.

In Argentina they can sniff real progress in their battle against endemic inflation. So their central bank slashed its benchmark interest rate overnight by -10% to 50%, the fifth change since December and the third in the past three weeks. They see a notable slowdown in monthly inflation and a "rapid adjustment" of inflation expectations. In March, Argentina's monthly inflation slowed more than expected for the third consecutive time, with consumer prices rising by 11% from February to March, below economists' forecast of 12.1%. The new administration has prioritised stringent spending cuts since December to combat inflation, and they now expect monthly inflation to decrease to 3.8% by September. That would take the current inflation rate of 288% down to under 50%.

On Monday, the OECD will release an updated assessment of the New Zealand economy and prospects. Today, its global Economic Outlook update sees an "unfolding recovery" and it has raised its global growth forecast to +3.2% for 2025 from 3.1% this year. They see New Zealand rising from a modest +0.8% in 2024 to +1.9% in 2025. For Australia it is a rise from +1.5% to +2.2%. For Japan, from +0.5% to +1.1%. For the US it is a retreat from +2.6% this year to +1.8% next. For China, they see a slip there too from +4.9% to +4.5%. They expect global inflation to ease but unemployment to rise modestly. For a world with wars and severe security stresses, it is a remarkably sanguine outlook. But that inflation outlook, even if it does ease, points to higher-than-wanted sticky levels.

Global container freight rates dipped a minor -1% last week to take them to +55% higher than year ago levels. The same drivers of high rates (war diversions, Suez security, and Panama drought) are all still there so immediate relief seems unlikely. Bulk cargo rates however slipped -5% for the week and are down -12% for the year.

The UST 10yr yield is now at 4.58% and down -3 bps from yesterday. 

Oil prices are down another -50 USc from yesterday at just over US$78.50/bbl in the US while the international Brent price is unchanged at just on US$83.50/bbl.

The Kiwi dollar starts today up +½c from yesterday at just over 59.5 USc. Against the Aussie we are holding at 90.8 AUc. Against the euro we are firmish at 55.5 euro cents. That all means our TWI-5 starts today just on 68.9 and up a mere +10 bps from yesterday.

The bitcoin price starts today at US$59,164 and up +2.5% from this time yesterday. Volatility over the past 24 hours has moderate at just on +/- 2.5%.

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

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

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

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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 today's Fed positioning is less hawkish that markets had expected.

The US Fed policy announcement today brought no change in their rate targets at 5.25-5.50%. They did note that ongoing inflationary pressures and a tight labour market has stalled progress toward bringing inflation back down to its 2% target in 2024, and they won't shift their rate signals until they actually see progress.

In addition they said they will slow their quantitative tightening activities starting from June 1, 2024. That means they will reduce their balance sheet by only US$25 bln per month from the previous US$60 bln per month.

In remarks after the policy announcement, Fed boss Powell said their next move is unlikely to be a rate hike. Equity markets like that, yields fell, and the greenback eased. But part of the lack of action could be its desire not to make large policy moves in an election year.

Meanwhile the widely-watched ISM factory PMI slipped back into contraction in April, just marginally weaker than the Markit version. The ISM version is usually lower than the Markit one, but both generally move in the same direction. Currently that is a softening.

That came as the US JOLTS job openings report declined by 325,000 from the previous month to 8.488 million in March, so really only a very small change. But markets noticed the slowdown.

But the ADP Employment Report beat estimates adding +192,000 workers to their payrolls in April, more that the expected +175,000 increase but less than the March gain of +208,000. Hiring was broad-based, they found.

All this comes ahead of Saturday's (NZT) US non-farm payrolls report which is expected to record a solid employed labour force gain of +243,000.

Because of the widespread May Day holidays around the world yesterday, there is little other international data released overnight.

In Australia, their statistics agency released "employee living cost indexes" (LCI) separate from the consumers’ price index (CPI). In March, their CPI came in at 3.6%. But the employee LCI came in at 6.5%, mainly because of the sharp rise in their variable mortgage rates which pass through there very quickly. It was notable that the other groups, especially retirees, did not suffer much of a variation from the CPI in their own LCIs.

The UST 10yr yield is now at 4.61% and down -7 bps from yesterday. 

Wall Street has risen +1.0% the S&P500 after the Fed announcement. 

The price of gold will start today up +US$9 from this time yesterday at US$2303/oz.

Oil prices are down another -US$2 from yesterday at just under US$79/bbl in the US while the international Brent price is now just on US$83.50/bbl and down even more.

The Kiwi dollar starts today unchanged from yesterday at just over 59 USc. Against the Aussie we are holding at 90.9 AUc. Against the euro we are also holding at 55.3 euro cents. That all means our TWI-5 starts today just on 68.8 and down -10 bps from yesterday.

The bitcoin price starts today at US$57,694 and another -4.3% lower that this time yesterday. And this is a new two month low. Volatility over the past 24 hours has remained very high at just on +/- 3.9%.

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

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

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

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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 as we await our local labour market report, the global economy is expanding modestly, but inflation isn't killed off yet.

First in the US labour costs rose +4.2% in the year to March, up +1.2% from the prior quarter. This is the highest rate of increase since mid-2022 and is more indication that inflation's pressures remain at a stick level - not excessively high, but not tracking down as their central banks needs.

American retail sales at physical stores were up +5.5% last week from the same week a year ago, another indicator that consumers are still spending those higher payroll increases, and keeping inflationary pressures on.

But the Conference Board survey of consumer sentiment retreated in April. What American consumers say and what they do are diverting again. This time it isn't about present conditions which they think are ok, rather about future conditions which they are more worried about. But there are some interesting differences. Those on modest incomes are more confident than those on higher incomes. Those under 35 are more confident than those older.

In Japan, it is becoming clearer that their central bank did in fact intervene in currency markets to support the yen yesterday.

In China, the private Caixin factory PMI survey was more bullish that the official version. The modest Caixin expansion held in April, and in fact the sixth straight month of growth in factory activity recorded by this survey (which is concentrated in smaller private sector firms) and even though low, the fastest pace since February 2023.

On the other hand, the official factory PMI survey, which is more focused on large State-owned enterprises was less positive even if it was their second straight month of (low) expansion in factory activity. Basically it is just holding.

More positive is the official services PMI, but that was less positive in April than March and it came in well below what analysts were expecting, and the softest pace since January, as new orders shrank at a steeper rate. But it is positive still and that streak is now out to 16 consecutive months.

In an earnings call comment, the Yili boss said Chinese milk supply has been higher than demand which isn't growing as it once did. But he was optimistic that the back end of 2024 would improve for the Chinese dairy industry.

In Europe they said their April inflation was stable at 2.4% (Euro Area), and that their overall economy grew by +0.5% in the year to March (whole EU), which was a bit better than expected. Interestingly, it was led by Spain, Portugal, France and Greece, and held back by Germany.

In Australia, retail sales were softer than expected in March, dropping by -0.4% from February and missing market estimates of a +0.2% growth. February was also downwardly revised. It was the first decline since last December as turnover fell in all retail sectors.

Locally, we will get our March quarter labour market data later this morning. We will have a full update then (at 10:45am).

And the RBNZ releases its important Financial Stability Report prior to that (at 9am) and will have full coverage on that too.

And we should note that as speculators unwound long positions, the cocoa price is falling as rapidly as it rose.

The UST 10yr yield is now at 4.68% and up +6 bps from yesterday. 

The price of gold will start today much lower, down -US$46 from this time yesterday at US$2294/oz.

Oil prices are down another -US$1 from yesterday at just under US$81.50/bbl in the US while the international Brent price is now just on US$86/bbl.

The Kiwi dollar starts today down -¾c at just over 59 USc. Against the Aussie we are holding at 91 AUc. Against the euro we are -½c lower at 55.3 euro cents. That all means our TWI-5 starts today just under 68.9 and down -40 bps from yesterday.

The bitcoin price starts today at US$60,270 and -4.4% lower that this time yesterday. And this is a two month low. Volatility over the past 24 hours has remained very high at just on +/- 3.9%.

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

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

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

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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 that today we are in the quiet period before some big news coming up in the rest of the week, starting with our own labour market data out tomorrow, and the US Fed rate review on Thursday (NZT).

In the meantime in the US, the pressure from rising petrol prices seems to have completely evaporated. Pump prices reported are just +1.2% higher today than a year ago, and virtually unchanged from a month ago. But we shouldn't overstate the importance of this. Retail fuel prices account for just 4% of their CPI basket. "Shelter" (rent) accounts for more than 30%, and rent inflation is running at 5.6% pa (even though it is far below its recent 8.2% peak a year ago). House insurance has risen by +8.6% in the past year. CPI pressures are shifting

Previously we have pointed out Tesla's share price slide in 2024, down more than -40%. But in the past few days there has been a sudden recovery, up +35% on the news that the under-fire company has apparently won approval for its "full self-driving" technology in China. It has struggled to get those approvals in the US due to the perceived poor safety record of those systems. But China made a political decision to approve after a visit to Beijing from Musk, side-lining regulators.

In Europe, energy ministers from the Group of Seven (G7) major democracies reached a deal to shut down their coal-fired power plants in the first half of the 2030s, in a significant step towards the transition away from fossil fuels.

Germany's consumer price inflation came in at 2.2% in April. This retains its lowest level since May 2021 and was slightly below analyst forecasts of 2.3%. A slowdown in services inflation was offset by a small rise in food prices. A year ago, German inflation was running at 7.2% so this is significant progress since then, and achieved while the separation from Russian energy source reliance was achieved. In hindsight it is an impressive achievement.

EU sentiment was largely unchanged in April, but it is still running at a low level. But at least it has recovered from the sag in the middle of 2023 and held that improvement.

Yesterday's sudden yen devaluation past 160 to the USD has been reversed today just as quickly, now bank to 155 yen to the USD. That has some wondering whether Tokyo authorities intervened although there is nothing more than suspicion at this point. But the Bank of Japan has a reputation of being unyielding in the face of market and trader pressure so perhaps some of those reversed themselves unable to hold their short positions. It is unclear at this point what drove the pullback.

The UST 10yr yield is now at 4.62% and down -4 bps from yesterday. 

The price of gold will start today a little firmer, back up +US$3 from this time yesterday at US$2340/oz.

Oil prices are down -US$1 from yesterday at just under US$82.50/bbl in the US while the international Brent price is now just on US$87/bbl. Gaza ceasefire hopes might be behind this shift.

The Kiwi dollar starts today up nearly +½c at just over 59.8 USc. Against the Aussie we are firmish at 91 AUc. Against the euro we are firm at 55.8 euro cents. That all means our TWI-5 starts today just over 69.3 and up a minor +10 bps from yesterday.

The bitcoin price starts today at US$63,031 and down -1.1% from this time yesterday. Volatility over the past 24 hours has remained modest at just on +/- 1.1%.

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

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

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

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Kia ora,

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

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

And today we lead with news that jobs will be in focus this week.

In the week ahead, all eyes will be on the US Fed's interest rate decision on Wednesday, followed closely by their April labour market report on Saturday (NZT). And that comes after our own local labour market report for March on Wednesday.

The US ISM PMI will come out this week (recalling the internationally benchmarked one has already showed a slowdown). And similar PMIs will come for China, Canada, and South Korea among others. The US JOLTs job openings data, foreign trade figures, factory orders, and Conference Board consumer confidence index are also due this week and any one could be market-moving if it steps out of range. And the US Q1 earnings reporting season reaches its peak this week.

Finally, we will get inflation updated for the EU, South Korea, Switzerland, Indonesia, and Turkey.

But first, a weekend data release showed profits earned by China's industrial firms rose by +4.3% in the first three months of 2024, much slower than a +10.2% jump in the prior period. But they actually fell in the month of March from the same month a year ago, down -3.5% suggesting their economy’s stronger-than-expected growth early this year might be tough to maintain. The latest result underlined that the government has struggled to get a recovery momentum amid a prolonged property downturn, persistently weak domestic demand, and lingering deflation risks. Profits in state-owned companies fell while those in the private sector sharply slowed on the three-month basis they like to use. But it is masking building near-term weakness.

And it is not only the Japanese who have a 'currency problem'. The recent volatility of the yuan, depressed profits and unexpected shifts in external demand are combining to make some Chinese exporters less sure about their business prospects – and more likely to park their cash assets in anything but the yuan. The yuan's value has recovered somewhat since October but exports haven't, and business holders of the CNY are sensing a potential official depreciation is imminent.

Markets are also sensing a new official rate cut is imminent in China, and Chinese government 10 year bond yields dropped sharply on Friday - before recovering just as sharply as officials stepped in.

And staying in China, there are reports that property market sentiment is improving, and that has property-based equities rose sharply on the Hong Kong stock exchange - on Friday, but oddly, not yet on the Shanghai exchange. One to watch.

And in a new stimulatory action, China is offering trade-in subsidies for new car buyers. ICE car owners can get a ¥10,000 subsidy (NZ$2325) to buy a new NEV, or they can get ¥7000 (NZ$1625) for a new ICE car with engines of 2 liters and smaller. The world's largest car market is about to get larger and have its profitability problems 'solved'. But this is bringing louder international calls for action to push back on "Chinese overcapacity'. This issue worries the EU and Japan a lot.

The Bank of Japan kept its policy unchanged on Friday, as expectations mount for central bank action to deter further selling of the embattled yen. From the no-change position the yen has continued to fall, primarily against the USD but even against the NZD. At Friday's 93.8 Yen to the NZD, that is now it's 'lowest' since May 1986, thirty-eight years ago. Against the USD, the yen has sunk to 158 to the USD, its 'lowest' since March 1986. Markets are betting that Tokyo is going to have to intervene very soon. While Japanese exports are suddenly much more competitive, a depreciation like this (-15% in the past year) could bring an inflationary shock with it.

Across the Pacific, the American PCE inflation index came in at 2.7% for the year to March, back to levels they last had in November. It has now risen, modest as it might seem to us, for the past three months. Their 'core' rate has held at 2.8%. The financial market takeaway is that American inflation is uncomfortably sticky and that the Federal Reserve is right to be cautious about signaling a cut in its benchmark policy rates. (Again, it seems the Fed has called this correctly, and market analysts got ahead of themselves.)

The same data shows American consumers spending normally with personal consumption spending +2.7% higher than a year ago while disposable personal incomes were only up +1.4%.

The UST 10yr yield is now at 4.66% and down -1 bp from Saturday. 

The price of gold will start today a little softer, down -US$3 from this time Saturday at US$2337/oz.

Oil prices are little-changed from Saturday at just on US$83.50/bbl in the US while the international Brent price is now just on US$88/bbl.

The Kiwi dollar starts today marginally softer at just under 59.4 USc. But for last week it rose +½c. Against the Aussie we are softer at 90.9 AUc. Against the euro we are a unchanged at 55.6 euro cents. That all means our TWI-5 starts today just under 69.2 and also little-changed from Saturday but up +40 bps for the week.

The bitcoin price starts today at US$63,733 and down -0.5% from this time Saturday. Volatility over the past 24 hours has remained modest 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 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 all about American GDP and reactions to the first quarter results.

US economic activity expanded an annualised +1.6% in Q1-2024, compared to +3.4% in the previous quarter and below forecasts of +2.5%. It was the lowest growth since the contractions in the first half of 2022, the advance estimate showed, although there are two more revisions due (an in the Q4-2023 set, they rose with each revision). The result was held back by a decrease in inventories and a rise in imports. However, disposable personal income rose an impressive +4.5% according to today's release.

However, the PCE data released with this shows inflationary pressures unabated. So the US 10-year Treasury note yield rose to above 4.7%, the highest since early November, as traders to scale back their expectations regarding the timing of a Fed rate reduction, with the the first cut now not priced in fully until December.

We should note that lower growth with still-high inflation equals stagflation, a gnarly public policy problem, as history shows.

Further, today's US Treasury 10 year bond auction reveals median yields rise to 4.47% in yet another well-supported offer. That was +37 bps higher that the prior equivalent event a month ago. (But it does seem curious that the secondary market prices these at 4.7% however, especially when demand is so strong in the primary market.)

Meanwhile the number of initial US jobless claims fell to just 201,000, a bigger than expected retreat and the second-lowest weekly level in the past 13 weeks. That means there are now 1.82 mln people on these benefits the lowest since mid-December.

US mortgage applications fell rather sharply last week, down -2.7% from the week prior and are now -15% lower than the same week a year ago. So it will be a surprise to know that March pending home sales rose +3.4% from February although they are virtually unchanged from a year ago.

New orders for durable goods surged by +2.6% in March from February, following a downwardly revised +0.7% growth in February. The March rise was more than expected, but the year-on-year change is still a negative -2.2%. It was the largest monthly advance in durable goods orders since last November, primarily propelled by robust demand for transport equipment. Orders for non-defence capital goods rose too.

Canada released retail sales data for February, and in real, inflation-adjusted terms, they fell -0.3%.

All eyes are now turning to the Bank of Japan which is meeting today. They have important policies to balance regarding rising inflation, an expanding economy, but a currency that the being depreciated in USD terms, the one relationship that motivates them. But then, many countries are struggling with the rising USD at present.

In China, the Shanghai prime office vacancy rate has hit a 20 year high - at over 20% vacant. That is a lot of spare capacity and it will worry policymakers that it is continuing to swell.

In Australia, Warren Hogan, who was ranked 2023’s most accurate economic forecaster, predicts their rising economy will force the RBA to lift rates to 5.1% this year. He is an outlier, but part of a growing cohort of analysts who don't see inflation beaten yet and the economic expansion rolls on in many of the world's major countries with its pressures.

Better income expectations, economic prospects and a rising 'propensity-to-buy' among consumers has shifted the German GfK Consumer Climate Indicator to it's 'highest reading' in two years (well actually its least negative reading in two years). But they will take the progress.

We should note that copper prices have surged recently and now top US$10,000/tonne and that is its highest since April 2022. (It is now only 6% below the all-time high, also in 2022)

Global container freight rates were unchanged last week on average, making them +55% higher than year ago levels. Bulk cargo rates fell -4.9% in the past week, but they remain little-change from long-run averages.

The UST 10yr yield is now at 4.70% and up +10 bps from this time Wednesday, and that is its highest level since late October 2023. 

The price of gold will start today a little firmer, up +US$7 from this time Wednesday at US$2333/oz.

Oil prices are little-changed from Wednesday to just under US$83.50/bbl in the US while the international Brent price is still at just over US$87.50/bbl. In between however it has been volatile.

The Kiwi dollar starts today little-changed at just under 59.5 USc. Against the Aussie we are -¼c softer at 91.3 AUc. Against the euro we are little-changed at 55.4 euro cents. That all means our TWI-5 starts today just on 69.1 and little-changed from Wednesday.

The bitcoin price starts today virtually at US$64,762 and down -3.0% from this time Wednesday. Volatility over the past 24 hours has been modest however at just on +/- 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.

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With economic growth no longer producing benefits seen in the past such as raising living standards for the middle class, and human activity having exceeded some planetary boundaries, it's time to embrace degrowth, argues Jennifer Wilkins.

Wilkins is a researcher and advocate on sustainability in business with a focus on degrowth. In a new episode of interest.co.nz's Of Interest podcast, she discusses the degrowth movement.

"Degrowth is normally described or defined as an equitable downscaling of production and consumption. Other people add in other parts of that definition, which is about reorganising the market for a new role in provisioning. So I think about degrowth as being a transition. Starting from the economy that we have now, which is very much about trickle down wealth and extracting from nature, to a future economy which is more about universal wellbeing in an economy within ecology and nature. And degrowth is really the transition from one to the other," Wilkins says.

"So I don't think about it as being a very rapid change or a very smooth change. I think about it as being a hybrid of emergence and receding ideas, quite a lot of tension and a lot of mutation in the economy. So it's quite a complex thing, degrowth."

She traces degrowth's origins to the 1970s, and Romanian mathematician, statistician, economist and author of The Entropy Law, Nicholas Georgescu-Roegen, "the father of ecological economics."

The push for net zero greenhouse gas emissions is needed but not enough, Wilkins says. With a degrowth economy requiring more of a collective than individual approach, Wilkins says "the jury's out on the role of capitalism." And does advocating for a reduction in production and consumption mean people would be expected to accept a lower standard of living?

"I think degrowth is definitely looking to raise standards of living for the majority of people around the world. I think standards of living are actually decreasing at the moment. I think around the world, middle class lifestyles are decreasing in quality. And so there's this myth, if you like, that raising growth improves wellbeing. But the evidence shows that there's actually a bliss point. Economic growth improves wellbeing up to a certain GDP per capita, and beyond that, it either doesn't make a difference and/or eventually it begins to reduce wellbeing," says Wilkins.

"The bliss point is actually quite a lot lower than New Zealand's GDP per capita. So we have theoretically enough wealth already. We just need to redistribute it. I think people who are very well off will not see a reduction in their wellbeing or their living standards through a redistribution, but I think people who are less well off will see a great improvement in their wellbeing through a redistribution."

Wilkins believes degrowth will become public policy, saying politicians who want to run on a degrowth platform have lots of positive things they can say.

"It's about redefining what we see as value. I mean, at the moment we think about wealth as value and prosperity, but prosperity is really about things like having more leisure time, having a healthier natural environment around us, having more community health and more community cohesion, having more access to services and assets, and having an increase in our democratic participation. And those are all things that degrowth wishes to grow," Wilkins says.

"I think it [degrowth] will become public policy. I think parties will run on it as a platform. It's hard to say when that would happen, but I think in the not too distant future. And I think the thing is that growth as an idea is so embedded as a common sense that it never has to explain itself. And so there's a bit of an unfair playing field in terms of degrowth will have to explain itself to become credible. Whereas growth gets a free pass."

"Growth is not producing the effects that we have experienced in the past, like the raising the living standards of the middle class. That ship has sailed. We're in a different world now. There isn't room for growth to create those kinds of benefits anymore. We need to create benefits in a different way. So growth will fail to evidence itself as a wellbeing, a process for wellbeing in future. And there'll be a confluence of factors. There'll be, you know, this failure of neoliberalism, which I think we're already experiencing," says Wilkins.

There's more from Wilkins in the podcast itself, including what degrowth would mean for individuals, businesses and communities, and what it would mean for agriculture, manufacturing and tourism.

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

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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 world's factories are getting busier, especially in India.

But first, the strong run of American retail sales is continuing. Sales at bricks & mortar stores on a same-store basis were +5.3% higher last week than the same week a year ago. This extends the +5% expansion to four consecutive weeks, and the above-inflation streak to eight consecutive weeks.

There were American PMI's out for April, the internationally-benchmarked set, but they revealed growth slowing amid signs of demand weakness. The factory PMI slipped to a minor contraction, and the services expansion slowed marginally.

However, sales of new-built houses soared +8.8% in March from February, the highest level in six months, and rebounding from a -5.1% drop in February. Demand seems to be returning despite elevated mortgage rates. Meanwhile, building consents and housing starts eased back in the month. This will have the effect of tightening inventories of unsold new-builds.

The latest US Treasury bond tender brough rising support, and rising yields. But the push higher seems to be rising. Almost US$184 bln was bid for the US$69 bln on offer. The median yield on these two year Notes was 4.85%, up +31 bps from the prior equivalent event. A year ago the equivalent auction went for 3.92%.

In fact investors are now starting to price in the chance of a US Fed rate hike, rather than a cut, in 2024.

In Japan, their factory PMI made big gains in April, meaning the sector is now stabilised and no longer contracting. Their services PMI rose at a good rate too, expanding faster. Both are now at 11 month highs.

Taiwan industrial production rose +4.0% in March from the same month a year ago, confirming the strong recent export order data we have previously reported. But the retail sales growth impetus is slowing, up only +0.7% in the month.

The severe flooding in the Pearl River basin in southern China continues and is predicted to get worse before it eases.

Led by its factory sector, Indian PMIs revealed economic growth continued to strengthen in April. Positive demand trends fuelled new order intakes and output. In both cases, rates of expansion were the fastest in close to 14 years. India is in a significant expansion. In fact, it is now enough to topple Japan from being the fourth largest economy globally on a gross basis sooner than expected (although nowhere near on a per capita basis of course). That switch is expected to happen in 2025, a year earlier than previously forecast.

The Eurozone recovery is building momentum in April according to the overnight release of their PMIs, but price pressures are also revived.

In Australia, their 'flash' PMI rose at a good clip too, expanding for a third consecutive month and at the quickest pace since April 2022. Although most of the rise was from the services sector, like Japan, their factory sector improved sharply too to a 'stable' level.

The UST 10yr yield is now at 4.60% and down -2 bps from this time yesterday. 

The price of gold will start today marginally lower, down -US$4 from this time yesterday at US$2326/oz.

Oil prices have risen +US$2 to just under US$83.50/bbl in the US while the international Brent price is up a bit less at just over US$87.50/bbl.

The Kiwi dollar starts today up nearly +¼c at just over 59.4 USc. Against the Aussie we are softer at 91.6 AUc. Against the euro we are unchanged at 55.5 euro cents. That all means our TWI-5 starts today just on 69.1 and little-changed from yesterday.

The bitcoin price starts today virtually unchanged at US$66,766. Volatility over the past 24 hours has been modest at just on +/- 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 on Friday because tomorrow is a public holiday in New Zealand.

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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 markets are waiting for some big earnings reports, especially from Big Tech in the US. They are waiting in a positive mood.

But first in the US, the Chicago Fed's National Activity Index rose for a second consecutive month March, the first time that has happened since mid-2022. The result was more than expected and is the highest reading since last November, build primarily on employment gains. When this index is positive it indicates activity is expanding faster than its long-term average.

Canadian producer prices fell -0.5% in March from the same month a year ago, notable because this the smallest fall since February 2023. Raw material prices rose, only the second year-on-year rise in the same timeframe.

The People's Bank of China left benchmark lending rates unchanged at the April fixing, in line with market expectations. The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, was maintained at 3.45%. Meanwhile, the five-year rate, a reference for mortgages, was retained at 3.95% for the second straight month. The strong USD limits their ability to cut rates to provide local economic stimulation because doing so would sharply weaken the yuan.

Following a weak February, Taiwanese exports jumped in March to their highest level since July 2022 in an impressive performance. They also got a strong rise in export orders in March, although only at the upper end of what they have been getting over the past year.

Although it is in a minor improving trend, EU consumer sentiment in April has remained deeply negative, well below its long-term average.

Cocoa prices leapt up through an all-time record US$5000/tonne in early February. Three weeks later they hit US$6000/tonne. Two weeks after that it was US$7000/tonne. US$8000/tonne came just a few days later. Then an accelerated surge began in earnest, hitting US$10,000 at the end of the first week of April. Today? Well this price has reached US$12,218/tonne. Where to from here? As hard as it is on chocolate consumers, I hope the West African farmers are getting some long-delayed rewards.

The UST 10yr yield is now at 4.63% and up a minor +1 bp from this time yesterday. 

Wall Street is roaring today with the S&P500 up +1.3% on expectations of strong earnings reports and future guidance that is positive, especially from Big Tech companies. Tesla is likely to star in these releases for all the wrong reasons, however. Overnight European markets all rose, led by London's +1.6% and trailed by Paris's +0.2%. Yesterday, Tokyo ended its Monday session up +1.0%. Hong Kong ended up +1.8%. But Shanghai fell -0.7%, a real outlier in yesterday's trade. Singapore ended up +1.5%. The ASX200 finished up +1.1% and the NZX50 closed up +0.5%.

The price of gold will start today sharply lower, down -US$61 from this time yesterday at US$2330/oz.

Oil prices have slipped -50 USc again, to just on US$81.50/bbl in the US while the international Brent price is down -US$1 at just under US$86/bbl.

The Kiwi dollar starts today up +¼c at just under 59.2 USc. Against the Aussie we are still at 91.8 AUc. Against the euro we are a +¼c firmer too at 55.5 euro cents. That all means our TWI-5 starts today just on 69.1 and up +30 bps from yesterday.

The bitcoin price starts today sharply higher at US$66,788 and almost a +3% gain from yesterday. Volatility over the past 24 hours has been modest however at just on +/- 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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