Economy Watch

Kia ora,

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

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

And today we lead with the giant US economy is putting most other major economies in its shadow, expanding while others stumble.

But first, the number of people claiming unemployment benefits in the US fell by -12,500 from the prior week to 222,000, firmly below market estimates. It was the lowest reading in nearly one month, adding to the latest jobs report that indicated historical tightness in the US labour market, and so maintaining the leeway for the Federal Reserve to remain hawkish.

But American retail sales fell -0.8% in January from December, reversing December's rise, and worse than market forecasts of a -0.1% fall. It is the biggest decrease in retail sales since March last year, primarily driven by the aftermath of the holiday shopping season and cold weather. Car sales were notably weaker.

Business inventories rose, but in relation to sales they remain stable and slightly below historical averages.

But they need to be cautious; industrial production edged slightly lower in January from December, missing market expectations of an expansion after recording no change in December. And that meant there was zero change from a year ago. Frigid weather got some of the blame for the January result.

But things may be on the improve. Both the Philly Fed's factory survey, and a similar one in New York both recorded sharp improvements in their February surveys.

Canadian housing starts came in lower than expected in January, and by quite a bit.

Official data in Japan suggests their economy was in recession in the second half of 2023. Japan's GDP unexpectedly shrank -0.1% in Q4 from Q3, missing market forecasts of a +0.3% growth and following a revised -0.8% fall in Q3, flash data showed. That is a big miss for the world's third largest economy. That is their first recession in five years, as private consumption, which accounts for more than half of the economy, declined for the third successive quarter. What is off about this is that the granular data that makes up the result was relatively positive in the period.

This Japan retreat was enough to sink it from the world's third largest economy, to #4 behind Germany. But while Japan's nominal economic activity slipped below Germany, the country's growth rate has surpassed that of China for the first time in almost half a century (on a nominal basis).

India reported very strong growth in car sales in January, driven in large part by sales in rural communities. In fact, they "smashed" the previous record, up almost +14% year-on-year.

The British economy contracted -0.3% in Q4 from Q3-2023, following a -0.1% decline the previous period. That was worse than market forecasts of a -0.1% fall. Their economy entered recession (if you use the two-quarter rule) amid a broad-based decline in output, including in services. This is election year in the UK.

The euro zone economy will grow slower than expected in 2024 according to updated forecasts from the European Commission. But they also expect to face reduced inflation pressure.

For the first time in two years, the Australian jobless rate has risen above 4%. The actual 4.5% rate means they now have 654,000 people without jobs, the highest level since October 2021. (The headline rate is the 4.1% seasonally adjusted rate.)

Australian inflation expectations held unchanged in February at 4.5% in this Melbourne Institute survey. Their central bank would have been disappointed in that.

Globally, container shipping freight rates slipped slightly last week but are still unusually high. The risks keeping them high are basically unchanged. Bulk cargo rates are again little-changed, and low.

The UST 10yr yield starts today at 4.24% and little-changed from yesterday. 

The price of gold will start today up +US$10/oz from yesterday at US$2001/oz.

Oil prices are back up +US$1.50 at just over US$78/bbl in the US while the international Brent price is up a bit less to US$82.50/bbl.

The Kiwi dollar starts today at just on 61 USc and little-changed from this time yesterday. Against the Aussie we are still at 93.8 AUc. Against the euro we are still at 57.7 euro cents. That all means our TWI-5 starts today at just under 70.6 and little-changed.

The bitcoin price starts today at US$52,232 and another +1.0% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.5%.

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

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

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

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

Kia ora,

Welcome to 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 supply is rising and demand is shifting away for energy intensity and efficiency reasons, so oil prices are falling.

Crude oil prices are falling quite sharply today because the latest US EIA data showed a surge of over +12 mln barrels in American crude oil stocks last week, far higher than the +2.5 mln anticipated. Their economy is expanding in a way that doesn't need as much petroleum and high global supplies have pushed prices down to record lows on an inflation-adjusted basis. Neither Russia's war nor the Middle-East tensions - nor an expanding global economy - are keeping this price elevated.

US mortgage applications fell -2.3% last week from the week before, ending the recent and short run of expansions when four of the past six weeks had recorded gains. These levels are -12% lower than a year-ago.

Meanwhile, final revisions for American PPI has them falling slightly more than originally estimated for December from November to be only +1.0% higher than a year ago. The January data will be released on Saturday (NZT).

In Canada, analysis there now expect their central bank to end its quantitative tightening program much sooner than originally indicated, maybe as soon as April.

The EU reported that their industrial production took something of a surge in December, expanding +2.6% (real), to enable it to be +1.2% higher (real) than in the same month a year ago. It was an unexpected bit of good news from them. They weren't able to report any 2023 expansion in economic activity (GDP), calling it "stable". But at least it wasn't a decline. They benchmark themselves against the US, and apart from the pandemic, the gap they suffer now is as wide as it was in the GFC.

Staying in the region the UK reported its CPI inflation at 4.0% and core inflation at 5.1%, both unchanged levels in January than December.

In Indonesia, former general Prabowo is projected to win Indonesia election on the first round of voting. At first sight, it appears to be a turning away by Indonesia from China to a more Western-friendly stance. But first-looks can sometimes be deceiving in Indonesia.

The UST 10yr yield starts today at 4.25% and -4 bps lower. 

The price of gold will start today down -US$2/oz from yesterday at US$1991/oz.

Oil prices are down -US$1 at just over US$76.50/bbl in the US while the international Brent price is now just under US$81.50/bbl. However, prices are still falling as we report this.

The Kiwi dollar starts today at just under 60.9 USc and recovering about +¼c from this time yesterday. Against the Aussie we are little-changed at 93.8 AUc. Against the euro we open higher at just over 57.7 euro cents. That all means our TWI-5 starts today at just on 70.5 and up +20 bps.

The bitcoin price starts today at US$51,699 and up a very strong +6.6% from this time yesterday. Volatility over the past 24 hours has been high at just under +/- 3.8%.

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

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

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

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 a miss on US core inflation has markets moving a lot today.

The highly anticipated American inflation rate for January fell back to 3.1% at the headline level following a brief increase to 3.4% in December, but the more important core rate came higher than forecasts of 2.9%. The monthly rate edged up to 0.4%. Markets were expecting better 'progress' than this and have reacted sharply to the news, realising the US Fed may not trim official rates as soon as they expected - and that they should have listened to the Fed's signals that it is a time to be cautious on progress in the fight against inflation. The next FOMC policy meeting is not until March 21 (NZT) however.

The USD rose, benchmark bond yields jumped, and Wall Street reacted badly with a sharp selloff. 

Meanwhile, there was a jolt lower in retail sales growth last week, as measured in same-store bricks & mortar outlets. It was aup, but only by +2.5% from the same week a year ago, the first time it hasn't risen in real terms in five months.

Across the Pacific there was another unexpected jolt lower. Japanese machine tool orders slumped in January, coming in at their lowest level since early 2021.

The ZEW Indicator of Economic Sentiment for Germany rose for a seventh consecutive month in February, reaching its highest level in a year and bettering market expectations, largely based on hopes that major central banks will start cutting interest rates this year.

In Australia, the Westpac-Melbourne Institute Consumer Sentiment Index rose +6.2% to 86 in February, from 81 in January. This is the biggest monthly gain since April last year, when the RBA paused its rapid series of interest rate rises, and takes the Index to its highest level since June 2022.

Australian business confidence, as monitored by the NAB survey, rose just 1pt to +1 index point, and still well below its long-run average. The improvement was largely driven by manufacturing and construction, partly offset by falls in wholesale and retail confidence. Confidence remained negative across all the states however.

The UST 10yr yield starts today at 4.29% and an +12 bps shift up on the changed views following the US CPI data. 

In Wall Street's Tuesday trading session, the S&P500 is down a sharp -1.2% on the same driver. 

The price of gold will start today down -US$21/oz from yesterday at US$1993/oz and a sharp reaction lower after the US CPI data was released.

Oil prices are up +US$1 at US$77.50/bbl in the US while the international Brent price is now just over US$82.50/bbl.

The Kiwi dollar starts today at just under 60.6 USc and down more than -¾c from this time yesterday. But that is mainly a USD shift up. Against the Aussie we are little-changed at 93.9 AUc. Against the euro we open at just over 57.5 euro cents and a -½c fall. That all means our TWI-5 starts today at just over 70.3 and down -40 bps.

The bitcoin price starts today at US$48,482 down -2.0% from this time yesterday but still over NZ$80,000 after the NZD retreat. Volatility over the past 24 hours has been moderate at just under +/- 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

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 of a warning of a permanent downgrade on asset quality that will affect banks worldwide.

But with Japan, China and Singapore all on holiday, global economic news is a bit thin today.

First up, American inflation expectations seem to be easing, even if the changes are small. But for the year ahead they were steady in January at 3%, the lowest in three years. Even though the overall pace is steady and key items are declining, some core elements are still relatively high. They were lower for petrol but at 4.2%, the lowest since December 2022, for food at 4.9%, the lowest since March 2020, and for rent at 6.4%, the lowest since December 2020. Overall, looking ahead three years, they are down to 2.4%.

In India, consumer inflation is falling also, even if there are some key elements that remain high. Overall it eased to 5.1% in January, the lowest in three months, from 5.7% in December and matching market expectations. Their central bank has a wide 2-6% target range. The slowdown is mostly due to an ease in food inflation and favourable base effects from last year. But food inflation only fell to 8.3% from 9.5%.

Indian industrial production was up +3.8% in December from a year ago, handily more than November's +2.4% and the expected +2.5%

Indonesia goes to the polls tomorrow in elections that include one for President. And it is looking like one candidate will win in the first round, current Defense Minister Prabowo Subianto. Prabowo is from the Suharto political dynasty. He also chose the son of very popular outgoing president Jokowi as his running mate. Jokowi is barred from running for a fourth term and many believe he is organising the Prabowo candidacy and will be a major influence in the new leadership.

And there was a second round presidential election in Finland over the weekend. Alexander Stubb of the centre-right National Coalition Party narrowly won defeating liberal Green Party member Pekka Haavisto, who conceded defeat. Stubb is pro-European and a strong supporter of Ukraine and someone who has taken a tough stance towards Russia.

In China, the January data on new car sales were a disappointment. They reported their first month-on-month decline in vehicle sales since August, despite renewed efforts by some carmakers to offer discounts in the world’s largest auto market. Just on 2.04 million vehicles were sold in the month, down -14% from December. Sales of passenger NEVs fell almost -30% month-on-month to 668,000, also the first such drop since August.

In Europe, a new ECB official is worried about structural changes in their banking sector and asset quality is starting to deteriorate. She warned of a permanently changed risk landscape that requires lenders to alter how they operate.

The UST 10yr yield starts today at 4.17% and little-changed from yesterday. 

The price of gold will start today down -US$10/oz from yesterday at US$2014/oz.

Oil prices are little-changed, still at US$76.50/bbl in the US while the international Brent price is still just over US$81.50/bbl.

Perhaps we should also note the rather stunning fall in natural gas prices worldwide. In the US, these prices are back to levels they first had in 1990. In Europe, back to levels they first had in 2011. Not only is Russia a major exporter and suffering the downturn, so is Australia. In inflation-adjusted terms, natural gas has never been cheaper.

The Kiwi dollar starts today at just under 61.4 USc and marginally softer that this time yesterday. Against the Aussie we are down nearly -½c at 93.9 AUc. Against the euro we open at just under 57 euro cents and little-changed. That all means our TWI-5 starts today at just over 70.7 and down -20 bps.

The bitcoin price starts today at US$49,598 and up +2.8% from this time yesterday. And at that level it is now over NZ$80,000 for the first time since December 2021. Volatility over the past 24 hours has been moderate at just over +/- 2.3%.

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.

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 bank lending distortions are catching attention in both China and the US.

But first in the week ahead, all eyes will be on the American CPI data which comes out on Wednesday - and the following Fed speaker reactions. The US also releases retail sales data and PPI data this coming week along with a big sentiment survey. And the final big earnings reports are due for Q4. There will be the GDP result for Japan, CPI for India, and Australia will chime in with their January labour market update and the NAB January business sentiment report.

China is now on a full national holiday for a week (春节, Year of the Wood Dragon) and authorities managed to stave off a share market crisis before they closed in Shanghai (even if Hong Kong got the wobbles again on Friday).

In China, under official pressure banks are shovelling out the loans. Banks extended more than ¥4.9 tln in new yuan loans in January, a record high since comparable records began in 2004 and beating forecasts of ¥4.5 tln jump. Mortgages rose to ¥980 bln in new lending and corporate loans jumped by ¥3.86 tln. Meanwhile, "total social financing" which is a broad measure of credit and liquidity, also reached a record high level of ¥6.5 tln (NZ$1.5 tln), well above forecasts of ¥5.55 tln. But while the levels may be high watermarks, the growth isn't. In fact these expansions from a year ago are the least since 2004. That has led to calls to "do more".

In Japan, the Nikkei 225 Index jumped as much as 1.1% before settling only marginally higher at 36,897 on Friday, its highest level in 34 years as strong corporate earnings, a weakening yen and a dovish outlook on Bank of Japan monetary policy pushed the markets to these new heights. On Thursday, a Bank of Japan Deputy Governor said the central bank would not aggressively tighten its monetary policy even if it eventually decides to end negative interest rates.

In the US, the S&P500 closed above the 5000 index level for the first time. It was up +0.6% on Friday their time, up +1.4% for the week, and up +6% so far this year. And all this is in the face of rising bond yields which makes it a bit unusual. The Fed's 'win' in its battle against inflation while keeping employment growing is a key factor that profits remain robust. Investors seem impressed.

Meanwhile, lending by commercial banks to shadow banks ("Loans to nondepository financial institutions" in official language - line #26 in this data) topped $1 tln in January for the first time. It was up +12.2% in a year, although the big expansion came mid-2023. However, that surge caught the eye of the Fed who are watching for system risks from the big non-bank mortgage component.

In January, Canada added +37,000 new jobs in the month, a surprise because a decrease was anticipated. But +49,000 were part time positions and full time employment fell -12,000. Their jobless rate eased slightly on this data, also not expected. Unfortunately for them, their population grew faster than employment.

With China largely closed for its New Year holidays, commodity prices are likely to just meander along with little direction. But that won't stop chocolate prices racing higher on climate-related supply challenges. Cocoa prices were up +17% last week alone, to be up +42% so far this year alone, up +123% in a year and up +160% since this surge started in mid-2022. Chocolate is back only as a luxury item. Meanwhile sugar prices, which maxed out in 1975, aren't showing any similar acceleration.

Staying with commodities, the price of palladium fell below that of platinum for the first time since April 2018 as growing demand concerns and bets on stable supply weighed on the metal. The price of palladium is now at its lowest since mid-2017. Palladium (and/or platinum) is mostly used in catalytic converters for ICE cars.

Household spending rose +2.3% in December from a year ago in Australia. This was the smallest growth in household spending since February 2021. But that is before inflation was accounted for. Discretionary spending actually fell -0.6% (also before accounting for inflation). This data highlights how their cost-of-living crisis is affecting them.

The UST 10yr yield starts today at 4.18% and down -1 bp from Saturday. 

The price of gold will start today up +US$1/oz from Saturday, holding at US$2024/oz.

However oil prices are still at US$76.50/bbl in the US while the international Brent price is still just over US$81.50/bbl.

The Kiwi dollar starts today at just on 61.5 USc and marginally firmer that this time Saturday. Against the Aussie we are unchanged at 94.3 AUc, and a 14 month high. Against the euro we open at just over 57 euro cents and also firmish. That all means our TWI-5 starts today at just on 70.9 and at its 2024 highs.

The bitcoin price starts today at US$48,128 and up +1.1% from this time Saturday. And this new higher level is its highest since December 2021. Volatility over the past 24 hours has been modest at just on +/- 1.5%.

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

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

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

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 that the rest of the world doesn't actually need an expanding China. Their financial market struggles are - so far at least - having little impact elsewhere even as some investors take sharp losses in the Middle Kingdom, especially on bonds.

The strength of the US labour market is on display again with jobless claims falling more than expected last week. There were 233,000 new claims last week a decrease of -32,000 from the week before. There are now still 2.1 mln people on these temporary benefits but that is slightly above year ago levels - although not when you account for the growth of their labour force over that time.

Overnight, the USDA released its February World Agricultural Supply and Demand Estimates (WASDE) report. They raised ending stock estimates for American corn, soybeans, and wheat more than traders expected. And they noted a bumper Brazilian soybean harvest. For 2024, beef import estimates were raised largely on higher expected imports from Oceania. 2024 milk production forecasts were lowered and the US expects to export less.

The US Treasury had a big 30 year bond auction earlier today, one that was well supported. But the median yield rose to 4.31% from the 4.16% at the prior equivalent tender a month ago. Increases like this are evidence that global rates are still pushing higher.

The Reserve Bank of India held its benchmark policy rate at 6.5% for the sixth consecutive meeting at its overnight meeting. This was as widely expected and comes amid persistent price pressure. Indian inflation rose to a four-month high of 5.69% in December due to rising food prices. But that is still within the RBI's generous 2-6% target range "in the medium term". However, dominating this review were questions about how they handled the blocking of Paytm.

China released its January CPI data and it isn't calming nerves. Consumer prices fell by -0.8% in January from a year ago, marking the fourth straight month of decline which was the longest streak of drop since October 2009. This data came worse than market forecasts of a -0.5% fall, and is the steepest retreat in more than 14 years. Food prices declined at a record pace with beef prices down -7.7% in a year and lamb prices down -5.9%. Milk prices were more insulated, down just -0.8% in the year.

Meanwhile the -2.5% drop in producer prices is actually an easing of the declines in the factory sector, even if it is running more deflationary than consumer prices.

Global container freight rates dropped by a marginal -1% last week to remain very high on the shipping crisis induced by military actions and droughts. This minor shift overall masks big changes both ways on many key routes. Meanwhile bulk cargo rates are little-changed again at historically low levels.

The UST 10yr yield starts today at 4.17% and up +6 bps from yesterday. 

The price of gold will start today down -US$8/oz from Monday at just on US$2031/oz.

However oil prices are on the move up, up +US$2.50 to just under US$76/bbl in the US while the international Brent price is now just over US$81/bbl.

The Kiwi dollar starts today at just under 60.9 and down a bit less than -¼c from this time yesterday. Against the Aussie we are up nearly +¼c at 93.9 AUc. Against the euro we open at 56.5 euro cents and down -20 bps. That all means our TWI-5 starts today at just on 70.4 and essentially unchanged from yesterday at this time.

The bitcoin price starts today at US$44,991 and up a notable +4.2% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.6%.

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

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

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

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 global trade seems to be less of a driving feature of the international economy even if it remains important and there are plenty of shifts. And despite that, the NZD is rising.

But first up today, US mortgage applications bounced back last week after the prior week's large -7.2% fall, to rise +3.7% year-on-year. And that was even though mortgage interest rates were virtually unchanged.

Also rising strongly was the US logistics managers index (LMI), driven by freight rates. It been almost two years since the rising cost of freight has been a factor in this monitoring.

Meanwhile, as expected US exports rose a bit more than imports but their overall trade deficit (goods & services) was little-changed in December. But for the whole of 2023 the deficit was the lowest in three years at 2.7% of GDP. (That is down from -3.0% in 2020.) The 2023 deficit with China shrank to the smallest total since 2010 while trade gaps hit records with Mexico, the EU, Mexico, South Korea, Taiwan, and India. In fact the US imports more from Mexico now than China. Logistics are easier and safer too.

China's foreign exchange reserves slipped in January to just over US$3.2 tln, but the slip was less than expected.

Although they were up year-on-year, Chinese January vehicle sales fell more than expected from December, especially NEVs which were down almost -39% in the month. The recent economic travails are biting car demand quite hard now in China. Having said that they are running at a 24 mln pa pace, and still easily the world's largest car market.

We should perhaps note that the price of lithium, cobalt and nickel are now all at multi-year lows.

Meanwhile, Beijing is replacing some senior officials in its struggle to control the economic gloom enveloping parts of their economy. But still no word yet of the expected big stimulus.

In Europe, German industrial production fell in December from November to be a full -3.0% lower than year ago levels on a volume (real) basis. The December retreat was its seventh straight month of falls.

And staying in Europe, ex-coal company and now renewables giant Ørsted, the world's largest offshore wind farm developer, has cut 800 jobs, lowered renewable development targets and suspended a dividend after a difficult year of trading. It will also withdraw from the Norwegian, Spanish and Portuguese markets and its chair is to stand down after a decade in the role. Its transition has not gone well.

The UST 10yr yield starts today at 4.11% and up +2 bps from yesterday. 

The price of gold will start today up +US$2/oz from Monday at just on US$2039/oz.

However oil prices are little-changed at just over US$73.50/bbl in the US while the international Brent price is now just over US$78.50/bbl. 

The Kiwi dollar starts today at just on 61.1 USc and and up a bit less than +½c from this time yesterday. Against the Aussie we are up nearly +½c too at 93.7 AUc. Against the euro we open at 56.7 euro cents and almost a +¼c gain. That all means our TWI-5 starts today at just on 70.4 and up +40 bps from yesterday at this time.

The bitcoin price starts today higher at US$43,161 and essentially unchanged from this time yesterday. Volatility over the past 24 hours has been low at just on +/- 0.6%.

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

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

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

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 US economy is powering a global expansion, covering a weakening Chinese economy.

But first up, the overnight dairy auction was a good one. Prices rose another +4.2% and are now up +5.4% since the start of the year and up +3.3% above year-ago levels, the largest year-on-year rise since July 2022. In New Zealand dollars the rise is +5.4%. WMP was up +3.4% and SMP was up +4.6%. But the most encouraging signals are from the foodservice commodities like cheddar cheese, up +6.3%, and butter, up +10.3%. This is the ninth good rise in the past twelve auctions so analysts will be reaching for their calculators on this one to look at a possible raising of their farmgate milk payout price forecasts.

Elsewhere, the weekly monitoring of American retail sales at bricks & mortar stores revealed a strong rise last week, up more than +6% from a year ago and showing excellent above-inflation growth. It is an impressive signal that Q1-2024 is developing positively for them.

American household debt is also rising, and although it hit a new record high, the rise was a modest +US$212 bln in Q4-2023 from Q3-2023 to US$17.5 tln. Home loan balances accounted for half the rise (up +0.9%) boosted more by rising interest rates than activity. Credit card balances however rose +4.6% in a quarter (+US$50 bln) but car loans rose only +0.8% in the same period. Of some concern is that delinquency rates rose for all debt types - except for student loans.

The ISM services PMI jumped much more than expected, continuing the strong data we have had in 2024. It validates the strong labour market data we have had recently. The result was led by a healthy jump in both new orders and the level of order backlogs. American service industry companies are however cautious about lingering inflation and the associated cost pressures.

In Japan, Toyota has raised its profit forecasts as it hybrid business soars. That is notable because EV makers are going the other way with shrinking margins and profits.

In China, it is clear Beijing is rattled by their economic stutter. Markets are betting big that some major short-term stimulus is about to be announced. It is also backed up by announcements that home team financials will be big buyers in stock markets, a manipulation that will benefit traders - and give them a profitable lifeline to quit markets. It seems like a naive strategy by Beijing. But you never know, it might work. China is also expecting interest rate cuts soon.

China is also struggling with a major cold weather snap, right at the start of their major New Year travel season. It is widespread and a big weather event.

The level of "de-risking" from China is expected to be on display in export data due out very soon from China and import data from the US. Analysts are expecting the trade deficit to be its lowest between the two countries since 2003 (when George W Bush was president). It has retreated fast in the past three years.

In Taiwan, inflation is easing, coming it at only 1.8% in January, a sharpish fall from 2.7% in the previous month. They were expecting a sharp easing, but only to 2.2% so this shift is an outsized one.

EU retail sales volumes declined in December from November, and rather sharply too. That puts them down about the same year-on-year.

But they are getting an unexpected boos from a rise in German factory orders in December, boosted by orders for major capital equipment. It was an impressive turnaround from November and recorded a creditable +2.7% gain in real terms from a year ago.

Across the ditch, the Aussie central bank held it policy rate in its Tuesday review. This was as expected. Perhaps the only observation worth noting is that they didn't wholeheartedly signal that they are done raising rates, something markets were perhaps expecting. They are still looking for reassurance that recent trends are sustained. The Aussie dollar rose on that thought; true not by much, but it did rise. The RBA has kept the option open to raise rates if inflation's retreat doesn't pan out.

And staying in Australia, retail sales barely rose in their Q4-2023 period in real, inflation adjusted terms. But on a per-capita basis retail volumes fell for a sixth straight quarter, down -3.5% compared to the same period in 2022.

The UST 10yr yield starts today at 4.09% and up +5 bps from Monday. 

The price of gold will start today down -US$3/oz from Monday at just on US$2037/oz.

However oil prices are +US$1 higher at just over US$73.50/bbl in the US while the international Brent price is now just over US$78.50/bbl. But they are still in this tight range that have been in for a while.

The Kiwi dollar starts today at just on 60.7 USc and holding its lower Monday level. Against the Aussie we are still at 93.2 AUc. Against the euro we open at 56.5 euro cents and a small gain. That all means our TWI-5 starts today at just on 70 and up +10 bps from Monday.

The bitcoin price starts today higher at US$43,183 and up +0.7% from this time yesterday. Volatility over the past 24 hours has been 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.

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 economic conditions in China are in focus today.

But first looking ahead, this week we get second tier American data around trade and PMIs (especially for services). It is the same in many other countries including China and Australia. Chinese CPI and PPI data is due this week. Canadian labour market data and EU retail sales data are coming too. Australia (tomorrow) and India (late Thursday) will have interest rate decisions. And StatsNZ will release our labour market data for Q4 on Wednesday which will be closely watched.

First up today we can report that the IMF has been reviewing China's economic prospects and it sees growth slowing relentlessly. GDP will slip to +4.6% in 2024 they say and keep retreating to 3.4% by 2028. The IMF sees them stuck paying the price for low quality development in the past, and now demographics limits their ability to up their game in a meaningful way. The seeds for this growth retreat were planted years ago.

And China’s real estate market is having a rough start to the year, with January new property sales plunging to a monthly low not seen in five years, despite government measures to boost the ailing sector as it grapples with a liquidity crisis. New property sales were down -34% in January from a year ago and down -48% from December.

Last week, Chinese stock markets fell sharply, with Shanghai down a startling -6.2% for the week. And this is presumably after 'home team' intervention. Investors are unhappy. Authorities are nervous. Voices for major emergency stimulus are growing. It isn't helping that the pessimistic mood is spreading just as millions disperse to their villages for Chinese New Year, potentially spreading uncertainty across the country quickly. It also isn't helping that authorities are claiming all is well, nor that the Ministry of State Security has made it a crime to say things aren't going well in the economy.

Across the Pacific, the US economy added many more jobs in January than expected. Equity markets rose on the news, the US dollar strengthened, and bond yields rose on the view that the Fed may not cut rates as soon as they expected if the US economy is in a stimulatory phase.

At the headline level, American payroll employment rose +355,000 in January and that is almost double the expected +180,000 rise the market was expecting. It is the second consecutive very strong result.

Behind this result we see that on an actual basis employer payrolls are +2.9 mln higher than a year ago at 155.6 mln at the end of January, maintaining the "about +2%" annual growth pace they have had since July, which is an eased pace from the "about 2½%+" pace earlier.

Looking more broadly, the household survey increase isn't as fast. There are now just under 160 mln people employed, the difference from the payrolls report being the unincorporated self-employed. It is quite clear more people are transitioning into company payrolls now, so the overall growth isn't quite as strong as the payrolls data suggests.

Average weekly earnings, which had been rising at about a +4% page in 2023, slipped to +3% from a year ago in January. However markets focused on average hourly earnings which rose more than they expected, up +4.5% in a year. But they are looking at the wrong data - the broader average weekly data is what they should be looking at because that encompasses working hours.

After a strong rise in November, American factory orders rose only modestly in December from a month ago to be +1.4% higher than year ago levels. There is nothing encouraging about that although the January PMIs suggested the pace picked up in the next month.

Consumers in this market are clearly feeling better however. The University of Michigan sentiment survey reported a big improvement and its highest level in 2½ years. They called the change a "surge".

The American earnings season for Q4 results is in full swing now and the news is 'good'. Investors are responding to better-than-expected results and have pushed the S&P500 up to an all-time record high. Wall Street is about halfway through the expected corporate reports and so far earnings growth is +7.8% reported. If that is maintained that would be the best of any 2023 quarter. However we should note that is "above expectations" - and expectations weren't high. Sure, cost control and productivity drives are helping - and effective - but in mid 2023 expectations were higher and have been scaled back considerably since. It is against this scaled-back version that things look good. And most companies are not signaling forward momentum from here. They are cautious, saying if they can hold the line they will count that as a success. So be wary about "better-than-expected results".

In Australia, mortgage approvals rose almost +12% over all of 2023 but ended the year on an unexpectedly soft note with a -4% monthly fall. And that December month data ties into housing market figures on prices and turnover that shows their residential real estate market momentum has slowed and that affordability pressures are starting to bite.

And staying in Australia, the port dispute between Dubai-owned port operator DP World and the MUA union has resulted in a big win for port workers. They won a +23% rise over four years (with background help from the Canberra government), ending a dispute that has tied up some of their largest ports for months. Port charges are expected to rise significantly as a result.

The FAO World Food Price Index fell for a sixth consecutive month in January, a fresh three year low, since February 2021. Prices of cereals were down notably as global wheat export prices declined amid strong competition among exporters and the arrival of recently harvested supplies in Australia and South America both a which have had excellent growing conditions. Also, meat prices fell and dairy prices were stable. Overall global food prices are back to levels that held between 2007 and 2014. Food is 'cheap' in inflation-adjusted terms, worldwide.

The UST 10yr yield starts today at 4.02% and down -2 bps from Saturday. 

The price of gold will start today up +US$4/oz from Saturday at just on US$2040/oz.

However oil prices are little-changed at just under US$72.50/bbl in the US while the international Brent price is now just under US$77.50/bbl.

The Kiwi dollar starts today at just on 60.6 USc and holding its lower Saturday level as the greenback rose. It is -¼c lower than a week ago. Against the Aussie we are still at 93.2 AUc. Against the euro we open at 56.2 euro cents. That all means our TWI-5 starts today at just on 69.9 and down -10 bps from Saturday.

The bitcoin price starts the week slightly lower, now at US$42,893 and down -0.7% from this time Saturday. Volatility over the past 24 hours has been low at just on +/- 0.6%.

Tomorrow is Waitangi Day in New Zealand, a public holiday. This update will not be produced tomorrow.

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 Wednesday.

New Zealand should be working towards a 100-year planning horizon when it comes to infrastructure, and viewing planning as "an exercise in dynamism and inquisition" rather than a "bureaucratic exercise."

That's the view of Geoff Cooper, General Manager of Strategy at the New Zealand Infrastructure Commission.

Speaking in interest.co.nz's Of Interest podcast, Cooper argues planning gets a bad rap.

"It's seen as a bureaucratic exercise and it should be seen as an exercise in dynamism and inquisition. I think we need to see more of this planning expertise coming into government, and planning happening from a much earlier period of time, front footing the needs rather than waiting for them to be in front of us," Cooper says.

"Getting ahead of the planning cycle is a really obvious place to start. And start identifying options before we get into solutions because the moment a project is announced you've created interests. The moment you announce a project all of a sudden there's interested parties. And once there are interested parties, whatever the project is, it's very difficult to do optioneering, almost impossible."

"So what we would say here is think slow, act fast. Go through a slow, rigorous planning process, identify your problem definition first ... then once you've got a preferred solution which you've stress tested,  then you get on with it and do it as fast as you can," says Cooper.

In terms of the sort of timeframes we should be thinking about for infrastructure planning in New Zealand, Cooper says there's no firm answer.

"But certainly I would be thinking [a] 100-year [time]frame personally."

In the podcast Cooper also talks about the five key drivers of infrastructure demand, NZ's infrastructure deficit, how our infrastructure needs are changing, project selection and delivery, why big projects always seem to cost more and take longer than expected, funding, financing, contestable infrastructure priorities, plus the resilience and sustainability of infrastructure.

"What we're dealing with here is uncertainty and risk. As we're building our new infrastructure what we're seeing are the risks associated with climate change, and the level of resilience that we need, is far higher than what we thought. In fact a lot of our infrastructure is simply not designed for the level of resilience that we need today. And it's going to take decades to get it there as you've seen with things like the earthquake strengthening. The difficult thing with resilience, of course, is out of sight out of mind. It's very difficult to get the acceptance that we need to invest in something that you may or may not need in the future. So it becomes a very difficult thing to sell," Cooper says.

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