Economy Watch

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 investors are marking down Chinese equities in a brutal retrenchment Beijing doesn't seem to be able to arrest. Funds are fleeing to Tokyo and the US both of which reached modern record highs.

But first in the US, a closely-watched leading indicator metric slipped marginally in December even though more components rose than fell. However the improving metrics were more than offset by weak conditions in manufacturing, relatively high interest-rates, and lowish consumer sentiment. But the magnitude of monthly declines has lessened, and the LEI’s six-month and twelve-month growth rates have turned upward even if they remain negative. The 'recession; signal from this data is weakening.

China's Loan Prime Rates were unchanged yesterday, not a surprise given last week's unchanged Medium-Term Lending Facility rate. The unchanged LPR rates are because their central bank is in a very tough position, having already prioritised keeping up the value of the yuan to try and hold back the equity market retreat. Lower interest rates would make it almost impossible to hold the yuan's value - and they are prepared to take the risk on economic expansion.

The declining prospects for the Chinese economy can't now be avoided, even in China itself, it seems. Rare stories are surfacing about a 'deflationary nosedive'.

In Taiwan, export orders fell a sharp -16% in December from the same month a year ago to under US$44 bln, far worse than market forecasts of a -0.3% fall and reversing a +1% gain in the previous month. This was the largest annual decline since June, as demand decreased for all product groups. It is a big change, but one magnified by high orders a year ago, so a base effect is in play here. A significant share of these export orders are for production in China by Taiwanese companies, so the decline won't all be felt in Taiwan.

The almost halving of the nickel price over the past year is causing a messy shakeout among miners in Western Australia (and globally in fact). Mines are closing and those running are loosing big money. High inventories and very weak demand from China are behind the retrenchments. Nickel is mainly used in making alloys such as stainless steel. Among other technical industrial applications, it is used in batteries as a "critical mineral", including rechargeable nickel-cadmium batteries and nickel-metal hydride batteries used in EV and hybrid vehicles. The lithium price has fallen even further and its miners are taking a cold bath too.

The UST 10yr yield starts today at 4.10% and down -3 bps from this time yesterday. 

Wall Street has opened its week modestly higher, with the S&P500 up +0.2% but that is a new record high. Overnight European markets were up a bit more, up +0.6% on average. Yesterday Tokyo surged again ending up +1.6% apparently driven by offshore demand. Hong Kong fell -2.3% and Shanghai a very large (for them) -2.7%. Singapore was little-changed. The ASX200 ended its Monday session up +0.8% which the NZX50 ended up a more modest +0.2%.

The price of gold will start today down -US$6/oz from yesterday at just on US$2023/oz.

Oil prices are up +US$1.50 at just under US$75/bbl in the US and the international Brent price is up +US$1 just over US$79.50/bbl.

The Kiwi dollar starts today at just under 61 USc and marginally lower from this time yesterday. Against the Aussie we are softish at 92.6 AUc. Against the euro we are also soft at 56 euro cents. That all means our TWI-5 starts today just under 69.9 and down -10 bps in a day.

The bitcoin price starts today lower. It is now at US$40,511 and down -2.6% from this time yesterday. Volatility over the past 24 hours however has been modest at +/- 1.8%.

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

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

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

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 good economic news that just keeps coming even as fears don't abate.

First, for those returning to work, welcome back. For those still on holiday, lucky you.

This coming week we will get some grunty American data along with the meat of their earnings reports for December results. (Tesla's will be particularly interesting.) They will report their first estimate for Q4-2023 GDP, December PCE, and personal income & spending data, as well as durable goods order data. Outside the US, Japan has a rate decision, as does the ECB, Canada, Norway, Turkey and Malaysia. We will get PMIs from Australia and their NAB Business Sentiment update for December.

Over the weekend, data from China showed investors are still withdrawing funds from the country on a net basis. Foreign direct investment into the Middle Kingdom fell by -8% in 2023. But although the transparency on this data is limited, there is a suggestion that there was a small improvement in the month of December from a year ago.

But that may be a data mirage. Bloomberg is reporting that things are getting grimmer in Chinese equity markets. Tokyo has overtaken Shanghai as Asia’s biggest equity market, while India’s valuation premium over China has hit a record. The meltdown in Chinese share values is wreaking havoc on the nation’s asset management industry, pushing mutual fund closures to a five-year high. But you won't find any of this in Hong Kong or other Chinese analysis.

Japan's December CPI inflation rate came in at 2.6%, down from 2.8% in November. And their core rate was at 2.3%, down from 2.5% in November. That is the 21st consecutive month it has been above the Bank of Japan's 2% target. But with this slippage, the central bank will likely remain very cautious that Japanese inflation is really back. 2.3% is a 17 month low even if over all of 2023 inflation was at a 41 year high in Japan. To help ensure that inflation stays embedded, Japan's government is urging businesses to raise wages ahead of annual spring negotiations between employers and labour unions. The largest union is demanding a 5% rise.

In the US, consumer sentiment as measured by the widely-watched University of Michigan survey surged in January, and inflationary expectations retreated. This was a combo that was not expected, or at least, not as decisively. Sentiment is now suddenly its highest in 2½ years. Year-ahead inflation expectations softened to 2.9% after plunging in December. That current reading is the lowest since December 2020. Few analysts saw such a sharp improvement in both measures coming although it is reflective of the steady progress in the American economy in other data, especially labour market data.

But American existing home sales activity dropped by -1.0% in the December month from a month earlier to an annualised rate of under 3.8 million, reaching the lowest level since August 2010 and falling below the market's anticipated 3.82 million units. For all of 2023, they sold 4.1 mln, the lowest level in nearly 30 years.

North of the border, Canadian retail sales jumped in December (but after a drop in November), the sharpest increase in 11 months.

Across the Atlantic, German producer deflation got "worse" in December with producer prices falling a whopping -8.6% from the same month a year ago. On an annual average basis, industrial producer prices were -2.4 % lower in 2023 than in 2022. But the December result is not all bad because a lot is due to extreme base effects. And energy prices in December were down more than -23% from the same month in 2022. Basically it is a gift from Russia. Germany is surviving a cold winter with plenty of gas and low prices.

Closer to home, in Australia the IMF released the results of its annual staff review. The IMF wants to see meaningful tax reform there, and doesn't like that the markets pricing interest rate cuts in 2024. They [rightly] point out that inflation and inflation expectations are still far too high. The IMF's call for tax reform in Australia is a long-standing position - but one Canberra ignores.

The UST 10yr yield starts today at 4.13% and down -3 bps from this time Saturday. 

In a global market that has been rising since the start of 2023, investment grade corporates have just issued a record $150 bln in debt in January - so far. It's a head-turning pace. Corporate treasurers are voting with their deals, trying to stay away from the upcoming Trump uncertainties, and betting rates will rise sharply in the future. There is also pent-up rollover demand.

The price of gold will start today up +US$4/oz from Saturday at just on US$2029/oz.

Oil prices are little-changed at just on US$73.50/bbl in the US and the international Brent price is still just over US$78.50/bbl.

The Kiwi dollar starts the week at 61.1 USc and little-changed from this time Saturday. But that caps an almost -2½c retreat since the start of the year, or a -3.8% devaluation. That is large and there could be inflation implications. Against the Aussie we are holding at 92.8 AUc. Against the euro we are also holding at 56.1 euro cents. That all means our TWI-5 starts today just under 70 and a -1.6% devaluation for 2024 so far on that basis.

The bitcoin price starts this week a bit higher but still in its recent lower range. It is now at US$41,585 and up +2.6% from Saturday. Volatility over the past 24 hours however has been very low, +-/ 0.4%.

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

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

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

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 supply-chain pressures are about to hit global trading patterns again.

But first, US jobless claims were relatively low last week. In fact, seasonally, new claims fell to levels we last saw in September 2022, and continuing claims down to October 2023 levels. Those losing jobs in the US are clearly having a relatively easier time in finding new positions. No sign of labour stress here yet.

US December housing starts have come in better than expected although not quite to the November levels. But they were +7.6% higher than year-ago levels. And there was a big jump (+6.1%) in residential building consents being issued, so the future looks ok for this sector.

But the latest Philly Fed factory survey was downbeat, a bit like from some other regions. New order levels are shrinking but perhaps at a slower pace than previously. But shrinking all the same. This report covers an important and very large heartland manufacturing region.

Yesterday the US Fed released its Beige Book summary of all these surveys for December and overall it reported little-change from an uninspiring position.

In China, analysts are waiting for the official December foreign direct investment data - to see how 'bad' it is. But we have to keep in mind it is not career-enhancing in China these days to report news that doesn't show the Party in a good light.

Australia shed -65,000 jobs in December from November, with a huge -107,000 retreat in full time jobs and only +41,000 extra part time jobs replacing them. Their December jobless rate stayed at 3.9%. (NZ releases its December quarter labour force data on Wednesday, February 7. The September level was 3.9%)

Australian inflation expectations have settled in at 4.5%, the same in December as November. It has been sticky between 4.5% and 5% since March 2023 - at a level that the RBA is unlikely to feel comfortable with given their target is "between 2% and 3%" and there is no evidence they are moving toward that.

The IEA has updated its forecasts for oil demand and they are higher for 2024, both from the Suez supply chain disruption, and from rising demand by China. Global inventories are lowish at present, especially in the US. This report, and a similar outlook from OPEC, raised oil prices today.

And in China, despite the official rhetoric about becoming carbon-neutral, their coal mining output hit a new record high again in 2023, and they have plans to boost it much larger than present levels.

The spreading of Middle-East tensions and fights has resulted in another very sharp rise in ocean container freight rates. They were up a stunning +23% last week and have now increased by +82% when compared with the same week last year. That is now even affecting outbound trans-Pacific routes where they rose +38% last week. Capacity demand for avoiding the Suez Canal and Red Sea have jerked things around a lot. China's factories won't be enjoying the cost consequences. Meanwhile, bulk cargo rates continue to ease.

The UST 10yr yield starts today at 4.14% and up another +2 bps from this time yesterday. 

The price of gold will start today up +US$9/oz from yesterday at just on US$2014/oz.

Oil prices are a lot firmer, up +US$2.50 at just under US$74/bbl in the US and the international Brent price is now at just over US$78.50/bbl and up US$2.

The Kiwi dollar starts today at 61.1 USc and little-changed from this time yesterday. Against the Aussie we are down -¼c at 93 AUc. Against the euro we are unchanged at 56.2 euro cents. That all means our TWI-5 starts today just on 70.1 and virtually unchanged.

The bitcoin price starts today lower again, now at US$41,808 and down another -1.2% from yesterday. Volatility over the past 24 hours however has remained modest at +/-1.4%.

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

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

Kia ora. I'm David Chaston. And we will do this again 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 the strains in the Chinese economy are grabbing market attention today.

But first, it is mostly upbeat economic news from the US. American mortgage applications were up +10% last week as this market shows signs of stirring again. Benchmark mortgage rates slipped with the key 30 year fixed rate down to 6.89% plus points.

So it won’t be a surprise to know that the NAHB/Wells Fargo Housing Market Index rose, extending the rebound from a near-on-year low touched in November and its best level since August 2023

December retail sales came in much better than expected. They were up +0.6% from the prior month, following a +0.3% rise in November and beating forecasts of +0.4%. It is the biggest increase in three months, led by sales of cars. Year on year they were up +5.6% and handily beating inflation which rate at 3.4% over the same period.

Adding to today's positive vibe, US industrial production also rose more than expected in December although the bar wasn't high here. On a volume basis, it is +1% higher than a year ago.

The UST 20yr bond auction today was well supported, with a median yield of 4.36%, up from the prior equivalent event a month ago at 4.15%. That is a notable rise.

There was a big set of important Chinese economic releases late yesterday. As foreshadowed in Davos, China recorded a Q4-2023 GDP expansion of 5.2% which was marginally less than the +5.3% expected. The official 2023 target was "around 5.5%" so they undershot slightly. Disappointing analysts was that this was only achieved by outsized public-sector spending. Consumer spending was a drag on this result.

China's industrial production grew by +6.8% year-on-year in December 2023, after a +6.6% gain in the previous month and beating market forecasts of +6.6%. It was the fastest recorded pace of expansion in industrial production since February 2022 and electricity production rose +8.0% which supports the industrial production claim.

However their housing development retreat deepened in December. And new house prices fell at their fastest pace since March. Prices for pre-owned units fell faster and everywhere.

Meanwhile, China's population is declining faster now, as deaths rise above norms. The number of people in the world’s second-largest economy fell for a second year to 1.41 billion in 2023. The Chinese population started shrinking in 2022 for the first time since 1961.

We should also note the Chinese Lunar New Year runs this year from January 26 to March 5. It is the Year of the Wood Dragon. It is also the first post Covid period where family travel is high. In the middle, Spring Festival, China's biggest festival, will fall on February 10. Passenger trips via railway, highway, waterways, and civil aviation are expected to hit 1.8 billion during the period officials predicted. About 80% of the trips will be by car, which are likely to hit a new high. They also expect Covid to spike and spread during this gigantic travel and intermingling.

Both S&P and Moody's issued separate global reports overnight for 2023 that showed sharply higher funding costs are resulting in many more corporate defaults. The 12 month trailing corporate default rate rose to 4.8% in December, the highest rate since May 2021. Although almost half the defaulters they rated were in the US, Europe was where the biggest increase came from. And in 2024 it is the "media and entertainment" industry that is the most vulnerable.

In Australia, they are getting to realise that rate cuts may not be on the agenda as soon as they had priced in. And in Canberra yesterday at a long press conference, the Chinese ambassador took a tough line over Australia's complimentary comments about the free and fair democratic voting in Taiwan. There seems to be a cooling underway in China-Australia relations not long after a thawing had started.

Locally, the REINZ will release its December transaction data at 9am this morning. We will have full coverage.

The UST 10yr yield starts today at 4.12% and up +4 bps from this time yesterday. 

The price of gold will start today down another -US$22/oz from yesterday at just on US$2005/oz.

Oil prices are softer at just under US$71.50/bbl in the US and down by another -50 USc. The international Brent price is now at just over US$76.50/bbl and down almost -US$1.

The Kiwi dollar starts today at 61 USc and down almost another -½c from this time yesterday. Against the Aussie we are holding at 93.3 AUc. Against the euro we are lower at 56.2 euro cents. That all means our TWI-5 starts today just under 70.1 and -30 bps lower.

The bitcoin price starts today lower, now at US$42,308 and down -1.9% from yesterday. Volatility over the past 24 hours however has remained modest at +/-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 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 expectations for US Fed rate cuts in 2023 were scaled back by financial markets overnight on Fed-speak commenting. Benchmark bond yields rose.

But first, the overnight dairy auction was a 'good' one with prices up +2.25% in USD terms, and boosted by a falling NZD to be +4.1% higher on the local basis. Most products got better prices, especially butter which was up +5.8% from the prior event two weeks ago. The key WMP was to +1.7%, but that was enough to take it back to a level that we had not seen in more than a year. SMP was up +1.2%. Today's event helps underpin the better farmgate payout levels analysts had expected late in 2023.

In the US, the New York Fed's Empire State factory survey delivered a fierce blow, diving sharply. New orders and shipments also posted sharp declines. The headline general business conditions index fell twenty-nine points, its lowest reading since May 2020. Perhaps oddly however, their expectations of future activity rose just as sharply and while still subdued, clearly firms don't expect the current drop-off to continue into 2024.

Meanwhile a national household survey, also released by the New York Fed, showed a continuation of the recent declining trend in monthly household spending growth, even though spending growth remains well above pre-pandemic levels.

In Canada, December inflation rose to 3.4% in December from 3.1% in the previous month, a rise that was expected - but probably not welcomed by their central bank all the same.

They would have been pleased by the very good rise in housing starts in December, however.

In China, Bloomberg is reporting that China is considering ¥1 trillion (NZ$225 bln) of new debt issuance under a so-called special sovereign bond plan, only the fourth such sale in the past 26 years, as authorities seek more money to finance intensifying efforts to shore up the world’s second-largest economy.

Meanwhile in Davos, a senior Chinese official said the 2023 GDP economic expansion would come in at 5.2% for his country. Apparently there are no inhibitions there for officials releasing market sensitive data early.

The ECB survey of inflation expectations shows it trending in the desired direction there. Median consumer expectations for inflation over the next 12 months dipped to 3.2% in November, marking the lowest rate since February 2022 and down from the previous month's 4.0%.

Also better than expected, the German ZEW sentiment survey rose again for a fifth consecutive time to its highest level since February 2023.

In Australia, the Westpac-Melbourne Institute Consumer Sentiment index fell -1.3% in January from December, remaining in negative territory now for nearly two years. A surge in the cost of living and high interest rates continued to dominate sentiment. The index has been below the 100 mark since February 2022, the longest streak since the early 1990s recession.

The UST 10yr yield starts today at 4.08% and up +10 bps from this time yesterday. 

The price of gold will start today down -US$28/oz from yesterday at just on US$2027/oz.

Oil prices are marginally softer at just under US$72/bbl in the US and down by -50 USc. The international Brent price is still at just under US$77.50/bbl.

The Kiwi dollar starts today at 61.4 USc and down another -½c from this time yesterday. Against the Aussie we are holding at 93.2 AUc. Against the euro we are almost unchanged at 56.5 euro cents. That all means our TWI-5 starts today just under 70.4 and -10 bps lower.

The bitcoin price starts today having turned up, now at US$43,116 and up +1.5% from yesterday. Volatility over the past 24 hours however has remained 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 tomorrow.

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 in the shadow of closed American markets.

First, remember today is a public holiday in the US - Martin Luther King Birthday. Both the bond and stock markets are closed.

First we should note that the Davos talkfest is underway again. It will have no impact this year despite the headlines it generates, just as it hasn't had for years. But both China and Hong Kong senior officials will be there to try and divert attention from Taiwan's free elections and Hong Kong's recent clampdown moves.

In China, their central bank did not cut its medium term lending facility rate as was expected. It held it at 2.5%. But it did add much more to banking system liquidity, a +¥216 bln (+NZ$47 bln) net injection from its overall ¥995 bln (NZ$222 bln) offering yesterday. This was a surprise (unexpected) move. Markets are now absorbing the implications of these two policy actions.

In Canada, the Business Outlook survey run by their central bank reported further declines in sentiment and now there is barely more 'positive' views than 'negative' ones. If anything the negative momentum is building. Almost 40% of firms surveyed said that are suffering sales declines. The same survey found that price pressures are easing however.

Japanese machine tool orders revealed a recent recovery in December, up +9.2% from November driven by strong local orders, up more than +15% on the same basis. These recent gain a reduced the year-on-year deficit to under -10% and its least since late 2022.

Indian exports rose strongly in December from November, up +13% on that basis, but were only +1% higher than the same month a year ago. The Red Sea choke effects haven't hit them yet.

EU industrial production withered further in November, down -0.3% from October to be -5.8% lower than the same month a year ago. It is not a healthy track overall, but was particularly hurt by Ireland, Belgium and the Netherlands. Showing good gains were Denmark especially, but also Sweden. Even France managed a year-on-year rise. But not so Germany. (If the UK was still included, it would have been a drag too, although not by as much as the average.)

Meanwhile, Germany released its full year 2023 GDP result which recorded a small -0.3% drop. That was far worse than the +1.8% expansion in 2022 although it was what was expected. The 10 year long-run annual gain has been +1.2% so 2023 was disappointing all round for them and they had the dubious distinction of being the worst performing major economy in 2023. But they are not yet in "recession" if your definition is two straight declining quarters; despite the -0.3% drop in Q4 from Q3, their Q3 change was revised to be flat.

In Australia, there has been a rather remarkable legal decision handed down relating to a gas pipeline proposal and "cultural heritage". Justice Natalie Charlesworth rejected claims on behalf of a group of Tiwi Islanders that the proposed pipeline would damage Sea Country and anger two creatures of their Dreaming stories – Ampiji, the rainbow serpent and the Crocodile Man. Her judgment slammed the evidence based on “cultural mapping” presented by the taxpayer-funded Environmental Defenders Office as “so lacking in integrity that no weight can be placed” on it and said there was “a significant degree of divergence” in the evidence given by Tiwi Islanders. She called the EDO positions "confection" and "made up" by their lawyers, and not supported by the Tiwi Islanders themselves.

The UST 10yr yield starts today at 3.98% and up +4 bps from this time yesterday. 

The price of gold will start today up another +US$6/oz from yesterday at just on US$2055/oz.

Oil prices are marginally softer at just under US$72.50/bbl in the US and down by -50 USc. The international Brent price is now at just under US$77.50/bbl.

The Kiwi dollar starts today at just under 62 USc and down almost -½c from this time yesterday. Against the Aussie we are down -¼c at 93.1 AUc. Against the euro we are almost -½c lower at 56.6 euro cents. That all means our TWI-5 starts today just on 70.5 and -40 bps lower.

The bitcoin price starts today lower again, now at US$42,485 and down another -1.0% from yesterday. Volatility over the past 24 hours however has been modest at +/-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 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 inflation's impulse seems to be easing worldwide.

In the week ahead, the big international data will focus on the Q3 Chinese GDP result on Wednesday. In the US, the data will be second tier this coming week, although Q4 earnings reports will be released in a swelling tide. We will get some European CPI data and the same from Japan.

Locally, we could get REINZ December data this week too depending on how fast agencies got their reports in over the holiday period.

Over the weekend, China's new yuan lending for December came in well short of what was expected. Beijing is clearly having trouble getting funding out of its large policy banks. The December +¥1.17 tln was marginally higher than in November but well short of the expected +¥1.4 tln. In their context ¥1.4 tln isn't large by historic standards. And the +10.4% rise from a year ago is very low by Chinese standards - in fact a record low expansion on that annualised basis. 

China's exports rose from US$292 bln in November to US$304 bln in December, a +4.0% rise and a bit more than expected. They were up +2.3% from the same month a year ago. But the good December result - aided by a depreciated currency - masks that for all of 2023 exports dropped -4.6% from the record 2022 level.

Helping the December result was that producer prices fell -2.7% in China, quite a different pressure than the virtual no change in December 2022.

And as expected, consumer inflation was negative - that is, deflation - with prices -0.3% lower in December than the same month a year ago. This was slightly "less worse" than expected, and is the third month in a row of year-on-year deflation. But that is their longest deflation streak in 14 years. Overall food prices rose +0.6% in the month to be -2.0% lower than a year ago. But beef prices are -6.0% below year ago levels, lamb -5.7% down, and milk down a lesser -0.9%.

The Taiwan election result delivered a tough outcome for the winner, the China-sceptic DPP candidate. Lai Ching-te won by a comfortable margin though with less than half the vote, but his party lost control of parliament on which the president-elect will have to rely to pass legislation and spending.

Indian industrial production momentum fell away in November. It was up +2.4% from a year ago, marking the lowest reading since March last year, following a downwardly revised +11.6% growth in October. Analysts had expected November to expand by 4%. Output decelerated sharply across all key sectors. Meanwhile consumer inflation ticked up slightly in December, up to 5.7%, above the November 5.4% but less than the expected 5.9% rate.

American producer prices unexpectedly fell in December from November but only by a tiny amount. That means that their producer prices were up only 1.0% in the year, up from a rise of +0.8% in November on that basis. A year ago US PPI was rising at a +6% rate. This latest PPI data was less than expected.

The January edition of the USDA's WASDE report forecasts lower American beef exports in 2024 and higher imports from Australia and New Zealand. The American milk production forecast is lowered too.

We should also note that for all states and the US Federal Government, it will be a holiday tomorrow, Martin Luther King Day. American stock and bond markets will be closed. 

In Australia, they set their milk price for dairy farmers at AU$9.44/kgMS once a year in June. That is a mandated, government policy. Since then international prices for dairy products have dived significantly. In New Zealand, our June price was NZ$8.75/kgMS. But as prices retreated it has been eased back to NZ$7.50/kgMS. However the Aussie price is still AU$9.44/kg. That makes Australian dairy products very expensive locally, makes exporting from there near impossible - and it encourages imports. In fact because we have full access to the Aussie market under CER, our exports dairy to have surged, for some products by more than +60%. More is to come. Some local Australian dairy facilities are in threat of closing, some already have. It is all a lesson in the folly of a government-mandated price "to protect farmers". It will end up hurting them more. It is clearly much better to have market signals all the way down the supply chain.

The RBNZ reported that the total value of our housing stock as at the end of September rose by +$27.6 bln from June to $1.59 tln. That was the first quarter-on-quarter rise since December 2021, although a year ago this value was $1.63 tln, so it is still some way down on that basis and still -$172 bln lower than the peak in December 2021. Over that time we have been building new houses, aggressively in some places (Auckland), so that data shows the per-dwelling value down more than -13% from that peak, nationally, a retreat of -$118,000 per dwelling.

Infometrics reports supplier cost increases remained higher than a year ago in December, but there was continued moderation in the annual pace of change. In fact there was no change from November. The Infometrics-Foodstuffs Grocery Supplier Cost Index shows an average +4.5% increase in what suppliers charged Foodstuffs supermarkets for goods in December compared to a year ago.

The UST 10yr yield starts today at 3.94% and down -2 bps from this time Saturday. 

The price of gold will start today up +US$6/oz from Saturday at just on US$2049/oz.

Oil prices are holding under US$73/bbl in the US. The international Brent price is still at just over US$78/bbl.

The Kiwi dollar starts today at 62.4 USc unchanged from Saturday. And it is unchanged from this time last week. Against the Aussie we are also unchanged at 93.4 AUc. Against the euro we are firm at 57 euro cents. That all means our TWI-5 starts today just on 70.9.

The bitcoin price starts today lower, now at US$42,921 and down -0.8% from Saturday. Volatility over the past 24 hours however has been low at +/-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 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 have a quick news wrap-up so you can get back to your 'time-off'.

First, American inflation has proved more sticky than markets had hoped, up to 3.4% in December, a rise from a five-month low of 3.1% in November. Market had expected a 3.2% rate. Energy prices went down at a slower pace as did food prices and rents. Core inflation came in only marginally lower than the prior month at 3.9% when a fall to 3.8% from the prior 4.0% was expected.

US equities retreated in the news and bond yields rose marginally, with investors less certain a US Fed rate cut is coming soon.

Meanwhile the signals from their labour market remain strong. US jobless claims fell last week from the low seasonal level the prior week. This data is still not revealing the long-expected labour market stress market bears have been warning about.

Meanwhile we should note that Hertz is selling down its EV rental fleet in the US, reverting to ICE cars. Hertz previously set a target for 25% of its fleet to be electric by the end of 2024 but high operating costs mainly related to collision damage, and very weak resale values have them reassessing the move. They will take a -US$250 mln witeoff related to the move.

The latest US 30 yr bond auction brought a median yield of 4.16%, down from the prior 4.28% a month ago. Both were well supported with competitive bidding.

In China, December vehicle sales data for December is out revealing a record high 3.15 mln units sold in the month, and taking the annual total to just over 30 mln and also a new record high. NEVs accounted for 9.5 mln units for the year (no, China is not an all-electric market yet). Even for December NEVs sold almost 1.2 mln but that was only just over a third. (You may recall, New Zealand NEV car sales in December were more than 80%.)

We will get China's December CPI inflation rate today at 3pm. Expect deflation again of -0.4% for the year after a -0.5% retreat in November.

In Norway, with an 80:20 approving vote, their parliament pushed ahead with commercial plans to open the Arctic Ocean to seabed mineral exploration. That was despite environmental groups and the fishing industry’s warnings that the move would put the biodiversity of vulnerable ecosystems at risk.

Globally, containerised shipping freight rates rose again last week to be +15% higher than the surge the prior week, again all about the Red Sea risks. China to Europe rates were up almost +25%. Transpacific rates to the US barely changed. Going the other way, bulk cargo rates retreated rather sharply this week.

Australian exports rose to AU$46.3 bln in November, +1.7% higher than October but -8.2% lower than a year ago. Meanwhile imports slipped rather sharply, down almost -8% from October, so their trade surplus got a boost to +AU$11.4 for the month.

Locally we should note that the new head of the Insurance Council is Kris Faafoi, replacing retiring Tim Grafton. Faafoi is an ex-minister in the previous Labour Government. He will start in the role in April.

The UST 10yr yield starts today at 4.03% and up +3 bps from this time yesterday. 

The price of gold will start today down another -US$9/oz at just on US$2017/oz.

Oil prices have risen +US$1 to be now just over US$73/bbl in the US. The international Brent price is now just over US$78/bbl.

The Kiwi dollar starts today at 62.1 USc and -10 bps softer from yesterday. Against the Aussie we are little-changed at 93.3 AUc. Against the euro we are marginally softer at 56.7 euro cents. That all means our TWI-5 starts today still just under 70.7.

The bitcoin price starts today slightly firmer, now at US$46,017 and up +1.1% from this time yesterday. Volatility over the past 24 hours however has been very high at +/-4.3%. At one point bitcoin got up to US$49,000 but has retreated most of that since. In a 3-2 split vote, the SEC has approved the establishment of Bitcoin exchange traded funds. Now rather than storing Bitcoin in online wallets, speculators in Bitcoin ETFs would own shares in funds containing the digital currency.

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 have a quick news wrap-up so you can get back to your 'time-off'.

First, after the sharp fall in the two week Christmas holiday period, American mortgage applications recovered as strongly last week. Average mortgage rates were little-changed at 6.81%, plus points.

More generally, Bloomberg is reporting that most large economies are about to issue very large volumes of bonds in 2024, almost US$2.1 tln worth and a +7% rise from 2023. This comes at the same time central banks are selling down their own holdings. It will be up to private investors to take up these unprecedented volumes and there is likely to be strong upward pressure on interest rates as a consequence. European bond sales have already hit a record this week at more than €108 bln, and there’s still two days of issuance to go.

Meanwhile, an ECB official says the eurozone needs to be ready for another downturn.

Tomorrow we will get the US CPI data and that is expected to come in little-changed at 3.2% and well above its policy targets. This, along with still-strong labour markets probably means the bond market pricing of five -25 bps rate cuts in 2024 might be somewhat aggressive.

And we are also likely to get China's new bank loan data for December which is widely expected to come it at +¥1.4 tln (+NZ$315 bln) and a sharp increase from the November ¥1.1 tln. That would take the 2023 bank debt increase to a massive +¥23 tln (+NZ$5.2 tln) which incidentally is more bank debt issued than the 2023 GDP of countries like the UK. Beijing is pushing out new debt at scale as a way to keep its economic activity expanding, using its five big policy banks as the funnel for most of it.

In Australia, they released their November monthly CPI indicator which rose at a 4.3% rate. That however is down from 4.9% on October and 5.6% in September; going the right way but still far above where they need it to be.

Interestingly, the fastest rises were for insurance premiums, up more than +16%. And a new report out overnight noted that more than 0.5 mln Aussie homes will be uninsurable by 2030.

That same report identified the top five risks for New Zealand, in order, as the cost-of-living crisis, rapid and/or sustained inflation, natural disasters and extreme weather events, an asset bubble burst, and a debt crisis.

Locally, we will get November building consent data later this morning. Yesterday, ANZ said 2023 ended with a little momentum in card spending in their monitoring of customer card use. However they noted that spending on durables and clothing was particularly weak, while spending on utilities and miscellaneous spending is growing faster than other types of spending. However they put some of this 'strength' down to outsized inflation.

Meanwhile commodity prices ended the year on the up. The ANZ World Commodity Price Index gained +2.4% in December from November, seeing it end the year down just -1.8% from a year ago. Dairy prices improved to drive the index higher, more than offsetting weaker aluminium prices. In New Zealand dollar terms, the index lifted a lesser +1.9% from November as the NZ dollar gained +2.4% against the trade weighted index.

With job ads falling rather quickly locally it is perhaps surprising that the latest employment data for November reveals an expanding workforce. Most of the recent growth was from the primary and factory sectors, also somewhat unexpectedly given the economic struggles in both. The slowdown in earnings per filled job growth reflects a labour market that is loosening from its tight stance earlier in 2022 and early 2023, with the war for talent more or less over and reducing the pressure for higher wages from “high” to “moderate”.

Globally, demand for air cargo seems to be recovering well. No doubt it will be getting a further boost with the Red Sea / Suez problems. Volumes were up +8.1% in November from a year ago and now down only -3.1% from November 2019. Asia Pacific volumes are up +9.8% from a year ago, but have more to climb to get back to equivalent 2019 levels.

Global passenger traffic seems fully recovered. Total traffic in November rose almost +30% compared to a year ago. And that almost matches its November 2019 levels. But there is still some way to go in the Asia/Pacific region where we still lag -17% for international travel, almost all due to Chinese tourists staying at home.

The UST 10yr yield starts today at 4.00% and down a mere -1 bp from this time yesterday. 

The price of gold will start today down another -US$4/oz at just on US$2026/oz.

Oil prices have slipped -50 USc to be now just over US$72/bbl in the US. The international Brent price is now just over US$77/bbl.

The Kiwi dollar starts today at 62.2 USc and -20 bps softer from yesterday. Against the Aussie we are down -¼c at 93.3 AUc. Against the euro we are -¼c softer too at 56.8 euro cents. That all means our TWI-5 starts today just under 70.7 and and -20 bps lower from this time yesterday.

The bitcoin price starts today lower, now at US$45,494 and down -2.9% from this time yesterday. Volatility over the past 24 hours has been quite high at just under +/- 4%.

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

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

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

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 have a quick news wrap-up so you can get back to your 'time-off'.

First, American retail is still rising at an increasing rate, up +5.9% last week on a bricks & mortar same-store basis. The gains above inflation are mounting, with Q4-2023 putting in an impressive performance and this latest data for the first full week of January continuing that trend.

It looks like the American economy will post another solid expansion in Q4-2023.

Meanwhile the consumer debt data we were awaiting yesterday has been released, and it expanded far more than we were expecting, driven in large part by "a big jump" in the use of credit cards. To be fair the "big jump" is only the seasonally adjusted change from October; year on year it is +9.5% higher and that is its slowest gain in 22 months. The dollar rise actually isn't anything special either with single month rises in 2022 and 2021 outshining November 2023. There is actually a slowing in credit card debt rises, not the quickening that some 'analysts' jumped to when they saw the s.a. result.

The US logistics managers index (LMI) rose into expansion in December, led by better warehousing utilisation and prices and rising transport utilisation.

But both US exports and imports fell in November (goods and services), with imports falling a bit more so narrowing their trade deficit situation and an improvement that has been evident all year.

Canadian goods exports slipped -0.6% in December from November to be +3% higher than a year ago, ending a strong run of monthly rises starting mid-2023. Their exports to the US and China held up, but to other countries - mostly the EU - were for almost -5% lower in the month.

Taiwanese goods exports soared almost +12% in December from the same month a year ago, driven by good demand for its electronics of course. That was a shar0p gain from November’s 3.8% rise and well above market expectations of a 5% increase. It is the largest growth since July 2022.

Australia posted good retail sales data for November yesterday. Retail sales in Australia rose by +2.2% from the same month a year ago and although this exceed market estimates it is still undershooting inflation. Despite that, it was the strongest pace in retail trade since November 2021, boosted by Black Friday events.

Overall Australian building consent levels came in at modest levels in November but were still better than expected. But house building is a real drag; it is the multi-unit projects that are still being consented quickly. Year on year, overall consents were down -4.6% from the same month in 2022. Houses were down -6.2% on that same basis, but multi-units were up +0.8%. Month on month, multi units were up +6.7%. It is not a happy time for Aussie housebuilders, but ok for the big apartment builders.

Elsewhere in Australia, their resources industry it taking some lumps. Plant closures at both aluminium and nickel refineries have been announced and it just seems a matter of time before lithium miners will retrench too. But at least the iron ore price is holding.

On their domestic front, their peak financial complaints system said they feel overwhelmed by the current levels, with more than 100,000 complaints received in 2023, up +23% from 2022. Compensation they awarded exceeded AU$300 mln, up +38%.

Globally, food prices eased substantially in 2023, and ended with dairy prices rising and meat prices falling. Global food security wasn't as stressed in 2023 as many were expecting.

And staying global, the World Bank says the global economy is set to grow at its slowest pace since the pandemic, up just +2.4% in 2024. They said higher interest rates were a major factor in stunting expansion and that trade and investment would continue to be stifled by wars. At +2.4% it would be the weakest since the GFC (pandemic excepted). The also said that the good expansion in the US meant that 2023 expanded +2.6% globally.

The UST 10yr yield starts today at 4.01% and up +3 bps from this time yesterday. 

The price of gold will start today down -US$3/oz at just on US$2030/oz.

Oil prices have recovered from yesterday's drop, up +US$2.50 at just over US$72.50/bbl in the US. The international Brent price is now just under US$77.50/bbl.

The Kiwi dollar starts today at 62.4 USc and marginally softer from yesterday. Against the Aussie we are up at 93.3 AUc. Against the euro we are firmer too at 57.1 euro cents. That all means our TWI-5 starts today just under 70.9 and marginally firmer from this time yesterday.

The bitcoin price starts today much higher, rising to US$46,831 and a jump of +4.1% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.6%

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

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

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