Economy Watch

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 China's rapidly changing demographics are weighing heavily on the country.

But first, and maybe related, today's dairy auction was a weak one. Prices were only very marginally lower in USD terms, but they fell -2.2% in NZD terms as our currency rose overnight. The key WMP price was up +1.9% in USD terms, but SMP fell a sharpish -3.8% and cheddar cheese fell a whopping -9.7% from the same event two weeks ago. That speaks to extended weakness in foodservice markets, probably in China. That leaves prices -10% lower than last year’s level which themselves were -18% lower than the year prior. The long slide continues, hurt by both China's continuing weakness, and the USD's new0-found weakness.

Meanwhile, American retail sales are managing to rise at inflation's level however. They were up +3.4% in the latest Redbook survey of bricks & mortar stores on a same-store basis.

But things remain weak in America's real estate market with existing home sales down -4.1% in October from September to be -15% lower than year-ago levels. Average prices are inching up however, even if the inventory of unsold properties is growing..

The American National Activity Index monitored by the Chicago Fed fell in October to its lowest in seven months. All four major categories they monitor retreated.

The AtlantaFed's GDP Now monitor is suggesting American Q4-2023 economic activity is expanding at a +2% rate. It is worth keeping an eye on this indicator; it was one of the few that correctly predicted the strong Q3 gains. It turned out far more positive than most private sector forecasts.

In Canada, CPI inflation is easing back now. It came in at 3.1% in October, down from 3.8% in September. It was a larger fall than expected. That means they are getting close to their central bank's target range of 1%-3%.

In Hong Kong, the weak Chinese housing market is affecting them too, with a new development offering new homes at prices that are a six year low.

As anticipated, China’s birth rate reached a new low last year, with the number of newborns falling to 9.6 mln, the first reading below 10 mln since 1950.

We should note that EV battery manufacturers are buying much less lithium carbonate, and the price of that raw material continues its sharp retreat. Much like the nickel price we noted earlier in the week. Lithium is down -75% in a year, which was when it peaked. Nickel is down more than -50% in 2023.

The UST 10yr yield is little-changed from yesterday, now at 4.43%. 

The price of gold will start today just on US$2000/oz and up +US$26/oz from this time yesterday. It was last at this level in late October.

Oil prices have slipped -50 USc to be just over US$77.50/bbl in the US. The international Brent price is now at US$82/bbl. It is probably a weaker mover than it seems given the falling USD.

The Kiwi dollar starts today at 60.6 USc and up another +¼c from yesterday. Against the Aussie we are up +½c at 92.4 AUc. Against the euro we are up +½c too at 55.5 euro cents. That all means our TWI-5 starts today at just under 69.6 and a +40 bps rise.

The bitcoin price starts today at US$37,286 and virtually unchanged (up +US$17) from this time yesterday. Volatility over the past 24 hours has also been moderate however at just on +/- 2.0%.

The Wall Street Journal is reporting that Binance and its CEO Changpeng Zhao have agreed to plead guilty to criminal and civil charges under a deal worked out with the Justice Department. A fine of more than US$4 bln has also been accepted.

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 it seems to be the season for some "shock therapy" - from OpenAI to Argentina.

Byt first in the US, this is the lead-up week to their long Thanksgiving holiday weekend, a four-day Thursday-to-Sunday work-break - for many. Wednesday is usually a travel crush day. Thursday (Friday NZT) a quiet family day, and then followed by an all-out retail shopping frenzy, shopping for Christmas gifts traditionally. Economic eyes will be on the retail impulse. Financial market activity is already thinning out in the run-up to the holiday.

On Wall Street, all eyes are on the ructions at the ChatGPT firm OpenAI. Overnight, Microsoft hired its fired CEO and 500 staff said they were ready to join him. These are juicy headlines in a newly high-profile business segment, but not likely to have much lasting economic impact. The motivation for the OpenAI board, one ultimately controlled by core AI scientists, seems to be that the company’s expansion was out of control, maybe even dangerous.

In China, their central bank kept its key lending benchmarks unchanged in their November review - despite the obvious need for stimulus. It won't come from lower lending rates because this would expand downward pressure on the yuan and risk increasing capital and portfolio outflows. Those outflows hit -US$100 bln in both September and October. However as long as the interest rate spread to the USD remains heavily against the Chinese yuan, these outflows will likely persist. All they can do at the moment is not make matters worse which is why the one-year and five-year loan prime rates were held steady at 3.45% and 4.20%, respectively.

Taiwanese export orders rose +2.9% in October from September to be -4.6% lower than year-ago levels. But they have been on a steady recovery since the low point in April, and are now back to the high levels they were in the 2020-2022 period.

In Argentina, they have elected right-wing libertarian firebrand Javier Milei as its new president. He won decisively, 55:45. He is a hard-line social conservative with ties to the American right, opposes abortion rights and has called climate change a “lie of socialism.” He has promised to slash government spending by closing Argentina’s ministries of culture, education, and diversity, and by eliminating public subsidies. He also wants to close their central bank and "dollarise" their economy. But their central bank has no US dollars, so the challenge will be huge. How do you "dollarise" when you have no dollars? This will be new territory: no country of Argentina’s size has previously turned over the reins of its own monetary policy to American decisionmakers. The whole affair smacks of abject desperation.

When he won the first round, the Argentine peso came under immense pressure and was devalued -18% to 350 to the USD. Now he is president-elect, another large devaluation is underway. The unofficial rate is now 1000 to the USD. Campaigning against his own currency has become self-fulfilling. He seems to have engineered a situation of making his own currency completely worthless while lacking the resources to dollarise. Who knows what happens from here. Those without US dollars are now destitute.

Also, while we are not looking, Turkey's currency is falling further while its inflation rate hovers stubbornly above 60% and almost double what it was in June. All this is the result of another crazy "shock therapy" experiment that went badly wrong.

The UST 10yr yield is little-changed from yesterday, now at 4.42% and -2 bps lower.

The price of gold will start today at US$1974/oz and down -US$7/oz from this time yesterday.

Oil prices have risen +US$2 to be just over US$78/bbl in the US. The international Brent price is now at US$82.50/bbl.

The Kiwi dollar starts today at 60.2 USc and up +¼c from yesterday. Against the Aussie we are down marginally at 91.9 AUc. Against the euro we are little-changed at 55 euro cents. That all means our TWI-5 starts today at just under 69.2.

The bitcoin price starts today at US$37,269 and up +2.5% since this time yesterday. Volatility over the past 24 hours has also been modest however 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 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 some eyes are on the cliff-hanger election is Argentina. It is turning out to be very close.

But first, in the week ahead, the main focus will be on the Fed meeting minutes followed by American durable goods orders, manufacturing PMIs, and some housing market data. We will also get flash MPI manufacturing and services PMIs for Australia, the EU, the UK, and Japan. Upcoming are policy interest rate decisions for Turkey, and Sweden. And CPI inflation rates will be released Canada, and Japan.

However, first up over the weekend, China released its October foreign direct investment data that was only +¥106.5 bln (+$24.5 bln), continuing the run of weak inflows. In fact these are now -9.4% below year-ago levels.

In the US, housing starts rose by +1.9% in October from September, above market expectations as limited supply in the resale market has boosted new construction. Also, residential building consents, a forward-looking indicator of future construction, moved +1.1% higher. However, these might be recent trend increases but both are still lower than year-ago levels. And completions are now running higher than new housing starts.

A new Boston Fed research paper released over the weekend examined how much labour market surveys undercount gig-workers. It could be by a lot, and answer the question about why the US participation rate seems so low. US employment is already at a record high. It may well be very much higher than those official levels, and that has monetary policy implications.

In Canada, producer prices are falling, essentially due to the much lower fuel prices. They fell by more than -1% in October from September, the steepest decline in producer prices since August 2022. Year-on-year they are down -2.7% on the same oil-cost retreat.

In Europe, the euro area recorded a current account surplus of €41 bln in September, the fourth consecutive one and the largest since July 2021. That is an improvement from a deficit of €5.40 billion in the same period of the previous year.

In Argentina, final voting is underway in their presidential election, one making headlines because one of the candidates is an out-there libertarian outsider. A key driver of his appeal is that inflation has spiralled to over 140% pa, up more than 8% in October alone. Voters are frustrated.

Separately, we should note that nickel prices have dived and continue to be pressured downwards. The price for this key commodity is down -44% since the start of 2023. Poor demand, especially by EV manufactures is weighing more than some short-term supply challenges by one large producer. This market is facing the largest supply-demand surplus in at least a decade. It does seem specific to nickel; zinc, tin, copper and lead are all holding their own on price at present.

The UST 10yr yield is little-changed from Saturday, now at 4.44% and +1 bps firmer.

The price of gold will start today at US$1981/oz and up just +US$1/oz from where we left it on Saturday. A week ago the yellow metal was at US$1936/oz so a weekly gain of +2.3%.

Oil prices have held their Saturday rise to be just on US$76/bbl in the US. The international Brent price is also still at US$80.50/bbl. These are week-ago levels.

The Kiwi dollar starts today at 59.9 USc and and little-changed from Saturday. But it is up almost +1c from a week ago. Against the Aussie we are up marginally at 92 AUc. Against the euro we are little-changed at 54.9 euro cents. That all means our TWI-5 starts today at just on under 69.1.

The bitcoin price starts today at US$36,375 and virtually unchanged since this time Saturday. A week ago however it was at US$37,215. Volatility over the past 24 hours has also been low at just on +/- 0.5%.

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

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

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

Although trading in foreign exchange markets is inherently very risky, the Reserve Bank (RBNZ) boosting its capacity to do so makes sense both from monetary policy and financial stability perspectives, Westpac New Zealand Chief Economist Kelly Eckhold says.

Speaking in in the latest episode of interest.co.nz's Of Interest podcast, Eckhold whoformerly worked as the RBNZ's manager of foreign reserves and at the International Monetary Fund, says the RBNZ's foreign currency intervention capacity is likely to increase significantly over the next two or three years from the NZ$17.725 billion as of its latest disclosure.

That's even after the RBNZ in July ramped up its foreign currency intervention capacity by almost NZ$4 billion by creating and selling NZ dollars. This followed January's announcement of its new Foreign Reserves Management and Co-ordination Framework (FRCF).

Eckhold points out the RBNZ's total level of foreign reserves hadn't changed substantively since 2008, and the economy's about 80% bigger now and the foreign exchange market has probably doubled in size.

"When you see this rather large and abrupt change in the level of reserves going on here it's a consequence of the fact that the framework hasn't been reviewed for a very long time," Eckhold says.

"We have a well functioning foreign exchange market. The purpose of having the intervention policy for crisis situations is to keep it that way at all times," he says.

From a monetary policy perspective the RBNZ may intervene when the NZ dollar "overshoots or undershoots relative to its justified or fundamental levels." It's a tool available to "lean against some of those really large unjustified deviations in the exchange rate."

"With respect to the crisis intervention role, what it really does is help provide a bit of insurance in the event that some relatively rare but bad situations occur. And one of the good things about insurance is that it makes people probably a little bit more comfortable investing in the country because they feel there's some buffers there that could be used if something bad happens. That probably means all else equal your interest rate's a little bit lower, potentially your exchange rate could be a little bit less volatile, and that's going to be to the benefit of ordinary New Zealanders and firms," says Eckhold.

"For the monetary policy intervention operation to the extent they have some success in helping moderate the cycle, then that would help contribute to reduced instability in output, inflation, [and] the exchange rate itself. And that's also going to be of benefit to everybody over time."

"I calculated the total government foreign exchange reserves at [the equivalent of] about 7% [of] GDP. So we're not talking about something that's going to break the bank here."

In the podcast Eckhold also talks about how and where the RBNZ holds its foreign currency reserves, how much bigger the holding might get, the circumstances under which the RBNZ may intervene, the RBNZ's intervention track record, its hedged and unhedged foreign reserves, and more.

The new FRCF will be reviewed every five years.

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

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 of some weaker American data overnight that has brought a risk-off tone to financial markets and a pull-away from commodity currencies like the NZD.

US jobless claims rose marginally last week but the weekly series of small rises are now adding up and they are now at their highest in almost 3 months. The level is still very low, even on a post-pandemic basis, but the trend is becoming noticeable. There are now however less than 1.6 mln people on these benefits so those falling off coverage is actually higher than new claimants.

Overall industrial production in the US fell -0.6% in October from September, the most in 4 months and more than market expectations. It is now -0.7% lower than a year ago.

Both the Kansas City Fed and Philly Fed's factory surveys came in with marginal overall improvements for November however. One reported lower new order levels, the other positive levels.

Canadian housing starts were impressive in October, rising from September when a fall from that already high level was expected. These starts were especially strong in Vancouver. Year-on-year they were up +3.9%.

Japanese machinery orders rose in the September data released overnight and by more than expected. But they remain -2.2% lower than year ago levels even if this is the least annual decline in 2023. Their look ahead however isn't especially positive.

Official data for Chinese house prices was glum again, and given the low volumes and sensitivity of this data, maybe not really telling the full story. Anyway that official data reveals further small declines in new house prices, larger declines for used houses. Only 11 of their 70 largest cities posted rises in new prices. And in only 2 of them did used house prices rise. It seems unlikely the official price data really reflects the state of their housing markets.

In Australia, their jobless rate rose to 3.72% in October and it’s highest since May 2022. Employment rose by +54,900 but +37,900 of those were part-time roles. Part time workers now make up 30.7% of their employed workforce, the highest proportion since March 2022.

The recent rising trend in container shipping freight rates came to an end last week with prices falling -2% from the week before. Bulk cargo freight rates are still rising however.

The UST 10yr yield is back down -11 bps from yesterday, now at 4.44% in a return to levels of two days ago. 

The price of gold will start today at US$1982/oz and up +US$21/oz from yesterday.

But oil prices have crashed -US$4.50 overnight, to be just over US$73/bbl in the US. The international Brent price is now down to US$77.50/bbl. Driving this were unexpected high American oil inventories.

The Kiwi dollar starts today at 59.8 USc and back down -½c from yesterday. Against the Aussie we are little-changed at 92.4 AUc. Against the euro we are also down -½c from yesterday at 55.1 euro cents. That all means our TWI-5 starts today at just on at 69.2, and a net -40 bps lower.

The bitcoin price starts today at US$36,570 and up a net +0.6% from this time yesterday. Volatility over the past 24 hours however has also been moderate at just on +/- 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 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 American data points to the soft landing the US Fed has been looking for as it seems to have successfully navigated the inflation transition.

But first we should note that President Xi has arrived in San Francisco for the APEC meeting, his first visit to the US in five years. The last time he was there, China's economy was in the ascendency and Trump was the US president. This time those factors have reversed. The Biden-Xi meetings have started but there are low expectations for immediate progress on the thorny issues facing them. Progress, if it comes, will come slowly in small steps.

Meanwhile, US mortgage applications had a rare rise last week, and mortgage interest rates were unchanged. But the rise was as much about the year-ago base as any strength this year.

American producer prices fell in October in something of a surprise retreat. But it was driven lower fuel prices so that is a definite upside. Their PPI fell -0.5% in October from September to be +1.3% higher than a year ago. Good prices went down -1.4% in the month, the first decrease since May mainly due to a -15% drop in petrol prices. Services prices were unchanged from the prior month. It is a good result that indicates the American inflationary impulse has probably passed.

Retail sales decreased by -0.1% in October from September, putting an end to a six-month streak of increases, but at least it was much less than the market expectation of a -0.3% decline, so they have held up better than analysts expected. Year-on-year they are up +2.7%.

Going the other way, they was a very large, and unexpected, rise in factory activity in New York State, in the Fed survey for that region. It was most impressive, up +9.1% but it was driven by a surge in inventories, so it is unlikely to last. New order levels were little-changed, but there was a major catch-up in unfilled orders.

In the US Congress, the Republicans recently installed a new leader in the House of Representatives and his first big test was shepherding a budget funding bill through that body. He succeeded, but only with overwhelming Democrat support. 93 Republicans voted against his measure! Don't bother learning his name (Mike Johnson), he may not be around long. But the net impact of yesterday's vote is that shutdown pressures have evaporated - till the next time, probably in early February 2024.

In Japan, their economy shrank -0.5% in Q3-2023 from Q2, worse than market forecasts of a -0.1% decline and after a +1.1% growth in Q2, a flash figure showed. This was the first quarterly GDP contraction since Q4-2022. It was sluggish private consumption that caused the pullback and that was a surprise because intervening data didn't signal such a drop.

China's October industrial production came in +4.6% higher than year ago levels. These increases have been very even each month since March, looking like they will meet national targets in a steady, planned way.

China's October electricity production was up +5.2% from a year ago, but in fact down -8.6% from September and down -16.7% from August. These recent declines just points out how low the year-ago base was. Unfortunately much of the year-on-year rise was from coal-fired generation.

Retail sales in China were little-changed in October from September (+0.07%), but were up an impressive +7.6% from a year ago, which says more about the weak year-ago base than anything else.

In Europe, September data for industrial production looks kind of awful, no matter which way you look at it. Declines everywhere.

In Argentine, we should note that they are now close to the final round of voting in their presidential election. It is a Peronist vs a libertarian contest. Hyperinflation is the key backdrop.

In Australia, wages rose +4.0% in September from a year ago, the highest rate since 2008. A large part of this was because their Fair Work Commission annual wage review decision of +5.75%, rises in their aged care sector affecting about ¼ mln workers, and ratchet clauses in many wage and salary contracts. There were some chunky public wage settlements as well. In the same year, Australia had 5.4% CPI inflation. (For reference, NZ CPI was 5.6% in the same period and the QES reported weekly gross wages up +5.5% - so holding their own in New Zealand).

Optus has confirmed the software upgrade that triggered its nationwide meltdown last week was from the network of its parent company, Singtel.

The UST 10yr yield is up +8 bps from yesterday, now at 4.55% in a bounce of yesterday's dump. 

The price of gold will start today at US$1961/oz and down -US$2/oz from yesterday.

Oil prices have softened about -US$1.50 overnight, to be just under US$77.50/bbl in the US. The international Brent price is down to US$81.50/bbl.

The Kiwi dollar starts today at 60.3 USc and up almost +½c from yesterday. Against the Aussie we are up to 92.5 AUc. Against the euro we are also up at 55.5 euro cents. That all means our TWI-5 starts today at just on at 69.6, and a net +40 bps higher.

The bitcoin price starts today at US$36,365 and down another -1.4% from this time yesterday. Volatility over the past 24 hours has also been moderate at just on +/- 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 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 markets sense the US Fed is about to say it is done raising rates

In the US, their annual inflation rate slowed to 3.2% in October from 3.7% in both September and August, and below market forecasts of 3.3%. Core inflation retreated to 4.0%, also a touch less than expected. Even the month-on-month data came in lower than expected. These are all small moves, but they had a large impact on financial markets, who took them as a signal that the Fed is done raising rates in this cycle. Equities raced higher, bond yields fell sharply, and the USD weakened sharply.

The American Redbook index of retail sales rose just +3.0% last week over the same week a year ago, and hardly keeping pace with inflation.

Despite that, the NFIB SME optimism index came in better than expected for October, even if it did edge marginally lower than in September.

In China, they are contemplating a release of ¥1 tln in low cost debt funding for urban village renovation and affordable housing programs, in its latest effort to bolster the struggling property market.

Markets are sensing something bigger is coming because iron ore prices are now rising and back near Mar 2023 highs.

EU GDP was unchanged in Q3-2023, but edged a touch lower (-0.1%) in the euro area from Q2. That means the annual year-on-year expansion hardly exists now. But this happened as employment rose slightly, ameliorating the impact.

But in Germany there was a surprise jump in economic sentiment, as measured in the widely-watched ZEW survey. Both the business and financial sectors drove the rise. Firms are indicating the bottom has passed.

In Australia, the widely watched NAB business confidence index fell to -2 in October from a downwardly revised flat reading in the prior month, pointing to the lowest level since May. However business conditions did edge up.

Australia released its September short-stay visitor arrivals data yesterday and they are still not back to 2013 levels yet, struggling to get to levels that existed a decade ago. They were 584,000 in the month, and the largest source was New Zealand (22%), followed by China (10%), then the USA (6%).

In a new embarrassment for PwC, the ICIJ has released a hoard of documents that shows the firm actively aided Russian oligarchs in Cyprus to avoid Western sanctions.

The UST 10yr yield is down a very sharp -17 bps from yesterday, now at just 4.47%. 

The price of gold will start today at US$1963/oz and up +US$18/oz from yesterday, mainly on the USD change.

Oil prices have firmed about +US$1 overnight, to be just under US$79/bbl in the US. The international Brent price is up a bit less to just on US$83/bbl.

The Kiwi dollar starts today at 59.9 USc and up a full +1c from yesterday. Against the Aussie we are unchanged at 92.2 AUc. Against the euro we are also unchanged at 55.1 euro cents. That all means our TWI-5 starts today at just on at 69.2, and a net +30 bps higher.

The bitcoin price starts today at US$36,871 and down -0.7% from this time yesterday. Volatility over the past 24 hours has also been modest at just on +/- 1.1%.

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

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

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

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 the Americans face yet another government shutdown threat from disorganised partisans in Congress.

But first today, the respected NY Fed American inflation expectations survey was actually little changed. Consumers said in October that inflation for the year ahead will be to 3.6%, down from 3.7% in September. Inflation expectations remained high but unchanged for rent (at 9.1%) and food (at 5.6%). They were much lower for many other items. Essentially, inflation expectations declined slightly at the short- and longer-term horizons while remaining unchanged at the medium-term horizon. For three years they see +3.0% inflation. Labour market expectations and household expectations of future income and spending growth were largely stable.

And small businesses were much less pessimistic in October. The RealClearMarkets/TIPP Economic Optimism Index rose to 44.5 in November 2023, the highest in seven months.

That may get challenged again soon as chaos in the US Congress (specifically by the Republicans in the House of Representatives) yet again are threatening a shutdown because they can't agree a way forward in their factions. The key date now is Saturday, November 18 (NZT). Meanwhile all eyes on on the US October CPI data due out tomorrow. Expect a 3.3% rate.

Across the Pacific, Japanese producer prices rose by just +0.8% in October from a year ago, slowing from an upwardly revised +2.2% annual gain in the prior month and coming slightly less than market forecasts of +0.9%. This was the lowest producer inflation since a deflation in February 2021 and was the tenth straight month of a slowdown.

And staying in Japan, October levels of machine tool orders took quite a hammering, after being quite strong in September. It was the largest fall since June and was affected by retreats from doth domestic and international buyers.

Annual retail price inflation in India fell to 4.9% in October 2023, the lowest in four months, but actually little-changed from the 5.0% in September or the forecasts of 4.8%. The month-on-month change was a rise, and more than expected.

In China, banks extended ¥738 bln in new loans in October, the least in three months, compared to ¥2.31 tln in September. The amount of loans usually falls in October due to seasonal factors, but this year's figures came above ¥615 bln in October 2022 and forecasts of ¥665 bln. But this is just the latest in a set of data that suggests the Chinese economy hasn't found any momentum yet.

In Australia, via a speech by their acting chief economist, the RBA says "the road ahead could be bumpy" in their fight to control inflation and bring it back into target ranges. Certainly they see it now as a long struggle against domestic price pressures and higher wage expectations. No-one should expect the RBA to be cutting its policy rate any time soon. Perhaps the opposite.

And we should note that the four large Australian ports are now back on line and operating again after the big cyber-attack. In the end it was only a weekend shutdown and the recovery seems to have been effective.

The UST 10yr yield is down -1 bp from yesterday, now at 4.64%. 

The price of gold will start today at US$1945/oz and up +US$6/oz from yesterday.

Oil prices have firmed +50 USc overnight, to be just over US$78/bbl in the US. The international Brent price is up +US$1 to just on US$82.50/bbl.

The Kiwi dollar starts today at 58.9 USc and unchanged from yesterday. Against the Aussie we are a -½c weaker at 92.2 AUc. Against the euro we are a touch softer at 55.1 euro cents. That all means our TWI-5 starts today at just on at 68.8, and a little lower.

The bitcoin price starts today at US$36,871 and down -0.7% from this time yesterday. Volatility over the past 24 hours has also been modest at just on +/- 1.1%.

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

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

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

Kia ora,

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

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

And today we lead with news that on top of the Optus screwup, now the four larges ports in Australia are effectively shut down via a cyberattack.

But first up today, we should note that credit rating agency Moody's has held the US rating at Aaa, but changed the outlook to 'Negative' from 'Stable'. It has been 'Stable' since 2013. S&P has them at AA+ Stable. Fitch is also at AA+ Stable. Moody's expects federal interest payments relative to tax revenue and to GDP to rise to around 26% and 4.5% respectively by 2033, from 9.7% and 1.9% in 2022.

That is one way to start the week, a week that will feature the US CPI update for October, retail sales data and a number of Fed speakers. We'll also get US PPI, industrial production data and housing start numbers.

China will be in the limelight with updates on new yuan loans, industrial production, retail sales, and fixed asset investment. The week will also unveil Q3 GDP growth rates for Japan and a number of other countries. India will release CPI data, and Australia will provide updates on both Westpac Consumer Confidence and NAB Business Confidence.

Over the weekend the latest consumer sentiment survey for the US, the one by the University of Michigan, reported a sharpish retreat of sentiment in November from October. But to be fair it is still 6.5% higher than a year ago. Almost all the fall is in the 'current conditions' component. The future expectations component rose marginally. Of more concern is that the inflation expectations component rose somewhat to 4.4% for the year ahead. Long term inflation expectations in this survey hit a 12 year high of 3.2%.

Still in the US we should note that they regularly adjust their tax rate bands for inflation, avoiding bracket-creep. This year they rise by 5.4%, following last year’s +7% rise in the bands. The IRS released the details on Friday (NZT)

Staying in the US, Fed boss Powell was speaking and said it is too early for them to definitively announce the conclusion of its interest-rate hikes. But he didn't make a case for further rate hikes either. Powell was quite cautious acknowledging the dangers overtightening, while also noting the danger of being “misled by a few good months of data.” The tone reinforced they are not ready to declare an end to their tightening campaign, even though financial markets and many economists have concluded the central bank is done raising rates. He noted the supply-side benefits that have helped slow American inflation so far may have run their course, and repeated that stronger growth could warrant further tightening.

Japan and Korea are partnering up on building out hydrogen infrastructure, a major effort to decarbonise their domestic freight systems. They also signaled that they will cooperate closer on the technology around quantum technology and semiconductors. These agreements are expected to be signed on the side-lines of the San Francisco APEC meeting.

Also at that meeting, China has finally confirmed a worst-kept 'secret'; that President Xi will meet with the US President at the end of the week.

China’s October vehicles sales rose at a faster pace of +13.8% year-on-year to 2.85 mln units, a record high for an October. But still, that level was fractionally lower than for September, despite the rising levels of discounting in the drive to meet ever higher sales targets. Production is rising faster than sales now, so the crunch is on. Electric and hybrid sales were up +33% year-on-year to 956,000 units, now representing a third of all sales.

The world's biggest holiday shopping bonanza, Singles Day, or 11/11, peaked over the weekend. All indications are that gross sales might have exceeded last year's level by about +2.1% in value but volumes may have been higher and the intense, even extreme competition may in fact reinforce deflationary trends.

India's industrial production was up +5.8% from a year ago in September, a sharp slowdown from the 14-month high of a +10.3% gain in August. This is also well below market expectations of +7% year-on-year gain. Most key sectors are in retreat, especially for factory production and electricity production. Overall, industrial production fell -3.5% in September from August, with factories down -2.0% and electricity production down -6.6%. They won't want this recent trend to embed.

The OECD said 48 countries have signed a data sharing agreement for crypto asset reporting as part of their global tax transparency data sharing moves. The US, Canada, Japan, and the EU are core signers, as is Australia, Korea and Singapore. Tax haven like the British Channel Island and the Caymans are signed up too. But New Zealand is not on the list. Nor is China, Russia, or North Korea obviously.

We should note that ratings agency Fitch has maintained Australia's AAA rating with a 'Stable' outlook.

And staying in Australia, the RBA released its Monetary Policy Review with updated data and forecasts and noting there “was likely to be less progress” in bringing down inflation in the quarters ahead than it had previously thought, and that had increased the risks of inflation remaining higher for longer. They now see inflation only down to 3.5% by the end of next year, and to just 3% by the end of the following year.

Four of Australia's largest port operations, those owned by Dubai's DP World, are effectively shut down due to a cyber-attack on the company. They say no ransom demand has been made yet. But the failure has prompted government crisis meetings over the weekend and is leaving more than 30,000 containers stranded ahead of the year-end holiday season.

We should also note that the risk of a major volcanic eruption in the Icelandic town of Grindavik is suddenly very high and evacuations have begun.

The UST 10yr yield is up +3 bps from Saturday, now at 4.65%. 

The price of gold will start today at US$1939/oz and up +US$3/oz from this time Saturday.

Oil prices have firmed +50 USc overnight, to be just on US$77.50/bbl in the US. The international Brent price is now just on US$81.50/bbl. Both a much lower than a week ago however.

The Kiwi dollar starts today at 58.9 USc and unchanged from Saturday. Against the Aussie we are a tad firmer at 92.7 AUc. Against the euro we are also a touch firmer at 55.2 euro cents. That all means our TWI-5 starts today at just on at 68.9, and little-changed.

The bitcoin price starts today at US$37,126 and down a mere -0.2% from this time Saturday. Volatility over the past 24 hours has also been modest 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 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 Apple's tax tussle with the EU isn't going its way. And more than NZ$20 bln is at stake.

But first up, US jobless claims were reported lower in the seasonally adjusted data, but actually rose in the raw data, and by quite a bit. There are now 1.608 mln people on these benefits, a +2.1% increase in a week. This may be the very first actual sign of the long-awaited American labour market weakening - although to be fair these levels are only back to August levels and still far lower than most points in 2023.

The USDA WASDE update confirms earlier trends where American beef numbers are slipping and imports are rising. Prices are expected to rise well into 2024. American milk production is falling too and they raised their 2024 forecast milk price.

China slipped fully into deflation in October with consumer prices -0.1% lower than in September and -0.2% lower than in October a year ago. Neither levels are in themselves important, but the trend is.

Meanwhile, Chinese producer prices (PPI) remained -2.6% lower in October from a year ago, although these prices were unchanged from September. So perhaps the deflationary forces are running out of steam in China's factories. But they are not out of the woods yet. These pressures are still severe and perhaps one reason Beijing has reverted to imposing a fixed (to the USD) exchange rate. Even when goods from China are sold in CNY, they are priced first in USD, making the claims that the CNY/CNH is rising a bit hollow.

Yesterday we noted that Beijing had directed Ping An to rescue Country Garden. Well, investors weren't impressed and trashed the Ping An share price, it falling -10% or more than -US$5 bln in the day’s trading. Everyone outside of Beijing knows this is a bad idea.

In Europe, Apple has lost the latest skirmish over the huge fine a lower court imposed for avoiding taxes using its Irish domicile. At stake is €13 bln (NZ$23 bln). Apple won its first appeal but has now lost this more senior appeal. The loss has had no impact on its share price.

International air travel rose strongly in September, up +31% from a year ago with the Asia/Pacific region up +92%. Of course the base was very challenged. Compared with September 2019 however we still have some way to go to get back to those levels, but there is a recovery underway.

Also rising, and more sharply than in the prior week, container freight rates were up +7% last week. Rates out of China to both the US and Europe drove the increase. Bulk cargo rates have started rising again.

The UST 10yr yield is up from yesterday as bond prices rise yet again, now at 4.62% and a rise of +9 bps. 

The price of gold will start today at US$1963/oz and up +US$9/oz from this time yesterday.

Oil prices have recovered a minor +50 USc overnight, to be just under US$76/bbl in the US. The international Brent price is up more, now just on US$80/bbl.

The Kiwi dollar starts today at 59.4 USc and unchanged from this time yesterday. Against the Aussie we are up +¼c at 92.6 AUc. Against the euro we are a little firmer at 55.5 euro cents. That all means our TWI-5 starts today at just on at 69.3, and up +30 bps.

The bitcoin price starts today at US$36,490 and up a strong +3.0% from this time yesterday. That puts it over NZ$60,000 for more than one day for the first time since April 2022. Volatility over the past 24 hours has been high at just on +/- 3.9%.

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

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

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