Economy Watch

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 there is little evidence the global economy is on the rise. Bond markets don't think so.

But first, last week there was a rare rise in American mortgage applications, now off a lower base however, but also helped by sharply lower mortgage interest rates. Their benchmark 30 year fixed rate fell to 7.61% plus points, a retreat from 7.86% and the largest fall since July 2022. Of course, they are following the US Treasury rates lower.

American consumer credit levels rose in September from August, but really only back to where they were in July. But they are up +9.0% in a year.

American beef prices are rising, and sharply, as drought threatens cattle herds. Although this is not strictly 'news' - the trend has been around for a year - the drought slaughter in the southwest is ending and the overall US herd is much smaller now. Imports will be benefiting significantly now.

Canadian building consents recorded a very sharp -6.5% fall in September, much more than expected. Much of that was a base effect of unusually large non-residential projects being approved a year ago. But the value of residential consents rose +4.3% from August and were +2.3% higher than a year ago. The residential consent levels are especially strong in Vancouver.

In China, concern about the country’s lackluster economy and troubled property market has led to rising discontent among citizens, a new study shows.

And Beijing is about to make a classic mistake in its efforts to stave off a Country Garden bankruptcy. The giant real estate developer has avoided a complete collapse but is on its last legs. In desperation, Beijing as now ordered insurer Pin Ang to "invest" to save it. One huge zombie could now well infect a healthy company. This is an example of Xi's acolytes being very light on basic economic or business experience. The consequences could be wide, especially if Country Garden does linger on and avoid its 'creative destruction' - which will invite a repeat of the technique.

Meanwhile, their central bank said it will provide emergency liquidity to regions with heavy debt as necessary to help local governments resolve debt risks. Again, more debt to resolve unsustainable debt issues.

In the EU, retail sales volumes slipped again in September to be -2.7% lower in a year. Euro area levels were weaker than the overall EU levels.

In Australia, they had their driest October since 2002 due to El Nino. Rainfall was -65% below the 1961–1990 average.

And staying in Australia, the mammoth Optus outage, one made worse because networks there don't 'share' when they have major issues like this, is being forensically examined for the cause. It is likely they accidentally misconfigured its own BGP routers; whether someone else did it accidentally, or whether someone else did it deliberately, remains to be seen. It’s also not yet clear whether Optus’ BGP issues are the cause of its outage, or a symptom of some other problem.

Globally, September air cargo traffic was up +1.6% from the same month ago, and the fastest growing region was the Asia/Pacific region (+4.2). But the overall levels arte still -1.8% lower than in September 2019, and -3.2% lower in the Asia/Pacific.

The UST 10yr yield is down from yesterday as bond prices rise again, now at 4.53% and a drop of another -4 bps. 

The price of gold will start today at US$1954/oz and down another -US$10/oz from this time yesterday.

Oil prices have fallen again overnight, down another -US$2.50 to be just over US$75.50/bbl in the US. The international Brent price is down more, now just under US$78/bbl. These are three and a half month lows.

The Kiwi dollar starts today at 59.3 USc and unchanged from this time yesterday. Against the Aussie we are also unchanged at 92.3 AUc. Against the euro we are a little lower at 55.3 euro cents. That all means our TWI-5 starts today at just on at 69, and also little-changed.

The bitcoin price starts today at US$35,427 and up +2.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.9%.

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

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

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

New Zealand should be one of the easiest places in the world to get to net zero greenhouse gas emissions and we should be planning for net negative, the next step after that, says Christina Hood.

Hood, the head of energy and climate policy consultancy Compass Climate, spoke to interest.co.nz in a new episode of our Of Interest podcast. Hood is also the former head of the climate unit at theInternational Energy Agency in Paris.

In the podcast she spoke about the push to net zero by 2050; addressing issues such as what it actually means, what the practicalities of it are, and what it'll mean for the lives and livelihoods of New Zealanders and the economy.

"I think New Zealand is one of the easiest places in the world to get to net zero because of our abundant renewable energy resources, [and] because of the amount of land that could be restored to indigenous forests. A lot of our CO2 [carbon dioxide] emissions since preindustrial times are from land clearance not from fossil fuel use. And we see in Tairāwhiti a lot of land that should never have been cleared, so there's a lot of trees that can go back. We have all of that potential, it's totally doable," Hood says.

"We also have a legal framework in place through our Climate Change Response Act and that sets stepping stones towards 2050 to try and keep governments on track. National has firmly committed to the interim milestones. We have carbon budgets for every five years that step down to meet the net zero target and they've said they're committed to those. And that's actually where things are going to bite because those short term targets hold politicians' feet to the fire in terms of acting now, not just making plans for later."

But, Hood says, when and if we get to net zero we can't rest on our laurels.

"If we do [get there] it's not the end of the story. It's just a particular point that we pass through. Because the science tells us that when we get to that point we would have already emitted too much C02 for the kinds of temperatures that we want to keep our climate systems liveable."

"Even if we get to that net zero we will have emitted too much. The phase after that is actually to be net negative. We're going to have to continue to draw down that excess C02 from the atmosphere through native forest regeneration, but also through technology. And we should be starting to plan for that phase now because it's only a few decades away," says Hood.

In the podcast she explains what net zero means, what the origins of the concept are, the key challenges to getting there, what it means for the agriculture sector, trade and travel, plus feeding the planet, the challenges and targets in big emitters such as the United States, China and India, and also talks about different visions of what net zero means.

"There's a spectrum. [At] one end [there are] extreme techno optimists who say 'new technologies will just replace everything that we currently use and we'll carry on and nobody's going to notice the difference'," Hood says.

"At the other end of the spectrum is an extreme degrowth perspective which says 'technology is just not going to be the answer. What we need to do is to fundamentally reconstruct the way we run society, shrink our energy use until it reaches such a point as we're in balance with nature.' Most climate people, including myself, sit somewhere in the middle."

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 global trade is in the spotlight.

The run of dairy price rises ended in today's Global Dairy Trade auction today. Overall prices fell -0.7% in USD terms, down -1.2% in NZD terms. The key WMP price fell -2.7% in a key shift, but one signaled by the weekly GDT Pulse events although today's price was actually higher than last week's Pulse result. Keeping the dip limited were rises for SMP, up +2.3% and for Cheddar cheese, up +4.5%. These two suggest better demand from the food service sector, especially in China.

In the US their logistics managers index (LMI) rose and quite sharply, indicating rising demand for these key distribution services, although freight rates actually decreased in this survey.

Meanwhile the US September trade result (for goods and services, that is, on a balance of payments basis) came in with a modest but continuing deficit. Overall exports rose +2.2% which overall imports rose +2.7%. This involved an increase in the goods deficit of $1.7 bln to -$86 bln and a decrease in the services surplus of $1.2 bn to +$25 bln. But still, this is the third lowest trade deficit since 2021.

Last week, the rising retail sales gains evaporated. Their weekly Redbook index of retail sales at brick & mortar outlets on a same store basis was up only +3.1% from the same week a year ago, barely beating inflation. Although to be fair, much of this was an unusual rise in last year's base.

Overnight we also got an update on US household debt levels and they actually changed very little in September from the prior quarter, mainly because housing debt rose very little. Year on year, housing debt is up +4.2% but non-housing household debt is up +6.4%, mainly credit card debt.

In Canada, September exports rose +2.7% in September to the highest since June 2022 and the third consecutive monthly increase. Imports rose +1.0% to their highest since January. That meant they recorded a +C$2 bln surplus, twice what was expected.

The IMF has been reviewing China's economy and now says it will expand by +5.4% in 2023, up from an earlier forecast of a +5% rise. Most of the extra is down to Beijing support initiatives, they say. For 2024 they say China will expand +4.6%.

In China, exports fell -8.1% in October from September to be down -6.4% from October in 2022. Meanwhile imports fell -1.4% from the prior month even though they were up +3.0% from a year ago. As the West de-risks from China, (exports down -15% to the US, down -10.6% to the EU and down -8.6% to Japan) clearly selling more to Russia (up +52%) isn't going to save them. Only Africa (+8.0%) is the other region they made gains. China's exports to New Zealand are down -14.9% and to Australia down a much lesser -4.2%.

China's foreign exchange reserves at the end of October were marginally lower at US$3.1 tln, as expected.

Meanwhile Taiwanese exports fell rather sharply in October, down -4.5% from year ago levels. A small rise was expected. Imports fell very sharply, down more than -12% although this was pretty much as expected.

In Europe, data for industrial production in Germany for September came in lower than expected, down -3.7% from the same month a year earlier.

In Australia, and in an about-face the Reserve Bank of Australia is no longer standing on the sidelines as inflation turns back up. It has pushed through a new +25 bps rate hike to 4.35% and markets are thinking a December rise may come too

The UST 10yr yield is down from yesterday as bond prices rise again, now at 4.57% and a drop of -8 bps. 

The price of gold will start today at US$1964/oz and down another -US$18/oz from this time yesterday.

Oil prices have fallen overnight, down a very sharp -US$3.50 to be just under US$78/bbl in the US. The international Brent price is now just over US$82/bbl. These are three and a half month lows. In fact it first reached this level 16 years ago, so after inflation it is now unusually cheap.

The Kiwi dollar starts today at 59.3 USc and down -½c from this time yesterday, dragged lower by the Aussie dollar. Against the Aussie we are slightly firmer however at 92.3 AUc. Against the euro we are little-changed at 55.5 euro cents. That all means our TWI-5 starts today at just on at 69.1, down only -10 bps.

The bitcoin price starts today at US$34,665 and down -0.8% from this time yesterday. Volatility over the past 24 hours has been low too at just on +/- 0.9%.

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

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

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

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 mostly about Australia today.

The Australian prime minister is in Beijing meeting with President Xi. Trade is the main topic, and that needs improved relations after a period of bilateral tension. These latest meetings bring a notable thaw, ahead of the US-China meetings at the upcoming APEC conference. Xi said China's relationship with Australia is now on "the right path". Albanese pointed out that an improvement will be beneficial for both countries. But Australia is negotiating trade restriction rollbacks that should never have been imposed in the first place. However, Albanese invited Xi to Australia.

Back in Australia, ASIC data for October shows company bankruptcies were -16% lower in October 2023 than the same month a year ago. But this is a rare bit of good news on this front because year on year these bankruptcies are running +38% higher.

The Melbourne Institute's Monthly Inflation Gauge fell -0.1% in October 2023 after a flat reading in September, showing declining prices for the first time in fourteen months and clouding the outlook for the RBA monetary policy. The annual growth rate also eased to 5.1% in October from 5.7% in September.

Later today the Reserve Bank of Australia delivers its monthly monetary policy review and increasing numbers of observers are expecting them to raise its policy rate from the current 4.10% to 4.35%. If they do, parts of Australia will be 'shocked' but they shouldn't be because inflation is rising and their housing markets are becoming sharply less affordable. A rise could give blowback on the NZD and our interest rates, although to be fair some of that will already be priced in. Oh, and there is a horse race in Australia today too.

Germany factory orders rose unexpectedly in September. While it wasn't a large rise, a correcting fall was expected after the rather large jump in August. Foreign orders were the driver here, up +4.2%, with new orders from the EU rising +6.2% and orders from the rest of the world rising +2.9%. It is an impressive signal, especially as it is more than just for one month.

Also later today, the winner of the 2023 Earthshot prize will be announced in Singapore. So far, more show than substance, but the five winners do take away more than $2 mln as seed money for a major environmental project. So far none of the ten prior winners have gone on to make a global impact, but it is early days yet. Hopefully this initiative isn't an irrelevancy, and more than just grandstanding.

The UST 10yr yield is up today from yesterday in a small recovery to 4.65%, a gain of +7 bps. 

The price of gold will start the week at US$1982/oz and down -US$10/oz from this time yesterday.

Oil prices have risen overnight, up about +US$1 to be just over US$81.50/bbl in the US. The international Brent price is now just under US$86/bbl.

The Kiwi dollar starts today at 59.8 USc and down almost -¼c from this time yesterday. Against the Aussie we are similarly softer at 92 AUc. Against the euro we are a bit more softer at 55.6 euro cents. That all means our TWI-5 starts today at just on at 69.2, down about -20 bps.

The bitcoin price starts today at US$34,946 and virtually unchanged from this time yesterday, down a mere -0.1%. Volatility over the past 24 hours has been modest at just on +/- 1.2%.

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

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

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

Kia ora,

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

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

And today we lead with news the US Treasury’s debt issuance plan eased investors’ fears of a looming deluge of long-term government debt that had triggered a bond market rout and bond markets have rallied very sharply.

But first in the US initial jobless claims rose last week by a mere +2800 last week to 197,000 and there are now 1.58 mln people on these programs. But after seasonal adjustment the rises were magnified as reported elsewhere and stated to be the highest since April and an indication their labour market is turning (even if that is not what the actual data shows yet).

Meanwhile, American factory orders rose a sharp +2.8% in September from August, the most since January 2021. (Year-on-year they are up +2.2%.) Durable goods orders were up a remarkable +4.7% as orders for aircraft roared back, up +65% from a year ago.

October vehicle sales were expected to dip slightly from September, to an annual rate of 15.3 mln from 15.7 mln. But the actual dip was a lesser 15.5 mln annual rate. This is very much higher than the year-ago levels of about 14.5 mln rate.

In American factories making all this stuff, labour productivity surged in the September quarter, up a remarkable +4.7%.

In New York, authorities there have prevailed in a case that held ride sharing companies like Uber have "systematically cheated" New York drivers out of pay and benefits. They are making huge restitution.

In Toronto, the gloss is coming off their housing market and sales volumes are falling. October brought the third straight monthly drop and the fastest pace of decline in 15 months. In Vancouver, things are steady.

In Japan, their government has approved a program of tax cuts and other measures to help households battle inflation's pressures. The overall package is worth about NZ$190 bln.

Singapore's factory PMI expanded more in October than September, a second consecutive expansion and a fifth straight rise.

In Norway, their central bank kept its policy rate unchanged at 4.25%, but signaled that a hike is likely before the end of the year, because they are not on top of inflation yet.

Meanwhile the Bank of England kept is key policy rate at a 15-year high of 5.25% for a second consecutive meeting, in line with market forecasts. They are grappling with persistently high inflation and signs of an economic slowdown. Three of nine policymakers actually voted for a rate hike, but that is less than the four at their prior review.

In Germany, their unemployment rate is holding. The number jobless fell by -20,000 in October from September (when a +15,000 rise was expected) and there are now just over 2.6 mln people without jobs there, an unchanged 5.7% rate. But the rise is up +165,000 from a year ago.

In Australia, Westpac’s new business banking boss says the fate of many struggling small firms will hinge on the December-January period. Might be so here too. The the new Westpac Australia chief economist, ex the RBA, says her old employer may be forced into more than one more rate rise because inflation isn't tamed there yet. That won't help those SMEs either.

Australia's merchandise trade surplus fell to a 30-month low of +AU$6.8 bln in September from an upwardly revised AU$10.2 bln in August. The September result was well below market forecasts of an AU$9.4 bln surplus as exports fell -1.4% while imports surged +7.5% from the prior month.

Housing investor demand (+2.6% from a year ago) is keeping mortgage lending up in Australia, while owner occupiers are borrowing less. Lending for new houses remained at 20 year lows. On the commercial side, construction loans rose, and rather sharply (+55%).

In global container freight markets there was a surprise +5% rise in freight rates last week, driven by very sharp +11% increases on the Chine-Los Angeles route. Meanwhile, bulk cargo rates continued last week's retreat.

The UST 10yr yield is down a sharpish -14 bps from this time yesterday, now at 4.67% as bond markets rally after the US Treasury’s debt issuance plan. It has had a global flow-through. 

The price of gold will start today at US$1982/oz and up +US$6/oz from this time yesterday.

Oil prices have held at risen +50 USc to US$82/bbl in the US. The international Brent price is now at US$86.50/bbl.

The Kiwi dollar starts today at 58.8 USc and up +½c from yesterday. Against the Aussie we are firmish at 91.7 AUc. Against the euro we are marginally firmer at 55.4 euro cents. That all means our TWI-5 starts today +30 bps higher at just under at 68.7.

The bitcoin price starts today at US$34,604 and +0.4% higher than this time yesterday. Volatility over the past 24 hours has 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 the US central bank still sees American inflation 'elevated' above where it needs to be.

At its latest review, the US Fed has delivered the result markets expected, and one well signaled by the recent Fed speakers - a hawkish hold. They kept the federal funds rate at a 22-year high of 5.5% for the second consecutive time. Inflation is easing back and they seem aware of avoiding an overshoot in monetary tightening. But with the American economy defying repeated expectations of a slowdown, market expectations that the Fed is 'done' raising rates may be premature, and the Fed is clearly keeping its options open on that.

Staying in the US, the level of mortgage applications fell -2.1% last week from the prior week. This in itself is not surprising, because it extends a long run of weakness. But it does take their current levels down to those last seen in 1995, a 28 year low. Mortgage interest rates slipped slightly in the latest week, down to 7.86% plus points for the benchmark 30 year mortgage, still close to a 23 year high.

With the American working age population growing at least +70,000 per month, it is 'positive' that payrolls rose +113,000 in October from September in the pre-cursor ADP Employment Report on private sector payrolls, and well above the +89,000 gain in September. But the rise was much less than the expected +150,000. This Saturday (NZT), non-farm payrolls are expected to grow +150,000 when they are reported for October. The ADP report noted that annual pay rose +5.7%, so there is still significant strength in US labour markets - a key factor why the UAW won its dispute with carmakers.

In a 'positive' surprise, job openings in September rose by 56,000 from August to 9.55 mln, the highest level in four months and exceeding the market consensus of 9.25 mln. But they are down sharply from the 10.9 mln in September a year ago. Hires were lower too on a year-on-year basis, but 'separations' fell.

In the nation's factories, the internationally-benchmarked Markit PMI was revised up slightly to neither expanding nor contracting in October, a small improvement from their 'flash' report. But the widely-watched local ISM factory PMI told a different story, contracting slightly, and slightly faster in October than September. Weak new order levels were a feature of the ISM report, contrasting with rising new order levels in the Markit survey. Take your pick.

In Japan, Toyota has signaled record high profits, justifying its market strategies and position. It is an interesting contrast to the recent Tesla result which is suffering from the price-slashing carnage in the EV market, especially in China.

Mirroring the official version, the private Caixin PMI for China's factory sector slipped lower into contraction in October. It just reinforces earlier data that they are in a funk, one that will be hard to escape from - at least in the way they were running pre-pandemic. This Caixin report drop wasn't expected.

And for the first time on record, bank lending for commercial property actually fell in September according to central bank monitoring (item 6). They claim it has stabilised. Debt growth to companies was high overall, up +10.9% from a year ago, but it seems to have 'culminated' in the commercial real estate sector.

In India, their jobless rate jumped to 10.1% in October from 7.1% in September, the highest level since May 2021. The issue is especially sharp in rural India where the weakest monsoon rains in five years is weighing on farm production, especially for rice.

In Australia, building consents dropped -21% in September from a year ago. They fell -4.6% from August. These were sharper retreats than expected because a rise was expected from August.

And staying in Australia, mortgage stress seems to be rising. Surveys by Roy Morgan show that as at the end of September, 1,573,000 or more than 30% of mortgage holders were 'at risk' of mortgage stress, up an eye-watering +760,000 from a year ago when only 15.7% were under stress threat.

The IMF is about to release an update of its review of Australia. It will be critical of policy approaches especially around 'wasteful' infrastructure spending which they say will be inflationary and require the RBA to raise official rates further. The visiting IMF economists concluded the economy was running above capacity, with low unemployment, “sticky” inflation and rising house prices.

In international shipping, we should note that the drought affecting the Panama Canal is crimping international trade and the effects are likely to worsen with El Nino.

The UST 10yr yield is down -5 bps from this time yesterday, now at 4.81%. 

The price of gold will start today at US$1976/oz and down another -US$15/oz from this time yesterday.

Oil prices have held at their recent lower level, still at just on US$81.50/bbl in the US. The international Brent price has risen +50 USc to be now just under US$86/bbl.

The Kiwi dollar starts today at 58.3 USc and back up +¼c from yesterday. Against the Aussie we are softish at 91.6 AUc. Against the euro we are also +¼c firmer 55.3 euro cents. That all means our TWI-5 starts today fractionally higher at just on at 68.4.

The bitcoin price starts today at US$34,464 and another tiny -US$31 or -0.1% lower from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 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 Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

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

And today we lead with news the Chinese President is having to get involved in shoring up China's faltering economic track.

In China, their official factory PMI fell unexpectedly in October back into contraction after the minor expansion in September. Markets weren't expecting that, So China's economic recovery remains fragile with more support measures from the government needed. New orders were the weak issue, returning to contraction.

And it was a similar story in their services sector. It did manage to stay in expansion mode but only just after dipping from September. The October result is the weakest of 2023. New orders were particularly weak which is a worry and these are now contracting.

Meanwhile, President Xi underscored his concerns about China’s shrinking population in a speech calling on women to help bolster the birth rate by promoting a “culture” of childbirth. It also played to his conservative social views.

He was active at the Central Financial Work Conference, trying to shore up issues related to ballooning local government debt risks. The recent ¥1 tln debt swap program allowing local governments to replace their so-called “hidden” debt for bonds carrying lower interest rates was part of this push. Also part is a new requirement for bankers to study the volumes of books with Xi's Thought.

In Japan however, yield curve control policies are all the focus. Late yesterday the Bank of Japan loosened its reins, allowing their ten year government bond yield to rise to about 1%. But despite that, the yen fell.

Japanese consumer confidence ticked up a little after two months of sagging, now back to May-June levels. Most components of this survey rose, except views on job security.

EU inflation fell more than expected in October, down to just 2.9% and its lowest since July 2021. This is largely due to retreating energy prices. Their core rate, without food or energy, cooled to 4.2% from 4.5% in September.

Meanwhile, EU GDP shrank -0.1% in the three months to September from the prior quarter, worse than market forecasts of a flat reading and following an upwardly revised +0.2% rise in the second quarter. It rose +0.1% from the same quarter a year ago. Lower inflation and lower growth comes after the ECB's steady diet of rate hikes, and all eyes are on whether that phase is done now.

Meanwhile, German retail sales were expected to rise in September from August, but they fell in an unanticipated retreat.

But American retail sales, as measured weekly by their Redbook index of bricks & mortar stores, rose strongly again last week, and by more than expected to be +5.3% ahead of year-ago levels on a same store basis. They are growing handily more than inflation now.

But coming in better than expected but worse than the prior month was the US Conference Board survey of consumer sentiment, a widely-watched metric. A big dip from September was anticipated, but a small dip was delivered. But what these consumers are telling the survey is different to how they are acting, it must be said, with rising confidence for continued spending.

And for those who follow business sentiment in the Mid-West industrial heartland, the Chicago PMI was unchanged in October, but still low. However they recorded a good uplift in new orders in the month.

Caterpillar reported a double-digit rise in profit overnight, beating Wall Street estimates on solid construction equipment sales in North America, but its shares slid in trading today on signs of slowing machinery demand.

In Australia, new census data for 2022 shows that there are now 29.5% of their population born outside the country, not a new high because in 2020 that level was 29.9% and then stunted by the pandemic. There were 586,000 New Zealanders, the fourth largest country of origin, topped by China's 597,000, India's 754,000 and by far the fastest growing group, with the most born in England 961,000 and a declining cohort. 

The UST 10yr yield is down -3 bps from this time yesterday, now at 4.86%. 

The price of gold will start today at US$1991/oz and down another -US$7/oz from this time yesterday.

Oil prices have fallen -50 USc today to be now at just on US$81.50/bbl in the US. The international Brent price has fallen a bit more now just over US$85.50/bbl.

The Kiwi dollar starts today at 58.1 USc and down -¼c from yesterday. Against the Aussie we are firmish at 91.8 AUc. Against the euro we are still just on 55 euro cents. That all means our TWI-5 starts today again little-changed at just on at 68.3.

The bitcoin price starts today at US$34,433 and a mere -US$40 or -0.1% lower from this time yesterday. Volatility over the past 24 hours has been low at just on +/- 0.8%.

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

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

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

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 geopolitical risks remain high but they don't seem to be escalating from here, and markets are taking that as a positive signal. But benchmark interest rates are back rising again.

First up today, global banking giant HSBC has announced a doubling of its profits in Q3-2023. They made NZ$13 bln in the three months to September, benefiting from higher global interest rates.

Second, General Motors has apparently settled its dispute with its union who have been on strike, the last of the big three American carmakers to resolve the dispute. It appears, like the other settlements, the UAW has prevailed in all its substantive claims.

In Japan, all eyes are on their central bank who later today are expected to make a significant shift in policy and let some of their interest rate targets rise.

The World Bank has been assessing the prospects for commodity prices. It sees oil prices falling away - assuming we avoid a sudden supply-constrained geopolitical shock. Their base case has oil falling from here, to the low US$80/bbl range. But in their worst-case scenario they see US$150/bbl oil. They also see food prices falling as rising supply more than makes up for rising demand. An exception is for rice. But they are not seeing price being a threat to future global food security out to 2025. In the current circumstances, they have a very sanguine outlook - with the usual caveats about unexpected shocks.

Meanwhile, EU sentiment continues to weaken. It recorded a slight decrease from the previous month and came in lower than expected even if the change was minor. This is the weakest it has been since November 2020. The combination of persistent inflationary pressure and the ECB's extended policy tightening has exerted a dampening effect everywhere. In a week or so we get the next ECB inflation expectations survey.

And there might be some relief in store. In Germany, and with the help of easing food inflation, their October CPI inflation rate fell to 3.8%, sharply lower than the September 4.5% rate. The October rate is their lowest inflation level since August 2021.

Meanwhile, the German economy was expected to shrink by -0.3% in Q3-2023 but the actual result was a -0.1% retreat - and prior quarter falls were revised into slight rises. This was a very much 'better' result than expected, despite its negativeness, and markets were 'impressed'.

In Australia, September retail sales rose more than expected to be +2.0% higher than a year ago, pumped by the +0.9% rise in September from August. The year-on-year result is far less than inflation but the more recent rise is sharpish and may encourage the RBA to hike, thinking that along with earlier +5.6% monthly inflation indicator data, the risks of waiting for are not worth taking.

The UST 10yr yield is up +4 bps from this time yesterday, now at 4.89%. 

The price of gold will start today at US$1998/oz and down -US$6/oz from this time yesterday.

Oil prices have fallen -US$3 today to be now at just over US$82/bbl in the US. The international Brent price has fallen a bit more now just under US$86.50/bbl.

The Kiwi dollar starts today at 58.3 USc and marginally firmer from yesterday. Against the Aussie we are softish at 91.6 AUc. Against the euro we are still just on 55 euro cents. That all means our TWI-5 starts today again unchanged at just under at 68.2.

The bitcoin price starts today at US$34,473 and up just +0.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.0%.

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

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

Kia ora. I'm David Chaston. And we will do this again 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 economic news away from the global geopolitical struggles was only 'average' over the weekend.

In the week ahead, the key local data is our September labour market situation which is due Wednesday. More here.

Then on Thursday (NZT), the US Fed will review its monetary policy position, quickly followed on Saturday (NZT) by their non-farm payrolls report for October.

There will be a raft of PMI updates this week too all for October. And a big set of CPI updates are due this week, the most interesting will be from the EU, Korea, and Turkey. Japan is also due to review its monetary policy decision this week, as well as some second-tier countries like the UK and Brazil.

And we must not overlook we will be into the meat of the global earnings reporting season this week, which could also be influential.

But first, following Friday's surprise surge in US economic growth, details released over the weekend confirmed the sharper than expected rise in consumer spending, up +0.7% in September from the prior month. Their core PCE is up +3.7% for the year. The appetite for both goods and services rose at about the same rate. Personal income rose at a consistent +0.3% from the prior month. Their savings rate eased back marginally.

But behind the consumption rise, there are signs that Americans are avoiding big-ticket items. Firms are reporting softer demand or a preference for less expensive alternatives. It seems the more you have to think about a purchase, the less likely you will make it.

So far, with nearly half of companies reporting, the Wall Street earnings season is developing into a good one, despite some high-profile misses. Of the 245 companies in the S&P 500 that have reported earnings so far, 77% of them beat earnings expectations.

In China, profits earned by their big industrial firms fell by -9.0% from a year earlier in the first nine months of 2023, amid weak demand at home and abroad and persisting margin pressures. The decrease followed a -11.7 % slump in the prior period, so the situation is easing. Things have turned up smartly in the past two months even if they still lag year-ago levels.

Australia has had the same difficulty we had, getting the EU to agree to a trade deal, despite their better hand. The sticking point was access for agricultural products. The top EU officials are Eastern European, with the EU trade chief from Latvia, and their Agriculture boss from Poland, so expectations should not have been high for the weekend 'last ditch' effort at a ministers meeting at the G7. Not unexpectedly those talks collapsed. Australia wants access for its farm products, the EU wants access to Australian minerals. But domestic EU politics couldn't bridge the gap. Earlier in 2023 New Zealand took the crumbs of what the EU offered; the Aussies have not.

The UST 10yr yield is little-changed from this time Saturday, still at 4.85%. A week ago it was at 4.93%. 

The price of gold will start today at US$2006/oz and up +US$20/oz from Saturday to start the week. A week ago we at US$1982/oz.

Oil prices have risen +50 USc today to be now at just under US$85/bbl in the US. The international Brent price has risen more, up +US$1.50/bbl now just under US$90/bbl. But these latest price levels are still lower than a week ago.

The Kiwi dollar starts today at 58.1 USc and marginally softer from Saturday. Against the Aussie we are holding at 91.8 AUc. Against the euro we are just on 55 euro cents. That all means our TWI-5 starts today unchanged at just under at 68.2. This time last week it was at 68.4, so again, little change.

The bitcoin price starts today at US$34,409 and up +2.2% from this time Saturday. Last week it made a notable +14% move up. Volatility over the past 24 hours has been low at just on +/- 0.9%.

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

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

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