Economy Watch

Kia ora,

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

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

And today we start with news international travel may be back on the agenda for many, but it is likely to cost a lot more post-pandemic.

But first, US jobless claims came in virtually unchanged last week from the week before. That remains a low level. There are now 1.916 mln people on these benefits. Still this leading indicator isn't yet showing labour market stress rising.

But those monitoring major layoffs are finding more now. US-based employers announced 102,943 cuts in January, and far higher than the 19,100 cuts in January 2022. As spectacular as these changes are, you need to keep in mind the US workforce is 156 mln, so this new level is just 0.07% of that.

American labour productivity rose in the December quarter and labour costs rose at a much slower pace than anticipated, only at a +4% annual rate. Financial markets kicked along on this news.

And US factory orders bounced back to growth in December from their big and unexpected November fall, but not by as much as expected.

Going the other way, Canadian building consents fell more than expected in December after an unexpectedly large rise in December.

In what might be seen as an act of desperation as Beijing's grip on Hong Kong tightens and confidence leaks away, the city's governor is giving away 500,000 free airline tickets to try and entice visitors back in 2023.

As expected, the ECB raised it policy rate by +50 bps to 3.0% during its February meeting, its highest level since late 2008 and indicating to will deliver another +50 bps rate hike at its meeting in March.

And in a mirror decision as expected, the Bank of England raised their rate by the same +50 bps, taking their policy rate to 4.0%.

In Australia, their building consent levels rebounded very strongly in December ending a period where they languished. Bouncing back most strongly were approvals for new apartments, surging by more than +50%. However, despite this December jump, Q4-2022 consent levels are still lower than Q4-2021.

The IMF has been reviewing Australia, and its report says specifically: "The capital gains tax exemption for the sale of main residences, costing around 2½ percent of GDP annually in foregone revenues, should be restricted." (See page 14.)

A commodity we don't watch much is the cost of aircraft jet fuel. But it is in shortish supply, made worse by a sudden shift higher for air travel demand, which started in the US and is expected to grow rapidly in Asia now. We are talking +20% to +60% year-on-year rises. Just in the past few weeks the cost of this fuel has risen +11% since the start of 2023. It is hard to see it reverting back any time soon.

One commodity we do watch regularly is container shipping rates and they were unchanged last week. Bulk cargo rates seem to have stopped falling, bottoming out at a low level.

The UST 10yr yield starts today at 3.38%, and down another -8 bps from this time yesterday. 

The price of gold will open today at US$1916/oz and down -US$8 from this time yesterday.

And oil prices start today with little net change at just under US$77/bbl in the US. The international Brent price is now just under US$83/bbl. 

The Kiwi dollar is softish at 64.9 USc and up +½c. Against the Australian dollar we start today back up +½c too at 91.6 AUc. Against the euro we are back up +½c too at 59.5 euro cents. That all means our TWI-5 starts today at 71.4 and up +50 bps from yesterday and back to where we were this time last week.

The bitcoin price is now at US$23,817 and up a strong +3.6%% from this time yesterday. Volatility over the past 24 hours has been high too at +/- 3.2%.

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

And 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.

Today the big news of the day, the one markets are waiting for, is the US Fed review and its policy re-positioning. But that isn't released until 8am NZT, so this section of our report will be updated when these details are released, on our website. Markets are now expecting them to raise their policy rate by +25 bps, which is a downshift from the recent pace. That will take the upper bound to 4.75%.

But before that, there is other important data out today in the US.

First, there were two parallel PMI reports out overnight for the American factory sector. The widely-watched ISM one slipped slightly further into contraction, but the new orders component was particularly weak. The internationally benchmarked Markit one reported that same decline, but this is a sharpish recovery for this survey. They say new order flows only softened slightly. For both reports, that is now three months of contraction.

US mortgage applications resumed their downward track last week, falling -9% to be -41% lower than a year ago. There was little change in mortgage interest rates last week.

This weekend we get the next US non-farm payrolls report and that is expected to show +185,000 rise which will be less for January than December. Today, the precursor ADP employment report said the gain for private sector payrolls was only +106,000 and that was far less than the +178,000 expected and the surprisingly positive December level of +253,000. To be fair, storms hit hiring in January and that will affect the non-farm payrolls report as well.

And the closely-watched JOLTS report of job openings was released for December today and that reports a continuing 'hot' labour market. These rose to more than 11 mln in surprising strength, when a fall to 10.25 mln was expected. There was no uptick in layoffs. In fact, this report is a major positive surprise.

In China, it is a fine margin but the private Caixin PMI survey did not confirm the official Chinese factory PMI with a shift to an expansion. The Caixin survey still reports a small contraction, but new orders shrank for the sixth straight month.

In India, the woes of the Adani Group mount, in the face of a highly critical report of the honesty of the company. Adani had pushed ahead with a capital raising from 'friends' and had claimed it was fully subscribed. But then suddenly it abandoned the transaction. That leaves it in a precarious position and their share price has fallen into the basement. One of the world's richest men is suddenly no more. No business can survive on distortions.

Meanwhile in New Delhi, the Indian Government released its 2023 Budget which includes a major boost for infrastructure spending. This is their final full budget before the 2024 general election. India is now the fifth largest global economy.

Japan's factory PMI stabilised in January, but that is still a small contraction.

The EU PMIs saw their manufacturing downturn easing further and cost pressures fading. But they are still reporting a small contraction.

EU inflation fell to 8.5% in January when a 9% rate was expected, and December recorded a 9.2% rate. Falling energy costs are certainly helping. Although this is a good result, tracking in a positive direction lower, we should note that 'core' inflation didn't budge.

The UST 10yr yield starts today at 3.46%, and down -7 bps from this time yesterday. 

The price of gold will open today at US$1924/oz and dipping -US$3 from this time yesterday.

And oil prices start today sharply lower, down -US$1.50 at just under US$77/bbl in the US. The international Brent price is now just on US$83/bbl. 

The Kiwi dollar is softish at 64.4 USc. Against the Australian dollar we start today much lower at 91 AUc and a -¾c fall as the Aussie dollar surges. Against the euro we are -½c lower at 58.9 euro cents. That all means our TWI-5 starts today at 70.9 and down -50 bps from yesterday.

The bitcoin price is now at US$23,000 and down a minor -0.5% from this time yesterday. Volatility over the past 24 hours has remained modest at +/- 1.0%.

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

And 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.

Today we lead with news the IMF says the world in back on a rising expansion track, even if it is pretty modest by past standards.

But first, remember all local eyes will be on Stats NZ at 10:45am this morning and the December labour market stats. Our jobless rate is expected to remain at a very low 3.3% but jobs growth is expected to be a minimal +0.3% in a very tight labour market. Any significant changes from these levels could be market-moving.

In China, according to their official survey, their factory sector bounced back to an expansion in January. It was an unexpected improvement.

Better yet for them, their services sector survey recorded a very large improvement, one that indicates the non-manufacturing sector is expanding its fastest in seven months. This was also very much better than anticipated. Most analysts had expected both sectors to struggle for some months yet as they reopened.

Both indicators, if they are confirmed in the private surveys, will probably light a fire under commodity prices in the days and weeks to come.

Japanese industrial production was weaker in December however, but only marginally so, and nowhere near as weak as expected.

Meanwhile, Japanese retail sales rose +3.8% in December from a year earlier, better than expected and following a +2.5% gain in November which was considered very good at the time. This was also the tenth straight month of growth in their retail trade, as domestic consumption continued to recover from the pandemic slump.

While it is still depressed, Japanese consumer sentiment rose again in January, its best reading since the turnaround started in September last year.

South Korean industrial production however is struggling, down sharply in December and by much more than anticipated.

American retail sales picked up a bit last week on a same-store basis but are still expanding barely higher than US CPI inflation, which has been the case all January.

The next American sentiment indicator, this one from the Conference Board, is little-changed but holds the positive outlook it has had for the past six months

In the factory sector, the Chicago PMI was also unchanged, but remained in contraction, and for its fifth month in this heartland area. It's not a great start to the year for them.

German retail sales turned in a very poor December result, far worse than expected. Although they were up +4.2% in December from a year ago, if you remove inflation, their real retail sales fell an eye-watering -6.4%. To be fair to them, they are one of the few countries that highlight their 'real' retail sales result. This time, it isn't good.

But German labour markets eased back only a minor extent in December, and probably not statistically significant. They like many other economies have tight labour markets with widespread skill shortages.

The EU managed to eke out a minor expansion in the overall Q4-2022 result, which took their annual growth to +1.9% and slightly better than expected. Markets were expecting a small overall contraction in this last quarter.

In Norway, their sovereign wealth fund, one of the world's largest investors, posted a record loss of -1.64 trillion crowns (-NZ$250 bln) for 2022, bringing to an end a three-year run of soaring profits, as their stock and bond holdings were hit by the Ukraine war and inflation.

Meanwhile, Australian retail sales fell sharply by -3.9% in December from November, surprising markets. Although strong Black Friday sales and a shift to travel spending in late 2022 put downward pressure on December retail sales, the extent of the fall suggests households have started to cut back on discretionary spending.

Through all this data chatter and changes, the IMF says global growth is projected to fall from an estimated +3.4% in 2022 to +2.9% in 2023, then rise to +3.1% in 2024. These are higher estimates than those made in October, especially for 2023. They also see inflation easing. A lot of this will be led by a Chinese recovery they say, although the 2022 result found the EU outperforming both China and the US.

The UST 10yr yield starts today at 3.53%, and down -2 bps from this time yesterday. 

The price of gold will open today at US$1927/oz and up a mere +US$3 from this time yesterday.

And oil prices start today down another -50 USc at just under US$78.50/bbl in the US. The international Brent price is now just on US$85/bbl. The continued fall in the natural gas price is something to behold, now back below long term averages.

The Kiwi dollar is softish at 64.6 USc. Against the Australian dollar we start today at 91.7 AUc and unchanged. Against the euro we are softish at 59.5 euro cents. That all means our TWI-5 starts today at 71.4 and down -20 bps from yesterday.

The bitcoin price is now at US$23,111 and virtually unchanged from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.5%.

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

And 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.

Today we lead with news we are now on the eve of some large central bank interest rate announcements, and the size of those rises will tell a story about how they see 2023's economic prospects.

First it will be the US Fed, followed by the ECB. Then smaller central banks like the RBA and the BofE will also chip in.

Markets are picking more restrained rises even if inflation levels haven't yet pulled back.

But before that, the next regional factory survey in the US is from Texas where they report flat conditions and weaker new order levels. And that makes it eight months in a row new orders have declined in America's oil patch. This region's results are a drag on the overall results.

In China, and in a somewhat odd announcement, Chinese officials are pushing students to enroll quickly at overseas universities, or their course "will no longer be certified". This will involve a rush for visas and flight bookings, and pressure on overseas universities to confirm enrollment. It isn't entirely clear why they are pressing their young students to act so quickly. Their attempt to explain themselves isn't very helpful.

Health authorities in China's southwestern province of Sichuan will allow unmarried individuals to raise a family and enjoy benefits reserved for married couples, in the latest effort to bolster a falling birth rate.

Taiwanese consumer confidence stayed very low in January, but at least it rose marginally from December which was their lowest since 2010.

In India, Adani Group shares extended their sharp falls as their 413-page rebuttal of an American short-seller's criticism failed to pacify investors. As expected, they framed it as an "attack on India". The unconvincing rebuttal drove share market losses for these companies to almost -NZ$110 bln over just three days.

This comes as the Indian Federal government is about to release its 2023 Budget, and Adani will be an unwelcome distraction. Inside India there is very muted reporting of the Adani woes. But now UAE royals are moving in and buying up positions cheaply.

In Europe, economic sentiment rose from a month earlier in January, to its highest level since June and well above market expectations. This is the third consecutive month it has improved and comes amid easing inflation and an improved economic outlook.

But despite those improvements, including in broad German sentiment indicators, the German economy shrank marginally in Q4-2023. However they revised their Q3 result up. Together they flattened the 2022 expansion it just +1.1%. However the Q4 contraction in Europe's largest economy was mainly led by a small dip in household consumption as those households prioritised saving.

The UST 10yr yield starts today at 3.55%, and up +4 bps from this time yesterday. 

The price of gold will open today at US$1924/oz and down -US$5 from this time yesterday.

And oil prices start today low at just under US$79/bbl in the US which is more than a -50 USc dip from yesterday. The international Brent price is now below US$85.50/bbl.

The Kiwi dollar is little-changed, still at 64.8 USc. Against the Australian dollar we start today at 91.7 AUc and that is firm by more than +¼c. Against the euro we are still at 59.7 euro cents. That all means our TWI-5 starts today at 71.6 and little-changed from yesterday.

The bitcoin price is softer today, now at US$23,166 US$23,631 and down -2.0% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.1%.

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

And 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.

Today we lead with news metals prices are indicating 2023 may be a year of global economic recovery.

But first, if you are North Island listener, we trust you are surviving the downpours. They have been 'amazing', and not in a good way. And of course, today is a holiday in the top half of the North Island. Many of us will be using the day to clean up and brace for the next atmospheric waves. Hanging on the phone waiting for an insurance call center might be adding to some frustrations. Long waits for repairs and remediation will become the norm as contractor capacity is clearly going to be overwhelmed. Insurers are triaging claims, as you might expect.

So much damage has been done, it will have economic consequences here for months.

Elsewhere, China will be returning from its week-long Lunar New Year holiday. Although some may have been in a pensive mood, despite the extreme cold in some parts of the country, there is evidence that 'opening up' has being embraced by consumers. This is early evidence, and the strength of the return is still to be assessed. Beijing is making an effort to encourage consumer spending activity.

Meanwhile, the Indian economy is rising fast, with a growing economic expansion that shines in comparison with China now. But it seems the Indians are just copying the Chinese economic playbook, building it on "more debt" to fuel the expansion. Bank lending rose +16.7% from a year ago. Economic activity rose +7.0%.

It is notable that India's economic and regional strategic power seems to be rising as it slides towards autocracy.

In Japan, their special Tokyo inflation data came in at +4.4% and the fastest increase since 1981. Tokyo prices are considered a leading indicator for national Japanese prices. But it is not clear that this will motivate the Bank of Japan to ease off its ultra-loose monetary policies. They are determined to wait out the current cost-push inflation until it turns into a demand-driven one, accompanied by wage growth.

In the US, we got more detail on the American PCE inflation level and it confirmed the implied rate in the Q4 GDP data. By this measure prices are rising at a +5.0% rate in December which is down from +5.5% in November. But the Q-on-Q rate has slipped away quite a bit to an annualised rate under 2%. Markets liked that data and all rose on the assumption the US Fed is more likely to ease back at its next rate review meeting on Thursday, February 2 NZT. (The US January CPI data is not due out until February 15, NZT.)

Also positive is that household incomes are rising (+0.2% in December from November) faster than expenditures which fell more than expected (-0.2%). Consumers themselves are girding for tougher times, it seems. And that may also be a signal the US Fed likes.

Meanwhile American real estate agents are hoping their market funk is easing. Pending home sales unexpectedly rose +2.5% in December from November, the first rise since May, and beating market expectations of a -0.9% drop. Still, year-on-year, pending home sales sank a whopping -34%.

So perhaps it is no surprise that consumer sentiment improved in January, even it was only by a small amount and is still historically low.

In Australia, there is evidence price pressures are easing for businesses. Their producer price index rose +5.8% in the year to December, but only at the annualised rate of +2.8% in the December quarter from the September quarter. We won't get to know how our PPI data tracked in the December quarter until February 21.

Meanwhile, as January draws to a close, Sydney housing market observers are expecting their real estate weakness to mean median prices there have now fallen below AU$1 mln. That will be more than a -12% fall over the past 12 months, down from AU$1.14 mln a year ago (all dwellings). In inflation-adjusted terms, that fall is now approaching -20%. (-12% nominal when consumer prices rose 7.8% over the same time.)

Globally, we should note that some key metals, like iron ore, tin, zinc and aluminium are all now at six-month highs. Dr Copper has joined that group too. These gains are all on the basis that the US will still keep growing in 2023, China will recover, and India's rise will extend. Interestingly neither coal nor oil are in that group. Inflation-adjusted, the oil price is really languishing, hurt by mountains of Russian oil that has few customers, and those it does have are low-balling the price

The UST 10yr yield starts today at 3.51%, and down -2 bps from this time Saturday. 

The price of gold will open today at US$1929/oz and very little changed, even from week-ago levels.

And oil prices start today low at just over US$79.50/bbl in the US even if they are +50 USc up from Saturday's level. The international Brent price is now at US$86/bbl.

The Kiwi dollar is little-changed, still at 64.9 USc. It is also little-changed in a week.  Against the Australian dollar we start today at 91.3 AUc but that is down -1.7% in a week. Against the euro we are still at 59.7 euro cents. That all means our TWI-5 starts today at 71.5. For the week however we are -30 bps lower.

The bitcoin price is firmer today, now at US$23,631 and up +2.2% from this time Saturday. Volatility over the past 24 hours has been modest at +/- 1.5%.

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

And 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.

Today we lead with news American resilience is on full display today.

First up, our weekly look at the up-to-date stress index of the American labour market shows ... nothing. Weekly jobless claims fell last week and fell more than expected. On a seasonally adjusted basis it is a 9-month low. There are now only 1.87 mln people on these benefits, -7% fewer than a year ago. There may be a recession coming in the US in 2023, but it won't be led by their labour market.

However, the tech-sector layoffs keep building, and news about them is everywhere. But demographics and their widespread labour shortages in skilled positions isn't meaning their labour market is buckling. Not yet, anyway.

And there is no sign in America's factories either. Durable goods orders soared +5.6% in December from November, the sharpest gain since July 2020 and well above market forecasts of a healthy +2.5% rise. From a year ago these orders are +11.2% higher, more than accounting for inflation. Capital goods orders were up +25% year-on-year. No sign of recession in this factory order data.

But this data is for the immediate future. We are coming off a flat period in American factories however. The National Activity Index produced by the Chicago Fed, reported little change. And the next Fed district to report its factory activity said it was "mostly flat".

New home sales rose in December from November, but they still languish -16% below year-ago levels. American real estate agents probably think there is a recession in their sector.

Still, despite these apparent 'flat' indicators, overall their economy is still expanding. The advance estimate of Q4 American economic growth came in better than expected, recording an annualised +2.9% expansion which was better than the +2.6% expected although it was a slowing from the +3.2% expansion in Q3. But for such a large economy, and in this part of the business cycle, +2.9% is a Goldilocks outcome.

Another reason to be impressed is that personal disposable income rose +6.5%, faster than personal spending, which allowed personal savings to rise. Of course the distribution won't be even, or even 'fair', but it is better than decreases.

PCE inflation cooled to 3.2% pa, well lower than the 4.8% rate in Q3.

Hong Kong's exports are really struggling now, down -29% from a year ago. But other nations are rising. Singapore's industrial production rose faster in December than a while. And the Philippines reported strong GDP expansion.

After their Australia Day holiday, Aussies are supposed to return to work today. But that seems unlikely. Market activity there is probably going to be very light today.

Global container freight rates changed little last week, but what change there was, were slips, especially in freight out of China. Bulk cargo rates fell further and are now well below their long term average levels - and after inflation, at lowest-ever levels.

The UST 10yr yield starts today at 3.47%, and up +1 bp from this time yesterday. 

And we should note that markets have sharply pared back their bets on a +75 bps rate hike from the RBNZ now. +50 bps is currently how the market prices that possibility, which is a very sharp change in just a few days. Swap rates have followed them down. That may all change again however if the labour market data stays strong when it is reported next week. New Zealand inflationary impulses are certainly not beaten yet.

The price of gold will open today at US$1927/oz and down -US$9 from this time yesterday.

And oil prices start today up +50 USc, at just under US$81.50/bbl in the US while the international Brent price is up +US$1 at US$87.50/bbl.

The Kiwi dollar is little-changed from this time yesterday, now at 64.7 USc. Against the Australian dollar we start today at 91.2 AUc. Against the euro we are at 59.2 euro cents. That all means our TWI-5 starts today at 71.3, and also little-changed.

The bitcoin price is firmer, now at US$23,022 and up +1.8% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.8%.

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

And 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.

Today we lead with news high and rising inflation in Australia is leaving their central bank with some ugly choices.

But first, US mortgage applications rose last week from the prior week, a third week of improvement, while mortgage interest rates remained largely unchanged. But year-on-year the variations still remain very negative.

The Canadian central bank raised the target for its overnight rate by +25 bps to 4.50% as expected, and signaled the end of its current aggressive tightening phase. But it is continuing its sell-down of bonds

China might be on holiday this week, but their weather is becoming a story there. Temperatures have dived - and that has caught out their energy system to supply enough heating in some key regions and cities. Local governments starved for cash after enormous spending on their “zero Covid” measures cannot afford to keep up adequate supplies of natural gas. And they are in no position to bring in subsidies which have been a strategy in the past to make heating and cooking affordable in winter. As the pandemic spreads illness, the cold is adding to the misery of millions. These are problems China doesn't need right now.

Singapore said its consumer inflation rate rose by 6.5% in December 2022, which was less than the 6.7% it recorded in November. And the annualised rate from November to December rose at just a +2.5% rate.

Yet another sentiment indicator from Germany reports recovering conditions, this one for business sentiment from Ifo. Bolstering these surveys, the German Government said its economy will not fall into recession in 2023, which given what is going on, on its borders, is an impressive achievement.

EU corporate earnings are surprising some with their staying power, and also dispelling fears a recession is imminent there.

In Australia, their CPI rose +7.8% in the year to December. That was above market expectations and its highest since 1990. The most significant price rises were domestic travel (+13.3%), electricity (+8.6%), international travel (+7.6%). Food prices rose +9.2% there. The RBA next reviews its cash rate target on Tuesday, February 7, 2023. It is more likely to be a substantial rise now to be followed by more big ones - and that in turn may affect the RBNZ thinking for its February 23, 2023 MPS review.

The RBA seems to be at an inflection point, with tough choices. Either go hard and risk recession or hold off and risk a wage-price spiral.

And staying in Australia, their new home market is retreating faster. Sales of new homes fell by -4.6% in December leaving sales in the final quarter of 2022 a remarkable -42% lower than at the same time in 2021. Anecdotal data in New Zealand suggests a similar pattern is developing here in 2023.

The UST 10yr yield starts today at 3.46%, and little-changed from this time yesterday. 

The price of gold will open today at US$1936/oz and up another +US$5 from this time yesterday.

And oil prices start today up +US$1, at just under US$81/bbl in the US while the international Brent price is little-changed at US$86.50/bbl.

The Kiwi dollar has fallen by -½c from this time yesterday, now at 64.6 USc. Against the Australian dollar we start today down a full -1c at 91.3 AUc. Against the euro we are down -½c at 59.3 euro cents. That all means our TWI-5 starts today at 71.2, and down -70 bps from yesterday.

The bitcoin price is a little lower again, now at US$22,622 and down -1.0% from this time yesterday. Volatility over the past 24 hours has remained modest at +/- 1.6%.

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

And 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.

Today we lead with news it will be all about CPI inflation today.

First, Stats NZ will release our December inflation figure at 10:45am (markets expect 7.1%). Then at 1:30 pm NZT the Aussies will release theirs (markets expect 7.5%). Misses from these expectations could well move financial markets.

Internationally last week, American retail sales grew their slowest on a year-on-year basis for same-store trading, and that wasn't enough to keep pace with inflation and was the weakest result since early 2019 (excluding the pandemic twists).

The Richmond Fed factory survey wasn't flash either and reported some deterioration in business conditions in January. New order levels and order backlogs were notably weak. Price pressures are still high even if they are falling away quite quickly now.

More generally, activity in both service and manufacturing sectors fell at a slower pace in the US in January according to the internationally benchmarked Markit PMIs for both their factory and services sectors. These are out on a 'flash' basis for this month.

Overall, companies are shedding temporary jobs faster now, in what can be an early sign of a labour market contraction.

In Japan, the small steps are going the other way. Japan's factories contracted slightly slower in January, and their services sector expanded slightly faster to a good moderate pace.

In Europe, the start of 2023 saw business activity rise marginally, according to their flash PMI data, showing a tentative return to growth after six successive months of decline.

Backing that up, the German GfK consumer sentiment survey improved yet again (that is, got less negative). The latest reading was the highest since August 2022, pointing to the fourth straight month of improvement in consumer sentiment.

The New Zealand service sector might only be expanding modestly, but at least it is still expanding. The Australian services sector is contracting. The best they can say is that it contracted less in January than in December. And the Aussie factory PMI has dipped slightly from a tiny expansion in December to a small contraction in January.

The NAB business sentiment report in Australia 'improved' in a very marginal way in December from a small negative in November. This was disappointing because it was expected to shift into positive territory. But it didn't. NAB is claiming inflation has now peaked in Australia.

But Gulf airline Emirates said travel demand is growing faster than expected and is reintroducing pre-pandemic service levels to Sydney and Melbourne and restarting services to Christchurch via Sydney. Services to Auckland had been restored earlier.

The UST 10yr yield starts today at 3.48%, and back down -5 bps from this time yesterday. 

The price of gold will open today at US$1931/oz and up +US$8 from this time yesterday.

And oil prices start today down -US$2, at just over US$80/bbl in the US while the international Brent price is down to just over US$86.50/bbl.

The Kiwi dollar has firmed slightly overnight, now at 65 USc. But that is the highest of 2023 and a +2.4% appreciation. Against the Australian dollar we start today little-changed at 92.3 AUc. Against the euro we are firmish at 59.8 euro cents. That all means our TWI-5 starts today at 71.9, and firm from yesterday but up only +0.7% for the year.

The bitcoin price is marginally lower, now at US$22,867 and down a mere -0.2% from this time yesterday. Volatility over the past 24 hours has remained modest at +/- 1.1%.

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

And 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.

Today we lead with news investor inflation expectations are the key uncertainty this week.

Despite China being on holiday, it will be a busy data week ahead. For us it will be highlighted with the Wednesday release of our Q4-2022 inflation data. That will be quickly followed by the same data from Australia. Both have the potential to be market-moving. Markets expect the NZ CPI rate to come in at 7.1% and little changed from the September 7.2%, and for Australia at 7.5% and up from the prior 7.3%. The week will end with the US releasing its first estimate of 2022-Q4 GDP growth on Friday, and a +2.6% rate is expected. At the same time a +2.5% rise durable goods orders is expected. Before all that flash PMI data for January for the US, Japan, Europe and Australia will be released. We will also be following the Canadian policy rate decision on Thursday (+25 bps expected to 4.50%).

Of course, it is a full week official holiday in China, and Taiwan and Singapore are other countries taking a New Year holiday today at least. Hong Kong's financial market will be closed until Thursday this week, unlike Shanghai which doesn't reopen until Monday, January 30.

The Chinese central bank reviewed its loan benchmarks late Friday and left them unchanged. This wasn't a surprise and is the fifth straight month they have been untouched. 

The gigantic Chinese New Year (Year of the Rabbit) travel event has started, which will see more than 900 mln people move around internally and externally, probably extending Covid to every corner of their country. Some 2.1 bln trips are expected to take place during the 40-day Spring Festival period, double the number of treks from last year.

China's financial markets and government departments will be closed for all of next week, returning on Monday, January 30, 2023.

But when they return, there is some optimism that the restart to their economy will be stronger than we have seen it for a while, and that should drive a counterbalance to an expected slowdown in the US economic engine. (Optimism about China's prospects is not universal however, even in China.)

It's been a long-talked-about American slowdown, but there are few real signs of it yet. However, it will be no surprise if one comes. Most analysts expect it to be a mild retreat, and if inflation also retreats and stays down, then a more sustained rise may follow.

American resales of existing homes fell in December, continuing housing's current funk. 

The key to watch is the American labour market. Their tech industry retrenchment is gathering steam, with Google the latest to announce very large job cuts. But so far, the wipe out by the tech titans has had little impact on overall employment.

And of course, markets will be jostling ahead of the next US Fed meeting on February 2, 2023 (NZT).

Canada retail sales rose in December after falling in November, but the shifts are pretty modest. Year on year sales rose in nominal prices (+5.1%) less than their inflation rate (6.3%), they are seeing volume declines.

Japanese inflation hit a 41-year high in December, up +4% and above their central bank 2% target for a ninth straight month. It is up from +3.7% in November, the sharpest rise since 1981. The rise from November to December was at an annualised +3.5% rate, so perhaps there is some moderation coming.

In Australia, investors are increasingly wary of commercial real estate. They suspect there will be a reset in asset values as credit markets tighten will hit office landlords. It a re-pricing that will be wider than that sector of course, but it has been on the cards for some time as interest rates rise. Much will depend on market reactions to the upcoming CPI data.

The IMF is about to release its latest global forecasts and indications are it will be raising estimates of expansion, including in China - and the EU.

The UST 10yr yield starts today at 3.48%, and unchanged. 

The price of gold will open today at US$1926/oz and very little different from where we left it on Saturday.

And oil prices start today little-changed, at just over US$81.50/bbl in the US while the international Brent price is just over US$87.50/bbl.

The Kiwi dollar has firmed slightly overnight, now at 64.7 USc. Against the Australian dollar we start the week at just under 93 AUc. Against the euro we are unchanged at 59.6 euro cents. That all means our TWI-5 starts today at 71.8, and the highest of the year so far.

The bitcoin price is up further, now at US$22,836 and a heady rise of +6.9% from this time Saturday. Volatility over the past 24 hours however has been modest at +/- 1.6%.

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

And 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.