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 China is wrestling with how to respond to its slowdown, with the measures announced so far causing volatility.

But, first up today, and as expected, the American CPI inflation rate fell in September but by less than expected. It came in at 2.4%, down from August's 2.5%, but above the expected 2.3% rate. For three consecutive months. the month-on-month rise has been +0.2%, so it is tracking at the annual rate as well.

Rents dipped to that +0.2% month-on-month rise but from a year ago they remain +4.9% higher. But food prices were up +0.4% in September from August, the most in a year, even though the year-on-year change was only +2.3%. So one to watch.

However, the overall inflation situation remains pretty benign. No-one will be overly worried about this data. But it will reinforce the Fed that outsized rate cuts at this time are probably not warranted.

Initial US jobless claims however spiked sharply last week, coming in at +235,000 actual (more on a seasonally adjusted basis). There are now 1.62 mln people on these benefits, and virtually no increase from the prior week. The spike probably has more to do with the Florida storm impacts, and perhaps the Boeing strike, than any meaningful slowdown in the US labour market.

In China, money flows around their surging equity markets are creating issues for policymakers. Huge amounts have flowed out of WMP (wealth management products) chasing the expected equity market gains. But foreigners and some local professionals seem to have taken the opportunity to cash out in the rising market. And as the rises haven't been sustained, there may be a lot of very disappointed local investor/speculators.

But help may be on the way. The central bank yesterday announced the start of a key operation to prop up the stock market. That put a floor under the market, embedding the Beijing 'put'.

And all eyes will be on an announced weekend briefing by Beijing authorities on their next economic policy moves.

The rise in Japanese producer prices in August matched the pace in the prior four months, and is embedding at about a +2.5% annual rate. Again, little to morrow policymakers here.

German retail sales unexpectedly rose in August for a second straight month to now be +2.1% higher than year-ago levels, something few saw coming. That is actually their best year-on-year growth since April 2022. Further, this is a 'real', after inflation result. So it is quite strong. Food and travel volumes rose the strongest.

In Australia, it seems that the stage is being set for a new Federal election. On emust be held before the end of September 2025 anyway, but it may well come earlier in 2025 now.

Container shipping rates fell again last week to be down another -4% from the prior week, which takes them back to levels at the start of 2024. They are still elevated because they are +135% higher than pre-pandemic levels, and the reasons still relate to Middle-East security pressures. But clearly the world, and the industry, are finding ways to adapt. All the current weaknesses are China outbound rates.

Bulk cargo rates fell a sharpish -9% last week from the week before, and are now also -9% lower than at the same time a week ago. But there is nothing special about these levels, which are similar to the long run 35 year average. However, on an inflation-adjusted basis, they are remarkably low. It isn't great for shipowners.

The UST 10yr yield is now at just on 4.10% and up another +3 bps from yesterday.

The price of gold will start today at US$2621/oz and up +US$12 from this time yesterday.

Oil prices are +US$3 higher at just under US$76/bbl in the US while the international Brent price is now just over US$79/bbl.

The Kiwi dollar starts today at 60.8 USc and up +20 bps from this time yesterday. Against the Aussie we are also up +20 bps at 90.4 AUc. Against the euro we are up +30 bps at 55.7 euro cents. That all means our TWI-5 starts today now at 69.1, and up +30 bps from yesterday at this time.

The bitcoin price starts today at US$60,422 and down -2.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.3%.

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.