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 of more evidence and expectations that the "impending recession" might be avoided.

First up today, the IMF has raised its global growth forecast. They say the world's economy is expected to expand by +3% in 2023, slightly higher than the 2.8% seen in their April forecast. However, at that level growth still remains weak by historical standards mainly due to the impact of the central bank policy rate hikes aimed at combating inflation. The say they now expect the US to expand +1.8% (up), China by +5.2% (unchanged), India by +6.1% (up), Japan by +1.4% (up) and the EU by +0.9% (up). Neither Australia nor New Zealand get a mention in this latest update. China is now the key risk to global growth, they say.

The US certainly isn't getting any expansion impetus from bricks & mortar retail sales. They fell again last week for a third week in a row on a same-store basis.

But that may just be that corner of retail sales. The widely-watched Conference Board consumer sentiment survey reported something of a surge in confidence in July, up sharply from June which was also a good rise from May.

And you can see those improvements also in the two Richmond Fed July surveys out overnight, a bit more in the services survey, but also in their factory survey.

If the American tide keeps coming in, maybe the IMF will need to raise their US growth forecast again. They say the Americans are more likely to avoid a recession now.

Notably absent from a raft of Statements from an emergency Politburo meeting in Beijing yesterday has been any confirmation of widely-expected new economic stimulus measures. However, there were announcements about a relaxation of property restrictions, plans to tackle local government hidden debt, and measures to stabilise employment.

But Reuters is reporting that several Chinese steel mills, all state owned and including the world's largest, have received verbal instructions to cap this year's output at the same level as 2022. This will likely cap iron ore demand in the world's top steel market.

Separately in China, President Xi has fired his recently-appointed foreign minister. In the very unusual move, which probably indicates a power struggle in the ministry, he has been replaced by the recently retired Foreign Minister, Wang Yi. The reason allowed to be talked about is an alleged affair with a TV reporter.

China appointed Pan Gongsheng as governor of their central bank, replacing respected Yi Gang who is said to have reached retirement age. These changes at the top in Beijing aren't the only ones.

South Korea said its economy grew more than expected in Q2-2023, a second straight quarterly expansion. This is despite a decline in exports. Now their central bank expected their GDP will grow +1.6% this year from 2022, slightly higher than the IMF's forecast of +1.5%.

In Germany, the widely-watched Ifo Business Climate indicator fell for the third month in a row in July to the lowest level since last November and well below market expectations.

The UST 10yr yield will start today at 3.91% and up +5 bps from this time yesterday. 

The price of gold will start today at US$1962/oz and up +US$3 from yesterday.

And oil prices are up +US$1 at just over US$79.50/bbl in the US. The international Brent price is now at US$83/bbl.

The Kiwi dollar starts today up +¼c at just on 62.2 USc. Against the Aussie we are slightly softer at 91.7 AUc. Against the euro we are up nearly +½c at 56.4 euro cents. That all means the TWI-5 has risen only slightly and to 69.9 which is up +10 bps from this time yesterday.

The bitcoin price has firmed slightly since this time yesterday. It is up +0.8% and now is at US$29,266. Volatility over the past 24 hours has been modest at just over +/- 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.