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 other than the crazy American political campaign which just seems to feed conspiracy narratives. We will ignore that and just concentrate on the data.

This coming week, all eyes will be on the New Zealand CPI rate for Q2-2024 which will be released on Wednesday. Preview here. Japan, Canada and the UK will all also release June CPI data. Later today we will get the China GDP result for Q2 and it is likely to confirm to the CCP designated targets. But of more interest will be their retail sales, industrial production, and electricity production data. We will also get Australia's June labour force data this week. And from the US it will be retail sales, housing starts, and industrial production. Also, Wall Street will get to see the second week of their Q2 earnings season. The first week was very positive.

Over the weekend, China reported new yuan data for June and it wasn't especially strong. Chinese banks extended +¥2.1 tln in new yuan loans in June, a sharp contraction from the +¥3.1 tln in June the previous year, and slightly below market expectations of ¥2.2 tln. The slip aligned with the sharp slowdown in outstanding loan growth, dropping to +8.1% in June from +9.3% in the previous month, to mark the smallest amount of loan growth since data started being recorded in 1998. A year ago it grew at +11.3%. Total 'social financing' in June was -22% less that the same month a year ago.

China's exports were expected to rise +8% in June ahead of new American tariffs. But they actually rose +8.6% to a 15 month high. Their imports fell -2.3% however when a +2.8% rise was expected. That divergence meant they reported another big surplus - which will undoubtedly spread the fear of Chinese dumping from its over-capacity situation.

They reported they imported almost -16% less from New Zealand in June than in the same month a year ago. They exported +2.4% more to us. For Australia, imports were down -5.2% and exports down -4.9%. For the US, their imports from them were down -4.9% and exports to them up +1.5%. Overall trading with China is pretty muted now. The only destinations that China has good exports to were Brazil, Vietnam, Indonesia, and surprisingly Taiwan. Everyone else - Russia included - is very ho-hum. And total trade (imports and exports) is only healthy with Vietnam, Malaysia, and Brazil.

Japanese industrial production rose +3.6% in May from the prior month to be up +1.1% from a year ago, solidifying the evidence of an improving Japanese economy. No doubt the recent lower yen has helped, especially at the pressure from energy prices has waned substantially.

India's inflation rate rose to 5.1% in June. up a rather startling +1.3 in June alone. From a year ago, food prices were up +9.4% however within that. This rise was not expected, although their central bank is not expected to react to it because they have given themselves a very generous 2% to 6% target range for inflation. But they are now well above the 4% midpoint and the froth developing in their breakneck economic expansion will need to be dealt with soon.

Industrial output in India rose +5.9% in May from a year ago, well above market expectations of a +4.9% gain and marking the highest growth rate since October 2023. Manufacturing which accounts for nearly 80% of total industrial production, expanded by +4.6% with surged growth noted in the pharmaceutical sector (+7.5%), basic metals (+7.8%), mining (+6.6%) and electricity (+13.7%).

American producer prices rose +2.6% in June from a year ago (+0.3% for the month), the most since March 2023, and rising from an upwardly revised 2.4% rate in May. Markets had expected a rise of 2.3%. Under the hood, inflation pressures still lurk but remain at a much more manageable level.

But despite all the vastly improved economic signals, American consumer sentiment still lags. According to the widely-watched University of Michigan survey, it fell for a fourth straight month in July to its lowest since November. Nearly half of consumers are still concerned about high prices and economic uncertainty persisting as their upcoming election looms.

In Australia, the number of permanent arrivals in the country is now almost at a new record high in a very sharp rebound. +12,680 people arrived in the country in May, taking the annual level to +161,000. The record high permanent arrival level was +163,400 in February 2009.

The UST 10yr yield is now at 4.19% and unchanged from Saturday. A week ago it was at 4.28% so a -9 bps net fall since then. 

The S&P futures, which actively trade through the weekend, suggest Wall Street will open tomorrow with a +0.9% gain.

The price of gold will start today down -US$4 from Saturday at US$2410/oz. So far, no safe haven rush.

Oil prices are still at just under US$81.50/bbl in the US while the international Brent price is still at just on US$84.50/bbl. A week ago these prices were US$83/bbl and US$86.50/bbl respectively. Earlier today, Kuwait said it has discovered very large new oil reserves in a marine environment and it plans production "as soon as possible".

The Kiwi dollar starts today still at 61.2 USc and back nearer the week-ago level of 61.4 USc. Against the Aussie we are still at 90.2 AUc. Against the euro we are still at 56.1 euro cents. That all means our TWI-5 starts today at 69.9 but down from the 70.6 of a week ago.

The bitcoin price starts today at US$60,044 and up +2.6% from this time Saturday. Volatility over the past 24 hours has been moderate at just on +/- 2.6%.

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.