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 the economies of most major powers are in good shape and their companies are prospering.

But for those who follow such things, we should note that President Biden has decided not to run in the Presidential election in November, stepping aside. The race for the Democratic nomination is now open at their convention in Chicago starting on Tuesday August 20 (NZT) even though Biden endorsed Kamala Harris.

Well before then and ahead this week will be some early PMIs for July released for many key economies. Although there are no major June CPI due for release, the US's important PCE inflation data is due on Saturday NZT and that will be keenly awaited. The US will also release its first estimate of Q2 GDP on Friday and markets expect real growth there to be +2% from Q1. Good recent data might well see it above that.

Canada is reviewing its policy rate on Thursday, and market now expect a -25 bps cut to 4.5%

China is set to announce its policy interest rate decision this week, and it should be releasing its troubled FDI update soon, both possibly later today.

Over the weekend, the big overnight news was that a "faulty channel file" from CrowdStrike took down Windows computers everywhere, including in New Zealand. Outages were widespread, including for many bank services. It was a spectacular own-goal and not a malicious strike. We have more details here. And our review shows how you can recover if you were affected.. But be careful; within hours scammers had launched new domains hoping to trick users into 'response scams'. CrowdStrike made its name fixing tech problems. Now it has caused a doozy. The echoes are lingering and may do for some time yet.

And the situation isn't going to do anything for tech company valuations generally. US$13 bln CrowdStrike's share price was down -11% on Friday alone, down -18% for the week.

Interestingly, China seems to have escaped the issue, largely due to its self-sufficiency policies. But it has hit Hong Kong.

A new research note by the New York Fed is pointing out that since the GFC, American factory productivity improvements have stalled. Tech has been no saviour to this sector. Prior to that, large firms built innovative advances. But since even the leading firms haven't got productivity gains. They call the change a 'mystery'. Even shifting low-wage production offshore didn't have the effect of raising it. Nor competition, it seems. And all this come as their employed workforce hit record highs.

In Canada, their expected May retreat in retail sales after the strong April gain came in deeper than expected. If it wasn't for good car sales, it would have been much worse. June is expected to be -0.3% lower too. Now their year-on-year gain is only +1.0%, much less than their inflation of +2.7%.

Canadian producer prices rose +2.8% in the year to June, the same as for the year to May.

Japanese inflation stayed at 2.8% in June, well above their central bank's upper target range. It has been consistently above 2% since April 2022. Food prices rose 3.6% in June although that was lower than the May 4.1% rate. Energy prices were up 2.4% but that is somewhat artificially high because fuel subsidies ended in May. These levels are marginally lower than analyst expectations.

China has ended its internal policy meetings, the Third Plenum. As suspected, little real economic reform seems to have been on their agenda. Just more of a 'security is everything' attitude, more excessive adverbs, and a seeming turn inward. Those hoping for 'reform' and 'opening up' will have been disappointed.

The UST 10yr yield is now at 4.24% and unchanged from Saturday.

On Wall Street, earnings season will hit a crescendo this week with over thirty companies boasting market caps exceeding US$100 bln are set to unveil their Q2 financial reports. So far, only one in seven of S&P500 companies have reported Q2 results but they have been strong. Of those most are reporting earnings growth, and more than anticipated by analysts.

The price of gold will start today up just +US$3 from Saturday at US$2401/oz after Friday night's big drop.

Oil prices are holding lower at just on US$78.50/bbl in the US while the international Brent price is just under US$82/bbl.

The Kiwi dollar starts today little-changed at 60.1 USc but more than -1c over the past week. Against the Aussie we are still at 89.9 AUc. Against the euro we are also still at 55.2 euro cents. That all means our TWI-5 starts today at 69 but down -90 bps for the week.

The bitcoin price starts today at US$66,720 and up a minor +0.3% from this time Saturday. 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.