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.

And today we lead with news the New Zealand currency and interest rates have fallen after the RBNZ dovish no-change Monetary Policy Statement as markets removed the factors that had priced in some risk for a rise.

Firstly in the US, mortgage applications fell again last week and are now -12% below year-ago levels. Their benchmark 30 year loan interest rate is still over 7% which keeps this market quiet.

The American merchandise trade balance in January was little-changed at about -US$90 bln for the month. It is always less when services are included.

The second estimate of Q4 US GDP confirmed the early estimate, adjusted an insignificant tick lower. The +3.2% expansion in Q4 came after the +4.9% Q3 expansion and +2.4% expansion for the year prior to that. By any measure that is a very good two year track record. They ended 2023 with an economy generating US$28 tln in economic activity, +US$1.5 tln more than at the same time a year earlier. (For perspective, that rise is about the same as the whole Australian economy for a year. And it is double the expansion of the Chinese economy.)

US inventories seem to be in reasonable shape too, overall. But retail inventories crept up solely due to rising unsold car stocks and we should keep an eye on that

In Hong Kong, a creditor of giant Chinese property developer Country Garden has petitioned a court for a winding up order. Country Garden's fall would be as big an earthquake as that of Evergrande. The implosion of the property development sector in the Middle Kingdom is not done yet.

Authorities are working to encourage buyers back into the sector. Success seems far away at present, but a key enticement are historic low mortgage interest rates.

EU sentiment was broadly stable in February even if both consumer and industry sentiment is still running below their long term averages. However retail, construction and the services sector are all running at about their long term average levels.

In Australia, their monthly CPI indicator in Australia stood at 3.4% in the year to January, unchanged from the previous month and less than market forecasts of 3.6%. Still, the latest reading pointed to the lowest since November 2021.

The UST 10yr yield starts today at 4.29% and little-changed from this time yesterday. The NZ Government 10 year bond rate is down a sharpish -9 bps at 4.82% on the changed OCR view.

The NZX50 ended its Wednesday trade up +0.6% with a good afternoon session, bolstered by the removed risk of higher interest rates.

The price of gold will start today down a mere -US$1/oz from yesterday at US$2032/oz.

Oil prices are little-changed at just over US$78/bbl in the US while the international Brent price is now just under US$82/bbl. But that masks considerable volatility over the past 24 hours.

The OCR no-change has knocked back our currency. The Kiwi dollar starts today at just under 61 USc and down almost -¾c from this time yesterday. Against the Aussie we are down -½c at 93.8 AUc. Against the euro we are down almost -¾c at 56.2 euro cents. That all means our TWI-5 starts today at just under 70.4 and down more than -60 bps. But to be fair that just takes us back to where we were two and three weeks ago.

The bitcoin price starts today at US$61,787 and up another strong +8.2% from this time yesterday. It is now back to where it was more than two years ago. Its record high was US$67,633 in November 2021 - although with the retreat this week in the NZD, the bitcoin price in our current is now over NZ$100,000. And at today's NZ$101,323 that is an all-time high. Volatility over the past 24 hours has been unsurprisingly very high as well at +/- 4.6%.

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.