Kia ora,

Welcome to Tuesday’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 financial markets are all awaiting the New Zealand Q3-2022 inflation data, due out at 10:45am NZT today. This will set the scene for where fixed home loan rates are headed, and upcoming policy move by the RBNZ.

But first, overnight the factory survey in the State of New York showed business activity declined "modestly" in October. New orders, unfilled orders, and shipments were all little changed from last month. Delivery times held steady, and inventories inched higher. Their labour market indicators pointed to a small increase in employment and the average workweek. Input price increases picked up, while the pace of selling price increases held steady. Looking ahead, firms there do not expect business conditions to improve over the next six months.

Freight shipments across the whole of the US rose +4.8% in September from a year ago but fell -2.9% from August. Having said that, road freight activity is still quite high in the US, certainly higher than pre-pandemic levels. This data supports the contention that the general US economy is expanding with building activity. After a volatile recovery phase following the pandemic shock, growth metrics are now starting to settle down. The Atlanta Fed's GDP Now tracker has their Q3 expansion at +2.8%. More traditional models have it lower at half that level. US Q3 data will be released on October 28, NZT, a week from Friday.

China is in full hagiographic mode these days as their Party Congress dominates everything. But people in the West shouldn't be too smug about that. It was only weeks ago that the UK was also in full hagiographic mode over their monarch. Both are uncritical worshiping, worthy of some religious cults. Both 'opium of the people'.

In China, their new policy direction is setting back their economic "opening up" drives, probably by decades. Companies assess the political risks now outweigh the economic gains. The Russian experience isn't helping. International trade as a glue between political systems is losing its adhesion. The old adage 'security trumps economics every time' is being proven again when stresses are elevated.

In Japan, industrial production came in stronger than anticipated in August, a boost they weren't expecting.

In Australia, spreading flooding is quickly turning their positive grain outlook darker. It may take the top off what was going to be a record harvest.

The UST 10yr yield starts today at 4.01%, down -1 bp from this time yesterday. 

The price of gold will open today at US$1657/oz. This is up +US$12 from this time yesterday.

And oil prices start today up +US$1 from this time yesterday at just under US$85.50/bbl in the US while the international Brent price is just under US$91.50/bbl. Soft demand and record production saw natural gas prices fall today. The softer demand seems to relate to autumn temperatures being warmer than expected. That will also mean more will be exported to Europe to back up their requirements. Germany is now more certain it will get through this winter pretty much unscathed from the Russian gas cut-off.

The Kiwi dollar will open today at 56.4 USc and up more than +¾c since this time yesterday. Against the Australian dollar we are still at 89.5 AUc. Against the euro we are little-changed at 57.3 euro cents. That all means our TWI-5 starts today at 66.9 and up +40 bps.

The bitcoin price is now at US$19,512 and up +1.9% from this time yesterday. Volatility over the past 24 hours has however been modest at just +/- 1.4%.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.