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 the latest IMF forecasts show that the global economy is 'deteriorating'.

First up, American retail sales sagged to a weak +1.5% more than year ago levels in last week's same-store trading, far less than the inflation effect.

All American eyes are on tomorrow's CPI data which is expected to come in lower at 5.2% year-on-year and at an annualised 2.5% rate from February. If that is the actual; result, it will signal good progre4ss in their fight against inflation.

In China, consumer inflation has disappeared altogether. March prices were +0.7% higher than year ago levels and an 18 month low. But they are almost -4% lower than February on an annualised rate basis. That is the second consecutive month of falls. Deflation beckons.

Deflation is already here for Chinese factories. Their producer prices fell -2.5% from year-ago levels, the sixth straight month of retreats. In fact, the March fall from February ran at a -5% annualised rate. It will be no fun making stuff in China these days. The more orders they get, the tougher it will be.

China's new yuan lending rose strongly in March from February, but only to the expected levels. The rise wasn't as much as in January, or even January 2022, but it was the largest March rise ever and by some way. But new lending is one thing. Chinese borrowers are applying savers instincts, paying of their mortgages very much faster so the year-on-year rises are actually quite tiny. Beijing's efforts to juice things up with more debt is undermined by borrowers paying it off very much faster.

Meanwhile, Taiwanese exports fell faster in March than February, and fell faster than expected. Demand from China is the main cause. This is actually quite a grim report, although we should remember than many large Taiwanese companies have capacity outside the country, including in China and the US, like TSMC and Foxconn.

EU retail sales fell in March from year-ago levels and from month-ago levels too, although not by as much as expected. But this data just accentuates the steady decline in retail sales volumes that started at the start on 2022.

In Australia, the RBA pause on its rate hiking program has generated a substantial bump in Australian consumer sentiment, according to a recent survey. The biggest jump was by those who have mortgages. But the new improved level is still low, and Westpac says 2023 will still be lackluster.

On the business front, firms report current trading conditions are good, but confidence isn't, even if it didn't move any lower in March.

As earlier signaled, the IMF today revised its global growth forecasts lower to +2.8% from +2.9% for 2023 and to +3% from +3.1% for 2024, citing tight policy stances needed to bring down inflation, the fallout from the recent deterioration in financial conditions, the ongoing war in Ukraine, and growing geo-economic fragmentation. In its April World Economic Outlook report, they also noted the uncertainty from the recent financial sector turmoil. They also said a hard landing is likely if inflation can't be beaten. They are not optimistic about New Zealand's prospects although they don't see us falling into recession. They forecast +1.1% growth this year which will fall to a meagre +0.8% next year. Australia is expected to grow +1.8% this year and +1.7% next. All these levels are half of the 2022 expansions.

The UST 10yr yield starts today at 3.43%, and up +1 bp. 

The price of gold is at US$2005/oz and up +US$17 from this time yesterday.

And oil prices are up +US$1.50 USc at just under US$81.50/bbl in the US. The international Brent price is little-changed however at just over US$85/bbl.

The Kiwi dollar is again softer against the USD and now at 61.9 USc and its lowest in a month. Against the Aussie we are have fallen -½c to 93.1 AUc. Against the euro we have fallen almost -½c too, now at 56.8 euro cents. That means the TWI-5 is at 69.9 and down -40 bps from this time yesterday and also a one month low.

The bitcoin price is higher again today, now at US$30,228 and up another +3.6% from yesterday. Volatility over the past 24 hours has been moderate at +/- 2.3%.

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’ll do this again tomorrow.