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.

Today we lead with news lackluster data is starting to spread.

But first, American mortgage applications ticked up slightly, breaking its recent set of lower levels. And mortgage rates decreased as signs of slower inflation pushed Treasury yields lower. The 30-year fixed rate saw the largest single-week decline since July, dropping to 6.9%.

Meanwhile, retail sales in the US surged +1.3% month-on-month in October, the strongest rise in eight months, after a flat reading in September and beating market forecasts of an expected +1% gain. The overall rise was largely driven by car sales which were also up +1.3% as supply chain constraints continued easing. That helped juice petrol sales too.

But those good October results are unlikely to continue. Major retailer Target forecast a surprise drop in holiday-quarter sales, blaming surging inflation and "dramatic changes" in consumer behaviour for a drop in demand for everything from toys to home furnishings. Their shares have taken a beating.

And American industrial production was lackluster in October as well, slipping month-on-month when a rise was anticipated, and now only +3.3% ahead on a year-on-year volume basis. Good but not as good as expected. It is no surprise then that business inventories rose again are now +18% higher than a year ago. They aren't really out of line on an historical perspective, but this can't continue much longer.

Canada reported consumer inflation levels for October overnight and they came in at 6.9% and matching the prior month.

The UK also reported their October inflation rate, but this jumped to 11.1% and higher than the 10.7% expected, and even after the impact of their costly Energy Price Guarantee.

Going the other way, Chinese new house prices fell -1.6% in October house prices from a year ago, according to official data. That is their largest retreat since 2015. Only ten of their 70 largest cities reported any gain from a month ago, 19 from a year ago. For resales, the official data says only five of the 70 cities reported any gains from a month ago, only six from a year ago. One dropped as much as -11% year-on-year in this official record.

November car sales in China are reported as weak too.

Japanese machinery orders were also weak. Japanese machinery orders fell -3.3% in September from a month ago, ending the quarter on quite a weak note and contributing to their GDP slip. However, they are expecting a strong rebound in Q4 and the October data kicks that off. However, the sub-sector machine tool order levels in October didn't show an increase from September, so the official forecast effect is yet to show up.

In Australia, their Wage Price Index for Q3-2022 came in stronger than some expected, reaching a decade-high +1.0% from Q2 and up +3.1% from a year ago. By New Zealand standards, these aren't as high (ours was +3.7%), but for them they haven't seen increases like this since 2012. At these levels, real wages are falling fast. All eyes there now turn to their October labour market data due out later today.

Despite popular belief, Australians pay more personal income tax as a share of government revenue than almost any other advanced economy except Denmark, with the lion’s share coming from higher income earners. That is why the IMF is urging it to aggress bracket-creep in its latest review.

Meanwhile Aussie department store retailer David Jones say sales have increased by more than +50% in the first 20 weeks of the year, with its Sydney flagship store and CBD locations performing well ahead of expectations.

The UST 10yr yield starts today at 3.72% and down -12 bps from yesterday in another big retreat.

The price of gold will open today little-changed at US$1776/oz. This is up +US$5 from this time yesterday.

And oil prices start today down -US$1.50/bbl from this time yesterday at just under US$84/bbl in the US while the international Brent price is just over US$91/bbl.

The Kiwi dollar will open today at 61.5 USc and and a minor slip. Against the Australian dollar we are marginally firmer at 91.2 AUc. Against the euro we have slipped back to 59.1 euro cents. That all means our TWI-5 starts today at 70.1 and down -30 bps.

The bitcoin price is now at US$16,499 and down -2.6% since this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.0%. Contagion from the FTX debacle has now hit the Winklevoss twins.

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 on tomorrow.