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 China's rapidly changing demographics are weighing heavily on the country.

But first, and maybe related, today's dairy auction was a weak one. Prices were only very marginally lower in USD terms, but they fell -2.2% in NZD terms as our currency rose overnight. The key WMP price was up +1.9% in USD terms, but SMP fell a sharpish -3.8% and cheddar cheese fell a whopping -9.7% from the same event two weeks ago. That speaks to extended weakness in foodservice markets, probably in China. That leaves prices -10% lower than last year’s level which themselves were -18% lower than the year prior. The long slide continues, hurt by both China's continuing weakness, and the USD's new0-found weakness.

Meanwhile, American retail sales are managing to rise at inflation's level however. They were up +3.4% in the latest Redbook survey of bricks & mortar stores on a same-store basis.

But things remain weak in America's real estate market with existing home sales down -4.1% in October from September to be -15% lower than year-ago levels. Average prices are inching up however, even if the inventory of unsold properties is growing..

The American National Activity Index monitored by the Chicago Fed fell in October to its lowest in seven months. All four major categories they monitor retreated.

The AtlantaFed's GDP Now monitor is suggesting American Q4-2023 economic activity is expanding at a +2% rate. It is worth keeping an eye on this indicator; it was one of the few that correctly predicted the strong Q3 gains. It turned out far more positive than most private sector forecasts.

In Canada, CPI inflation is easing back now. It came in at 3.1% in October, down from 3.8% in September. It was a larger fall than expected. That means they are getting close to their central bank's target range of 1%-3%.

In Hong Kong, the weak Chinese housing market is affecting them too, with a new development offering new homes at prices that are a six year low.

As anticipated, China’s birth rate reached a new low last year, with the number of newborns falling to 9.6 mln, the first reading below 10 mln since 1950.

We should note that EV battery manufacturers are buying much less lithium carbonate, and the price of that raw material continues its sharp retreat. Much like the nickel price we noted earlier in the week. Lithium is down -75% in a year, which was when it peaked. Nickel is down more than -50% in 2023.

The UST 10yr yield is little-changed from yesterday, now at 4.43%. 

The price of gold will start today just on US$2000/oz and up +US$26/oz from this time yesterday. It was last at this level in late October.

Oil prices have slipped -50 USc to be just over US$77.50/bbl in the US. The international Brent price is now at US$82/bbl. It is probably a weaker mover than it seems given the falling USD.

The Kiwi dollar starts today at 60.6 USc and up another +¼c from yesterday. Against the Aussie we are up +½c at 92.4 AUc. Against the euro we are up +½c too at 55.5 euro cents. That all means our TWI-5 starts today at just under 69.6 and a +40 bps rise.

The bitcoin price starts today at US$37,286 and virtually unchanged (up +US$17) from this time yesterday. Volatility over the past 24 hours has also been moderate however at just on +/- 2.0%.

The Wall Street Journal is reporting that Binance and its CEO Changpeng Zhao have agreed to plead guilty to criminal and civil charges under a deal worked out with the Justice Department. A fine of more than US$4 bln has also been accepted.

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.