Kia ora,

Welcome to Monday’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 long term global bond yields are rising.

The coming week will be one dominated by the final central bank monetary policy decisions of the year. The big one, the one that will likely move markets, is the US one on Thursday NZT. Markets expect a -25 bps cut to 3.75%. There will also be central bank decisions from Canada (Thursday, no change expected), Switzerland (Friday, no change), Australia (Tuesday, no change), Brazil (Thursday, no change), and Turkey (Friday, -100 bps).

This week will also feature China releasing a series of key November economic data including for exports (expected to be strong), CPI inflation (expected to rise marginally but stay very low), PPI (still in deflation). Monetary and debt data will also be closely watched. In Japan, it will be all about their Q3 GDP, PPI, and machine tool orders.

In India, markets will focus on November inflation data.

In Australia, apart from the expected no-change RBA decision, labour market data will likely show their jobless rate edging up, and business confidence surveys are expected to be broadly stable.

At the end of last week bond markets kept pushing up long term yields. The rise of Japanese long bond yields has this market concerned. But that just comes on top of where US fiscal stability is heading.

In the US, personal income data is in catch-up mode with September details released over the weekend. Income was up +1.9% from a year ago while personal expenditures were up +2.1% on the same basis. Their PCE version of inflation was +2.8% and rising. There are no real surprises in this now-old data.

Meanwhile US consumer debt rose +2.2% or +US$9.2 bln in October, less than expected and less than the September rise. Revolving debt (like credit cards) rose at an annual rate of +4.9%. Non-revolving debt which includes car and student loans was up +1.2%.

Earlier, the University of Michigan December consumer sentiment survey reported it didn't fall from November, posting a small, probably insignificant gain. That leaves it -28% lower than a year ago. Year-ahead inflation expectations decreased from 4.5% last month to 4.1% this month. Despite the nominal improvements, the overall levels across the board remain quite dismal for most consumers there.

Canada reported payroll data for November over the weekend and rather than the expected -5000 dip, they got a +53,600 gain in overall employment. But unfortunately for them, all the gains were in part-time employment (+63,000) with full time jobs shrinking -9,400.

This extended better-than-expected labour market report is one of the reasons the IMF's latest review of Canada was quite positive. They are impressed by how Canada is handling the attempted-trashing it has been getting from the US.

In China, their foreign exchange reserves, already very large, climbed to US$3.346 tln in November and fractionally less than expected. It was the fourth straight month of increases, to the highest level since November 2015 and it happened even though the US dollar weakened. Meanwhile, the People’s Bank of China continued to add to its gold holdings for the thirteenth consecutive month, with reserves edging up to 74.1 mln troy ounces in November and their value rose +4.5% in a month (in USD).

In India, and as expected, their central bank cut its key repo rate by -25 bps to 5.25% at its Friday meeting. They claim confidence in a softer inflation outlook. The RBI has now cut rates by a total of -125 bps since the beginning of the year, bringing the repo rate to its lowest level since July 2022.

In Japan, household personal spending fell unexpectedly in October, and quite hard. It was down -2.9% from a year ago, way different to the market expectations of a +1.0% rise, and reversing a +1.8% gain in September. It was the first decline since April. From September, personal spending fell -3.5%, and starkly different from the expected +0.7% rise.

In Germany, factory orders rose +1.5% in October from September, better than the expected +0.5% gain but slowing from an upwardly revised 2.0% gain in the previous month. From a year ago, their factory orders are down -0.7% however. The latest data was boosted by a very large (+87%) jump in orders for large equipment like aircraft, ships, and trains. There was also a +12% rise in metal production and processing. In contrast, demand for electrical equipment fell -16%. These are all quite big moves with the overall change.

Globally, the FAO says its Food Price Index declined for the third consecutive month in November, with all indices but cereals down. Dairy prices were down -1.6% from a year ago, down -11.5% from their June peak. Meat prices were up +5.0% from a year ago but down -2.7% from their recent September peak.

It is probably worth noting that the Argentine wheat crop is going to be huge this year, one that will have global impacts. In Australia, the winter wheat crop will be the second largest ever too.

Also worth noting is that Trump's boast to farmers that the Chinese will be back buying American soybeans in a major way was just fantasy. They have bought only minor volumes. Administration officials are now admitting there never was any agreement.

And we should also probably note that the copper price is moving up sharply again, back toward its US-tariff-induced July heights.

The UST 10yr yield is now at 4.14%, unchanged from this time Saturday, up +12 bps for the week. 

The price of gold will start today at US$4197/oz, and down -US$18 from Saturday, down -US$13 for the week. Silver is moving higher again, back at over US$58.50/oz and near its record high.

American oil prices are holding at just over US$60/bbl, while the international Brent price is still at just under US$64/bbl, and up about +US$1 for the week.

The Kiwi dollar is marginally higher from Saturday, now at just under 57.8 USc, up +50 bps for the week. Against the Aussie though we are unchanged at just on 87 AUc. Against the euro we are also unchanged at 49.6 euro cents. That all means our TWI-5 starts today at 61.9, and little-changed from yesterday and from a week ago.

The bitcoin price starts today at US$89,503 and up +0.7% from this time Saturday. Volatility over the past 24 hours has been modest, at just on +/- 1.0%.

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.