No progress yet for China's reinvigoration

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 the world's second largest economy shows more signs of losing its expansion mojo

China's exports rose in September but at an unexpectedly slowish pace. They were expected to rise +6% from a year ago, but only rose +2.4%. This was the fifth consecutive month of export growth, though at the slowest pace since April. Cut price (dumped) steel exports were a factor, a trade that is worrying may countries. And as expected import growth was weak, barely more than a year ago and well less than the +0.6% rise expected.

China's new yuan loan growth also came in less than expected, rising almost +¥1.6 tln and much better than the 'modest' +¥1 tln in August. Banks are making more debt available. But it was a slower rise than the +¥1.9 tln expected. And in September 2023 they rose +¥2.3 tln, so well down on that basis too.

A lot now depends on issuing a lot more debt. Some this is an additional +¥9 tln is on the way, but to be fair much of that won't be direct commercial bank lending. But sovereign money-printing (bond issuance) may well flow though to this channel.

In a side note for China, we can report that their ETS carbon price rose to its highest-ever level yesterday, ¥103.5/tonne. The reason is that 'tougher' emissions standards are on the way there. But this ETS tax is low by New Zealand standards, equivalent to just NZ$24.40/tonne. Currently our ETS is pricing carbon at NZ$63/tonne. In the EU, that same price is €64.60/tonne (NZ$116). China's disincentive to pollute is cheap by comparison.

Singapore said it's economy grew +4.1% in Q3-2024 from a year earlier. That is its fastest pace in two years and accelerated from +2.9% growth in the Q2-2024 quarter.

Meanwhile in India, consumer inflation rose sharply in September to 5.5%, much higher than the August 3.7%. Driving this change were food prices, up at the rate of +9.2% in September and a far faster jump than the already-high +5.4% rise in August. This data may inhibit their central bank from starting an expected rate cut cycle. They have a mid-point inflation target of 4%.

In the US, recent days have brought sharpish falls in food commodity prices as it becomes clearer that US and international grain harvests will be very good this year. Wheat, soybean and corn prices are all falling on excess supply worries.

Overnight, the Nobel Prize in Economics was awarded. The prize was given to Daron Acemoglu, Simon Johnson and James Robinson for work that advanced the understanding of differences in prosperity between countries. Two are the authors of a book, 'Why Nations Fail'.

The UST 10yr yield is now at just on 4.12% and up +5 bps from yesterday. 

The price of gold will start today at US$2647/oz and down -US$10 from this time yesterday.

Oil prices are down -US$1.50 at just on US$74/bbl in the US while the international Brent price is now at US$77.50/bbl.

The Kiwi dollar starts today at 60.9 USc and down -20 bps from this time yesterday. Against the Aussie we are little-changed at 90.6 AUc. Against the euro we are also little-changed at 55.8 euro cents. That all means our TWI-5 starts today now just under 69.3, and marginally lower from yesterday at this time.

The bitcoin price starts today at US$65,786 and up +5.0% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.2%.

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.