Investors pause and modest economic gains filter through

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 of a day of mostly restrained gains in economic metrics.

First in the US, mortgage applications rose nearly +7% last week from the week before, driven by a sharpish -27 bps retreat in mortgage interest rates. Despite the gain, they are still -11% lower than the same week a year ago, itself quite weak.

American consumer debt only rose a very modest +US$8.9 bln in June from May, less than the +US$10 bln expected and the +$11 bln gain the prior month. These levels are up just +1.8% in a year. Clearly, Americans are not being profligate in taking on new consumer debt.

The latest US Treasury bond auction was again well supported, this one their 10 year. It delivered bidders a median yield of 3.89%, sharply lower than the 4.22% at the prior equivalent event a month ago.

Across the Pacific, China released its July trade data late yesterday. Their exports were up less than expected, a three month growth low. An export-led recovery doesn't seem to be happening. Their imports rose more than expected and their strongest rise since April. That meant their trade surplus shrank in July.

The Chinese dairy industry is going through a tough time at present with a number of listed companies in the sector delivering operating losses and warning of tepid demand.

China's FX reserves rose to US$3.26 tln, an eight year high even if the monthly gain was relatively minor. But it is still somewhat short of their all-time US$3.98 tln high reached in May 2014.

In Europe, German industrial production rose by +1.4% in June from May, better than expected on strong new order growth and making back about half the prior month's retreat. However both metrics remain deeply negative on a year-on-year basis.

Australia released its five Living Cost Indexes for Q2-2024 today, supplemental to their CPI. For 'pensioners & beneficiaries' they were up +4.1% for the year. For 'aged pensioners' up +3.7%. For 'self-funded retirees, up +3.6%. For other benefit recipients, up +4.6%. For 'employees', living costs were up +6.4%. The overall CPI was up 3.8% in the same period.

The UST 10yr yield is now at just on 3.97% and up another +9 bps from yesterday. 

The price of gold will start today virtually unchanged from yesterday at US$2392/oz.

Oil prices are +US$1.50 USc firmer at just on US$74.50/bbl in the US while the international Brent price is just over US$78/bbl.

The Kiwi dollar starts today up almost +½c from this time yesterday at just on 60.1 USc. Against the Aussie we are up almost +¾c at 91.8 AUc. Against the euro we are up +40 bps at 54.9 euro cents. That all means our TWI-5 starts today at 68.9 and up +70 bps.

The bitcoin price starts today at US$55,912 and down -1.4% from where we left it yesterday. Volatility over the past 24 hours has been moderate, at +/- 2.0%.

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.