Economy Watch

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 of a settling of the global economy after some big announcements by China. So far, little seems to have changed, other than investors now think they can't lose with Chinese equity investments.But first, the surge in American mortgage applications we noted last week has extended. Last week they soared +11% from the prior week, extending the earlier +14.2% gain to lift mortgage application volumes to their highest since June 2022, and now above year-ago levels. It's been a sudden shift. In fact this is the best two-week period in their housing market since late 2015. The upswing in home loan demand came as benchmark mortgage rates fell to a two-year low of 6.13%.So far it has not shown up in the purchase of new homes. Sales of new single-family homes fell -4.7% in August to an annual rate of 716,000 units. While this drop partially offset the revised +10.3% surge from the previous month, it was still marginally more than market forecasts. This market has been on a slow recovery since August 2022. But the mortgage application surge may well change this momentum in September.There was more evidence today that the US Government is having no problem attracting investors for its debt. The Treasury 5 year Note was well supported again with US$100 bln more in bids than available and the median interest rate came in at 3.46%, down from the 3.59% at the prior equivalent event a month ago.Taiwanese retail sales were subdued in August, rising only +1.1% from the same month a year ago. But their industrial production was up more than +13% on the same basis.After China's big signals of substantial monetary stimulus (and yesterday's follow-through of a -30 bps cut to the MLF rate to 2.0%, its biggest cut ever) you might have thought that commodity prices would have risen in anticipation of a meaningful market reaction. But they haven't - yet anyway. The copper price rose prior to the official announcements, but haven't kicked on today. Iron ore has stayed subdued. Other key metals have had conspicuously little reaction. This may all mean markets have been quite unimpressed with the scale of this stimulus effort. No-one is actually gearing up for 'the recovery'. Local investors still think they are however. But Aussie investors are very sceptical.Staying in China, an overnight announcement revealed a one-off cash handout to the poor will happen early next week. The amount of the gift wasn't revealed however.Overnight the Swedish central bank cut its key policy rate by -25 bps to 3.25% following a similar move in August and in line with market expectations. They signaled further cuts in the two remaining monetary policy meetings of the year.We don't often look at the French economy, Europe's second largest. But an overnight survey is worth noting. French consumer confidence rose more than expected in September and way above market expectations. This is the highest reading since February 2022. Consumers were less pessimistic about the outlook on both their financial situation and their standard of living. And their saving intentions rose. Tax rises for the rich seem to be on their agenda now.In Russia, the rise of their industrial production is slowing and quite fast. War is giving no meaningful boost to their output. Even corporate profits are struggling, down -6.5% from a year ago.In Australia, August inflation as monitored monthly was expected to fall to +3.1% from 3.5% in July. But in fact it fell far more sharply, down to 2.7% in August from a year ago. The RBA will be relieved as this is the first indication they wanted to see of it within their 1-3% target range. But, a lot of this was due to falls in the cost of petrol and electricity. And that came from a one-off impact of the start of their Commonwealth Energy Bill Relief Fund rebates, and the State Government rebates in Queensland, Western Australia and Tasmania, which drove the largest annual fall in electricity prices on record, down almost -18%. These rebates will last through 2025. Staying high however are rents, still rising about +7% pa.The UST 10yr yield is now at just on 3.79% and up +6 bps from yesterday. The price of gold will start today at US$2661/oz and up +US$11 from yesterday to yet another new all-time high.Oil prices have fallen -US$2 to US$69.50/bbl in the US while the international Brent price is now just over US$73/bbl. Libyan supply is on its way back.The Kiwi dollar starts today at 62.7 USc and down more than the ½c it gained yesterday. The spike was brief. Against the Aussie we are down -20 bps at 91.8 AUc. Against the euro we are down -40 bps at 56.3 euro cents. That all means our TWI-5 starts today at 70.3, and down -30 bps from yesterday.The bitcoin price starts today at US$63,112 and down a minor -0.2% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.4%.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.

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.Today we lead with news of some major emergency moves in China to reinvigorate their economy.But first, there was a good GDT Pulse auction result earlier this morning, although the reverse of what the futures markets had signaled. There was no gain in SMP prices, holding its recent higher levels. But the important WMP price rose +2.8% from the full auction a week ago and back to levels of a year ago.This is a good backdrop to this morning's Fonterra 2023/24 results announcement.The expansion of American retail sales at physical stores rose +4.1% last week from the same week a year ago. That is good but a slowing from the gains since August. A year ago they were rising +3.6%.But the widely-watched Conference Board consumer sentiment survey for September has brought a hesitation, slipping to the lower end of the narrow range it has been in for the past two years. Worries about job security seems to be a key factor here, although we probably shouldn't make too much of a range-bound shift.Election jitters have hit the Richmond Fed's factory survey covering the mid-Atlantic states, all "battle-ground states" where uncertainty of the outcomes is pronounced.There was a very well supported US Treasury 2 year bond auction today, delivering a median yield of 3.47%. That is down from 3.83% at the equivalent event a month ago. In both more than US$100 bln in bids went unsatisfied.And ratings agency Moody's has warned that a downgrade for the US Federal Government is a live possibility unless it tackles its growing deficits. This comes a year after it placed the AAA rating on 'negative outlook'. Clearly it is watching this with some unease.Across the Pacific, Japan's business activity continues to rise, largely based on a service sector that is now expanding at its fastest pace since April. Factory activity isn't expanding however, according to this PMI survey.Taiwanese export orders rose +9.1% in August from the same month a year ago, to a nine month high.In China, "a leading Chinese economist" and politician has called for Beijing to launch a ¥10 tln stimulus package (NZ$2.2 tln) equivalent to 8% of Chinese GDP, to tide their economy over through the rest of 2024, as credit growth and domestic demand remain drained of energy. The economist calling for this is Liu Shijin, deputy-director of the China Development Research Fund and deputy-chair of the economics committee of the Chinese People's Political Consultative Conference (CPPCC). He has been echoed by Yu Yongding.Responding to the plea for a jolt, the Governor of the Chinese central bank said in a rare briefing that they will cut their reserve requirement ratio by 50 bps, and likely match that again before the end of 2024. Together, these will add ¥2 tln 2024 liquidity. .He also said that the seven-day repo rate will be reduced by 20 basis points to 1.5%. And there will be a -30 bps drop in their medium term lending facility. Mortgage rates will be dropped by -50 bps and the minimum deposit on a home purchase will be dropped to 15%. They did not specify exactly when these changes will go into effect however. More here.Although these measures have more than a whiff of panic surrounding them, clearly President Xi has given his officials a rocket to act quickly to turn around an economy stuck in a rut. And equity markets responded with their own rocket.And so did some components of the commodities market; copper, for example. We may see more commodity action today. But we should also keep in mind the program announced yesterday is very much less than what its own experts are calling for.Yesterday, the RBA's policy review kept its rates unchanged in the face of higher than target inflation levels. It has been four years since they have had a rate cut. But inflation remains above target and is proving persistent so their room to move is limited.The UST 10yr yield is now at just on 3.73% and down -2 bps from yesterday. The price of gold will start today at US$2650/oz and up +US$32 from yesterday to yet another new all-time high.Oil prices have risen +US$1 to US$71.50/bbl in the US while the international Brent price is now just on US$75/bbl.The Kiwi dollar starts today at 63.3 USc and up +½c from this time yesterday and its highest of the year and back to where it ended in 2023. Against the Aussie we are up +40 bps at 92 AUc. Against the euro we are up +30 bps at 56.7 euro cents. That all means our TWI-5 starts today at 70.6, and up +40 bps from yesterday and a three month high.The bitcoin price starts today at US$63,216 and little-changed from this time yesterday. Volatility over the past 24 hours has been low at just under +/- 1.0%.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.

Milford Asset Management’s head of KiwiSaver says KiwiSaver – the country’s voluntary retirement savings scheme which is in its 17th year – is a teenager that’s about to head into adulthood.“I think it's the right time to have the discussions we were having at the [Financial Services Council] Conference. By and large, providers are pretty well aligned around how we can improve KiwiSaver and make it better for New Zealanders retirements,” Milford's Murray Harris says on a new episode of the Of Interest podcast.KiwiSaver has become a bigger topic of financial conversation this year and the discussion around potential tweaks and changes to the savings scheme has become more of a ‘when they happen’ and less of an ‘if’ scenario.At the Financial Services Council Conference in early September, KiwiSaver was a hot debate, with KiwiSaver providers discussing how New Zealanders are simply not saving enough for their retirement and the Retirement Commissioner pointing out that Kiwisaver governance lacks clarity.Harris tells interest.co.nz that KiwiSaver has been “very successful” in attracting members and the savings scheme doesn’t have a participation problem.The latest KiwiSaver statistics out of Inland Revenue shows over 3.36 million people are now enrolled in KiwiSaver as of July 2024 and Harris says the participation rates are highest amongst those between the age brackets of 25–34 and 35–44.  “The participation's really good, but we have an issue around the contribution rate or the amount that people are contributing,” he says.“Most people are doing 3%, and ... 90% of employers only do 3%. So together, those contributions are not going to be enough to get people to where they need to be for a really comfortable retirement. And I think that's the key issue. That's the real nub of it being very successful in terms of getting people interested and involved, but we're just not contributing enough.”The Financial Markets Authority released its 2024 KiwiSaver report on Tuesday which showed total KiwiSaver contributions – this includes employee, employer and government contributions – came to $11.2 billion in the March 2024 year. This is up 6.5% from the prior year.Harris says the KiwiSaver industry has a job to do in terms of educating its members that the current default contribution rate in KiwiSaver, which is 3%,  is a good start – but not enough to get people to where they likely think they're going to be savings wise by retirement.“Most people think it's 3%, and that's the problem with the settings as they are. You tell people to do 3%, that's what they'll do, and they'll think that's all they need to do. But in reality, it's a lot more,” he says.The Retirement Commission has called for a higher default contribution rate of at least 4% and says employers should be matching at this level or more. Harris says there are also things New Zealand can learn from “the lucky country” – Australia  – when it comes to saving for retirement.  The minimum contribution rate for Australia’s superannuation scheme – the equivalent to NZ’s KiwiSaver scheme – is currently 11.5% for employees and employers. This is being raised to 12% in 2025.“They've amassed a lot of assets and they've been able to reinvest those assets into the local economy. So you go to Australia, you cross some wonderful bridges, the motorway systems, the tunnels through central Sydney. Now they've been built with superannuation money and it's been a win-win because the economy moves better, industry can move their goods and services at a better pace and they've provided some great investment returns for investors, for super investors. So that's a win win. I think that's something that we could definitely learn from,” he says.*You can find all episodes of the Of Interest podcast here.

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 global expansion seems to be getting more uneven.In the US, the good economic data keeps on coming. They reported a healthy PMI expansion in September, driven primarily by their service sector which is now expanding its fastest since March 2022.And the Chicago Fed's National Activity Index surprised with an unexpected gain in August.And because there is now less than a week until the end of Q3-2024, the estimates now see an expanding economy rising at between a +2 and +3% rate 'real', and keeping up the pace of expansion that shows no sign of slacking. On a 'real', inflation-adjusted basis, the Trump economy grew +2.8% in his four year term. On the same 'real' basis the Biden economy has grown just on +10% during his 3½ years so far.So it may seem a bit odd that the heads of the regional Fed banks in Chicago, Minneapolis, and Atlanta all said, at a conference yesterday, they recommend more rate cuts.India's economy is still expanding fast in September, according to the same PMI survey results. However, the pace isn't quite as fast as they had in August.Singapore said its August inflation rate fell to 2.2% in August from 2.4% in the prior two months, matching market forecasts and notching the lowest level since April 2021, as food prices stayed at their lowest in over two years.China's September PMIs aren't released until next week. But they may not be great.China's car dealers are pleading for government help as demand softens fast.So in China yesterday, their central bank unexpectedly lowered the 14-day reverse repurchase rate by -10 bps to 1.85% yesterday. They also injected ¥75 bln in liquidity into the banking system. And they pumped in up to another ¥160 bln via 7-day reverse repos, but kept the rate unchanged at 1.7%.And in another unusual step, their central bank said its boss will give a unique briefing later today on "financial support for economic development".Also not great were EU PMIs. Their service sector is still expanding, but not as fast and service activity is now at a 7 month low. Their factory sector is actually contracting and at a nine month low. Leading them down is Germany.The flash Australia Manufacturing PMI fell further into contraction in September, an eighth consecutive month of contraction in manufacturing activity and at the fastest drop since May 2020. New orders and production also fell at the quickest pace in 52 months amid softening demand conditions. Their service sector expansion has almost evaporated, according to this same survey.And staying in Australia, their competition regulator is taking on the two dominant and giant supermarket chains (Coles & Woolworths), alleging that ‘Prices Dropped’ and ‘Down Down’ claims and the like are actually misleading.The UST 10yr yield is now at just on 3.75% and up +2 bps from yesterday. The price of gold will start today at US$2628/oz and up +US$7 from yesterday to a new all-time high again.Oil prices have dipped -50 bps to US$70.50/bbl in the US while the international Brent price is now just under US$74/bbl.The Kiwi dollar starts today at 62.8 USc and up +40 bps from this time yesterday and near its highest of the year. Against the Aussie we are unchanged at 91.6 AUc. Against the euro we are up +½c at 56.4 euro cents. That all means our TWI-5 starts today at 70.2, and up +30 bps from yesterday.The bitcoin price starts today at US$63,245 and +0.3% from this time Saturday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.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.

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.Today we lead with news a risk-on shift will start the week in most major economies.As we wind down September this week here, into both school holidays upcoming and daylight saving on the weekend, the key focus will shift to Fonterra's results on Wednesday, and local consumer sentiment on Friday.And tomorrow the RBA will review its monetary policy settings including its cash rate target. Despite the continuing inflation pressures, no-one really expects them to alter their existing 4.35% policy rate this time. Oddly that comes a day before they release their August monthly CPI report, which is expected to slip from 3.5% to 3.1%. They hope so at least. And a day after that they release their Financial Stability Report.In the US, the key focus will be on PCE prices, personal income and spending reports. They are expected to validate the Fed rate-cut move. And they will release their final Q2 GDP report, PMI data, consumer confidence, durable goods orders, and both new and pending home sales data too. There will be September PMI reports from many other economies as well.Over the weekend, China left its loan prime rates unchanged in its September fixing, as expected. These remain at record lows.And their 'youth' (16-24) unemployment rate was 18.8% in August according to official data, the highest since they changed the basis of this stat in January. They say their general jobless rate is 5.4%, and that too is its highest in a year.And don't forget, next week is China's National Day Golden Week from October 1 to October 7. Most businesses and factories in China will be closed for the holiday. This extended shutdown will significantly impact international supply chains.Japan reported 3.0% CPI inflation in August, up from 2.8% in the prior three months. It is their highest level since October 2023. Japanese inflation now seems well embedded, after decades of deflation.The Japanese central bank left its 0.25% policy rate unchanged, as expected late on Friday. They said "Japan's economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions." But press conference remarks after the release suggests that the Bank has turned dovish, so expectations for more rate hikes are lower now.India's economic surge is built on aggressive borrowing. Loan growth is running higher than +13% from the same month a year ago, even if that is lower than the almost 20% rate it was running in the same month in 2023.Canadian retail sales rose more strongly than expected in July, up +0.9% from a year ago when a +0.6% rise was expected. A key driver was car sales. And these retail rises are expected to continue as a new sense of optimism grows in Canada.Consumer sentiment in the EU continues to rise, in spite of their obvious economic struggles. In fact, it is almost back to its long-run average levels, something it hasn't managed since the pandemic period.The UST 10yr yield is now at just on 3.74% and up +1 from Saturday. But that is up +8 bps from a week ago.The price of gold will start today at US$2621/oz and up +US$1 from Saturday to near a new all-time high again. That is a +1.5% rise from a week ago when it was US$2582/oz.Oil prices are unchanged at US$71/bbl in the US while the international Brent price is still just on US$74.50/bbl.The Kiwi dollar starts today at 62.4 USc and little-changed from Saturday but up +80 bps from a week ago. Against the Aussie we are unchanged at 91.6 AUc. Against the euro we are still at 55.9 euro cents. That all means our TWI-5 starts today at 69.9, unchanged from Saturday but up +60 bps from a week ago.The bitcoin price starts today at US$63,055 and +0.9% from this time Saturday. Volatility over the past 24 hours has been low at just on +/- 0.8%.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.

Kia ora,Welcome to Friday’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 stock markets are roaring today after the US Fed rate cut, many, including Wall Street, powering up to record highs. And interest rate curves are steepening.But first, the actual number of people making initial unemployment benefit claims in the US dropped from the previous week to 185,000 last week, significantly lower than the expected 230,000, and a 4-month low. There are now 1.68 mln people on these benefits, also a decrease.Meanwhile the Philly Fed factory survey reported improved conditions in the rust-belt states in September. Although the new orders component didn't rise, the sentiment indexes for the future all did.But not rising is their real estate market. Existing home sales fell -2.5% in August from the previous month, the fourth decline of the year. It was down -4.2% from the same month a year ago. The fall happened despite the drop in mortgage rates in the period. And the median existing-home sales price fell too, to US$416,900 (NZ$670,000). The inventory of unsold housing rose rose to 18 weeks of sales at the latest rate, rising from 15.6 weeks in the prior month.But one thing the Fed rate cut did was suddenly drop home loan interest rates, falling more than -25 bps in the first day to 6.09% for their benchmark mortgage. It is likely to go sharly lower tomorrow again.The US current account deficit widened slightly to -3.7% of GDP in Q2-2024. That is entirely manageable, especially as the USD is still the world's reserve currency. (For comparison, the New Zealand current account deficit is running at -6.7% of our GDP - and we are certainly not a reserve currency.)Overnight there were central bank rate decisions in both Taiwan and England. Both made no changes. Perhaps the Taiwanese one was a bit of a surprise because they tend to follow the US Fed's moves. Later today Japan will also review rates, and no change in their rate is expected either. But markets will be looking for signals about when the next rise is coming.Will the start of the rate easing cycle trigger an economic upside? Certainly some commodities markets think so. And they also expect China to come to the party soon with new emergency stimulus, which would be another boost.In Hong Kong, a man was jailed for 14 months for wearing a t-shirt with a protest message.In Australia, their number of workers without a job fell by -10,500 to 627,000, or an unchanged 4.2% of their workforce. Even though employment rose by much more than the expected +25,000, the number of new part-time roles rose +47,500 and the number of new full-time roles fell -3,100 in August. Almost 31% of all Aussie jobs are now part-time. (In New Zealand it is barely touching 20%.)The overall jobs growth in Australia has analysts thinking that the RBA will delay any move to cut rates there any time soon. But a rise doesn't seem on the cards either, despite their outlier sticky inflation.Container freight rates fell another -5% last week, taking them back to where they were at the start of the year. But they remain 180% higher than the average 2019 pre-pandemic rate. The Panama issues are resolved, but the Suez/Red Sea issues are not. The shipping industry is adjusting to that new reality however. Bulk cargo rates fell -3.6% over the past week and are now themselves +30% higher than year-ago levels. As we all know, for both there has been a lot of volatility in between and that volatility has probably not ended.The UST 10yr yield is now at just on 3.73% and up +2 bps from this time yesterday. The key 2-10 yield curve is now +14 bps positive. Wall Street is surging today with the S&P500 up +1.8% from yesterday after the Fed decision. Overnight, European markets were all up too, but with varying enthusiasm. Tokyo ended its Thursday trade up is own strong +2.1%. Shanghai was up a more modest +0.7. But Hong Kong closed up +2.0%. Singapore was up +1.1%. The price of gold will start today at US$2589/oz and up +US$14 from yesterday's high to near a new all-time high again.Oil prices are up +US$1.50 at US$72/bbl in the US while the international Brent price is still just under US$75/bbl.The Kiwi dollar starts today at 62.5 USc and up +10 bps from yesterday. Against the Aussie we are down -20 bps at 91.6 AUc although all of that before the Fed. Against the euro we are up +10 bps at 56 euro cents. That all means our TWI-5 starts today at 69.9, and up +10 bps from yesterday.The bitcoin price starts today at US$63,817 and up another strong +5.6% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.6%.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 on Monday.

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 big call by the US Federal Reserve.First up you should know that the US Fed cut its benchmark policy rates by -50 bps, to the 4.75%-5.00% range, a larger cut that most professional observers had anticipated, but in line with some advance financial market pricing. (And it might be notable, that for the first time in almost 20 years, one voting member dissented, preferring only a -25 bps cut.)They say the key to the cut is their "greater confidence" that inflation is beaten.The Fed’s so-called dot plot, which they use to signal its outlook for the path of interest rates, shows the median 2024 year-end projection for the federal funds rate fell to 4.38%. That implies another -50 bps in cuts are coming soon. The median estimate for the end of 2025 decreased to 3.38%.Markets initially reacted with Wall Street rising, commodity prices rising, the USD falling, and UST bond yields moving relatively little at the long end but dipping at the short end. But conviction in these early market moves seems to be wavering.Of course, the US Fed isn't the first to cut rates in this cycle. We have already seen them from the ECB, Canada and England. And yesterday, Indonesia delivered a surprise rate cut. But now the Fed has moved, and decisively, many others will no doubt follow. Global rates are in a clear easing cycle, now that inflation seems to have been tamed.American mortgage applications leapt +14% last week from a week earlier, the fourth consecutive gain, marking the sharpest increase since the 18-month high of almost +17% in mid-August. The surge in home loan demand tracked the fall in borrowing costs, with the average interest rate on a benchmark mortgage falling by -14 bps from the earlier week to a two-year low of 6.15%.And there was a good (but not great) rise in American housing starts in August. They were up almost +10% from the previous month to an annualised rate of 1.36 mln units in the month, firmly above market expectations of 1.31 mln units, and rebounding from the near 7% plunge in the previous period. It was the sharpest increase in nine months. Starts of single-family homes rose by nearly +16%. Despite all that, housing starts are still -6.5% below the year-ago level.Japanese exports rose +5.6% from a year ago in August, slowing sharply from a 10.2% rise in July and falling short of market forecasts of another 10% rise. But it was the ninth successive month of increased export shipments.In China, and in another sign of worsening tensions, China has 'blocked' a Taiwanese company manager from returning home, essentially kidnapping him at the border.But that is minor compared to the economic signals. Mid-Autumn Festival mooncake sales were reportedly quite weak; celebrations didn't deliver the expected boost.In the UK, they delivered another tame inflation result for August. It was unchanged from July at 2.2% and as markets expectation. The largest upward contributions came from the almost +12% rise in air fares, mainly for European routes. The most significant falls came for petrol and other energy costs.The UST 10yr yield is now at just on 3.71% and up +7 bps from this time yesterday. The price of gold will start today at US$2575/oz and up +US$9 from yesterday's high to a new all-time high. This price jumped after the Fed decision to almost US$2600 but has since fallen backOil prices are down -US$1 at US$70.50/bbl in the US while the international Brent price is still just under US$73/bbl. Trading is active post the US Fed, but net movements are lower.The Kiwi dollar starts today at 62.4 USc and up +60 bps from yesterday after the US Fed decision although softening subsequently. Against the Aussie we are up +20 bps at 91.8 AUc although all of that before the Fed. Against the euro we are up +30 bps at 55.9 euro cents. That all means our TWI-5 starts today at 69.8, and up +40 bps from yesterday.The bitcoin price starts today at US$60,835 and up +4.9% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.3%.Join us at 10:45am this morning when we will be covering the Q2-2024 GDP release.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.

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.Today we lead with news we are in the shadow of tomorrows US Fed rate decision. There almost certainly will be a rate cut, but the size of it is still in doubt. Place your bets.Meanwhile, today's dairy auction was a relatively tame affair, largely delivering what the derivatives markets signaled. But AMF and butter slipped, with the rest of the powders and cheese all rising about +3%. But there was more of the weak milkfats in this auction than normal so the overall price rose only +0.8%. In NZD terms it was similar. There will be little to shake farmgate payout forecasts in this event's results.And staying local, we should note that there is another electricity crunch underway this morning from 7am to 8:30am. Prices are under pressure as you would expect.Elsewhere in the US, the data released overnight delivered another set of positives. August retail sales grew when a slip was expected. And July retail sales were sharply revised higher. Last week's Redbook index rose +4.7% from the same week a year ago.US industrial production rose and by more than expected in August. And that means on a year-on-year basis it is no longer negative.And their NAHB/Wells Fargo Housing Market Index rose in September beating expectations. This breaks a string of four consecutive monthly declines.There was a well-supported but relatively small UST 20yr bond auction today where the median yield came in at 3.97%, down from 4.10% at the equivalent event a month ago.In Canada, their CPI inflation rate fell to 2.0% and back to where their central bank needs it to be. It was a slightly larger adjustment lower than expected. The Bank of Canada next reviews rate on October 23 and there is growing talk of a -50 bps reduction then.Meanwhile Canada housing starts in August came in lower than expected.Across the Pacific, Singapore's August exports came in softer than was anticipated.But India's August exports beat estimates, even if the rise seems minor and overall Indian exports are not large by world scales.Remember, China is on holiday today.The UST 10yr yield is now at just on 3.64% and up +1 bp from this time yesterday. The price of gold will start today at US$2566/oz and down -US$15 from yesterday's high.Oil prices are up +US$1 at US$71.50/bbl in the US while the international Brent price is now just under US$74/bbl.The Kiwi dollar starts today at 61.8 USc and down -10 bps from yesterday. Against the Aussie we are down -20 bps at 91.6 AUc. Against the euro we are down -10 bps at 55.6 euro cents. That all means our TWI-5 starts today at 69.4, and down a minor -10 bps from yesterday.The bitcoin price starts today at US$60,835 and up +4.9% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.3%.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.

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 financial markets are now expecting a -50 bps rate cut from the US Fed later in the week.But first up in the US, the next regional factory survey came in surprisingly strong. The NY Empire State Manufacturing Index unexpectedly jumped sharply in September to its highest since April 2022. A key driver was new order growth.Also coming in better than expected was Canada's July manufacturing levels. Oil and coal production drove that. Also probably helping was an unexpected rise in Canadian vehicle sales. But that monthly gain only limited the retreat from a year ago to -1.1%.As regular readers will know, Canada has had longstanding housing affordability issues. Today it loosened some eligibility rules for first-home buyer access to 'insured mortgages'. But this is a demand side move. So these changes are likely to have the unintended consequence of adding more competitive pressures to already stressed markets.In China, the typhoon that hit Shanghai yesterday has come at a tricky time for China and its financial capital. Delayed and cancelled transport connections will have undermined their Mid Autumn Festival holiday spending in the region.In Australia, the ASX200 closed at an all-time high yesterday, fueled by bets the US Fed would cut interest rates by -50 bps on Thursday (NZT).But the same financial market 'bets' are pushing the USD lower, along with benchmark interest rates. Falling rates are having a global effect, except perhaps in Australia where there is widespread acknowledgement that the RBA hasn't tamed inflation yet. But they may be able to hold on with unchanged policy rates as the gap with others widens over the next few months.Interestingly, financial markets are also betting heavier that the next RBNZ rate change, on October 9, will also be -50 bps.The UST 10yr yield is now at just on 3.63% and down -3 bps from this time yesterday. The price of gold will start today at US$2581/oz and up +US$3 from yesterday's high.Oil prices are up +US$2 at US$70.50/bbl in the US while the international Brent price is now just under US$73/bbl.The Kiwi dollar starts today at 61.9 USc and up +30 bps from yesterday. Against the Aussie we unchanged at 91.8 AUc. Against the euro we are up +10 bps at 55.7 euro cents. That all means our TWI-5 starts today at 69.5, and up +20 bps from yesterday.The bitcoin price starts today at US$57,987 and down -3.0% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.3%.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.

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.Today we lead with news the world's second-largest economy is having trouble convincing anyone it is under control.This coming week it will be all about the US Fed rate decisions, and the size of the rate cut. We will get that on Thursday NZT. And there will be central bank rate decisions this week from Japan, Norway, China, the UK, and Turkey. Australia will release its labour market updates. And of course, the New Zealand Q2 GDP result will also come Thursday.But over the weekend it was mostly about China.China’s industrial production rose by +4.5% in August from a year ago, falling short of market forecasts and slowing from July. This was the softest growth since March, and the fourth straight month of a slowdown. But at least it was confirmed by their electricity production data, up +5.8%. It is rare that electricity use exceeds industrial production expansion, so perhaps that is an encouraging signal for them.But China's retail sales underperformed, rising just +2.1% from a year ago in August, moderating from +2.7% growth in the prior month and missing market consensus of +2.5%. Lower car sales kept a lid on this sector amid unusual weather events this summer.New home prices in 70 cities fell faster, down -5.3%in August, after a -4.9% fall in the previous month. It was the 14th straight month of decrease and the steepest pace since May 2015, despite Beijing's extensive measures to reverse a downturn in the property sector, such as trimming mortgage rates and reducing home buying costs.Every one of those cities recorded a fall in these official stats for used houses. The largest was the -13% fall in Wuhan. When resales lose money it will be very hard to sell new ones.So it will be no surprise that their August data shows new loan growth remains very subdued in what is extending to be unusual difficult trading conditions. Chinese banks extended +¥900 bln in new yuan loans in August, above a fifteen-year low of ¥260 bln in July, but less than the expected bounce-back. It is also the lowest value for an August month since 2015.And it won't be a surprise to that August FDI was particularly weak, down more than -48% in the year to August from the same period in 2023.We have noted the trend before, but the weak Chinese economy is driving a bond rally there. Yields fell to a new record low on Thursday, and state banks have been drafted in to sell some of their long-dated bonds to try and stem the rally. But until more confidence returns to the Chinese economy generally, it unlikely to work. If Beijing institutions don't have the firepower to move this market, it is unlikely the core SOE banks do either.In a rare statement with the loan growth data release, the central bank indicated that new stimulus is on the way to shore up the economy. Late last week, President Xi exhorted his government to ensure the 5% growth target is reached this year. Xi's intervention came after widespread voices warned that the 5% target was probably out of reach.Coming at a time that isn't convenient for their economy, China is going into an end-of-summer period of public holidays. First there is the upcoming Mid-Autumn Festival, September 15 to 17, a total of 3 days off - but where Saturday, September 14 has been declared a workday. That will be followed by the seven-day "National Day" holiday from October 1 to 7. But that is being offset by making it full workdays on September 29 (Sunday) and October 12 (Saturday). One consequence of all this time off is that foreign travel is expected to boom. Visa-free policies and lower air fares is seeing the number of Chinese booking holidays abroad surge.In India, officials there are chaffing over creditor moves in the US to put Byjus into bankruptcy. Indian officials have arbitrarily removed the creditors who petitioned the US court that ruled on bankruptcy, from the creditor processes in India. It might get quite messy.In Europe, July industrial production (real) was flat from June in the EU, but lower in the wider Euro Area. From a year ago the declines are -2.2% and -1.7% respectively.In Russia, their central bank increased its policy rate by +100 bps to 19% in a move markets did not expect. They are battling high inflation in a war economy that is distorting faster than their central bank is comfortable with.And in the US, the University of Michigan consumer sentiment survey increased for a 2nd month in September, to its highest level since May. This was above what was expected. Both current conditions and expectations improved, topping estimates. Meanwhile, inflation expectations for the year-ahead declined to 2.7% but those for the next five years rose marginally to 3.1%.You will recall that the Bank of Canada cut its policy rate two weeks ago, by -25 bps to 4.25%. But now the talk there is of much bigger cuts at their next meeting on October 24 (NZT). Maybe -50 bps, or more.And in Australia, the trend well established here is showing up there. Sharply more listings, lower auction clearance rates, and falling prices. Now observers are saying it has turned into a buyer’s market, especially in the eastern States.The UST 10yr yield is now at just on 3.66% and unchanged from Saturday. The price of gold will start today at US$2578/oz and down -US$4 from its Saturday new all-time high.Oil prices aresofter by -50 USc at US$68.50/bbl in the US while the international Brent price is now just over US$71.50/bbl.The Kiwi dollar starts today at 61.6 USc and unchanged from Saturday. Against the Aussie we have dipped slightly to 91.8 AUc. Against the euro we are unchanged at 55.6 euro cents. That all means our TWI-5 starts today at 69.3, and unchanged from Saturday.The bitcoin price starts today at US$59,791 and virtually unchanged from this time Saturday. Volatility over the past 24 hours has been low at just on +/- 0.7%.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.