Economy Watch

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 that US dollar has fallen to a seven-month low as American disinflation extends in their economy and that is raising expectations of rate cuts in each of the Fed's remaining three reviews this year.US equity markets are rising on the same expectation, with the S&P500 moving back to again challenge its mid-July all-time high. They seem to be voting with their money that the US Fed has in fact engineered a soft-landing, or better, and that the trajectory from here is 'up' on the back of an aggressive easing cycle from the Fed.However, the US Conference Board's leading indicators slipped a bit more than expected in July, but they also said the six-month trend no longer indicates a recession ahead.Meanwhile, the Atlanta Fed's GDP Now tracker still sees good +2% growth in Q3-2024 for the US economy, better than the 'blue chip' analysts that they benchmark against.Japan said core machinery orders, which exclude those for ships and electric power companies, rose by +2.1% in June from May, better than expected. It was on the back of an upturn in orders for the service sector. In JPY, these orders were up +2.6% from the same month a year ago.Later today, China will release its latest review of its Loan Price Rates but no changes are expected. These rates are already at all-time lows.The lackluster Chinese economy has sharp consequences for Australia. Australia shipped AU$138 bln of iron ore in the year to June. A Canberra report projected that to fall to AU$114 bln in the next 12 months and AU$102 bln in the following as prices continue to fall. That could leave a AU$3 bln hole from royalties in the Australian Federal results. The wider Australian economy will have downside risks from this too.The UST 10yr yield is now at just on 3.87% and down -1 bps from this time yesterday. The price of gold will start today down -US$6 from yesterday at US$2502/oz.Oil prices are down -US$2 at just on US$73.50/bbl in the US while the international Brent price is now just on US$77.50/bbl.The Kiwi dollar starts today up +½c from yesterday at 61 USc. Against the Aussie we are a tad softer at 90.7 AUc. Against the euro we are up +20 bps at 55.1 euro cents. That all means our TWI-5 starts today at 69 and up +20 bps from yesterday.The bitcoin price starts today at US$59,252 and down -0.5% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.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.

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 we are now in the final two weeks of the northern holiday season, and that is anchored by the central bank shindig at Jackson Hole, WY starting at the end of the week.This week, China will review its Loan Price Rates later tomorrow. No change is expected. Canada will report July CPI inflation. And there is a dairy auction on Wednesday. So it will be a light data calendar.But first up today, more evidence that foreign direct investment has stalled into China. We marveled at the stall in both May and June and it has extended into July although it was now a positive ¥40.6 bln (NZ$9.3 bln) in the month. The net inflows are still very small for a country the size of China. In July 2023 the inflow was ¥140 bln so in July 2024 it is down -70% from then. China has been masking the stall by only referring to the 'year-to-date' results rather than the monthly outcome. But even that approach will catch up with them soon. Now YTD 2024 is down -50% on YTD 2023. That is massive.And it is not just FDI. Beijing stops reporting equity flows starting today, a key sentiment indicator to track their NZ$14 tln equity market. The data to Friday showed the year-to-date flows turning negative. So the rush seems to be on to get out. From here on, we just won't know how fast it develops. Concerned about the negativity, China told fund houses to stop displaying real-time mutual fund products’ net value. The last time it was available it wasn't good. But if it does turn positive, Beijing will be the first to tell us.And the Middle Kingdom has had its weather/climate challenges this year too, more so than other large countries. The impact of floods, while common in China in summer, has grown more pronounced this year, affecting over 7 million people nationwide in July, when Beijing was struck by the worst rains in 140 years, after the capital's hottest June on record. The dramatic swings between extreme heat and intense rainfall have stressed China’s power grids and shut factories, while risking the country’s water security and causing widespread crop damage. Nationally, direct economic losses from natural disasters surged in July to almost NZ$10 bln in that one month, more than in January to June combined. There will be food security consequences.Meanwhile, Taiwan reported its Q2-2024 GDP expansion at +5.1%. But that was down from +6.6% on Q1-2024 even if it was up from +1.4% in the same quarter a year ago. Beijing is probably looking on in jealousy.In Japan, profits topped analyst forecasts for 70% of surveyed Japanese companies in the April-June quarter, led by the vehicle and artificial intelligence fields. Many are benefiting from the tailwind of the weak yen.In India, 19 or their 38 states are running 3%-to-GDP deficits or more in their bids to shine economically. That is raising the national public debt sharply. Delhi is concerned and tightening up what is permissible. And the central government is having to restrain itself to cover aggressive state deficit spending. The catchup of their infrastructure deficit is essentially driving the pressure.In the US the University of Michigan consumer sentiment survey index rose more than expected with its first increase in five months. The expectations index improved (the highest in four months) while both the year-ahead and the five-year inflation expectations were unchanged at 2.9% and 3%, respectively.But that rising sentiment doesn't include their housing market. Housing starts fell sharply in July to their lowest level since July 2019 (pandemic excepted). Residential building consents also fell and back to 2022 levels. The US economy is expanding at pace without the support of their housing markets.But it is very much better north of the border where Canada reported a surge in housing starts, up +10% in July from the same month a year ago.And tensions are rising in Canada over the railway/union bargaining that is going down to the wire. If there aren't strikes, they will likely be lockouts.The EU said its trade surplus is rising. But that is because imports are falling faster (-8.6%) than their exports (-6.3%).The UST 10yr yield is now at just on 3.88% and down -1 bps from Saturday and down -5 bps from a week ago. The price of gold will start today up +US$1 from Saturday at US$2508/oz and a new all-time record high. A week ago this price was US$2427 so a +3.3% rise since then.Oil prices are unchanged at just on US$75.50/bbl in the US while the international Brent price is now just on US$79/bbl and unchanged in a week.The Kiwi dollar starts today unchanged from Saturday, still at 60.5 USc. A week ago (pre the OCR cut) it was at 60 USc so a +½c gain from then. Against the Aussie we are still at 90.8 AUc. Against the euro we are still at 54.9 euro cents. That all means our TWI-5 starts today at 68.8 and unchanged from Saturday.The bitcoin price starts today at US$59,568 and up a mere +0.2% from this time Saturday. However it is down -1.2% from this time last week. Volatility over the past 24 hours has been low at just under +/- 0.9%.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.

Deputy Governor Christian Hawkesby says the Reserve Bank's (RBNZ) Monetary Policy Committee might have taken a different stance in May if the economic activity forecasts had been more accurate.In May, forecasts had anticipated 1% GDP growth for the calendar year. But by August, that had been revised to a 0.4% contraction, with a deep decline in the June quarter.The RBNZ chose to cut the Official Cash Rate from 5.50% to 5.25% last Wednesday partly in response to these lower economic activity forecasts.Another key factor was that businesses have been adjusting their wage and price-setting behaviour more quickly than anticipated in response to the low inflation environment.Speaking in the latest episode of interest.co.nz's Of Interest podcast, Hawkesby said the committee would not have adopted such a hawkish stance if these data points had been available during the May meeting.“The uncertainty was around the speed and intensity that [tight policy] would be felt in the economy … Since then we've had a whole heap of evidence on the downside playing out”. UncertainHe said the OCR projection, published in that Monetary Policy Statement, was “flat with a slight upward bias” but with “big uncertainties” that were outlined in the record of meeting.Weaker than forecast GDP was not cited as a risk in the May meeting record, and uncertainty about price-setting behaviour was described as an upside risk. The committee agreed that interest rates need to “remain at a restrictive level for a sustained period.”The chapter on economic projections included a disclaimer that said there was “significant uncertainty” about the assumptions used in the baseline forecasts. But the possibility of easing rates in the near future was not mentioned in the 60-page document.This shift led some economists to describe the August decision as a 'U-turn.' However, there was consensus that it was the correct move, given the clear signs of a weakening economy.Stay off the trackHawkesby also said there had been a “misconception” that the central bank was going to keep the OCR at 5.50% until it saw inflation below 3%. “You need to work on the basis that monetary policy is going to work. You don’t have to wait until the number is within the band, you just have to have confidence it will settle there.” However, the May monetary policy statement projected the OCR would remain above 5.50% until September 2025, by which time inflation would have been below 3% for a full year.This was true in the February 2024 and November 2023 monetary policy statements as well. Hawkesby said the OCR track that published in each statement often gets overanalyzed, without enough recognition that it is based on a set of assumptions.“There's something quite peculiar that happens when someone sees a line on a chart, or they see a number in a table, it has this sense of being real and factual,” he said.“My advice to people would be to focus more on the record of the meeting than the OCR projection."

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 the gloomsters are going to have to wait even longer for a US slowdown and 'recession'. Markets are reducing the chance of a Fed rate cut in mid-September.First up in the US, initial jobless claims came in less than last week, a surprise because an increase was expected. But to be fair the actual shift wasn't large.But markets took more notice of the surprisingly strong +1% rise in retail sales in July, far more than expected. Americans are still spending big - on cars, appliances and furniture - in a surprise burst of activity that’s propelling their economy and helping shake off fears of an impending downturn. This was the largest jump in more than two years. Car sales were particularly strong. But there were gains across the board at restaurants and bars, as well in groceries, electronics, furniture and health goods. Year on year, American retail sales were up +4.0%, delivering real, inflation-adjusted gains.Helping was that business inventory growth was minimal, so their inventory-to-sales ratio stayed quite healthy.But spoiling the party somewhat was a small drop in industrial production in July and one that was more than expected from June but only easing -0.2% from a year ago.However, the New York State factory survey improved more than expected, although the Philly Fed's similar survey turned lower. Both are positive about the future however.In Canada, despite central bank rate cuts there, home sales fell in July. A looming rail strike there may not help future sales.In Japan, they released their Q2-2024 GDP result late yesterday and it expanded a very strong +3.1%, way more than the +2.1% expected, and far better than the -2.3% fall in Q1-2024.In India, their July passenger vehicle sales fell almost -2% in July from the same month a year ago. This was not expected, but to be fair these are settling into a higher level than has been seen in over the past 20 years, just not as high as you might expect given their booming economy. But two-wheeler growth was a very strong +12.5%.In China, the data out yesterday reinforced their tough economic conditions are extending there. Retail sales were up just +2.7% from a year ago, industrial production rose less than expected at +5.1% but electricity production (a better metric?) rose only +2.5%, and prices for new houses dropped -4.9% and the most since 2015. For second-hand houses, who knows? No cities reported year-on-year gains, the first time that has happened.In Australia, their July labour force rose with now 14.47 mln employed (+58,000). Their participation rate rose again (to 67.1%), and their jobless rate ticked up to 4.2%, or by +23,900 to 637,000. Full-time adult average weekly total earnings were up +4.6% to AU$1994 (NZ$2200).And staying in Australia, consumer inflation expectations are high and not easing. They rose to 4.5% in August from 4.3% in July, the highest level since April and similar to what they were in April 2023. The RBA will be unhappy about the stickiness.And we should probably note that UBS said it will sell-off the US$2 bln real estate fund it acquired when it bought Credit Suisse. It joins many other professional investors selling out of troubled commercial property markets, especially office buildings.Global container freight rates eased ever-so-slightly again last week but they are still +280% higher than year-ago levels. The core pressures are unchanged. Bulk cargo rates are little-changed this week, but are still more than +50% higher than year-ago levels.And we should probably note that iron ore prices have slipped below US$100/tonne now in a move down that started at the end of 2023, now back to levels first seen a decade ago. The 2021 peaks are long gone and the general trend will stay negative until China recovers. Even India can't arrest this slip.The UST 10yr yield is now at just on 3.93% and up +10 bps from yesterday in reaction to the strong US retail sales data. The price of gold will start today up +US$13 from yesterday at US$2454/oz.Oil prices are +50 USc firmer at just under US$77.50/bbl in the US while the international Brent price is up +US$1, now just on US$80.50/bbl.The Kiwi dollar starts today little-changed from this time yesterday, still just on 60 USc. A week ago (pre the OCR cut) it was at exactly the same level. Against the Aussie we are down -30 bps from yesterday at 90.6 AUc. Against the euro we are up +10 bps at 54.6 euro cents. That all means our TWI-5 starts today at 68.5 and unchanged.The bitcoin price starts today at US$59,326 and up a mere +0.3% from this time yesterday. 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 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 inflation data in both the US and UK keeps rate cuts in play.The widely-anticipated July American inflation rate came in largely as expected, dipping slightly to 2.9% from 3% in June. That is its lowest level since March 2021. The "core" rate dipped to 3.2%. Rents were up +5.1% in the year but petrol was down -2.2%. Financial markets saw little to worry about in this data and seem to feel comfortable that it won't deter the Fed from the rate cuts in the rest of 2024 they have priced in.More falls may be due in August; American petrol prices are now down more than -10% from a year ago in a respected national survey.Meanwhile US mortgage applications leaped more than +16% last week from the prior week, the biggest one-week rise since an outlier in early 2003, and before that, pre-pandemic. Triggering this was a sharp pullback in mortgage costs from the prior week as the rate on benchmark contracts fell nearly -30 bps since the start of the month, now 6.54%, and tracking the sharp decline in yields of long-dated Treasury notes and bonds due to the increasingly dovish expectations for the Fed.There seems little reason for the US Fed to delay the market rate cuts priced in by financial markets, although those markets do seem to be doing that for them. They next meet on September 19 (NZT).I know we have pointed this out before, but there are still two weeks to go in the US summer holiday season, one that end with their Labor Day on September 3 (NZT). It is after that that financial markets 'normalise'. In the meantime, central bankers will be getting ready for their annual retreat to Jackson Hole, WY, August 23-25 (NZT), which has become a bit of an economic obsession.It is not only the holiday season in the US, it is also a national holiday in India today, their Independence Day.In China, their leaders are at their summer retreat at the seaside resort enclave at Beidaihe.But in Japan, Prime Minister Fumio Kishida has resigned after nearly three years in the role.In Europe, there was CPI inflation data out for England. That remained low at 2.2% in July, but up from 2% in both May and June. They got higher rents (+8.6%) and their core inflation is running at 3.3% and kept down by lower petrol costs.And we should note that both steel rebar and soybean prices are still moving sharply lower, both in response to tough conditions in China. They are not the only falls, but are the commodities leading the retreat.Locally, the CBA profit result release heralds the start of the local earnings season reporting, one that is sure to colour where both the ASX and NZX goes from here.The UST 10yr yield is now at just on 3.83% and down -3 bps from yesterday. The price of gold will start today down -US$24 from yesterday at US$2441/oz.Oil prices are -US$1.50 softer at just over US$76/bbl in the US while the international Brent price is now just on US$79.50/bbl.The Kiwi dollar starts today down -¾c from this time yesterday at just on 60 USc following the OCR cut. But to be fair it is only back to where it was last week. Against the Aussie we are down -70 bps from yesterday at 90.9 AUc. Against the euro we are down -80 bps at 54.5 euro cents. That all means our TWI-5 starts today at 68.5 and down -70 bps.The bitcoin price starts today at US$59,138 and down -3.7% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.4%.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 the downturn in China is something that could quickly spread regionally.But first up today, the rise in retail sales at physical stores in the US was +4.7% last week, off the pace of the prior week's +5.1% gain, but still a healthy economic sign, and still well above inflation's level.Speaking in inflation, American producer prices rose less than expected in July from June to be +2.2% higher than year-ago levels. These muted increases raised bets of a softer CPI result tomorrow, backing expectations of a Fed rate cut next month. Equity markets responded like this.And the NFIB Small Business Optimism Index in the US jumped in July from June to its highest since February of 2022. It is recovering fast from quite low levels earlier in 2024, and is now +2% higher than year-ago levels.Japanese machine tool orders rose +8.4% year-on-year in July 2024, slowing from a +9.7% growth in the previous month. This was built on the almost +18% jump in orders from export customers.In China, their official media is talking up a story that says Beijing should provide additional direct support to consumers worth at least ¥1 tln (NZ$230 bln) either in cash or as vouchers for the rest of 2024 to "effectively address the pressing challenge of lackluster domestic demand".And overnight China released its July new yuan loan data and it was especially weak. Bank customers are wary of borrowing in their stunted market, despite top-down pressure on banks to push out loans. Chinese banks extended just ¥260 bln (NZ$60 bln) in new yuan loans in July, the least since October of 2009. For a country the size of China, that is an amazingly low level.We don't often report on South Africa, but today we probably should note that their unemployment rate rose to 33.5% in Q2-2024, the highest in two years, up from 32.9% in the prior period. That was a surprise deterioration because analysts had expected it to ease to 32.3%. The number of workers jobless rose by +158,000, reaching 8.4 mln, marking the highest figure since comparable records began in 2008. They are in a tough spot.In Europe there was a sharp and unexpected fall in overall economic sentiment in August according to the widely-watched ZEW survey. But that is off a recent surge, taking it back to 2021 levels.In Australia, the Westpac-Melbourne Institute Consumer Sentiment index rose by +2.8% from the prior month to a six-month high of 85.0 in August, although this is still quite a low level. Views on family finances bounced back from last month but remain weak. But there were some clearer signs of support from tax cuts and fiscal measures. Consumers seem less worried about further interest rate increases than last month, and Australians are still untroubled by jobs outlook. However, home-buyer sentiment sank to new lows as price expectations cooled noticeably.Australian business sentiment is still positive even if it did ease in July and June's positive reading was revised down a bit.The UST 10yr yield is now at just on 3.86% and down -5 bps from yesterday. The price of gold will start today down a minor -US$3 from yesterday at US$2465/oz.Oil prices are -US$1 softer at just under US$77.50/bbl in the US while the international Brent price is now just on US$80.50/bbl. This pullback comes after the IEA warned of a looming crude oil surplus.The Kiwi dollar starts today up +½c from this time yesterday at just on 60.7 USc. Against the Aussie we are up +20 bps from yesterday at 91.6 AUc. Against the euro we are up +20 bps at 55.3 euro cents. That all means our TWI-5 starts today at 69.2 and up +30 bps.The bitcoin price starts today at US$61,392 and up +3.5% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.6%.Join us at 2pm today for our coverage of the RBNZ's Monetary Policy Statement and the latest on the Official Cash Rate.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 that is second tier today ahead of a string of key data releases. But there are many interesting bits today all the same.First in the US, a national NY Fed survey of consumer expectations in July showed medium term inflation expectations are falling. The three-year-ahead inflation expectations fell by 0.6 percentage point to 2.3%, hitting a new series low since the survey’s inception in June 2013. Median one- and five-year-ahead inflation expectations were unchanged at 3.0% and 2.8% respectively. The labour market expectations were essentially unchanged too with consumers not expecting any significant rise in unemployment.USDA's August WASDE revealed that they will have record output and yields for both soybean and corn this season although wheat production there will be down marginally. But they expect world wheat production to be up. Climate stress is not reflected in this global assessment of food production, yet anyway, even if global rice production is seen easing, but only by -0.1%. Lower Vietnam production is the reason.US beef production will be lower they say, made up by imports. US milk production is easing off slightly but they still expect to be active in butter and cheese exports and they think those will rise.In Canada, building consents were expected to rise more than +5% in June from May after a sharpish -12.7% fall in May from April. But that did not happen. In fact the June fall was down almost -17% from a year ago. It is rather a grim set of data for this sector.In China, and although never far from the surface of Beijing concerns, demographic forces have moved them to act on the long awaited raising of their retirement age. The average life expectancy is now 78 years, but local males can claim their 'pension' at 60. For women it depends on their job, but it is as low as 55 years for them. Fast-shifting demographics mean the working aged population is down to 68% and falling. Ten years ago to was near 75%. (NZ is 59% currently.) Details are awaited but they may implement a +3 or +4 month-per-year rise in their retirement age, which would be quite a fast change.And although they are not reported locally, it appears strikes and labour unrest is on the rise in China. Raising the retirement age when there are growing labour stresses isn't going to help sentiment.Indian consumer inflation fell rather sharply in July and by a bit more than expected. It came in at 3.5%, down from 5.1% in June. (A year ago it was running at 11.5%.) This latest level is now below their central bank's mid-point in its target range of 4%, the first time it has undershot in almost five years. The reason for the fall is essentially because of food prices, and the reason foods prices fell to 5.5% from 9.4% in June is essentially because of year-ago base effects. So this easing of inflation will probably not last.Meanwhile, the Indian industrial production expansion eased off rather sharply in the June data released overnight. It was up 4.2% from a year ago, sharply lower than May's +5.9% rise. +4.2% is still exceptional but clearly the rapid expansion is reverting to a more sustainable pace. Pharma product growth actually shrank.The UST 10yr yield is now at just on 3.91% and down -3 bps from yesterday. The price of gold will start today up +US$38 from yesterday at US$2468/oz which is closing in on its record high.Oil prices are +US$2 firmer at just over US$78/bbl in the US while the international Brent price is now just on US$81.50/bbl. We should keep an eye on the Straits of Hormuz. Iran seems to have seized a Malaysian ship travelling through there in what could a portend flashpoint.The Kiwi dollar starts today up +20 bps from this time yesterday at just on 60.2 USc. Against the Aussie we are also up +20 bps from yesterday at 91.4 AUc. Against the euro we are up +10 bps at 55.1 euro cents. That all means our TWI-5 starts today at 68.9 and up +20 bps.The bitcoin price starts today at US$59,340 and down -1.6% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.5%.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 China is struggling to revive consumer interest in spending and consumption.But first, this coming week the key focus will be on the RBNZ Monetary Policy Review on Wednesday. A feature of the past month has been the volatility in the financial market pricing of this upcoming rate decision. Financial markets have had little conviction, shifting their pricing from 'zero change' to -50 bps cut. Currently they are guessing a -25 bps cut. But it is only a guess. We must remember, the new Government stripped jobs their mandate, leaving only inflation as they goal. And as we all know, inflation isn't beat yet. What we will all be looking for is whether the RBNZ committee thinks it is beaten on a semi-permanent basis. Two sleeps to know.Also this week we will get the US July inflation results, both CPI and PPI. Analysts expect a 2.9% CPI and a 2.6% PPI there. Retail sales data along with industrial production data will also be released for the world's largest economy.China will report new yuan loans for July later today, expected to be weakish, along with retail sales, house prices, and labour market data. In Australia, we will get the NAB business confidence report and a Westpac consumer sentiment survey, both probably tomorrow. And that will be followed later in the week by their July labour market data, expected to show only modest gains.In China, their consumer inflation picked up from an ultra-low +0.2% in June to +0.5% in July. But food prices are still showing some deflationary effects. Although overall those food prices are up a tiny +0.2% year-on-year, that is only because of a +20% rise in pork prices (from very low levels a year ago). Beef prices are down almost -13% in the year, lamb prices down more than -6%. Milk prices are down -1.9% on the same basis. If you take out the base effect from some key items like pork, the deflationary threat in China is still very much alive.And still in China, producer prices are still deflating, down -0.8% in July from the same month a year ago. That is the same fall recorded in June.And Chinese July vehicle sales fell to just under 2.5 mln units or -2.4% lower than in June but +4.1% higher than the same month a year ago. China is the world's largest vehicle market. But those sales figures include exports. Domestic sales fared far worse, falling -10.1% on the year to just under 1.8 million units for a steeper drop than the -7.4% decline recorded in June. Wider than cars, others are reporting that consumer demand is weak in their categories too. The pall of 'value losses' from their housing 'investments' is weighing heavily on consumer sentiment there. It must be bad because their official consumer sentiment survey hasn't been updated since May, after it recorded a big drop from April.In the US we should note that the US Fed is not shrinking its balance sheet as fast as it planned, with only a tiny -US$49 bln reduction in the past month. That takes it back to the level it first rose to at the outset of the pandemic four years ago. From its peak in April 2022, it is down -US$1.8 tln or -20% however. Progress now is slowing however.In Canada, their labour market is marking time. Employment fell by -2,800 in July to 20.5 mln, a surprise because analysts expected a +22,500 rise. Still, the number of unemployed fell by -8,600. They also had a -0.3 percentage-point drop in their labour force participation rate, and that takes it to a two-year low of 65%, the lowest since 1998 if you exclude the pandemic.In Russia, they are suffering the opposite through fast-rising inflation. In July it rose to 9.1% from 8.6% in June. Everything is rising faster there, especially food prices.The UST 10yr yield is now at just on 3.94% and unchanged from Saturday. The price of gold will start today up +US$4 from yesterday at US$2431/oz.Oil prices are marginally firmer at just under US$76/bbl in the US while the international Brent price is now just on US$79.50/bbl.The Kiwi dollar starts today little-changed from this time Saturday at just on 60 USc. Against the Aussie we are down -10 bps from yesterday at 91.2 AUc. Against the euro we are up +10 bps at 55 euro cents. That all means our TWI-5 starts today at 68.7 and up +10 bps.The bitcoin price starts today at US$60,318 and up a minor +0.2% from where we left it Saturday. Volatility over the past 24 hours has been low at just under +/- 1%.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 Monday's equity dump is now a fading memory.First up, the latest signals from the US labour market are that there is no rising stress. Initial jobless claims came in less than expected at 203,000 and there are now 1.9 mln people on these benefits. Both are lower than last week and -10% lower than the same week a year ago.This was data financial markets noticed today. Along with confirmation that mortgage interest rates are falling.It is the summer driving season in the US, so petrol prices are important there too. And they are lowish, for them, down almost -10% from year-ago levels. In some places they are under US$3/gal (NZ$1.32/L) at the pump.US wholesale inventories were up marginally (+0.1%) in June from a year ago. However the steady rises recently have ticked up the inventory-to-sales ratio recently, although it is still lower than year-ago levels.And there was a well-supported UST 30yr bond auction earlier today and that delivered a median yield of 4.23%, lower than the 4.33% yield at the equivalent event a month ago.In India and as expected, their central bank's monetary policy review brought no change to their 6.5% policy rate. It has been held at that level since February 2023.Taiwanese exports held steady at about +US$40 bln in July. But that was 'only' +3.1% higher than the same month a year ago. However it comes on top of a steady expansion since November 2023.Later today, China will release its July CPI inflation data and it is expected to remain very low (+0.3% year-on-year). Their PPI is again expected to report deflation.Global shipping freight rates for containerised cargoes slipped marginally again last week, down -3% from the prior week. But they remain three times higher than year-ago levels. Bulk cargo freight rates were unchanged from the prior week, up +50% from the same week a year ago (although that year-ago level was a bit of a low point).We have noted low steel prices recently. But we should also note than both wheat and soybean prices are also low, now down near five year lows. If there is food stress it is not because the cost of basics are high.The UST 10yr yield is now at just on 4.00% and up another +3 bps from yesterday. The price of gold will start today virtually up +UAS$31 from yesterday at US$2423/oz.Oil prices are +US$1 USc firmer at just over US$75.50/bbl in the US while the international Brent price is just on US$79/bbl.The Kiwi dollar starts today little-changed from this time yesterday at just over 60 USc. Against the Aussie we are back down almost -¾c at 91.1 AUc. Against the euro we are up +10 bps at 55 euro cents. That all means our TWI-5 starts today at 68.7 and down -20 bps.The bitcoin price starts today at US$59,562 and up +6.5% from where we left it yesterday. Volatility over the past 24 hours has been very high at +/- 4.8%.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 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 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.