Economy Watch

Steven Hail, a Modern Monetary Theory economist, challenges conventional economic wisdom about money and fiscal policy. He argues that governments, like New Zealand's, as currency issuers, won't run out of money and should focus on resource availability instead of funding quandaries. Hail critiques traditional inflation solutions post-pandemic, emphasizing a detailed understanding of fiscal policy. He also discusses the balance between climate change and economic growth, advocating for a sustainable, post-growth economic model that rethinks success beyond GDP.

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 rise of the US economy and the slowdown in China that Beijing can't seem to arrest is twisting a vast cast of supporting economies and their currencies. The NZD and AUD are devaluing faster now.First up today, the giant American economy grew much more than expected as reported by their 'advance' Q2-2024 release. It was up +2.8% when +2.0% rise was expected after the Q1-2024 +1.4% expansion. This was driven by strong consumer spending which broadly confirms the weekly retail impetus that we track. Consumers are acting 'positively'. Growth of +2.8% is 'moderate' in the grand scheme of things - until you realise that it is a +US$360 bln (nominal) expansion from Q1, almost +US1.6 tln from the same period a year ago. Nowhere else has expanded like that (and more than double China's +US$784 bln equivalent expansion). The American economy had economic activity of US$28.6 tln in the past year.Prices (PCE) were up +2.6% in Q2, a lesser rise than the +3.4% rise in Q1. Getting there, but not there yet.Meanwhile, US initial jobless claims fell more than expected last week at 225,000 from the 281,000 of the prior week. These levels are nearly back to where they were a year ago. There are now 1.9 mln workers on these benefits, a tiny slice of their 364 mln workforce.But new orders for durable goods slumped -6.6% in June from May, after four consecutive monthly increases and missing market expectations of a +0.3% rise. Transportation equipment drove the decrease. From a year ago, these durable goods orders were down a startling -11%. Orders for capital goods were worse, down -27% on the year-ago basis. (However, excluding aircraft, there was little change.)The next July regional factory survey is from the Kansas City Fed, and they reported little-change from June. Basically it mirrors the national durable goods order data.Earlier today there was a well-supported UST 7yr bond auction and that brought a 4.11% median yield. That is slightly lower than the 4.22% yield at the prior equivalent event a month ago.China's central bank unexpectedly cut the rate at which it lends to financial institutions, the first such cut in nearly a year. It lowered the one-year medium-term lending facility (MLF) rate to 2.3%, from 2.5%. The bank issued ¥200 bln in loans to banks at this rate.This rate cut is part of Beijing's attempts to spur a sluggish economic growth. This was just a part of actions taken yesterday. It is also expanding a subsidy program to get more people buying cars and consumer electronics. This will cost them ¥300 bln, paid for out of their issue of ultralong special treasury bonds. The subsidies for those trading in their passenger cars for new energy vehicles will double to ¥20,000, compared to the ¥10,000 subsidy announced in April. Trade-ins for petrol vehicles will rise to ¥15,000 from ¥7,000 per vehicle.Global container shipping rates stayed very high last week, but they did slip a small -2% from the week before and are just off their peak. That makes them +268% higher than a year ago. There seems no relief in sight yet. Bulk cargo rates were little-changed last week to be +24% higher than year-ago levels.The UST 10yr yield is now at just on 4.27% and down -2 bps from this time yesterday. The price of gold will start today down a very sharp -US$60 from yesterday at US$2352/oz. That is down -2.5% on the day.Oil prices are +50 USc firmer at just over US$78/bbl in the US while the international Brent price is just on US$81.50/bbl.The Kiwi dollar starts today weaker, down another -40 bps at just under 59 USc. That is a -3.4% devaluation since the start of the month. Against the Aussie we are down -10 bps at 90 AUc. Against the euro we are down a full -½ at 54.3 euro cents. That all means our TWI-5 starts today at 68 and down -40 bps from yesterday and that is near a two year low.The bitcoin price starts today at US$64,827 and down -2.6% from this time yesterday. Volatility over the past 24 hours has been moderate, also at +/- 2.6%.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 that despite good economic data, Wall Street equity prices are tanking today as it downs in investors they have been far too bullish on AI prospects.But first, there were July 'flash' PMIs released today. The American one is quite positive, especially for their service sector. There new order growth rose its fastest for the year, and that drove the overall PMI to its best result since April 2022, a 27 month high. The factory sector wasn't so positive, basically marking time. Encouragingly however, despite the rise, price pressures have waned. But there are suggestions employment has stopped growing.Retail inventories might be becoming a bit of a problem however, up +5.3% from a year ago. But because wholesale inventories are well contained (+0.2%), there is no reason to panic at this point.Meanwhile, things are so bright in their housing markets. Mortgage applications fell last week from the week before to be -15% lower than the weak week a year ago, even though mortgage interest rates retreated and are now near their lowest of the year.And new home sales came in quite low in June, well below anticipated levels. But this isn't a new situation. Overbuilding over quite some time means that they have a stunning nine months of inventory of new unsold homes at the current rates rate. The main problem area is in the North-East states.American exports rose +4.0% in June from a year ago. Imports were up +3.0% on the same basis, meaning their merchandise trade deficit shrank a little. The still-rising import levels also means the healthy demand in the US economy is still the main driver of world trade.There was another very well supported US Treasury bond auction overnight, this time for their 5 year Note. That delivered a 4.05% yield, down from 4.27% at the equivalent event a month ago. General market support for these debt issues remains impressive.In Canada their central bank cut its policy rate by -25 bps to 4.5% at its overnight meeting, a second cut in a row. Another cut in September seems a live possibility. They say the reduced rates could contribute to a slowdown in mortgage and shelter costs, which have been a large component of inflation there.Japan's July factory PMI actually slipped slightly below expansion levels to a very small contraction, an unexpected result of their Markt/S&P survey. But their services PMI went the other way with a solid expansion recorded for July.In India, new orders and business activity surged in July, driving both their services and factory PMIs to very fast expansions. And that brought their best expansion of employment in over 18 years. But because these pressures have been rising for some time, they are starting to get strong inflationary pressures from them now.India's soaring share prices, and the earnings growth by Indian companies have pushed this country to just under a fifth of the MSCI emerging markets index while China has fallen to a quarter, down from more than 40% in 2020. India this threatening China as the main emerging market.South Koreans are increasingly confident, according to a survey released by their central bank. Their composite index rose to its highest level since June 2023. Consumer sentiment regarding current living standards rose, as did their future outlook.In Europe, their flash PMIs show July sagged to a five month low. In Germany, while their service sector is still expanding a a good clip even if it is less, their factory sector is really struggling now and contracting at a rather sharp pace which will worry Berlin policymakers.In Australia, their July PMI also recorded a weaker rise in services activity and a sharper decline in manufacturing production. Persistent demand weakness led to a second consecutive monthly decrease in total new business and the fastest fall in new export orders in nearly four years.The UST 10yr yield is now at just under 4.29% and up +4 bps from this time yesterday. The price of gold will start today up another +US$9 from yesterday at US$2412/oz.Oil prices are +50 USc firmer at just on US$77.50/bbl in the US while the international Brent price is just on US$81/bbl.The Kiwi dollar starts today softish, down another -10 bps at 59.4 USc. Against the Aussie we are up +10 bps at 90.1 AUc. Against the euro we are down -10 bps at 54.8 euro cents. That all means our TWI-5 starts today at 68.4 and down -10 bps from yesterday.The bitcoin price starts today at US$66,573 and up +1.1% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.2%.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.

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 lower commodity prices spread more widely overnight and a dark mood flowed over Chinese equity markets late yesterday.But first, there was a GDT Pulse auction event overnight. Basically prices fell. The SMP price was down a bit more than expected, down -2.8% from last week's full GDT event and taking it back to levels last seen in April. The more important WMP price was down too, down -1.5% in a lesser retreat than expected. Given how commodity prices have been falling generally recently, perhaps this isn't as tough as it could have been.Meanwhile in the US, their retail sales at physical stores were up +4.9% last week from the same week a year ago, a much better gain than inflation, so consumers continue to spend, although not with quite the same impressive enthusiasm as a month ago.But they are not spending to buy a house. Existing home sales fell by -5.4% from the previous month to an annual rate of 3.89 million units in June, the sharpest monthly decline since 2022, to the fewest amount of sales since the start of the year. It was the fourth consecutive monthly decline in existing home sales as the median sales price climbed to a record high of US$426,900 (NZ$717,000). Higher-end houses are still selling but the middle of the market is now a buyer’s market. Unsold housing inventory rose by to 1.32 million units, or 4.1 months' supply at the current monthly sales pace.Also retreating was the Richmond Fed's survey of factories in the mid-Atlantic states. In fact, it contracted the most in four years. New order levels retreated although future expectations for new orders are holding up. Perhaps election-change prospects are weighing on these firms outlook?Meanwhile there was a UST 2yr bond tender earlier today, and it was again very well supported, delivering a median yield of 4.39% and that was -27 bps lower than the 4.66% at the prior equivalent event a month ago.In India, their Budget delivered a raft of changes. These included increased spending, job creation, and tax relief for the middle class. They hiked their Securities Transaction Tax, reduced taxes on short-term and long-term capital gains, and abolished the angel tax on foreign investment. They also cut import duties on gold and silver, but raised them on plastic products. Income tax thresholds were raised. In the end this is deficit spending equivalent to 4.9% of Indian GDP and continuing its fiscal stimulus. Modi's allies will be satisfied with what they got.Taiwanese retail sales improved again in June, up almost +4% from a year ago, well above inflation there. And their industrial production was up an impressive +13.5% on the same basis.EU consumer confidence improved marginally in July, although it remains low and well below its ten year average. But at least it isn't going backwards.The UST 10yr yield is now at 4.25% and little-changed from this time yesterday. Hong Kong equity prices fell -1.0% and Shanghai was down -1.7% in its Tuesday trade both in sharp late selloffs. Tech capital Shenzhen fell almost -3.0%. The price of gold will start today up +US$10 from yesterday at US$2403/oz.Oil prices are -US$1 lower at just on US$77/bbl in the US while the international Brent price is just on US$80.50/bbl.The Kiwi dollar starts today down another -¼c at 59.5 USc. Against the Aussie we are still at 90 AUc. Against the euro we are also still at 54.9 euro cents. That all means our TWI-5 starts today at 68.5 and down -30 bps from yesterday.The bitcoin price starts today at US$65,848 and down -2.3% 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 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 it’s been a toughish night for commodity currencies as markets mark down these prospects. That has been true for both hard and soft commodities, although it is more of a sag than a significant fall.In the US, the Chicago Fed's National Activity Index rose again, although this time it was minor. But the May index was revised higher. That makes it three rises in the past six months, and is a sharpish positive change from a year ago. This is actually an important indicator but one that is usually ignored by markets.In Japan, the newt meeting of their central bank is Wednesday, July 31. It has been widely expected they would raise their policy rate and make other moves toward normalisation, largely because their long-held goal of getting moderate inflation embedded seems to have been achieved. But now they are giving unofficial signals that there may be [yet another] delay because household consumption is not improving as they want.Taiwanese export order growth eased in June, rising 3.1% year-on-year, but that missed expectations of a +12% rise. The miss is largely due to lower orders from Japan. You may recall that May orders rose 7% on this year-on-year basis.Today is Budget day in India. This one may reflect the pressures on Modi from his coalition support parties, the ones he needed to stay in power. This price may not be 'cheap' and if it does seem excessive, there could well be financial market reactions.The People's Bank of China unexpectedly cut key lending rates by -10 bps to fresh record lows. The 1-year loan prime rate (LPR), the benchmark for most corporate and household loans was cut to 3.35%. Meanwhile, the 5-year rate, a reference for property mortgages, was trimmed to 3.85%. Yesterday's decision came days after the Third Plenum meetings at the end of last week, and follows a slew of data that indicated the Chinese economy continues to lose steam. At the same time, the central bank reduced its collateral requirement for its MTF facility. What we are seeing is a skew to short-term priorities.And staying in China, they are grappling not only with a fast-aging population, but an out-of-balance retirement age. Chinese men 'retire' at age 60, women at 50 to 55. By 2035 more than 30% of the population is expected to be at that age. Even though retirement support programs are skinny, these ages will have a dramatic impact sooner than many realise. But Beijing realises. And it moved at the Third Plenum meeting to raise that age. However the messaging is subtle because it is widely expected to generate substantial pushback among those affected. Demographics is destiny, and China won't have gotten rich like Japan before these trends become very difficult to manage, so their options are closing fast.In the EU, the ECB's survey of professional analysts suggests markets expect them to make only begrudging progress against inflation, but progress none-the-less. It won't be until 2025 that inflation hits 2% these analysts suggest. They haven't changed their view on economic growth in the region with tepid +1.3% real growth in 2025. But they do see 'better' progress battling unemployment even though the levels will remain relatively high by international standards (6.4% in 2025).The CrowdStrike IT disaster is still lingering, especially in the travel industry. It has raised many questions. One is, who will pay? That now largely seems to be insurers, and that has implications for premiums and coverage in the future.The UST 10yr yield is now at 4.26% and up +2 bps from this time yesterday. The price of gold will start today down -US$6 from yesterday at US$2393/oz.Oil prices are -50 USc lower at just over US$78/bbl in the US while the international Brent price is just on US$81.50/bbl.The Kiwi dollar starts today down more than -¼c at 59.8 USc as commodity currencies take a hit. Against the Aussie we are still at 90 AUc. Against the euro we are also down more than -¼c at 54.9 euro cents. That all means our TWI-5 starts today at 68.8 but down -20 bps from yesterday.The bitcoin price starts today at US$67,370 and up +1.0% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 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.

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 economies of most major powers are in good shape and their companies are prospering.But for those who follow such things, we should note that President Biden has decided not to run in the Presidential election in November, stepping aside. The race for the Democratic nomination is now open at their convention in Chicago starting on Tuesday August 20 (NZT) even though Biden endorsed Kamala Harris.Well before then and ahead this week will be some early PMIs for July released for many key economies. Although there are no major June CPI due for release, the US's important PCE inflation data is due on Saturday NZT and that will be keenly awaited. The US will also release its first estimate of Q2 GDP on Friday and markets expect real growth there to be +2% from Q1. Good recent data might well see it above that.Canada is reviewing its policy rate on Thursday, and market now expect a -25 bps cut to 4.5%China is set to announce its policy interest rate decision this week, and it should be releasing its troubled FDI update soon, both possibly later today.Over the weekend, the big overnight news was that a "faulty channel file" from CrowdStrike took down Windows computers everywhere, including in New Zealand. Outages were widespread, including for many bank services. It was a spectacular own-goal and not a malicious strike. We have more details here. And our review shows how you can recover if you were affected.. But be careful; within hours scammers had launched new domains hoping to trick users into 'response scams'. CrowdStrike made its name fixing tech problems. Now it has caused a doozy. The echoes are lingering and may do for some time yet.And the situation isn't going to do anything for tech company valuations generally. US$13 bln CrowdStrike's share price was down -11% on Friday alone, down -18% for the week.Interestingly, China seems to have escaped the issue, largely due to its self-sufficiency policies. But it has hit Hong Kong.A new research note by the New York Fed is pointing out that since the GFC, American factory productivity improvements have stalled. Tech has been no saviour to this sector. Prior to that, large firms built innovative advances. But since even the leading firms haven't got productivity gains. They call the change a 'mystery'. Even shifting low-wage production offshore didn't have the effect of raising it. Nor competition, it seems. And all this come as their employed workforce hit record highs.In Canada, their expected May retreat in retail sales after the strong April gain came in deeper than expected. If it wasn't for good car sales, it would have been much worse. June is expected to be -0.3% lower too. Now their year-on-year gain is only +1.0%, much less than their inflation of +2.7%.Canadian producer prices rose +2.8% in the year to June, the same as for the year to May.Japanese inflation stayed at 2.8% in June, well above their central bank's upper target range. It has been consistently above 2% since April 2022. Food prices rose 3.6% in June although that was lower than the May 4.1% rate. Energy prices were up 2.4% but that is somewhat artificially high because fuel subsidies ended in May. These levels are marginally lower than analyst expectations.China has ended its internal policy meetings, the Third Plenum. As suspected, little real economic reform seems to have been on their agenda. Just more of a 'security is everything' attitude, more excessive adverbs, and a seeming turn inward. Those hoping for 'reform' and 'opening up' will have been disappointed.The UST 10yr yield is now at 4.24% and unchanged from Saturday.On Wall Street, earnings season will hit a crescendo this week with over thirty companies boasting market caps exceeding US$100 bln are set to unveil their Q2 financial reports. So far, only one in seven of S&P500 companies have reported Q2 results but they have been strong. Of those most are reporting earnings growth, and more than anticipated by analysts.The price of gold will start today up just +US$3 from Saturday at US$2401/oz after Friday night's big drop.Oil prices are holding lower at just on US$78.50/bbl in the US while the international Brent price is just under US$82/bbl.The Kiwi dollar starts today little-changed at 60.1 USc but more than -1c over the past week. Against the Aussie we are still at 89.9 AUc. Against the euro we are also still at 55.2 euro cents. That all means our TWI-5 starts today at 69 but down -90 bps for the week.The bitcoin price starts today at US$66,720 and up a minor +0.3% 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 policymakers are still struggling with the last-mile gains in their war on inflation.But first, the number of Americans making initial jobless claims rose last week and by slightly more than expected. That takes them back to early June levels and while not high, it does arrest the recent reduction trend. And there were less claims in the same week a year ago. It is too early to say if this is a labour market turning point, or an outlier. There are now just under 2 mln people on these benefits.The Philly Fed factory survey rose sharply to its best level in four months driven by new orders. The outlook for the next year was especially positive.Japanese exports rose to a three month high in June, a much better outcome than anticipated. While not a record, these exports are at an historically high level and only bested by two previous months in the past year. They are up more than +5% year-on-year and delivered a surprise trade surplus. That is mainly because energy costs no longer swell their import bill.India's central bank is turning its attention away from supporting breakneck economic growth, to controlling inflation. They signaled this in a Bulletin released yesterday - and a return to the policies of Raghuram Rajan, the ones he got removed by Modi for.The ECB monetary policy review overnight delivered no change to their official interest rate settings. They are holding their restrictive policies because inflation pressures remain and wage gains seem to be driving those. European companies are suffering decreased profitability because they are unable to pass on these elevated costs, they say. But they reckon the pressures will be temporary until inflation is beaten. Still they seem very unsure when rate cuts will happen again.In Australia, their employed workforce expanded by +50,100 in June to 14.4 mln. +43,300 of those new jobs were full-time, +6,800 were part-time. Their jobless rate rose marginally to 4.1% and their participation rate is still hovering around 67%. Their employment rate of their working-age population is 64.2%. Container freight rates were little-changed last week but that is of no comfort because they are staying +286% higher than year-ago levels. The usual factors remain in play although the Panama Canal water levels are recovering and back to the 5-year average. July is when levels usually start to recover. Bulk cargo rates are little-changed from a week ago, although they did rise modestly in between before retreating yesterday.And we should probably note - again - that the copper price is still retreating hard, down -7.5 in the past week alone. The reason relates to demand out of the stuttering Chinese economy. Nickel, cobalt and lithium are all suffering too, all components of the 'green transition'.The UST 10yr yield is now at 4.19% and up +5 bps from yesterday. The price of gold will start today up +US$2 from yesterday at US$2455/oz and still hovering near its all-time highs.Oil prices are up +50 USc at just on US$82/bbl in the US while the international Brent price is just over US$84.50/bbl.The Kiwi dollar starts today little-changed at 60.6 USc. Against the Aussie we are also little-changed at 90.2 AUc. Against the euro we are still at 55.6 euro cents. That all means our TWI-5 starts today at 69.4 and essentially unchanged from this time yesterday.The bitcoin price starts today at US$63.799 and down -0.9% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 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 on Monday.

New Zealand's nascent private credit industry could account for up to 5% of business lending to operating companies over time, suggests Aotea Asset Management (AAM) executive director Will Carnachan.AAM, which launched three years ago, is a corporate debt fund manager organising wholesale investorsto contribute to direct secured loans to businesses. Private credit, a form of shadow banking, has made headlines in the US, Europe and Australia over the past couple of years. The International Monetary Fund estimates the fast growing "opaque" and " highly interconnected" private credit market topped US$2.1 trillion globally last year, and over time "could become a systemic risk for the broader financial system."In a new episode of interest.co.nz's Of Interest podcast, Carnachan says in NZ the largely unregulated private credit industry's probably a decade behind where it's at in larger economies, including Australia's."I don't necessarily think this industry will, or should, become heavily regulated over time because a big part of the driver here is to move risk away from deposit taking institutions which carry systemic risk. But it is really important, I think, for the longevity of the industry that managers are being really transparent around how they're conducting themselves, how they're valuing their assets," Carnachan says."There is huge potential for this industry to grow...If you look at that business lending segment in New Zealand, it's roughly $120 billion, a lot of that's property linked. If you say half of that relates to operating companies, $60 billion, I think realistically where private credit investors like ourselves could come in to help manage some of the risk it's really between 2% to 5% of that over time. A relatively small chunk of the market, but will create options for those great kiwi businesses that are looking to grow, looking to expand, looking to acquire."In the podcast Carnachan talks about who the private credit investors and borrowers are, the interest rates they earn and pay, how the floating rate loans are priced, loan covenants and syndications involved, the fees AAM charges, the impact of high interest rates and falling interest rates on private credit, where the sub-investment grade borrowers rank in S&P Global Ratings' methodology, how AAM's portfolio currently has no credit loss issues or impairment issues, and more."In terms of the return profile that we offer, we're a floating rate product, so we provide a spread or a margin above. We use the Official Cash Rate as the benchmark because it's well understood. So what that means is we are an inflation hedge because as inflation rises or falls, typically market rates move commensurately. But we can always lock in an attractive margin over that benchmark rate," says Carnachan."And I think it's important to understand in terms of that marginal credit spread, we do a lot of work around ensuring that that is driving really good risk adjusted returns for our investors, and also taking into account the fact that these underlying investments are relatively illiquid. So it's not a product that you can trade in and out of. It's a hold to maturity product.""We are effectively a fixed income product that provides, we think, a really attractive diversifier away from bonds and yield stocks."*You can find all episodes of the Of Interest podcast here.

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 American data is improving in a steady way without deficit or labour market stresses, so conditions seem right for monetary policy 'normalisation' to be completed.First, American mortgage applications rose an unusual +3.9% last week from a week ago to be -14% lower than the same week a year ago. Pushing things along was a drop of the benchmark mortgage interest rate to under 6.9% from just over 7%.Meanwhile, US housing starts rose more than expected in June (from May) to be -4.4% lower than year ago levels. But this is still a lowish level. Completions in June were unusually strong, adding more availability.And American industrial production beat estimates too, rising +1.6% from a year ago, the biggest gain since November 2022.The US Fed's Beige Book surveys paints a picture of a modest expansion with some uneven variations across the Fed Districts. It also confirms cooling inflation - but little labour market stress yet.There was a well-supported but relatively small US Treasury 20yr bond auction earlier today and that delivered a median yield of 4.41%. That is very little different to the 4.40% median yield at the prior equivalent event a month ago. Because US deficits are actually shrinking, and quite fast, the pressure is off this fundraising.More Fed officials are signaling that they are moving closer to a rate cut, and markets are starting to price that in. They seem to have beaten inflation without crashing their labour market. 'Normalisation' can proceed now, it seems.In Japan, the Reuters/Tankan sentiment index for the factory sector jumped to +11 points in July from +6 in June. It was the first rise in 4 months. Meanwhile, the index for the service sector cooled, reflecting a patchy economic outlook. The latest survey comes two weeks before the Bank of Japan’s July policy meeting where it could raise interest rates again and announce its bond purchase tapering plans. In China, which dominates the global rare-earth minerals processing industry with its state-owned enterprises, it is finding it hard-trading as prices sink sharply and losses pile up.We should also note that China's rebar steel prices have slumped to 2017 levels, now just over half the level they were at the peak in 2021.And the World Trade Organisation says China is backsliding on key reforms and lacks transparency on subsidies. (Para 23, page 12.) They say China's secret subsidies could top US$900 bln.Homebuilding is at a low ebb in Australia - but the March results released yesterday suggest it picked up in Q1.The UST 10yr yield is now at 4.14% and down -3 bps from yesterday. The price of gold will start today down -US$9 from yesterday at US$2453/oz and now off its all-time record high.Oil prices are up +US$1 at just on US$81.50/bbl in the US while the international Brent price is just under US$84.50/bbl.The Kiwi dollar starts today recovered somewhat at 60.7 USc and and up +¼c. Against the Aussie we are up +½c at 90.3 AUc. Against the euro we are unchanged at 55.5 euro cents. That all means our TWI-5 starts today at 69.4 and up +10 bps from this time yesterday.The bitcoin price starts today at US$64,350 and virtually unchanged (-0.1%) 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 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 IMF seems the global economy in a "sticky spot".But first up today we can report that the overnight dairy auction defied recent trends and the futures market. Instead of another retreat, in fact it held, virtually unchanged (+0.4). But the two key powders did decline, just not as much as expected. SMP was down -1.1% (less than the -2% expected) and WMP was down -1.6% (much less than the -6% expected). The event was rescued by the +6.2% rise in Cheddar cheese and to a lesser extent the +0.8% rise in the butter price. The small +0.4% gain in USD was enhanced to +0.8% in NZD.Now all eyes will turn to the New Zealand consumers’ price index for the June quarter, which will be released at 10:45am today. Check back then because we will have full coverage of data that could well be market-moving.Overnight, American retail sales rose +2.3% in June from a year ago, not quite enough for this to be a 'real' gain, but closer than recently. There was no change between May and June, because car sales took a breather.So far in 2024, American car repossessions are up +23% compared with the same period last year, according to data from Cox Automotive. That comes after a long low period however, but they are up +14% from pre-pandemic levels.And last week, retail sales as measured by the Redbook Index for physical stores rose much less than recently, although the year-on-year gain was still an impressive +4.8%. But is was the weakest gain since late March.Slowing American retail sales growth its putting upward pressure in business inventories, although again, this is relatively minor in the grand scheme of things. In May they were +1.7% higher than a year ago, but related to current sales levels they are unchanged.In Canada, CPI inflation for June was released overnight and it eased to 2.7% from 2.9% in the prior month. This wasn't expected because markets ad assumed it would remain at the 2.9% mark. The Canadians have already started their easing cycle in their policy interest rate, even though they target a 2% midpoint in a 1-3% range.Perhaps the 'early start' is needed because they had a rather sharp drop in new housing starts in June, down by more than -20,000 or -9% from May. Vancouver fell -13%, due to sharp falls in multi-unit starts; Toronto crashed -37% for the same reason.The IMF expects the global economy to grow 3.2% in 2024, the same as in the April outlook but the 2025 growth forecast was revised higher by 0.1 percentage point to 3.3%. For 2024, they revised their forecasts for the US down to 2.6% (vs 2.7%), reflecting the slower-than-expected start to the year. In Europe, growth for the Euro Area is seen higher (0.9% vs 0.8%). In Asia, growth forecasts were also revised higher for both China (5% vs 4.6%) and India (7% vs 6.8%) while the Japanese GDP in seen expanding at a slower pace (0.7% vs 0.9%). For Australia, they marginally lowered their 2024 estimate -0.1% but left 2025 unchanged. New Zealand did not get a mention in this report. Meanwhile, they warned that services inflation is holding up progress on disinflation, which is complicating monetary policy normalisation.The UST 10yr yield is now at 4.17% and down -5 bps from yesterday. The price of gold will start today up +US$42 from yesterday at US$2464/oz and that is an all-time record high.Oil prices are down -US$1 at just on US$80.50/bbl in the US while the international Brent price is just over US$83.50/bbl.The Kiwi dollar starts today sharply lower at 60.4 USc and down nearly another -½c. Against the Aussie we are down at 89.8 AUc. Against the euro we are down at 55.5 euro cents. That all means our TWI-5 starts today at 69.3 and down -30 bps from this time yesterday.The bitcoin price starts today at US$64,426 and up +1.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.2%.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.