Economy Watch

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.And today we lead with news American factory orders are rising and setting up a good second half of 2024.But first we should note that the US is on holiday today and tomorrow, their Memorial Day (like our ANZAC Day but with more retail). This marks the start of their summer season when investors traditionally pull back from markets a little. But to be fair, it is less of a 'thing' now than it used to be. They return Wednesday, NZT.The week will be 'highlighted' by the first full Budget by the new government, on Thursday. In Australia, they will release CPI inflation data, and inflation data will also come out in Germany and the EU. There will be Japanese data too (retail sales and industrial production) and some important guidance from the Bank of Japan. And from the US, they will release an important PCE update, more data on their GDP growth, consumer sentiment (CB) and home sales updates. We will also get the official PMIs for China for May at the end of the week.And this is a big week in India. It is the final week in their six-weeks of staggered regional voting for 543 parliamentary seats. The ruling BJP are expected to win in what is a system with questionable vote-counting integrity. Final official results will be released some time on Tuesday, June 4, 2024In China, isolation by foreign investors is becoming quite stark. New net foreign investment grew a paltry +US$8.3 bln in April from March which looks like it is a decade low. For a country the size of China, this amount is just a 'rounding error'. In April 2023 it was only +US$14.1 bln and also considered low. In fact the total new foreign investment in the first four months of 2024 was -31% lower than in the same period a year earlier which itself was weak. The international de-risking trend is biting hard now as the nation turns inward.And Bloomberg has an interesting story about the record withdrawals from Chinese bank deposits in April. One-year term deposits at China’s largest banks pay a record-low of just 1.45% pa. There was a large -NZ$880 bln outflow in deposits from banks in April, -1.3% of all deposits, and much of it flooded into bonds and "wealth management products". The policy goal is to spur national economic impetus by making these funds work harder. But China has had significant issues with "wealth management products" in the recent past so this is a very risky strategy. There is a history of a lot of people getting hurt - and very angry.In Japan, their inflation rate fell to 2.5% in April from 2.7% in March. Their core inflation rate dropped to 2.2% from 2.6%. While these falls were not unexpected, they are the lowest levels since January.Singapore's industrial production recovered sharply in April after the big miss in March. But it still isn't back to year-ago levels.Across the Pacific, US durable goods orders rose by +0.7% in April from March, following a +0.8% increase in March and defying market expectations of a -0.8% drop. That makes them a very impressive +7.9% higher than in April a year ago and augers very well for their factory sector in coming months. It was mainly driven by strong demand for transport equipment.An updated University of Michigan consumer sentiment survey result for May was released, coming in very much better than the preliminary version which recorded a drop. Yes there is still an easing but only a minor one. And this current level is +17% higher than a year ago.After three dour and disappointing consecutive months, Canada's retail sales sparked into life in April with its best rise in a year. But it will still be only +2% higher than a year ago and less than inflation's bite.The UST 10yr yield is now at 4.47% and up +1 bp from Saturday. And that is up a net +5 bps in a week. The price of gold will start today down a minor -US$1 from Saturday at US$2333/oz, and down -US$85 from a week ago.Oil prices are down -50 USc at just over US$77.50/bbl in the US while the international Brent price is just under US$82/bbl. These levels were US$79.50 and US$83.50/bbl a week ago, so about -US$1.50 less since then.The Kiwi dollar starts today unchanged from Saturday at just over 61.2 USc but -¼c lower than this time last week. Against the Aussie we are marginally firmer at 92.4 AUc. Against the euro we are also marginally firmer at 56.5 euro cents. That all means our TWI-5 starts today just under 70.6, which is up +20 bps from a week ago.The bitcoin price starts today at US$67,735 and down -0.4% from this time Saturday. Volatility over the past 24 hours has been quite low at just on +/- 0.6%.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 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.And today we lead with news China seems to be making a play to avoided as an investment destination.But first, initial US jobless claims fell to just +192,000 last week when a small increase was anticipated. Still no labour market stress signals here. The total number of people on these benefits fell below 1.7 mln, the lowest level of the year. The insured unemployment rate remains at a very low 1.1%.The globally benchmarked S&P Global/Markit factory PMI for the US rose (to 50.9) in May from its steady state in April although it did not get its boost from new orders this time. But new order growth was a feature of their May services PMI (54.8) with an impressive display and a two year high.This May strength is yet to show up in the Chicago Fed's National activity Index which slipped slightly in April. But it is showing up in the Kansas City Fed's factory survey which recorded a good recovery.It definitely did not show up in the April new home sales data, which in the month ran at almost -8% lower than the year-ago level. The retreat has been gradual each month in that period, but relentless.Perhaps we should note that there was another case reported where bird flu in US dairy cows has jumped to a human. Officials still say the risk is low.The internationally-benchmarked May S&P Global (Markit) PMI for Japan delivered its fastest expansion in nine months. Their previously shrinking factory sector rose to a minor expansion (50.5) while their service sector expansion slipped slightly (53.6).India's PMI data continued its strong run in May, for both the factory and services sector. A feature is the growing rise in exports, presumably benefiting from the China de-risking trend.Taiwanese industrial production was up more than +14% from a year ago in April. That is partly a reflection of weakness a year ago but for the past three months the month-on-month rises have been impressive and March was notably revised higher. Their retail sales growth was more modest however although its base was more solid. All this comes before the full-court pressure the PLA is currently applying to the island nation, a crude show of force in the Russian style.Beijing's claim that they are 'prioritising business reforms' rings hollow in light of the Taiwan pressure.In Europe, their economic recovery gained momentum in May, according to provisional PMI survey data. Faster increases in business activity, new orders and employment were all recorded in the month, while business confidence hit a 27-month high. This recovery is being led by Germany. Meanwhile, rates of inflation of both input costs and output prices softened from April, but remained above pre-pandemic averages in each case.Australian inflation expectations, as monitored in a respected Melbourne Institute survey, eased to 4.1% for the year ahead, down from 4.6% last month. The last time they measured actual inflation, it came in at 3.5% in March.The internationally-benchmarked May S&P Global (Markit) PMI for Australia delivered another small contraction in the factory sector (49.6) but a good expansion in the service sector (53.1). But both levels were lower than March and April. New orders retreated in both sectors, but to be fair the reductions were slight and the least in the past three months.The tighter global security situation has seen the container freight rates leap again, up +16% in the week to their highest in at least a year. The jump is all about outbound cargoes from China which emphasises the risks of trade from there. The Taiwan situation will make it even worse next week. So far, bulk cargo rates haven't moved much in the past week.The UST 10yr yield is now at 4.48% and up +5 bps from this time yesterday. The price of gold will start today still in a sharp down-trend, down another -US$51 at US$2336/oz. That is now down -US$119 from its all-time high on May 20, 2024, a -4.8% retreat.Oil prices are down another -US$1 at US$76.50/bbl in the US while the international Brent price is down a bit less to under US$81/bbl.The Kiwi dollar starts today unchanged from yesterday at just on 61 USc. Against the Aussie we are firmer, up +¼c at 92.3 AUc and a two-month high. Against the euro we are firmish at 56.4 euro cents. That all means our TWI-5 starts today just on 70.4, and up +10 bps from yesterday.The bitcoin price starts today at US$67,776 and down -3.0% from this time yesterday. Volatility over the past 24 hours has been modest however 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.

The fund backing New Zealand's incoming depositor compensation scheme is going to be small, it's going to take a long time to reach its target level, and the lack of depositor preference in the scheme is a mistake, according to a deposit insurance expert.Geof Mortlock, an international financial regulatory consultant who does work for the International Monetary Fund and World Bank specialising in financial system stability, resolution of bank failures and deposit insurance, spoke about the depositor compensation scheme in a new episode of interest.co.nz's Of Interest podcast.The scheme, expected to be launched in mid-2025, will provide protection of up to $100,000 per eligible depositor, per licensed bank, building society, credit union and deposit taking finance company, in the event of deposit taker failure. Finance Minister Nicola Willis has decided the fund backing the scheme, to be funded through levies paid by deposit takers, will be built up over 20 years to a size equivalent to 0.8% of protected deposits, or about $1 billion.Mortlock says other countries typically have a fund size equivalent to between about 1% and 4% of protected deposits, and he recommends taking about 10 years to build the fund up to its target level.He says the NZ scheme would likely be used for the failure of a non-bank deposit taker or small bank, but wouldn't be sufficient for the failure of a medium-sized or big bank, the failure of which would require "alternative mechanisms." Nonetheless Mortlock says it is worth having the scheme."I think it's definitely worth having because there are quite a sizable number of small deposit takers out there. And at some stage, one of them is going to fail. Hopefully not for a long time. But statistically, if you look around the world, there are occasional bank failures, and most of them tend to be small.""For a small deposit taker or a medium sized one, I think having a deposit insurance scheme is really important, and I think it helps in two ways. It reduces the risk of what we call interbank contagion, where one failure can trigger multiple runs across the banking system. And secondly, it helps to reduce the risk for the taxpayer, because it means that there is a dedicated fund paid in by deposit takers and therefore [this] reduces the need for government funding," says Mortlock."But for a large bank failure, it is not going to be sufficient. And if you look around the world for a large bank failure, deposit insurance funds are not typically used anyway."An option for a larger bank failure is the Reserve Bank's Open Bank Resolution (OBR) Policy. In the podcast Mortlock explains why he thinks it would be "potentially catastrophic" for the Reserve Bank to use OBR, and he doesn't think a Finance Minister would allow them to.In the podcast he also talks about what other resolution options could be for a large bank failure, what products the scheme will cover, the impact deposit takers paying a levy may have on deposit rates, how the Reserve Bank should administer the scheme, bail-in, depositor preference and more.Under depositor preference, depositors rank ahead of other secured creditors in a liquidation. Mortlock says it helps reduce the risk of runs on banks, and facilitates bail-in whereby unsecured liabilities such as bonds may be written down or converted into equity in the event of a bank failure.At the moment, with OBR, NZ is "about the only jurisdiction I can think of outside of some dubious ones, which would apply a haircut to deposit liabilities and no depositor preference," Mortlock says."So if you're a wholesale depositor in a bank and the banking system is looking shaky, and you know that the OBR is out there and could be triggered, what are you going to do? I think you're going to do a preemptive run. And what would that do? That would almost certainly mean that the [Reserve Bank] Governor, joined by the Minister of Finance, would have to say, a, we're not doing OBR, and b, we are putting in place a temporary guarantee of all wholesale deposits. Just the opposite of what you would want to have to do. So I think it is a foolish policy, OBR, and made even more foolish by the absence of depositor preference."*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.And today we lead with news the American central bank is wondering if they have done enough yet to quash the inflation impulse.But first, US mortgage applications rose +1.9% last week from the previous week, adding to the 0.5% increase from that earlier week and taking it to an unusual third consecutive week of gains in mortgage demand and only the second time this year that has happened. But they remain -11% lower than last year's weak level. Benchmark home loan rates slipped slightly (-6 bps) to just on 7%.But the recent rise in existing home sales fell back in April, down -1.9% from a year ago and also down -1.9% from March. It would have been a larger fall, but a surge of homes selling at the high end of the market capped the weakness. These are transactions less likely to need a mortgage. And that recent trend is also raising the median price.Yesterday's RBNZ scepticism that they are seeing needed 'last mile' progress in the inflation battle has been echoed by the US Fed in the minutes released earlier today for their May meeting. Getting to their target will take longer than they thought, these notes show. Some officials are open to another rate rise if needed to get on top of the stickiness. But in the end they stuck with their faith that disinflation will get them there. The equity market slipped when this document was released.Prior to that release, the US Treasury had another very successful bond auction, for a 20 year maturity, and that delivered a median yield of 4.58%, down from 4.77% at the prior equivalent event.Japan's machinery orders rose +2.9% in March from February, slowing from the +7.7% m/m gain in February but way better than market expectations which assumed a March correction was likely of -2.2%. Year-on-year March was up +11%. Their forecasts suggest the high levels of orders will be maintained in the coming three months. Of note is that orders for very large constructions (not included above) are running very strongly at present.But in China, their excavator sales - a market canary - fell almost -10% in the first four months of 2024, with domestic sales down -3% and export sales down -17%.In the UK, their CPI inflation rate eased to 2.3% in April, its lowest level since July 2021. However that was higher than the 2.1% rate expected. But that progress was overshadowed by the announcement that that country would go into an election on July 4, 2024. That is much earlier than expected. The UK pound rose on the news. There is currently expected to be a change of government at that election.Some Australian survey data shows that most 45 year old Aussies plan to retire soon after they reach 65. That is unchanged since 2018/19. There are now 4.2 mln retirees in Australia. Given their workforce is 14.3 mln, that means there are currently 3.4 workers per retiree. The same ratio in New Zealand is 3.3.The UST 10yr yield is now at 4.43% and up +1 bp from this time yesterday. The price of gold will start today down -US$33 at US$2387/oz.Oil prices are down another -US$1 at US$77.50/bbl in the US while the international Brent price is down a bit more to US$81.50/bbl.The Kiwi dollar starts today up only a net +10 bps from yesterday at just on 61 USc. Against the Aussie we are much firmer, up more than +½c at 92 AUc. Against the euro we are firmish at 56.3 euro cents. That all means our TWI-5 starts today just on 70.3, and up +20 bps from yesterday.The bitcoin price starts today at US$69,853 and up a mere +0.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 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.

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.And today we lead with news we are looking for signs inflation is actually easing and policy interest rates can be adjusted lower.But first, at the overnight GDT dairy auction, prices rose a bit more than +3.3% from the prior event two weeks ago. That takes the price level back to where it was in October 2022 with a nice up-trend developing now. Overall prices are now +13% higher than a year ago. Volumes offered however are at a four year low. The key WMP price was up +2.9%, SMP was up +3.5% and butter up +5.1%. Interestingly, mozzarella was up almost +10% indicating rising foodservice demand. China is back with good demand for WMP and butter, but it is the Middle East where the rising cheese demand is coming from. However we should note that the recently rising NZD capped the overall price increase at +1.9%.In the US Redbook retail sales indicator was up +5.5% last week from the same week a year ago, handily more than inflation so they are seeing real gains still.Not only are retail appetites high and rising, American stock ownership levels are now back to levels last seen prior to the GFC.At an event in Germany, the US Treasury Secretary Janet Yellen called out China, the UAE, and Türkey as the main evaders of the American and European sanctions on Russia over its invasion of Ukraine.In Canada, their CPI inflation rate eased to 2.7% in April from 2.9% in the earlier month, in line with market expectations, and is now the softest rate of consumer price growth since March 2021. Their core inflation rate is down to 1.6%. This shift lower is what their central bank said would happen. Easing food prices (from a year ago) led the shifts. The chance of rate cuts there next month have risen. Their policy rate is currently at 5%.In China, we are awaiting the data for April on foreign direct investment flows. It is unlikely to be very positive but it will give an updated position of where the 'de-risking' trend is at.In Australia, the expanding labour force (up +2.5% in March from the same month in 2023) is behind a +7.1% rise in total labour compensation in March from the same month in 2023. That means in April 2024, total wage and salary compensation will have pushed on up above AU$100 bln in the calendar month.Consumer sentiment in Australia, as tracked by the Westpac Melbourne Institute survey was virtually unchanged in May from April but at a low level still. It is a measure that has been in the doldrums for more than two years now; the last time it was 'positive' was in February 2022.Join us at 2pm this afternoon when we will have full coverage of today's RBNZ Monetary Policy Review. No-one is expecting any rate change, but their outlook opinions will be very important. Financial markets currently have two OCR rate cuts pencilled in for 2024 and three in 2025 and the RBNZ assessments of where they stand in the battle against inflation could well adjust that pricing - and that in turn may have echoes in current wholesale money markets.The UST 10yr yield is now at 4.42% and down -2 bps from this time yesterday. The price of gold will start today down -US$14 at US$2420/oz.Oil prices are down another -50 USc at US$78.50/bbl in the US while the international Brent price is still just under US$83/bbl.The Kiwi dollar starts today down another -20 bps from yesterday at just over 60.9 USc. Against the Aussie we are marginally softer at 91.4 AUc. Against the euro we are also softish at 56.2 euro cents. That all means our TWI-5 starts today just on 70.1, and down -10 bps from yesterday.The bitcoin price starts today at US$69,683 and up +1.9% from this time yesterday. Volatility over the past 24 hours has been moderate again at +/- 2.7%.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 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.And today we lead with news China seems to be struggling to find its way through the wreckage of its property crisis.The Chinese central bank left both its 1- and 5-year rates unchanged in their monthly review today, still at 3.45% and 3.95% respectively. The one year benchmark has been unchanged for nine consecutive months now, the five year benchmark for three. These 'holds' come amid a flurry of other loosening activity last week, targeted at reviving their property markets and saving the remaining large property developers.Analysts are forming the view that the actions China has taken to reinvigorate its property sector won't be enough to achieve that. Bets that much more stimulus will be required are juicing up some commodity markets. Copper, for example, has now risen to US$11,250/tonne, up +7.5% in a week, up double that in a month. Zinc has taken off too, up +10% in a month.Meanwhile that are chalking up some global success in other areas. The number of new shipbuilding orders in China rose almost +60% in Q1-2024 from the same period a year ago. This accounted for about 70% of global orders for ships. Almost 40% of those orders were for bulk cargo ships, 12% for container ships. But there was a notable surge in orders for oil tankers, accounting for 35% on Q1 orders. Normally they account for less than 10%.We should get the Chinese foreign direct investment data for April later today and markets are braced for another quite weak result as the two superpower blocks disentangle.And we should note that the southern province of the Guangxi (at the border with Vietnam) is suffering unusually heavy rainfall currently with widespread flooding. Both hourly and daily rainfall records have been broken.Meanwhile Taiwanese export orders came in in April at the same level as March, a very good result because that is almost +11% higher than April 2023 and well above the expected +4.5% gain.And we should also perhaps note that the New Zealand carbon price is falling away quite quickly now, with the NZU down to just $46/tonne. (You will recall it at over $80/tonne more than a year ago.) That is now miles below the NZ$132/tonne EU carbon price, which is languishing but not really falling.The UST 10yr yield is now at 4.44% and up +2 bps from this time yesterday. The price of gold will start today up +US$19 at US$2434/oz. Oil prices are down -50 USc at US$79/bbl in the US while the international Brent price is still just on US$83.50/bbl.The Kiwi dollar starts today down -20 bps from yesterday at just over 61.1 USc. Against the Aussie we are still up at 91.6 AUc. Against the euro we are softish at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2, and down -20 bps from yesterday.The bitcoin price starts today at US$68,332 and up +2.4% from this time yesterday. Volatility over the past 24 hours has been moderate however at +/- 2.1%.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.

Renting in New Zealand today is more difficult than a decade ago, with fewer properties available, rents continuing to increase, and the quality of rental properties not much better, Shamubeel Eaqub says. However, the economist and co-author of the 2015 book Generation Rent, rethinking New Zealand's priorities, says it's not all bad news.Speaking in the latest episode of interest.co.nz's Of Interest podcast, Eaqub says the "lived reality of renting" has got harder over the past decade, but the regulatory settings are slowly improving."We need to ensure there's sufficient renters' rights ... because in New Zealand renting is so insecure and is such a problematic thing for so many people."One area giving Eaqub optimism is the rise of build to rent, where landlords must offer 10-year rental tenancy agreements."I've been a long time fan of institutional landlords rather than accidental landlords. When you are in the business of land lording, you want to have as little turnover as possible, whereas if you're an accidental landlord, you are much more interested in having quick turnover and being able to sell it off and all those other bits and pieces. The tenant is kind of incidental to the story and a bit of an annoyance, really."Eaqub says build to rent offers two types of security; tenure security and financial security."Because more often than not [build to rent] will come with contracts that will have a known level of [rental] increase for the next, say three years, so you can plan your finances. Whereas in a normal tenancy you have only certainty for 12 months and then you don't know what will happen next."Build to rent is adding new housing supply targeted for one particular use, which he says is unusual in NZ."If you look at what happens in New Zealand, or how it has generally happened in New Zealand in the past, it's the idea of filtering, right? You build houses which are for new homes and for rich people, and then the older homes that are secondhand, that kind of gets recycled into the rental market.""So I'm very encouraged to see this new supply that's coming in, that's very much targeted towards renting specifically. Because if you think about the pressures that we see in terms of emergency housing, social housing and all those kinds of things, that's happening because people are falling out of the rental market, because the rental market is short supplied and is very expensive. And so the more we can do to get more supply directly and retained in the rental market, the better it is," Eaqub says.He also talks about his disappointment at the fracturing of the Labour-National consensus on medium density residential standards (MDRS)."[The consensus] showed me for the first time the grown-up-ness of the way that our politicians can respond to structural problems, that we can put aside our political differences and just do something because it's the right thing to do, not because you're on one side of the House or the other. But that grown up moment of politics lasted very, very briefly, and we threw it away at the first chance when the election campaign started," Eaqub says.In the podcast Eaqub also talks about NIMBYS, the construction sector, what's driving rents, problems with local government, his views on rent controls, the accommodation supplement, emergency housing, what the rental market may be like for his kids' generation, and more.*You can find all episodes of the Of Interest podcast here.

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.And today we lead with news metals prices eye a boost from the Chinese housing rescue.But first in the week ahead, it will be one dominated by the RBNZ's Wednesday Monetary Policy Statement, one that itself comes about a week before the new Government's first full Budget - and that too is likely to have a key influence on monetary conditions. No-one is expecting any change to the OCR, but signals for when it will be cut will be keenly awaited.In the US we will get advance PMIs for May, durable goods orders, and new and existing home sales for April. China (today), South Korea and Turkey also have rate decisions dues this week. And inflation rates will be released for Canada, the UK, and Japan. Sentiment surveys will be released in Australia and the EU, along with retail sales data in Canada.Wall Street has just booked a strong set of earnings reports. Most S&P500 companies have reported now (93%), and they have reported a +5.7% rise in profit growth, matching the outsized gains in Q2-2022 that was off the back of the prior pandemic weaknesses. Almost 80% of these companies came in with better than expected earnings-per-share, and 60% better than expected revenues. These sort of outcomes help explain why both the Dow and the S&P500 are at record highs. And why many investors don't think these equity markets are over-valued. But we should note that PE ratios ae higher than long-term averages now.In China, industrial production growth recovered in April after a disappointing March to be back yo the expansion level in the prior three months. But this is the only 'good news' in yesterday's data dump from the Middle Kingdom.Their retail sales rose by only +2.3% year-on-year in April, down from +3.1% in March and missing market forecasts of +3.8%. That is quite a miss.Electricity production slipped in April from March to be up only +3.1% in the year. That is a long way lower than the +8% rise in the year to December. If 3.1% is a proxy for GDP, they are not on track to achieve Beijing's growth targets.Prices for new dwellings fell their most since July 2015. Prices for resales fell even more. The depth of their property sector retreat is laid in the official information. It is no wonder they are considered a wholesale state intervention in the sector.To clear away the drag that their property market has created, Beijing has taken some 'drastic moves'. The central bank has removed its lower limit banks can charge for home loan rates, nationally. It has cut interest rate benchmarks for housing-related lending by -25 bps.And it has allocated ¥300 bln (NZ$42 bln) for lending aimed at buying by local authorities for unsold housing for "social purposes". They said the ¥300 bln of central bank cash will translate into an estimated ¥500 bln of credit overall.And we should keep an eye on what is happening to China's Agriculture minister. He was in charge of their food security program, and has suddenly fallen out of favour, receiving the standardised accusation of 'corruption' from Beijing authorities.More generally. the UN says India’s growth will rise in 2024 to +6.9%, from the 6.2% they estimated in January, driven by strong public spending and growing private consumption. The other big mover is Brazil, up to an expected +2.1% in 2025 from a January estimate of +1.6%. The US is still expected to expand +2.3%, Japan by +1.2%, China by +4.8% and the EU by +1.0%. Australia is +1.6%. New Zealand is ignored by this UN review.The EU released its final April CPI rate which came in at 2.6% for the bloc, 2.4% for the Euro Area. Both were little-changed from March but sharply lower than a year ago. In April 2023 the EU rate was 8.1%, the Euro Area was 7.0%. Getting rid of dependence on Russian oil and gas has not been at the cost of higher inflation. But we should observe that the range is wide across the bloc between countries. Denmark recorded at 0.5% annual inflation rate in April, whereas Belgium 4.9% and they are less than 700 kms apart.We should note that the social tensions in New Caledonia are echoing in the nickel market because there is an important mine there. It is the world's third largest producer, and may help explain why France isn't taking any backward steps. Global nickel prices have risen more than US$2000/tonne, up +11.3% over the past week over supply fears. It is a key ingredient for making stainless steel.The UST 10yr yield is now at 4.42% and unchanged from Saturday but down -8 bps from this time last week. The price of gold will start today down -US$4 from Saturday at US$2415/oz. That is up US$45 for the week and just off it's all-time high. Silver has shot up too, up +12% over the past week.Oil prices are still up at US$79.50/bbl in the US while the international Brent price is still just on US$83.50/bbl. Both are a bit more than +US$1 higher than a week ago.The Kiwi dollar starts today down -10 bps from Saturday at just over 61.3 USc. That is up almost +120 bps in a week. Against the Aussie we are still up at 91.7 AUc and a new one month high. Against the euro we are also firm at 56.5 euro cents. That all means our TWI-5 starts today just on 70.4, unchanged from Saturday and up +80 bps in a week.The bitcoin price starts today at US$66,732 and down a mere -0.2% from this time Saturday. And up +10.6% from this time last week. Volatility over the past 24 hours has been low however at +/- 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.And today we lead with news the ECB is warning investors aren't taking geopolitical risks into account nearly enough.But first in China, we are getting reports that Beijing is developing a plan to save their housing markets and SOE developers by having the state buy huge numbers of unsold properties to boost demand. It is a sign of desperation. What wouldn't go wrong? Millions of properties partly occupied are surely likely to give an enhanced sense of rot in the sector, while enriching the developers. The future for such a policy looks bleak indeed.Under the proposal, local state-owned enterprises would be asked to help purchase inventory from distressed developers at steep discounts using loans provided by state banks, Bloomberg reported on yesterday. Hong Kong shares of developers who will benefit from the "market clearing" zoomed again yesterday.In the US, housing starts rose in April from March but are still lower than year-ago levels, and that year-ago standard is not high. Previously we have seen stronger residential building consent levels but they are falling on a prior month- and prior year-basis too. The new home construction sector is falling back into line with the general real estate resale market with tepid demand at best.But that weakness is not reflected in their labour market. The actual number of jobless claims fell last week to 197,000 which was a slightly smaller fall than expected. It is interesting how expectations for rising labour pressure seemed to have turned around.And the real state of retailing in the US can be tracked by the activity of their largest retailers - and the largest is Walmart. They said Q1-2024 sales levels were strong, growing far more than inflation.Most serious analysts see the US economy expanding by +2% in 2024. But the AtlantaFed's GDPNow model reckons it is expanding nearly twice as fast as that, currently running at a 3.6% expansion, real.In one region, the US Philly Fed factory survey turned from a minor positive to a minor negative in May, basically because of a pullback in new orders. But also intriguing is the holding high of survey perceptions of business conditions. They seem confident about the future, very confident.Industrial production in the US was little changed in April, taking seven of the past twelve months as expansions, five as contractions. But most of the expansions, as small as they have been, are in the more recent half. And that has eaten into the year-on-year deficit, so it is now only -0.4%.In its latest Financial Stability Review, the ECB says investors are likely to be jolted by negative election surprises in 2024 that will weigh on financial stability. They reckon investors are blind to the sudden shifts in sentiment that geopolitical tensions can drive. And the extra spending they are having to do on the security from is likely to put future strain on European public finances they noted.In Australia, the April labour force data saw the jobless rate rise to 4.1% from 3.9% in March. (NZ was 4.3% in March.) That means 593,000 of their 14.9 mln labour force are without work. Full-time employment fell by -6100, part-time employment rose by +44,600. It was tougher in NSW where full-time employment fell -16,300 and part-time employment only rose +13,100.We have previously noted that financial markets had started pricing in a chance of interest rate rises from the RBA. A lowish chance, admittedly. But now we can note that they seem to have abandoned those bets - even though the consensus seem to be that the short-term Aussie Budget won't be especially inflation-friendly.More globally, the copper price has breached US$11,000 and an all-time high and now we are into the crazy world where short sellers are being squeezed, and having to buy their way out of the frenzy which bids up the price further.You may recall we reported a sharp rise in bulk cargo freight rates last week. Well, it was temporary and they have now fallen back to the prior week's level now. But containerised cargo rates are still rising as fast as they did last week, up another +11% this week and are now double year-ago levels. All this is driven by outbound-from-China rates roiled by the persistent Canal and security problems.The UST 10yr yield is now at 4.38% and up +2 bps from this time yesterday. The price of gold will start today down -US$10 from yesterday at US$2379/oz.Oil prices are up +US$1 today to just under US$79/bbl in the US while the international Brent price is up +50 USc, now just on US$83/bbl.The Kiwi dollar starts today with a slight easing from yesterday at just on 61.2 USc. Against the Aussie we are up at 91.6 AUc and a new one month high. Against the euro we are unchanged at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2 and little-changed from yesterday.The bitcoin price starts today at US$64,946 down a very minor -0.2% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.6%.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 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.And today we lead with news financial markets are in a risk on mood today.First, the April US inflation rate brought no surprises, coming in as expected at 3.4%, a dip albeit a small one, from March's 3.5%. But it still qualifies as 'sticky' - there have been nine lower readings in the past twelve. Their 'core' rate fell to 3.6%, also as expected. Airfares and rent remain the key components keeping inflation up in the US. Petrol prices rose a very minor +1.2% over the year. (The other measure we use has them up +2.0%. Either way, petrol is not pushing up inflation there.)The apparent slowing of inflation is bring debate and market bets on when the Fed will cut its policy interest rates. The Fed itself of tempering expectations, but markets aren't waiting. Yields on US benchmark bonds are falling in secondary markets, equity prices are rising in anticipation (and to record highs), and the US dollar is weakening as a risk-on mood envelopes markets today.Meanwhile, the official data for US retail sales were up +4.0% in April from a year ago on an 'actual' basis, and now showing 'real' gains above inflation. (But when you seasonally adjust this data and correct for varying holiday periods, the gain isn't that high.) Meanwhile, American business inventories are not rising, in fact posted a small dip in March. They don't currently have an excess inventory problem.US mortgage applications were little-changed last week from the prior week, to be -14% lower than the same week a year ago. Benchmark mortgage interest rates fell -bps to 7.08%, mortgage brokers report.China left its 1-yr Medium Term Lending Facility rate unchanged at 2.5% yesterday.Indian exports fell sharply in April from March, and were only +0.8% higher than a year ago. Presently, India is not a powerhouse exporter or participant in global trade. April merchandise trade exports of US$35 bln in the month is barely more than Australia's.The EU delivered some better economic results overnight with March quarter economic activity expanding (GDP was +0.4% higher in the quarter than the same quarter a year ago, 'real'.) Although they may seem low to us, they are 'good' for them in the current circumstances.Their Spring forecasts out overnight see a "gradual expansion amid high geopolitical risks", anticipating growth rising to +1.0% this year and +1.6% next. Industrial production is rising recently, cutting into the prior declines. But they are making hard work of it getting this key indicator to rise on a year-on-year basis.And staying in Europe, we should note an assassination attempt on the newly-elected nationalist firebrand Slovak prime minister. He has been a pro-Russian, anti- democracy lightning-rod, the subject of large street demonstrations since his election. It is the king of spark that in the past has kindled wider, broader consequences.Argentina's central bank cut its benchmark interest rate -1000 bps to 40% from 50%, marking the sixth adjustment since December due to a slowing inflation rate, bringing the rates to the lowest since June 2022. The monthly inflation rate slowed for the fourth straight month to 8.8% in April from 11% in the previous month and below market forecasts of a 9% gain.In Australia, the rate of gain in their wage pay slipped to 4.1% in the March quarter. That is the first time that gain rate has fallen since Q4-2020 and it may suggest labour market pressures are starting to ease there.Standard & Poor's has been looking at the 2024 Aussie budget. They are concerned about 'structural spending pressures' that won't ease in futute. They are also worried about the broader issue of weak productivity and “how effective spending programs such as Future Made in Australia are in allocating resources”.The UST 10yr yield is now at 4.36% and down -9 bps from this time yesterday. The price of gold will start today up another +US$34 from yesterday at US$2389/oz, a move essentially driven by the falling greenback.That same move has boosted oil prices today which are up +50 USc to just on US$78/bbl in the US while the international Brent price is now just on US$82.50/bbl.The Kiwi dollar starts today with a broad-based, across-the-board rise, up almost a full +1c from yesterday at just on 61.3 USc and its highest level in eleven weeks. Against the Aussie we are up at 91.5 AUc and a one month high. Against the euro we are +½c higher at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2 and up +60 bps from yesterday, and its highest since mid March.The bitcoin price starts today at US$65,097 and up a spectacular +6.3% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.2%.You can find links to the articles mentioned today in our show notes.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.