Economy Watch

In five years' time we would see things we can't imagine today if the Government adopts the Commerce Commission's recommendations to boost competition for personal banking services, Commission Chairman John Small says.Speaking about the Commission's draft report from its banking market study in the latest episode of interest.co.nz's Of Interest podcast, Small says he'll be interested to see what sort of response the Commission gets from the big four banks, ANZ, ASB, BNZ and Westpac, who it says are an oligopoly who don't face strong competition."We haven't accused them of doing anything nefarious. They're responding to the incentives that are in front of them. And we think that they've settled into a particular pattern of conduct that we think should be disrupted. But we don't blame them for that," Small says."I'll be really interested to see what they do have to say about it."The Commission makes 16 recommendations in its draft report, and says they should be considered as a whole. He's optimistic about what the market for personal banking services could look like five years from now if the Government was to adopt them all. "We would see things that we just can't imagine today. So if open banking is operational within a couple of years, if Kiwibank has already been disruptive, then I think we've set the industry up for a really healthy, competitive future that will be greatly beneficial to New Zealanders throughout their economy. And that [interest] rates will be sharper, and the range of services will be much wider and the choice between providers, trusted providers, will be much wider as well. So I would see it as being really positive five years from now," says Small.In the podcast Small also discloses which three of the Commission's 16 recommendations he believes are most important. With the Commission recommending the Reserve Bank review its bank regulatory capital settings, he also discusses dialogue with the Reserve Bank about this, and wanting them to "think really carefully about the competitive aspects of their decisions."He also talks about why the big four banks don't face strong competition, what could be done to make Kiwibank a disruptive competitor, how the banking industry hasn't disrupted itself via open banking, customers moving between banks, the competitive landscape for home loans versus deposits, his take on the idea of a windfall profits tax on banks, and what a parliamentary select committee bank inquiry could probe. *You can find all episodes of the Of Interest podcast here.

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 that is full of unexpected data and outcomes.US jobless claims fell last week to 190,000 and this was lower than expected. The number of people still on this unemployment insurance is lower too, at just over 2 mln. Neither signals growing labour market stress.The Philly Fed's factory survey was expected to retreat in March following a good rise in February. But it surprised with another good expansion. And these heartland rust-belt manufacturers are looking ahead with surprisingly strong optimism.Existing home sales jumped and by more than expected in February, up +9.5% from January on a seasonally-adjusted basis. But year-on-year, sales declined in all regions.Meanwhile the US economic expansion kicks along. The latest internationally-benchmarked PMIs show their service sector activity growth eased to a three-month low amid reports that price pressures that had restricted customers' ability to commit to new projects, while manufacturing production expanded the most since May 2022. Overall, new orders increased but at a slower pace, while the rate of job creation ticked higher, marking the fastest in 2024 so far.We should also note that a California referendum to raise property taxes to finance 11,000 treatment beds and housing units with health care and social services for homeless people suffering from mental illnesses and addiction, has passed. This is somewhat unexpected given the range of opponents and their well-funded opposition.In Japan, March is delivering their strongest rise in private sector activity in seven months. Their factory PMI 'rose' to a smaller contraction in March while their services PMI expanded much faster. New orders featured as the driver.In India, their March PMIs showed a surging manufacturing sector, but it was still overshadowed by even faster expansion in their services sector. India is on a fast-track.The March 'flash' EU PMI is being held up to a stable level by its services sector which is still expanding and covering a continuing contraction in its manufacturing sector. Things are similar in the UK although their factory sector seems to be in better shape.And there were a set of European central bank decisions out overnight. First Turkey sharply raised its rate unexpectedly, up +500 bps to 50%! (I kid you not.) And Switzerland unexpectedly cut its key policy rate by 25 bps to 1.5%, making it the first major central bank to cut. And in between, the English reviewed and did nothing, holding their rate at its historically high 5.25%.In Australia, their labour market report for February has delivered a big surprise. Analysts were expecting a very good +40,000 rise in the employed workforce, but actually they got an extra +78,000 full time jobs in the month, plus an additional +38,000 part-time roles. Their jobless rate slipped to 3.7%. While this is 'good', we should remember that 31% of their 14.3 mln workers are still part-time, an unusually large proportion. (In New Zealand, that level is less than 20%.)Still, the jobs surge probably means any rate cuts in Australia are now further away.Australia's population is probably now touching 27 mln. It was at 26.8 mln people in September according to official data, and is growing at a record pace, fuelled by immigration and a longer life expectancy among boomers.Global container freight rates eased another -5% last week but remain unusually high because the reasons for the January surge have not gone away - drought in Panama and pirate activity in the Red Sea. Interestingly, trans-Atlantic rates are now rising while the largest falls are Chine-to-Europe. Bulk cargo rates are staying elevated.The UST 10yr yield started today at 4.28% and unchanged from this time yesterday. The price of gold will start today higher by +US$21 from yesterday at US$2157/oz but in between they surged to well over US$2200 and then fell back quickly too.Oil prices are lower today by -50 USc at just on US$80.50/bbl in the US while the international Brent price is now just on at US$85/bbl.The Kiwi dollar starts today at just under 60.5 USc and little-changed from yesterday at this time. Against the Aussie we are down nearly -½c at 92 AUc following their strong labour market news. Against the euro we are still just under 55.7 euro cents. That all means our TWI-5 starts today at just on 69.6 and essentially unchanged.The bitcoin price starts today at US$66,649 and up +3.1% from this time yesterday. Volatility over the past 24 hours has been very high at just on +/- 4.2%.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 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.And today we lead with news the Fed has held its policy rate unchanged at 5.5% but given strong signals cuts are coming - but later than markets were expecting. However they still see three cuts in 2024.The UST 10yr yield fell slightly on the news. The US dollar fell slightly too. Wall Street moved higher.Meanwhile, American mortgage interest rates rose back to just on 7% last week for their benchmark 30 year fixed rate following the prior week's surprise drop. That came as mortgage applications ticked lower again last week and are now -14% lower than the same week a year ago.China held its prime loan rates unchanged at record lows in its review yesterday. You will recall they cut its 5 year prime rate (the reference for mortgage lending) by an outsized -25% bps last month.Taiwanese export orders slumped more than -10% in February, a surprise because markets had expected a +1.3% rise following a +1.9% gain in January. But it was not to be. Orders for heavy equipment fell, especially from the EU, Japan and China, and these falls overwhelmed their rising AI chip exports.The EU sentiment rose to be less negative in its March survey. It is now at its least-weak level since February 2022, amid a gradual slowdown in inflation and optimism surrounding potential interest rate cuts by the ECB later in the year.Britain's inflation rate dropped to 3.4% in February, down from 4% recorded in both January and December and slightly below market expectation of 3.5%. It was their lowest rate since September 2021.In Australia, a recent swell in business failures in construction, hospitality and retail has pushed up the number of monthly insolvencies to the highest in almost a decade. The absolute levels aren't high, but the trend will worry officials.New Zealand has slipped one place in the World Happiness Report rankings, and now sits just outside the top ten (at #11) in 2024. Australia moved up from 12th last year to 10th this year.The UST 10yr yield started today at 4.28% and down -2 bps from yesterday. After the Fed's decision it fell to 4.25%. The price of gold will start today little-changed from yesterday at US$2157/oz.Oil prices are lower today at just on US$81/bbl in the US while the international Brent price is now just on at US$85/bbl. Both are -US$1.50 lower than this time yesterday.The Kiwi dollar starts today at just on 60.4 USc and a small -10 bps dip from yesterday. After the Fed news, it rose to 60.6 USc. Against the Aussie we are still at 92.4 AUc. Against the euro we are still at 55.6 euro cents. That all means our TWI-5 starts today at just on 69.6 and marginally firmer.The bitcoin price starts today at US$64,620 and up +1.6% since this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.8%. There seems to be an outflow rush underway from some key ETFs.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 tomorrow.

With a United States presidential election looming in November, Patrick Watson, Senior Economic Analyst at Mauldin Economics, says it's difficult to say what the key economic battleground will be because many voters are "living in their own realities."Speaking in a new episode of interest.co.nz's Of Interest podcast, Watson says there's not a great deal of agreement on whether the US economy is even in good or bad shape."If you ask Democrats, they mostly say the economy is fantastic. If you ask Republicans, they say the economy is terrible. I think it's somewhere in between. I think that's what the data actually shows," Watson says.The election is expected to be a rematch between incumbent Democrat Joe Biden, and his Republican predecessor Donald Trump."On the Trump side, they have not really announced a great deal of specific policy. So that's kind of a mystery. We know what the Biden administration has done and says they will do. People can like it or not like it, but they at least know. So what we do know from the Republican Trump side is he wants to further restrict immigration. He will probably resume the various trade war and tariff measures that he was doing last time and possibly more aggressively," Watson says."But again, the difficulty is people aren't operating from reality. People are operating from their own predispositions, what they think is happening. So that makes it hard to predict."Asked whether the average American is feeling as if they're doing well at the moment, Watson says this is a really interesting question."The survey data that's out there is really confusing, because when they ask people, how is your situation, how are you doing financially in your own family and household? Most people, pretty solid majorities, over 60% are saying, 'I'm great, I'm in a good spot.' But then if you ask them how do you think the economy is doing overall for everyone else, they become very bearish. They think it's terrible. So it's hard to see how both of those are true at the same time," says Watson.In the podcast Watson also talks about this week's Federal Open Market Committee (FOMC) monetary policy review and the outlook for interest rate cuts, the US inflation picture including housing's role in its stickiness, what's going on in US share markets, regional economic performance in the US, challenges in the US labour market, and the influence of the Inflation Reduction Act.

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 of a week of big policy announcements with some potentially very big implications.First all eyes will be on Japan's rate review (tomorrow, Tuesday). Strong wage gains in Japan, and by much more than expected, are fueling speculation that that Bank of Japan won't wait any longer and will shift out of its negative policy rate when they meet.And the US Fed meets Thursday NZT with a review that includes economic forecasts and the so-called 'dot plot' interest rate projections. Also, in the US indicators such as Manufacturing and Services PMIs, along with building permits, housing starts, and sales of existing homes will be under review. Australia, Brazil, Turkey, Switzerland, The UK and Norway will all also be be reviewing that monetary policy positions and official interest rates. And this week we get inflation data from Canada, the UK, and Japan. Services PMIs from Australia, Japan, India, the EU are coming too this week. In China, they are scheduled to release data on industrial production, retail sales, their labour market, fixed asset investment. And their loan prime rate (LPR) reviews are on the docket as well.Chinese banks extended ¥1.45 tln in new loans in February, down from the record ¥4.9 tln in January. (January is usually a seasonal high.) The February level was basically as expected. But authorities would be disappointed it is not higher because they had taken action to encourage lending. The central bank had announced its largest-ever reduction in a key mortgage reference rate. And they signaled recently there was still room for cutting banks' reserve ratios, following a 50-basis point cut in January. Banks are finding to tougher to identify lending opportunities.China's house prices are falling, and a bit faster now according to official data. New house prices were down -1.4% from a year ago. In January the decline was -0.7%. Only seven of the 70 largest cities recorded any rise, all tiny, from a month ago. From a year ago only 13 showed rises. For resales, only two of those same 70 cities recorded a rise in February from January, none on a year-ago basis. But prices are -6.3% lower than year-ago levels and the largest fall since these records started in 2011.China's one-year medium-term lending facility (MLF) rate was unchanged at 2.5% in Friday's update.China’s national emissions trading scheme is set to expand to cover their aluminium sector as the compulsory carbon market pushes ahead to expand beyond the power sector and include more heavy emitters.Across the Pacific, American consumer sentiment is holding its recent highs in March, essentially the same as the past three months and back at levels prevailing in mid-2021. And at these current levels it is up a sharp +23% in a year.American industrial production rose (slightly) in February from January following a previous month retreat. Most of the gains were in construction activity. But it is still marginally lower (in real terms) than year ago levels.But March won't be helped by activity in the New York region. They reported a sharpish decline in their latest survey.In Canada, housing starts jumped by +14% in February from January, to 253,500 units and well above market expectations of 230,000 units, according to official data. It was the highest reading in four months.We perhaps should note that the current El Niño weather pattern is changing. The experts are saying La Niña is on its way with its cooler-than-average seawater in the central and eastern Pacific Ocean. In the past La Niña typically delivers northeasterly wind trends, bringing moist, rainy conditions to northeastern areas of the North Island and reduced rainfall to the lower and western South Island. Warmer than average air and sea temperatures can occur around New Zealand during La Niña. In Australia, rural areas typically benefit from more rainfall. But as global temperatures are elevated, maybe 'typical' reactions this time will be different. They were with the current El Niño.The UST 10yr yield starts today at 4.31% and unchanged from Saturday but it is up a sharp +29 bps for the week. The price of gold will start today -US$1 lower than Saturday at US$2156/oz and -US$30 lower than a week ago.Oil prices are little-changed at just on US$80.50/bbl in the US while the international Brent price is now just under at US$85/bbl. That is nearly +4% higher in a week however.The Kiwi dollar starts today at just on 60.8 USc and unchanged from Saturday. But that is a full -1c lower than a week ago. Against the Aussie we are still at 92.8 AUc. Against the euro we are still at 55.9 euro cents. That all means our TWI-5 starts today at just on 69.9 and unchanged as well but -40 bps lower in a week.The bitcoin price starts today at US$67,946 and a mere -0.6% slip from this time Saturday. And this level is virtually unchanged from a week ago. Volatility over the past 24 hours has been moderate at just on +/- 2.9%.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 on 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 American data supports the Fed's cautious approach to its monetary policy management - pushing away imminent rate cuts. Benchmark rates have risen sharply.US new jobless claims came in less than expected when a rise was anticipated. There were less than 200,000 new actual claims last week, and that takes the number of people on these benefits to under 2.1 mln. At the risk of sounding like a broken record, there is still no sign here of a wavering American labour marketBut American retail sales were up +0.6% in February from January, following an upwardly revised -1.1% fall in January and below market forecasts of a +0.8% gain. The relatively modest increase, combined with a larger decline in January, suggests a potential slowdown in consumer spending. But the February level is in fact +5.5% higher than year ago levels, pointing out the longer-term above-inflation expansion of consumer activity.Also rising are producer prices. They rose by +0.6% in February from January, marking the largest increase since last August and surpassing market expectations of a +0.3% rise. Goods prices rose by +1.2%, the most in six months, primarily driven by a surge in energy and food prices. These are not signals the Fed will likeAlthough they are definitely not at concerning levels and remain at long term average levels, American inventories are rising which will bring increased management attention at firms.We should point out that the official release on China new yuan loans seems to be delayed. Markets had expected a modest rise, but maybe it isn't like that.Meanwhile data is coming to light that the 2023 level of commercial property sales in China were unusually light, and marked by distressed sales. More than 20% of all sales were because of seller stress. And it may be more. Some non-distressed deals were made by stressed developers in need of liquidity. Nearly half of the distressed deals in 2023 were in the industrial sector. It seems the office sector's pain is yet to come.Distressed deals also have make up a high proportion of commercial real estate sales this year. In the first two months of 2024 more than 30% were distressed, and these were dominated by smaller deals.In India, Bloomberg is pointing out a rather sharp fall in their listed small-cap equities. So far in March, they have fallen -7.5% even if yesterday there was a small recovery. More than NZ$100 bln has been 'lost' in this retreat. It does point out that this market has gotten rather over-valued.Container freight rates fell another -4% last week although they remain 77% higher than year ago levels. Trans-Atlantic rates rose, but all others fell. Bulk cargo rates basically held over the past week, with the recent sharp rises ending.The UST 10yr yield starts today at 4.30% and up +11 bps from this time yesterday. We should note that the Tesla share price has fallen a very sharp +3.7% so far today. Over the past week that has compounded to a -10% drop. It is actually down more than a third so far this year.The price of gold will start today -US$15 lower than yesterday at US$2158/oz.Oil prices have risen another +US$1.50 to just over US$81.50/bbl in the US while the international Brent price is now just over US$85/bbl.The Kiwi dollar starts today at just under 61.4 USc and -20 bps softer than this time yesterday. Against the Aussie we are firm at 93.2 AUc. Against the euro we are holding at 56.4 euro cents. That all means our TWI-5 starts today at just on 70.3 and unchanged from yesterday. In fact we have been within a tight range around this level for more than two weeks now.The bitcoin price starts today at US$71,337 and down -2.5% 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 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 China's inward turn is gathering pace as it fears foreign influence.But first, US mortgage applications rose strongly last week from the week before, up more than +6%. and that was because mortgage interest rates fell rather sharply, down nearly -20 bps in a week to go under 7% for the benchmark 30 year home loan rate for the first time in a month. Still, mortgage applications are running -11% lower than year-ago levels - and they were very weak then too.Today's US Treasury 30yr bond auction was well supported and delivered slightly lower yields than the equivalent auction a month ago, but only fractionally lower. Today's event delivered a median yield of 4.28% whereas the month-ago result was 4.31%.In China, a Beijing-directed rescue of property giant China Vanke is apparently underway. We should all hope it works. But even if it does it will take a tough toll on the Chinese economy, Shenzhen in particular.And more developers there are falling.The downstream impacts are also pretty significant. Excavator sales are down -40% from year ago levels, as an example.China's Ministry of State Security (MSS) is now increasingly focused on "food security". They are banning foreigners traveling the countryside. The MSS says “In recent years, national security agencies have cracked down various espionage activities related to food security, cutting off the "black hands" of foreign espionage targeting China's germplasm resources, preventing and addressing the risks of food security leaks, and ensuring the smooth implementation of the national food security strategy”. That will put paid to the normal global method of sending analysts into the field to assess upcoming grain and crop harvest (something necessary because satellite photos can't yet assess yield prospects - you need to be in the field.) Without that sort of crop intelligence from a major producer (China), global seasonal food planning is going to be far less accurate.EU industrial production plunged -2.1% in January from December, marking a stark reversal from the downwardly revised -1.6% retreat recorded in December and faring much worse than market projections of a -1.5% decline. It was the sharpest contraction in activity since March 2023. Worse, it is now down -5.7% in a year. Anywhere that would be a lot. In an economic bloc as large as the EU, that is enormous. In fact, Ireland recorded an eye-popping -34% decline.Media reports say that PwC Australia is cutting another 5% of its staff and partners, a culling of more than -300 jobs as a result of the tax scandal that engulfed the firm in early 2023. The job cuts come on top of 338 announced in November. And after they hived off its advisory business. About 1,400 PwC Australia staff moved over to the new firm which was renamed Scyne Advisory.And staying in Australia, prudential regulator APRA has cleared NAB (BNZ's parent) of having to hold extra capital due to inadequate governance issues. But is is strangely silent on both Westpac and ANZ who are also facing this capital penalty. CBA (ASB's parent) was never on the APRA radar.China has proposed easing the punitive tariffs on Australian wine, imposed as part of their displeasure at the Morrison government’s foreign policies. But that pullback does not apply to Australian beef - not yet anyway.The UST 10yr yield starts today at 4.19% and up +3 bps from this time yesterday. The price of gold will start today +US$8 firmer than yesterday at US$2173/oz.Oil prices have risen +US$1.50 to just under US$79.50/bbl in the US while the international Brent price is now just over US$83.50/bbl.The Kiwi dollar starts today at just on 61.6 USc and marginally firmer than this time yesterday. Against the Aussie we are soft at 93 AUc. Against the euro we are holding at 56.3 euro cents. That all means our TWI-5 starts today at just on 70.3 and unchanged from yesterday.The bitcoin price starts today at US$73,189 and up +3.7% from this time yesterday. Volatility over the past 24 hours has been high at just under +/- 3.5%.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.

The "cheer squad" make it hard to have a proper debate on housing, especially when looking to address the question of what we want from the housing market from a public policy perspective.So says Cameron Murray, Chief Economist at Fresh Economic Thinking, a new Australian think-tank. In the latest episode of interest.co.nz's Of Interest podcastMurray talks about housing and his new book The Great Housing Hijack. He describes the housing markets and attitudes to housing in Australia and New Zealand as "culturally very similar in terms of the attitude to housing."Murray, who has been a real estate agent, property investor and worked for FKP Property Group, says his book title essentially describes the state of the public debate in housing."There are so many vested interests, so many different groups and hobby horses that have lobbied, professionally or not for many decades, that it is very hard to have a straight conversation about housing in a public forum. So that is the housing hijack," he says."The housing hijack is all about what I call in the book the cheer squad, these noisy people on the sideline distracting us from the game of housing and, rather than understanding the plays and the strategy of the game, we're getting distracted by the noise of the cheer squad."In the podcast Murray talks about why we should acknowledge the post-World War II to mid-1970s period was an unusual golden age in housing, what he sees as the five housing market equilibria, why he doesn't believe simply freeing up land and loosening zoning rules to enable housing supply is the silver bullet, KiwiBuild and the politics of housing.Murray proposes HouseMate, a parallel public homeownership system alongside purchase and rental in the private property market. It would offer non-property owner citizens the option to buy a home from a public provider at a cheap price."The reason to propose this is simply that I couldn't find any examples anywhere in history or anywhere in the world where we'd sold housing for that group, that 10% or 15% of people who are renters, who are getting squeezed every time the market adjusts and people's incomes are rising. I couldn't find any examples where those people's housing had been improved without a public option of some sort. Whether that's regulated rental, like Vienna, where there's massive council housing and it's somewhat universal, anyone can access it. Or whether it's public housing home ownership, which is more of a Singapore type approach. Europeans have long term rental, but I think culturally, the Australians and the Kiwis would go for a home ownership type approach," he says."At the end of the day, we have to accept the economics that there is a subsidy exactly equal to the difference between the market price and what you get people into that home at. There is no sneaking around this economically.""If I could find a way to just change zoning regulations and taxes and make housing cheap for those people, I would do it. Like, who wouldn't? It would be so easy. But I've spent decades looking around trying to understand housing, and in the last four years looking for examples around the world, and I just can't find them. I'm sorry. So we have to do it the hard way," says Murray.*You can find all episodes of the Of Interest podcast here.

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 the never-ending car crash that is China's residential property development sector, took another bump today.But first in the US, their inflation rate unexpectedly edged up to 3.2% in February, compared to 3.1% in January and above forecasts of 3.1%. The closely-watched core inflation rate slipped to 3.8% when it was expected to come in at 3.7%. And it will not have escaped the market's notice that the +0.4% monthly rise from January was the same as the prior month and the highest since April 2023. That means the recent pressure is building again.These misses bolster the Fed's view that they need to be patient to get conditions where consumer inflation actually will fall into its target range before they start cutting rates.The Redbook index of retail rates in the US rose +3.0% last week from the same week a year ago, and not quite enough to cover inflation..There was a well-supported US Treasury 10yr bond auction today which saw a median yield achieved of 4.10% and that was actually not too different to the same auction a month ago where the median yield was 4.04% pa.India's January industrial production came in lower than expected, rising +3.8% from a year ago when a 4.1% rise was expected , and down from +4.2% in December. The heady growth they reported most months to October now seems to have been exhausted, although expansions at the current lower level will still be looked on with envy by others. India's CPI inflation remained stuck at 5.1% in February.India's car sales rose +9.5% in February from a year ago, also an easing from the +14% rise in January. Over the past year, 3.6 mln passenger vehicles were sold, a far smaller market than the US (18 mln) or China (22 mln).China's property sector has taken another blow. State-backed property development giant Vanke had its investment-grade rating stripped by Moody's overnight who warned of potential further cuts, predicting credit metrics and liquidity will weaken because of falling home sales and funding uncertainties. Immediately, Vanke went into talks with banks (State-owned banks) on a debt swap that should help them stave off it’s first-ever bond default. Earlier this week they felt compelled to announce that they had made the most recent bond repayment. But the obligations ahead look daunting.As expected, the German inflation rate eased to 2.5% in February, down from 2.9% in January and 3.7% in December. Inflation-control progress is coming fast in Europe's largest economy, even if it is at the expense of demand.Not expected was a fall in British employment in January and a rise in their jobless rate.In Australia, the NAB business sentiment survey reported that business conditions rose in February, signalling their economy has remained resilient in the new year but inflation is still a challenge despite slowing growth. Business confidence fell slightly however, as firms struggled to deal with the combination.Russia's invasion of Ukraine caused wheat prices to spike. But that is over now with prices falling to a four year low and back to levels we had in the 2015-2020 period. Buyers rule. And now China is cancelling purchase contracts from the US - and at a rate faster than usual. This is because it can buy supplies cheaper elsewhere.The UST 10yr yield starts today at 4.16% and up +6 bps from this time yesterday in a rising market. The price of gold will start today -US$13 lower than yesterday at US$2165/oz.Oil prices have firmed less than +50 USc just under US$78/bbl in the US while the international Brent price is now just over US$82/bbl. These minimal changes come even after Russia suffers broad strikes on its oil refineries by Ukraine, as Ukraine tries to balance its resources deficit compared to the invader.The Kiwi dollar starts today at just on 61.5 USc and nearly -¼c lower than this time yesterday. Against the Aussie we are soft as well at 93.2 AUc. Against the euro we have slipped to 56.3 euro cents and -20 bps lower. That all means our TWI-5 starts today at just on 70.3 and also -20 bos lower.The bitcoin price starts today at US$70,562 and down -2.6% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 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 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 about how hard it is to get the 'last mile' of above-policy inflation accomplished.American consumer inflation expectations for the year ahead remained stuck and sticky at 3% in February, the same as in the previous two months, and holding at three-year lows. But is it enough for the Fed? Of some concern is that inflation expectations for 3 and 5 years ahead are rising, but only toward that same 3% mark. Clearly there is work to do to quell these expectations. The next big watch is on the actual February inflation and that comes tomorrow. Markets expect 3.1% with a core at 3.7% - in other words, no progress lower.There was a UST 3yr bond auction today and that was very well supported. The median yield came in at 4.15% and only marginally higher than the 4.09% at the equivalent auction a month ago. There seems no sign investors are either pulling back, or demanding sharply higher yields. Demand remains high, yields are as you would expect.The earlier official reports that Japan had slipped in to recession have proven incorrect. Their revised and updated data shows in fact it expanded at a healthy rate, driven by strong capital expenditure in the business sector. Private consumption, which accounts for more than half of Japan's GDP, remained weak at -1.0%, slightly worse than the preliminary -0.9% decline.All eyes are now turning to the next Bank of Japan meeting this time next week. Markets are increasingly expecting them to signal the end of their ultra-low (negative) interest rate policy, one they have had in place for eight years now.China's vehicle sales slumped in February, down -20% from the same month a year ago. But that comes after an exceptionally strong January. Combining the two months, overall vehicle sales in the world's largest market rose +11% to 4 mln units when you look at them both, with the NEV segment rising +29%.Indian vehicle sales for February are now awaited. They too come off very strong gains in January (+14%).In Australia, the peak body representing financial regulators, The Council of Financial Regulators, (The RBA, APRA, ASIC and the Australian Treasury) released the points they are talking about in a quarterly statement. The main issue seems to be the rise of hardship among borrowers, and the increase in the share of households who had fallen behind on loan payments (although from historically low levels).And since the start of 2024, the iron ore price has fallen almost -20% - largely because of falling expectations China will deploy its traditional infrastructure stimulus as a way to reinvigorate its stuttering economy. It's new focus on "high quality development" won't be minerals-intense.The UST 10yr yield starts today at 4.10% and up +2 bps from this time yesterday. The price of gold will start today little-changed from yesterday at US$2178/oz.Oil prices have stayed at just over US$77.50/bbl in the US while the international Brent price is now just under US$82/bbl.The Kiwi dollar starts today at just on 61.7 USc and little-changed from this time yesterday. Against the Aussie we are firmish at 93.4 AUc. Against the euro we have held at 56.5 euro cents. That all means our TWI-5 starts today at just on 70.5 and now unchanged over the past five days.The bitcoin price starts today at US$72,448 and up +4.0% from this time yesterday. Volatility over the past 24 hours has been very high at just under +/- 4.0%.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.