China readies more aggressive stimulus

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 has dropped the word "prudent" as it changes tack in its approach to economic support. Commodity currencies, including the NZD, got a boost from the shift

But first, US consumer inflation expectations for the year ahead increased to 3% in November from 2.9% in October which was the lowest since October 2020. Inflation expectations also increased for the three-year-ahead (2.6% vs 2.5%) and the five-year outlook (2.9% vs 2.8%).

The same survey shows increasing confidence their pay will increase, driven by those without any college education.

Across that Pacific, Japan's Q3-2024 GDP expansion was revised up, which was a surprise even if it was only a minor gain. The growth was still small however.

China’s annual CPI rate fell to 0.2% in November from 0.3% in the prior month, missing market forecasts. China's producer prices dropped by -2.5% year-on-year in November, following a 2.9% fall in the previous month and a softer decline than market expectations of a -2.8% fall.

Meanwhile, the Chinese Politburo met and told the People’s Bank of China to adopt a “moderately loose” strategy for monetary policy in 2025. The Central Economic Work Conference is about to meet. The move marked an aggressive shift from the previous “prudential” stance since 2011. Along with wording that indicates more fiscal stimulus, they also said they will directly support property and equity markets next year. They are going all-in on new stimulus to try and move their economic needle.

Taiwanese exports continue to rise aggressively, up +9.7% in November from the same month a year ago. We get China's November export data later today and it is also expected to show a sharp rise from a year ago, although that may only to try and beat upcoming tariffs from the US.

In India, the rupee dropped to nearly 85 to the USD and a record low as evidence of fresh capital outflows magnified the impact of dovish monetary policy and signs that their economy is slowing more than expected.

Meanwhile, they are about to change out the Governor of their central bank.

Also in India, the close ties between corruption-accused Gautam Adani and Prime Minister Modi were on full display yesterday.

In Australia, new data out yesterday shows the median weekly earnings of those in full-time employment rose +6.3% to AU$1700/week (AU$88,400 per year). For women the rise was faster, up +6.5%, for men slower, up +5.2%. In 2022, men had a +18% pay advantage over women. By 2024 this had shrunk to +12%. That current advantage is worth AU$191/week (AU$9,900 per year).

The UST 10yr yield is now at just on 4.20%, up +5 bps from this time yesterday.

The price of gold will start today at US$2636/oz and up +US$36 from yesterday.

Oil prices are aup +US$1.50 to just over US$68.50/bbl in the US while the international Brent price is now just on US$72.50/bbl.

The Kiwi dollar starts today at 58.8 USc and up +50 bps from this time yesterday. Against the Aussie we down -30 bps to 91 AUc. Against the euro we are up +40 bps to 55.6 euro cents. That all means our TWI-5 starts today at just under 68.4 to be up +35 bps from yesterday.

The bitcoin price starts today at US$97,373 and down -2.4% from this time yesterday. Volatility over the past 24 hours has been moderate 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 tomorrow.