China to turn economists into propagandists

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 is clamping down harder on negative views about their economic prospects. Chinese economists are now required to be cheerleaders for their economy.

But first up today, sales of new single-family homes in the United States rose by +5.9% from the previous month to an annualised rate of 664,000 in November, above market expectations of 650,000. However, this just takes it back to the 2024 average level.

November durable goods orders were lower than expected, down a rather sharp -6.3% from the same month in 2023. But this is largely due to a drop in aircraft and defence orders. And non-defence, non-aircraft capital goods orders also held at the same as the year-ago level. They could be better, but there is no collapse either.

That tame result fed into the US Chicago Fed's National Activity Index which reported a small expansion, and a much better result than the prior month.

The latest estimate of the US economy has it still expanding at a +3.1% rate in Q4-2024, a strong way to finish the year.

But consumers are more wary about what 2025 will bring, no doubt hit by the unsettling signs in their national politics. The rise in consumer sentiment over all of 2024 took quite a hit in this latest December survey.

There was another US Treasury 2yr bond auction earlier today for US$70 bln and it was very well supported again and delivered a median yield of 4.29% which was only marginally more than the 4.24% median yield at the prior equivalent event a month ago.

North of the border, Canadian producer prices rose +2.2% year-on-year in November, following a +1.1% rise in the previous month. But this just returns it to the growth rate it has had for most of 2024.

Across the Pacific, Singapore's November inflation rate was expected to rise, and it did, but not by as much as was anticipated. It is up to just 1.6% from the three-year-low October 1.4%. It's core inflation rate however eased lower in a way that was not expected.

In Japan, carmakers Nissan and Honda have agreed to merge, targeting mid 2026 to get all the US$58 bln pieces together. And they are trying to get Mitsubishi Motors to join them. It would create the world's third largest carmaker. A lot will depend on whether Nissan can execute a successful restructuring of its stumbling business before the merger.

Staying in Japan, they do an annual review of their National Accounts, an that now shows that low economic growth and demographic shifts meant that per capita GDP was higher in South Korea now than Japan in 2023 (see page 17). It is close, so it may switch back in 2024 as Japan has expanded faster this year. But the rise of South Korea will come as no surprise to many even if it is a surprise they have caught up with Japan.

In China, the warnings against economists and analysts having negative views about their economy are growing more strident. If individuals have "repeatedly triggered reputational risk over inappropriate commentaries or behaviours" within a certain period of time or caused "major negative impacts," their employer must "severely deal with the person until termination of employment," they said, without explaining the definition of inappropriate comments.

They are trying to head off a noticeable "slump" in consumer spending in the icon cities of Beijing and Shanghai. If the trend is being reported there, it will be likely be worse elsewhere.

The UST 10yr yield is now at just on 4.58%, and up +5 bps from this time yesterday, its highest since the brief spikes in April 2024 and October 2023, and its highest prior to that since 2007.

The price of gold will start today at US$2614/oz and down -US$8 from yesterday.

Oil prices are down -US$1 at just on US$68.50/bbl in the US while the international Brent price is still just on US$72.

The Kiwi dollar starts today just on 56.5 USc and down -20 bps from this time yesterday. Against the Aussie we are up +10 bps at 90.5 AUc. Against the euro we are holding at 54.3 euro cents. That all means our TWI-5 starts today at just on 67 to be down -10 bps from yesterday.

The bitcoin price starts today at US$93,628 and down another -2.1% from this time yesterday. Volatility over the past 24 hours has been modest however at +/- 1.9%.

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 Monday, December 30.

Merry Christmas everyone !