Some countries have an resurgent inflation problem

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 rising inflation pressures are now appearing everywhere in the West, underpinned by poor economic judgements.

This week will be a busy one on the economic data front, even with the US federal agencies shut down.

Locally, all eyes will be on the Q3 labour market data and most observers expect it to show our jobless rate rise to 5.3%.

In Australia, the key economic event will be the RBA's rate review late on Tuesday and there will be heightened interest on how they view their rising inflation. That will drive a reassessment by financial markets about where their interest rates are heading. Australia's September trade balance is due and a big surplus is anticipated.

Other central banks will chime in this week with rate reviews of their own, including Sweden, Norway and England, among others.

In the US while they won't have any official data, focus will turn to the ADP Employment Report, ISM PMIs, and the University of Michigan Consumer Sentiment Index. Canada will release its labour market data too.

In China, the October trade surplus is expected to widen to around US$100 bln, although the latest official NBS manufacturing PMI showed a decline in new export orders for October. The broader RatingDog (Caixin) Manufacturing PMI is also expected to signal a further slowdown in factory activity, and its services counterpart will also be closely watched.

China's official October PMIs came in over the weekend without any significant improvements from September. They say their factory PMI is now contracting marginally more and a noticeable step lower than last month, and their services PMI is barely expanding, when a small improvement was expected.

Japanese industrial production rose +3.4% in September from a year ago, a much better surge in the month than the +0.5% rise that was anticipated.

In the US, the Chicago PMI rose in October from its worryingly low August and September levels, but it is still contracting and it has done so for 23 consecutive months now. This month's slight improvement is on the back of a rise in new orders, modest as it may be. Basically this metric is just contracting slower now.

But some companies are doing well there. An example is Warren Buffett's Berkshire Hathaway which reported profits of US$48 bln in its latest nine month result, US$31 bln in Q3 alone. They now have cash holdings of US$382 bln. Buffett himself is fading from view now and it will be a challenge for his replacement to maintain the charisma.

The EU said its October inflation level is down to 2.1%, the expected dip from September's 2.2%.

In Australia, there is more evidence inflation is embedding at levels well above 3%. On Friday they released their Q3 PPI and that came in at 3.5%, unchanged from Q2, and up +1.0% for the latest quarter. Analysts had expected it to reduce.in Q3, but that isn't happening. The RBA will be as unhappy with this as it was with the equally high CPI result. Only recently a rate cut tomorrow was a sure bet, but no longer.

And staying in Australia, bank lending grew +7.3% in September, up +6.3% for housing but up +9.5% for business from the same month a year ago. But there is a noticeable dip in business lending in September from August which surprised some. Going the other way, observers were equally surprised by the monthly surge in housing loans.

The surge is worrying APRA. The combination of demand from the FHB guarantee scheme, and exuberance by investors is joining to create the rush. And it is only expected to increase. So the regulator is stepping in with warnings to banks to reign in the party. High DTI lending is their special focus.

The UST 10yr yield is now at 4.10%, unchanged from Saturday at this time. 

The price of gold will start today at US$4001/oz, down -US$5 from this time Saturday. That is down -US$107 from this time last week. But it is up +US$141 or +3.6% for the month.

American oil prices are+50 USc firmer from Saturday at just on US$61/bbl, with the international Brent price now just over US$64.50/bbl.

The Kiwi dollar is now at just on 57.2 USc, and down unchanged from Saturday. It is down -20 bps for the week, and down -70 bps or -1.2% for the month. Against the Aussie we are unchanged at 87.5 AUc. Against the euro we are also little-changed at 49.7 euro cents. That all means our TWI-5 starts today at just over 61.8 and down -30 bps from yesterday, down -20 bps for the week, down -40 bps for the month.

The bitcoin price starts today at US$110,113 and up +0.8% from this time Saturday. Volatility over the past 24 hours has been low at just on +/- 0.6%.

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.