Economy Watch

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 the week has started tentatively. But there was an eye-catching housing affordability proposal in Spain,But first, there were no real surprises in the latest survey of American inflation expectations. Consumers still see a 3% rate for the year ahead, more for food (+4.0%), less for petrol (+2.0%), but still high for rent (+5.5%). For three years ahead, expectations are for no relief, up from +2.6% to +3.0% per year.But more than expected, Chinese exports surged +10.7% in December from year-ago levels, much more than the market forecasts of +7.3% and accelerating from a +6.7% rise in November. Traders are clearly front-loading orders in anticipation of new aggressive tariffs from the incoming US administration. But Chinese exports to New Zealand were down -1.8% in the month, their imports from us down -7.9%.Chinese imports only rose +1.0%.China's new vehicle sales rose to 3.5 mln units in December, spurred by those taxpayer discounts to encourage spending. They were more than +10% higher in the month than the same month a year earlier. NEVs took a record 45% share of these latest sales. Traditionally, December is their peak sales month of the calendar year.India's CPI inflation rate eased from +5.5% in November to +5.2% in December. Food prices, which account for nearly half on their survey, rose +8.4%. If there is good news among this data it is that prices fell in December from November.Meanwhile, the Indian currency fell to more than 86.7 rupee to the USD. At the start of the year it was 'only' 85.5 so that is -1.4% in two weeks. At the start of 2024 it was at 83 so -4.3% since then. (Still, that is nothing like the -10.4% fall by the NZD against the USD since the start of 2024.)In Australia, the Melbourne Institute's Monthly Inflation Gauge rose by +0.6% in December 2024, sharply accelerating from a +0.2% increase in November and marking the highest level since December 2023. It was also the fourth consecutive month of gain.The ANZ-Indeed Australian Job Ads survey rose by +0.3% in December from November, swinging from a revised -1.8% drop in the prior month. The latest level suggests their labour market is still resilient on a short-term basis despite elevated interest rates. On an annual basis however, job ads dropped -12.5% from December 2023. They have dropped almost -28% from their peak in 2022.In Europe, Spain like many others is facing a housing crisis. They fear a "rich owner / poor tenant" split that is developing elsewhere. Their government has twelve measures proposed to deal with the issue, one of which is a 100% tax on non-EU house buyers.And for the record, the coal price fell further overnight. Oddly, demand is up in China, but so is output - more so - and they have fast-building inventories.The UST 10yr yield is now at just on 4.77%, and up just +1 bp from this time yesterday. The price of gold will start today at US$2665/oz and down -US$25 from yesterday.Oil prices are up +US$2 from yesterday at just over US$78.50/bbl in the US while the international Brent price is now just over US$81.The Kiwi dollar starts today just on 55.5 USc and down -10 bps from this time yesterday. Against the Aussie we are down -20 bps at 90.2 AUc. Against the euro we are up +10 bps at 54.4 euro cents. That all means our TWI-5 starts today at just over 66.6 and down less than -10 bps from yesterday.The bitcoin price starts today at US$92,068 and down -3.0% from this time yesterday. Volatility over the past 24 hours has been high at +/- 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.

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 the rise in long term benchmark rates is echoing everywhere, including in New Zealand.But first, if you are just back from your summer break, welcome back to work. Those benchmark interest rates have been on the move up while you have been away.The week ahead will be focused locally on early indications of Q4-2024 inflation. We get the 'selected price indicators' for December this week on Thursday, to be followed by the full Q4 CPI next week on Wednesday. In Australia, their December labour market report is also due out Thursday. In the US the main focus will be on earnings reports from the big banks.And the US will be releasing their CPI data, and given rising inflation fears and rising interest rates, that could well be a significant market mover. Currently markets expect it to run at 2.8% (from 2.7% in November), but you have to say there are upside risks here and financial markets are pricing those in now. They will release their influential inflation expectations survey on Wednesday NZT.China is set to release a suite of economic indicators this coming week, including Q4 GDP growth figures, as well as data on exports, imports, industrial production, and retail sales. Later today we expect their new yuan loan data for December, anticipated to be weak again.But first over the weekend, the US economy added +256,000 jobs in December, much more than the +212,000 in November, and way more than the market expectations of +160,000. Their jobless rate fell. These are the headline rates. The actual change was a tiny fall to 160.5 mln employed workers, but actually a much less reduction than seasonal factors would have indicated.For all of 2024, they had a rise of +2.2 mln payroll jobs and for the four years of the Biden presidency a rise of +16.9 mln new jobs. In the prior four years, there was a loss of -2.6 mln jobs.The wider employed labour force only grew by +11.7 mln in the past four years as many people transitioned from unincorporated self-employment back on to company payrolls. In the prior four years, the wider employed labour force shrank by -2.2 mln people. Any way you cut it, the past four years has been a golden period for American employment.Average weekly earnings rose +3.5% in 2024, up +20.0% over the past four years. In the prior four years they rose +18.0%.But Americans are increasingly fearful of the year ahead. The latest University of Michigan consumer sentiment survey in January dropped because of surging worries over the future path of inflation. Year-ahead inflation expectations jumped to 3.3%, the highest in eight months, from 2.8% in December. This is only the third time in the last four years that long-run expectations have shown such a large one-month rise. Consumers know they will be paying much more if tariffs are jerked higher soon.The financial markets also reacted to the jobs data and the impending impact of tariffs. Wall Street equities were -1.5% lower on Friday, bond yields have jumped, and a risk-off defensive tone spread which saw the USD rise. That's all because the strong jobs data argues for a Fed rate cut pause. Their bar for rate cuts has risen noticeably with this data. The Fed next meets on January 30 (NZT).Prior to this jobs data release, the latest Atlanta Fed Q4-2024 economic growth estimate was +2.7%. The subsequent strong labour market data may see some upside to that.Canada also reported their December labour force data today and that was strong too. Employment there rose +90,900 with more than half that as full-time jobs. Their jobs growth was far higher than the +25,000 expected and the +50,700 in November. This surge also calls into question whether the Bank of Canada will actually cut rates when they next meet, also on January 30 (NZT).The latest Japanese household spending survey indicated another fall in November, part of a pattern of monthly falls since early 2023. But this one was a little different because it was the smallest surveyed fall in the series and a much 'improved' result that from both prior months and from what was expected. Some see a turning point.In China, in a surprise move, their central bank said it would suspend treasury bond purchases in the open market due to a supply shortage, effective immediately. They will "resume purchases at an appropriate time based on market conditions". The move comes amid repeated warnings from them about bubble risks in their overheated bond market, where long-term yields have plummeted to record lows. Over the past year, yields on key bonds, including the benchmark 10-year government bond, have reached unprecedented lows as investors flock to safe-haven assets. This shift is largely driven by ongoing economic uncertainties linked to a prolonged property market slump. In December, Chinese leaders signaled further rate cuts, fueling another surge in bond market activity. This pushed the 10-year treasury bond yield to an all-time low of 1.6% earlier this month, exacerbating concerns over market exuberance.Their yields recovered after this move but the recovery didn't hold. But at least they arrested the decline and the day ended unchanged.Chinese analysts are expecting bad news coming from the series of large zombie property developers that have been holding on with government funding support. But most of them seem to have reached the end of the line, and a series of default-into-administration events are now anticipated. Investors will take a bath. None of this will help the economic mood.In India, their industrial production showed a small improvement in November, up +5.2% from a year ago with manufacturing up +5.8%. Both results were better than October and better than expected.In Australia, their Federal Government accounts for the five months to November show that tax receipts are surging. That is cutting into their budget deficit for the year quickly. At the current rate the full year budget deficit may halve. If the trend continues, they even have a chance of posting a surplus. The reason for the improved outlook is twofold: their jobs market is buoyant generating higher income tax deductions than expected. And their currency is falling vs the USD, and as their mineral exports are sold in USD that is generating an unexpected rise in royalty receipts (and higher corporate income tax receipts).And we should probably note that coal prices are falling still, now down to a three year low and where they were in May 2021. And that is despite a very cold spell in the Northern Hemisphere at present.The UST 10yr yield is still at just on 4.76%, and up +7 bps from Friday in the jobs-data reaction. A week ago it was at 4.59% so a +16 bps rise from then.The price of gold will start today at US$2690/oz and up +US$1 from Saturday and up +US$50 from a week ago.Oil prices are unchanged from Saturday at just on US$76.50/bbl in the US while the international Brent price is now just over US$79.50. That is the same as the weekly gain. The recent rise comes from fear of the effect of new sanctions activity.The Kiwi dollar starts today just on 55.6 USc and unchanged from Saturday but down -50 bps for the week. Against the Aussie we are still at 90.4 AUc. Against the euro we are also little-changed at 54.3 euro cents. That all means our TWI-5 starts today at just under 66.7 and up +10 bps from Saturday.The bitcoin price starts today at US$94,909 and up +1.4% from this time Saturday. Volatility over the past 24 hours has been low at +/- 0.9%.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 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 and Japan seem to be in the process of swapping places.But first, following a much better than expected rise in October, and driven by fast-rising credit card debt, the November American consumer debt levels corrected in November, falling -US$7.5 bln. Again, it was a sharpish pullback in credit card debt that drove the surprise November result. On the other hand, nonrevolving credit, which includes car loans and mortgages, saw a still-modest +2% rise, after small increases of +0.7% in October and +0.4% in September.There were announced job cuts involving 39,000 American workers in December, much lower than November and only marginally different to December a year ago. For the full year employers announced 761,500 job cuts, the most since 2020, and prior to that pandemic year, the most since 2009. In 2024, 134,000 of those cuts were in the tech sector. But in terms of the 160 mln US labour market, these announced annual cut levels are a truly tiny 0.4%.Across the Pacific in China, we noted yesterday that authorities there seem to have instituted a hard peg for the official yuan exchange rate to the USD. Now they have to defend that in open markets. Overnight they announced a massive ¥60 bln bill issue in Hong Kong in an effort to build demand for their under-pressure currency.The battle against deflation is far from over too. China’s annual consumer inflation rate edged down to +0.1% in December from +0.2% in November, aligning with estimates and marking the lowest rise since March. It is now at a nine-month low. The latest result came amid a slight decline in food prices and a modest rise in non-food costs. But beef prices were down -13.8% for the year, lamb prices down -6.1%, and milk prices were down -1.6%.Meanwhile, producer prices fell by -2.3% in December from a year ago, but that was their softest fall in four months. It was the expected fall.And perhaps we should also note that, although there was little movement in the past 24 hours, the 30 year Chinese bond yield at 1.89% is now lower than the equivalent Japanese government bond at 2.30%. While it is not the case for other tenors, the shifting directions are the same - China down and Japan up. China is turning Japanese, and Japan is shifting out of its hard deflationary cycle.In Japan, wages rose +3% in November from the same month a year ago, rising from the +2.6% increase seen in October and higher than market forecasts of a +2.7% gain. However, real wages adjusted for inflation and a key indicator of consumers' purchasing power fell by -0.3% year-on-year in November.In India, they have downgraded their fast economic growth estimates. After growing +8.2% in the year to June 2024, they now say that will 'slow' to +6.4% in the year to June 2025. Apart from the pandemic period, that will be their slowest expansion in more than a decade. While these expansion rates are still high by any standard, the worrying component for them is the fast slowdown in private investmentFrom the EU there was some positive economic news. Retail sales volumes - that is, after considering inflation's impact - were up +1.5% in November and to their best level since September 2022.In the UK, there are bond yield shifts too, some of them sharp. Their 30 yr Government bond is up to 5.46%, their 10 year up to 4.88%. That is more than +100 bps higher than a year ago. In just the past month their 10 yr is up from 4.37%. These 10 year benchmark levels are higher than either New Zealand or Australian equivalents now, and the shift up has caught financial market attention.Australian retail sales rose +4.1% in November from the same month a year ago, a positive 'real' gain. They were up stronger than that national average in Victoria, Queensland, and Western Australia. But the were only up +2.9% in NSW.Australian exports rose to AU$43.8 bln in November from October in a recent rising trend and boosted by strong rural exports. But at that level they are still -5.0% lower than in November 2023. Imports were also lower in November from a year ago. And their merchandise trade surplus was -AU$4.5 bln lower than in November 2023.The rush to get product from China to the US is in full swing now and commanding a premium on containerised freight rates. Those routes saw a +13% jump last week, which pushed the overall market up +2% for the week. Freight rates for other key routes are not on the move however. This special situation is expected to reverse within the next two weeks, and the global trade system's immediate outlook is quite uncertain. Bulk cargo rates fell -8% last week, and are now back to levels that prevailed in the mid-1980s.And an update on the US East Coast and Gulf waterfront labour dispute. The automation issue is settled and another strike is averted. On balance, employers lost. Markets have repriced equities lower for listed port operators. So US waterfront costs will stay higher than in most other port jurisdictions.The UST 10yr yield is now at just on 4.69%, and up +1 bp from yesterday.The price of gold will start today at US$2669/oz and up +US$18 from this time yesterday.Oil prices are back up +50 USc from this time yesterday at just on US$74/bbl in the US while the international Brent price is now just under US$77.The Kiwi dollar starts today just under 56 USc and down -10 bps from this time yesterday. Against the Aussie we are unchanged at 90.3 AUc. Against the euro we are down -10 bps at 54.3 euro cents. That all means our TWI-5 starts today at just under 66.9 but really little-changed from this time yesterday.The bitcoin price starts today at US$94,218 and down -0.5% from this time on yesterday. Volatility over the past 24 hours has been modest 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.

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 long term interest rates are rising and have much further to go.But first, American private businesses added +122,000 workers to their payrolls in December, the least in four months, compared to 146,000 in November, according to the precursor ADP Employment Report. That was below forecasts of +140,000. Hiring slowed in several industries and employment in manufacturing shrank for the third straight month. Employment growth was strong among large businesses in the West. Pay gains slowed slightly but are actually quite high, up +4.6% for those who stay in a job, up +7.1% for those who change jobs.Meanwhile, initial jobless claims rose on the expected seasonal basis to 305,000 last week, but much less than those seasonal factors would have indicated. 2.175 mln people are on these jobless benefits now, almost exactly the same level as a year ago. (On a headline, seasonally-adjusted basis, initial claims 'fell', and by more than expected.)Also falling were American mortgage applications, the fourth straight weekly retreat. Their benchmark 30 year fixed home loan rate almost touched 7% last week, deterring potential borrowers. Until the Trump risk goes out of long term benchmark rates, this is going to be a problem for the American housing market - and in fact all real estate transactions and other asset purchases that are valued based in yield.And those rising yields are now extending to very long-dated maturities. The US Treasury 30 year bond auction today came in with a yield of 4.87%, up from the 4.48% at the prior equivalent event just a month ago. The auction was well supported, but less to than that earlier one.The rise in longer term bond yields and interest rates is a global one. At its core is a demographic shift and ageing populations. But the Trump return has focused investors on the long term risks and they are back demanding a premium for that. Companies are also issuing more longer term debt, so there is a supply element to the trend. The Biden Treasury tended to prioritise shorter maturities in its fund raising, but the incoming Trump Treasury has already signaled it will go long. That will add to the supply pressure, and will spill out internationally. Pity American homeowners with 30 year mortgages.In China, they are getting more proactive ahead of the expected Trump Tariffs, and reactive about their stuttering economy. They announced an expanded set of taxpayer subsidies for a wider range of consumer products, hoping to spur sluggish consumer spending. They have expanded the eight-category subsidy program to now twelve categories, now including dishwashers, rice cookers and microwaves, which will get a 20% discount from existing sales prices.Overall, it is a program that has grown to NZ$2.8 bln, and still expanding.In fact, this announcement was part of a much wider stimulus effort. They are battling consumer anxiety, a tougher challenge than the previous democratic yearnings.Meanwhile, China is aggressively defending the yuan. It has held the official rate to the USD fixed since early November at 7.19. It last had a fixed peg in 2008-2010. Unfortunately for them offshore trading has it now at 7.35 and depreciating.In the EU, producer prices rose +1.7% in November from October, the biggest monthly rise since September 2022. A seasonal rise in energy costs was the cause. Year on year, the EU PPI was -1.1% lower.And staying in the EU, economic sentiment which had been stable for most of 2024, fell in December. Not a huge dip, but a notable one.In Australia, their monthly CPI indicator rose +2.3% in November from a year ago, after a +2.1% rise in the prior two months. Analysts estimates were for a +2.2% rise and the November since August, partly due to the timing of government electricity rebates. Most households received a single rebate payment instead of two in November. Still, the latest inflation level has remained within the central bank's target range of 2 to 3% for the 4th month in a row.And in maybe something of a surprise, there were 344,000 job vacancies in November in Australia, up by +14,000 from August. That is up by +4.2% and was was the first rise since May 2022, when job vacancies reached their historical peak. However, year-on-year the declines is almost -10%.In New Zealand we got the benefit of strong commodity price gains in 2024. ANZ reports that overall commodity prices finished 2024 up 15% from a year ago. All sectors except forestry achieved gains during the year but the largest were made by dairy (+19%) and meat (+23%). However, these sectors were more subdued in the December month. In NZD the rises were even more impressive, up +29% for dairy and up +35% for meat, year on year.The UST 10yr yield is now at just on 4.68%, and little-changed from yesterday.The price of gold will start today at US$2669/oz and up +US$18 from this time yesterday.Oil prices are down -50 USc from this time yesterday at just on US$73.50/bbl in the US while the international Brent price is at just under US$76.50.The Kiwi dollar starts today still at 56.1 USc and down -40 bps from this time yesterday. Against the Aussie we are down -10 bps to 90.3 AUc. Against the euro we are up +20 bps at 54.4 euro cents. That all means our TWI-5 starts today at just on 66.9 and down -20 bps from this time yesterday.The bitcoin price starts today at US$94,646 and down -3.2% from this time on yesterday. Volatility over the past 24 hours has been modest at +/- 1.7%.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 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 American economic data continues to impress.But first up today there was a full dairy auction, one that brought slightly lower prices overall in USD terms (-1.4%), and slightly higher results in NZD terms (+0.6%). The milk powders slipped -2.2% while the milk fats (cheese and butter) were firmer. Demand was lighter despite lower production reports in both the US and China. Although analysts will have noted these softer results, it seems unlikely the high farmgate payout forecasts will be altered by this result alone. But prices today are on the downside from recent highs.In the US, their Redbook monitoring of retail sales continued its very elevated rise from a year ago, up +6.8% and off a positive base. So this metric is still quite impressive.US exports continued their rise, up +5.2% in November from a year ago for goods, up +9.3% for services. Imports were up too, but probably distorted by a pre-tariff surge, a surge that will continue into December.US ISM services PMI was very expansionary, and more so that the internationally benchmarked S&P/Markit one. New order growth was strong, but it was current business activity levels that drove this rise.And that is reflected in the November JOLTS report. Analysts had expected a slip back, but in fact a surge in job openings was found in this survey, and quits were lower than expected. We are just three days away from getting the December non-farm payrolls report and today's release suggests there may be upside coming to the +154,000 gain expected.So it will be no surprise to know that their logistics sector is expanded fast in December. But an effort by firms to keep inventories under control meant that the latest fast expansion was less than in November.Today's UST 10yr bond auction brought a median yield of 4.62% at the well supported event, although less so than last time. But that was much higher than the 4.19% at the prior equivalent event a month ago.The Canadian Ivey PMI came in strong too with a solid expansion reported and its best in six months, although not quite up to the expansion analysts had expected.Canadian exports rose too in November.In China, an update by major developer Country Garden shows just how damaged the property sector is. In December it sold only 50% of the level it sold in the same month a year ago, itself a very weak benchmark. Beijing's stimulus efforts haven't helped this developer yet.And lower Chinese activity is seeing quite sharpish dips for both coal and rebar steel prices now.And staying in China, their foreign exchange reserves fell in December but their gold reserves rose for a second straight month. However, year on year those reserves are only -0.2% lower, and unchanged for the gold holdings.In Europe, their CPI inflation rate has been rising since October, and is now up to 2.4%, largely driven by the German inflation rise we reported yesterday. Europe-wide it is the rise in the cost of services that are the driver here; energy costs are the restrainer.Australian building consents came in less than expected in November. Year-on-year consents for new housebuilding rose +3.8% but multi-unit dwellings fell -6.4%. Month-on-month both fell more than expected. They may still be in an overall recent rising trend, but it that trend is weakening faster now.The UST 10yr yield is now at just on 4.69%, and up +6 bps from yesterday.The price of gold will start today at US$2651/oz and up +US$12 from this time yesterday.Oil prices are also little-changed from this time yesterday at just on US$74/bbl in the US while the international Brent price is up +50 USc at just under US$77.The Kiwi dollar starts today still at 56.5 USc and unchanged from this time yesterday. Against the Aussie we are up +10 bps to 90.4 AUc. Against the euro we are down -10 bps at 54.2 euro cents. That all means our TWI-5 starts today at just on 67.1 and up +10 bps from this time yesterday.The bitcoin price starts today at US$97,785 and down -4.2% from this time on yesterday. Volatility over the past 24 hours has been moderate at +/- 2.8%.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 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's financial markets are flashing some unwelcome signals.But first up today, there were a range of services PMIs for December released overnight. And the most interesting one (for us) is the Aussie one. Their service sector expanded in the month, with new business growth accelerating, inflation rising, and business confidence at its highest level in 2½ years. This got the attention of financial markets who promptly downgraded the chance of ab RBA rate cut when they next meet on February 18. Australian benchmark Government bond yields rose sharply across the board with their 10 year up an outsized +14 bps.In China, you mar recall we reported that their official services PMI jumped from a no-change growth position in November to an outsized positive 52.2 expansion in December - and we counselled to wait for confirmation by the private Caixin services PMI. Well, that Caixin services report is in and it also recorded an 52.2 expansion, an improvement although not as sharp as the official version reported. So we can be confident the Chinese services sector is expanding now at a good pace. And it does seem to confirm that the Beijing stimulus measures are having a positive impact.In Japan, their December services PMI improved to a better expansion, although to be fair it was only a marginal gain.In India, they also reported an uptick with faster growth and softer inflationary pressures. They still have a very strong expansion, although the December gain wasn't quite as strong as analysts had expected.In Canada they slipped from a November expansion to a December contraction in their services sector. (And we should probably note, unrelated to that, Pierre Trudeau has resigned as prime minister today, ending a long political career. He has been their prime minister since 2015. They alternate the role between Conservatives and Liberals and their successful leaders seem to remain in office for about nine years each.)In the US, their S&P/Markit services PMI rose in December to a good expansion, although not quite as strong as was expected. Their widely-watched local ISM services PMI is due out tomorrow and is also expected to report a modest improvement.Meanwhile, US factory orders slipped marginally in November from October to be only a marginal +0.1% higher than the same month in 2023.The US Treasury had a well-supported three year bond auction earlier today. That came in with a median yield of 4.29%, substantially higher than to the 4.07% yield at the prior equivalent event a month ago.In the EU, their service sector expanded in December after being neutral in November. But it may not last because the gains did not include rising new orders.And in Germany, there was a bit of a surprise overnight when they reported 2.6% CPI inflation (2.9% EU harmonised). Both levels were unexpectedly higher. Excluding food and energy it came in at 3.1%, and driven by higher services costs. They still have work to do to get inflation's impulse down to the target 2% level.Back in China, yesterday we noted the bond bubble they are having as sentiment about their economic policies takes a hit in financial markets. All eyes will be on these markets today, but the official pressure is being ramped up to quell the "wrong moves" by bond traders. Local media is saying "the worst of the de-rating is over" - although local media just parrot official narratives.The UST 10yr yield is now at just on 4.63%, and up +3 bps from yesterday.The price of gold will start today at US$2639/oz and little-changed from this time yesterday.Oil prices are also little-changed from this time yesterday at just on US$74/bbl in the US while the international Brent price is still just on US$76.50.The Kiwi dollar starts today just on 56.5 USc and up +40 bps from this time yesterday. Against the Aussie we are up +10 bps to 90.3 AUc. Against the euro we are down -10 bps at 54.3 euro cents. That all means our TWI-5 starts today at just on 67 and up +20 bps from this time yesterday.The bitcoin price starts today at US$102,103 and up +4.1% from this time on yesterday. Volatility over the past 24 hours has been moderate at +/- 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 tomorrow.

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 the economic world its returning after the end of year holiday season, and finding the 2024 worries are still here in 2025.First up however, the first post-New Year holiday week back will be a relatively quiet one, but there are still some important things to cover, and few of the key ones are local. But the week culminates with the December US non-farm payrolls report in the US, and that will increasingly dominate how the week goes. Markets currently expect a modest +150,000 rise in US jobs. That is close to 'average' over the past ten years. But don't forget that is the seasonally-adjusted result. Actual payroll shrink in the month usually, and that average over the past ten years is by -160,000. That is what we will be watching, because fewer actual people employed could have an outsized impact on metrics like retail sales and the like.The US will also release December services PMIs. A slightly softer expansion is expected. And China will release its important new yuan loan data, and the expectations are for another weak result. Eyes will also be on India's industrial production data, something that has been softish recently.Just as important for us, we will get more December real estate activity data this week. We will also get another full dairy auction on Wednesday, and the intervening Pulse results for both SMP and WMP have shown a marked softness since the last full auction event. And Barfoots are likely to release their December results later in the week.Over the weekend, the FAO World Food Price Index reported a -0.5% fall in December from an upwardly revised November. Dairy prices fell -0.7% but meat prices rose +0.4%. Overall this index is +6.6% higher than year-ago levels with dairy up +17% and meat up +7.0% on that annual basis.On the commodity front, both lithium and iron ore prices slipped on concerns about the prospects for the Chinese economy. The Shanghai stock exchange fell yet again, by -1.6% on Friday to be down a very sharp -5.5% for the week. And the benchmark yield for Chinese government bonds slumped to a new record low of 1.60% for the 10 year. The yuan fell, testing its lowest level since 2007 after their central bank stopped defending 7.3 to the USD.So China is ramping up its subsidy program for consumer durables, trying to spark some extra consumption activity.And China's central bank said late Friday during a quarterly meeting of its monetary policy committee that it will cut banks’ reserve requirement ratio and interest rates at the “proper time”.So China is starting the New Year on the back foot.Across all reporting countries, the global factory PMI contracted slightly in December, shifting from the slight expansion in November. Good expansions in India, Taiwan, Canada, and China (among eight others) was offset and more by retreats in the US, Australia and especially the Europe (among seven others). On balance, it was soft new order levels that is turning the global tide.In the US, a good rise in new orders saw the widely-watched ISM factory PMI rise by 0.9 points in December from the previous month to record only a very minor contraction and very much better than was expected. The result reflected the softest pace of contraction in the US manufacturing sector since March. Oddly, the narrative for the internationally-benchmarked S&P/Markit PMI was the inverse with weaker new orders and slipping output. However, both surveys landed at the same spot, reporting a very minor contraction.US vehicle sales ended the year on a strong note, running at a 16 mln annualised rate. EV sales accounted for 9.0% of those, and a surge in demand for EVs helped heavyweight GM claim the top spot for all cars and now second only to Tesla in EVs. Tesla slipped back in the final quarter. (For reference, NZ EV sales in 2024 were 7.3%.)Over the weekend, two Fed governors (Daly and Kugler) both reiterated that the battle to control US inflation is not yet won. Another was more positive, but thought restrive rates should still stay in place until things are clearer.In Canada, their factory PMI delivered a solid performance with good new order levels and rising output contributing to a rising expansion.In Australia, SE NSW and NE Victoria have been hit by a headwave with temperatures as high as 45oC. But a wind-change has relieved things today. Bushfire season is well underway there.Containerised freight rates rose marginally last week (+3% overall), built on a +7% surge on Trans Pacific rates from China to the USWC. Traders are trying to beat what are expected to be new tariffs from the incoming US Administration. Bulk cargo rates stopped falling this week, essentially holding at an 18 month low.The UST 10yr yield is now at just on 4.60%, and up +1 bp from Saturday. The price of gold will start today at US$2639/oz and little-changed (-US$1) from this time Saturday.Oil prices are unchanged from this time Saturday at just on US$74/bbl in the US while the international Brent price is still just on US$76.50. Both are up +US$2.50 since this time last week and at a two-month high.The Kiwi dollar starts today just on 56.1 USc and unchanged from yesterday, but down -20 bps from a week ago. Against the Aussie we are down -10 bps to 90.2 AUc. Against the euro we are also down -10 bps at 54.4 euro cents. That all means our TWI-5 starts today at just over 66.8 and down -10 bps from this time Saturday - but essentially unchanged from a week ago.The bitcoin price starts today at US$98,070 and up +0.1% from this time on Saturday. Volatility over the past 24 hours has been low 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 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 2024 has brought some huge and surprising changes. But in other sectors, not as much change as you might have expected. And through it all profits and wealth growth have been strong.But first in the US and based on a rise in new orders, the Dallas Fed's Texas manufacturing indexmoved up into positive territory in December, its first positive reading since April 2022. Forward sentiment was positive in that state for a second month in a row.Also driven by new order inflows, but the lack of them in this case, the Chicago PMI fell further in December from November and missing market forecasts. This is their 13th consecutive month of retreats, recording its steepest decline since May.US pending home sales in November grew a strong +6.9% from a year ago, their best rise since May 2021. To be fair however, it is off a weak base, but it is the fourth straight month of gains in sales volumes. Sellers seem to be capitulating on price expectations, and it has become a buyers market, according to the peak US realtor group.In China, a Reuters poll suggests factory activity there expanded in December, capping a three month gain.In Japan, their 10-year government bond yield edged up to around 1.11%, its highest since 2011, as investors continued to assess their latest inflation data.South Korean retail sales rose more than expected. Even so the gain was minimal. Korean industrial production undershot in November. But it is their political crisis that is hurting their currency, falling to its lowest against the USD since 2009.Other countries are depreciating too against the US dollar. The Turkish lira is at a record, all-time low. Ditto the Russian ruble. And the Chinese yuan is almost its lowest since 2007.The US dollar index is ending the year its highest since 2022, and prior to that, its strongest since 2002.Back on Wall Street, the Wall Street Journal is reporting the investment in exchange traded funds now exceeds US$10 tln, with a 2024 rise in these investment vehicles up +30% from 2023 or up +US$2½ tln in 2024.The UST 10yr yield is now at just on 4.55%, and down -8 bps from yesterday. The price of gold will start today at US$2298/oz and down -US$22 from yesterday. We started the year with this price at just on US$2,050/oz, so a +27% net rise for 2024.Oil prices are a bit more than +50 USc firmer at just over US$71/bbl in the US while the international Brent price is still just over US$74. We are ending 2024 almost exactly where we started.The Kiwi dollar starts today just on 56.4 USc and unchanged from yesterday. We started the year at 63.4 USc, peaked at 63.6 USc at the end of September, but the net devaluation until now has been -11.1% in USD terms. Against the Aussie we are up +10 bps at 90.7 AUc. Against the euro we are up +20 bps at 54.3 euro cents. That all means our TWI-5 starts today at just over 67 to be little-changed from yesterday. The TWI-5 started the year at 71.1, (it peaked at 71.4 mid February) for an overall devaluation of -5.8%.The bitcoin price starts today at US$91,907 and down -2.0% from this time on Saturday. Volatility over the past 24 hours has been modest at +/- 1.5%. It started the year at US$44,204 and rose to US$73,095 by mid-March. It was still at just US$69,391 just prior to the US election, and has risen since that result. It peaked by closing at US$106,169 on December 18, 2024.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, January 6.Happy New Year everyone !

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 major airplane crash in South Korea, probably due to a birdstrike.In the global economy, the situation is dominated by market fears of what the incoming Trump Administration will do. Bond yields are pricing in that risk by raising them to near their highest since 2007. Equity markets are down, with the S&P500 down -2% since its peak close on December 6. The Nasdaq is down -2.2% since its peak on December 16.Rising bond yields depress bond prices. And some finance professionals think the shift higher has only just begun and the risks will accelerate as the capricious Trump agenda takes shape. Bond investors are in for steep losses in 2025, they say.The type of flipflops from Trump, like going from campaigning to ban Ticktock to now telling the Supreme Court to leave it alone, from campaigning to ban immigrant H-1B visas to now saying they are essential, mean markets don't trust his positions anymore. They are late to this realisation. And perhaps it mattered little when he was just a candidate, but now he will be in power again, they sense chaos.We should also keep an eye on trade disputes between Canada and the US. A Trump penchant for tariffs on Canadian softwood exports to Canada could see a rise in competition in other markets for New Zealand logs and milled pine as a fallout.Meanwhile, US inventories, both retail and wholesale were little-changed in November. But they are likely to rise from here as traders rush to beat the impending tariffs.US exports rose +6.0% in November compared with the same month a year ago. But US imports are zooming higher on the expectation of those rising tariffs, up +7.3%. That caused a Trump-induced trade deficit of -US$99 bln in the month, up from -US$90 bln in the same month a year ago.Across the Pacific, Japanese retail sales rose +2.8% in November from year-ago levels, up from a downwardly revised +1.3% rise in October, and easily beating market expectations of a +1.7% gain. This marked the 32nd straight month of expansion in retail sales there and the fastest growth since August, with rising wages continuing to support consumption.However, Japanese industrial production fell by -2.3% in November from October, compared with market expectations of a -3.4% fall. The latest result followed a +2.8% growth in October and is the first contraction in industrial output since August. Year-on-year the November decline was -2.8%. A dip in machinery orders took the blame.Taiwanese consumer sentiment dipped in December from November, but remains sharply higher than year-ago levels, and still in the high recovered range after the low point in late 2022. However, it isn't yet back to pre-pandemic levels.In China, local observers now expect "outsized stimulus" from Beijing policymakers in 2025.Perhaps that is because Chinese industrial profits fell -7.0% in November, compared to the same month a year ago. Even the Chinese habit of only reporting year-to-date results shows a decline now of -4.4%, so the recent months are coming in weaker than earlier. After peaking in 2021, these profits have fallen each year since. Interestingly, state-owned enterprises, which tend to be very large businesses are doing the weakest, down -8.4%. Private foreign-owned businesses are doing the least-worst (-1.0%). And other private sector businesses are down -4.7%. It is hard to see private investors happy in this environment.China’s commerce ministry said on Friday that it has launched an investigation into imported beef at the request of representatives from its struggling domestic industry. New Zealand is one source, including through the Silver Fern Farms link. But the main focus is on imports from Brazil and Australia.In Tibet, and in an area China controls but is disputed with India, China just committed to build a vast hydro-electric river dam, so large it is expected to take a decade to finish, and then deliver three times the output of their famous Three Gorges Dam. But they are damming the Yarlung Tsangpo River, which is known as the Brahmaputra River in India and one of India's great rivers. Expect a rise in tension between India and China because of this, although the main impact will be on Bangladesh.In Iran, their currency is under severe pressure and energy shortages are growing. The country is bracing for a spike in civil unrest.We should also note that coffee prices are soaring again, now higher than all the prior peaks in 2011, 2007, and 1997. Droughts in Brazil and Vietnam are getting the blame. Cocoa prices are staying very high too, and for similar reasons although they have pulled back a bit since mid December.The UST 10yr yield is now at just on 4.63%, and up +2 bps from Saturday, and up +12 bps from this time last week. It is up from 3.86% a year ago, but most of that is since the November US election.This will be tough for yield-linked investments like real estate. After hanging on through the pandemic, commercial property values are especially at risk. The sector cleanout could be a feature of 2025, internationally.The price of gold will start today at US$2620/oz and up +US$6 from Saturday.Oil prices are little-changed at just over US$70.50/bbl in the US while the international Brent price is now just over US$74. A week ago these prices were -US$1 lower.The Kiwi dollar starts today just on 56.4 USc and up +10 bps from Saturday. Against the Aussie we are down -10 bps at 90.6 AUc. Against the euro we are also up +10 bps at 54.1 euro cents. That all means our TWI-5 starts today at just on 67 to be up +10 bps from Saturday and down -10 bps from this time last week.The bitcoin price starts today at US$93,747 and down -0.3% from this time on Saturday. A week ago it was at US$97,137 do down -3.5% since then. Volatility over the past 24 hours has been modest at +/- 1.1%. Most of the annual rise in the bitcoin price has been after the November US election.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.Happy New Year everyone !

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 !