US economy records continuing vigour

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.

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 China seems to have managed to arrest its deflationary mood with solid consumer spending in their Lunar New Year holiday.

But first, in the week ahead, we get the important US CPI inflation rate on Wednesday, along with retail sales, producer inflation, the Michigan consumer sentiment index, and industrial production data this week.

In Japan we will get a Q4-2023 GDPO update and it will likely be more positive than the shrinking first estimate. In Australia, the NAB business confidence index will also come this week. Also, the inflation rate for India is due along with its industrial production data.

From China, the focus this week will be on monetary indicators including new yuan loans, car sales, and the house price index. They will also review their one-year medium-term lending facility rate.

In China over the weekend they reported February consumer prices and they rose by +0.7% from the same month a year ago, above market forecasts of an expected +0.3% rise and a turnaround from the sharpest drop in over 14 years of -0.8% in January. Seven of their past twelve months have reported zero inflation or deflation. The latest result was the first positive consumer inflation since last August, hitting its highest level in 11 months. This was due to better Lunar New Year holiday spending. Food prices declined the least in eight months. Beef prices fell but lamb prices turned up from the prior month. Milk prices are still falling however.

Meanwhile they still have producer price deflation. This sector is wallowing in -2.7% deflation, marginally more in February than January. A year ago their PPI ran at -1.4%.

Another large property developer is showing signs of struggle. And they aren't the only one. The issue is spreading into signs of stress in the local government bond market now.

Separately China's Ministry of Finance data shows that interest on debt obligations are rising fast for the Chinese government - in fact a jump of +7.8% in interest payments this year is a bigger relative rise than for their defense spending (+7.2%). If, as some expect, Beijing suffers a ratings downgrade this year from "A1", that cost will only grow.

Taiwanese exports are still expanding on a year-on-year basis, although not as fast in February as they recorded in January. After a longish run of decreases, this is the fifth month in the past six where exports have risen.

Japanese household spending fell more sharply than expected and continuing a run of retreats, this one the largest in six months. Japanese policy makers might be a bit worried about this latest data trend.

Across the Pacific and at the headline level, the American economy added +275,000 jobs in February, beating forecasts of +200,000 and higher than a downwardly revised +229,000 in January. But their unemployment rate ticked up as more people joined their labour force, and wage growth slowed.

Behind the headline numbers (and looking at actual rather than seasonally adjusted numbers), employer payrolls rose by +1.1 mln to 156.5 mln people now employed. That is +2.7 mln more than a year ago. The household survey, which includes self-employed people, rose +665,000 from the prior month to 160.3 mln, and up +602,000 from a year ago. The shift from self-employment to payroll employment continues.

American consumer debt rose by nearly +US$20 bln in January, following a +US$1.6 bln rise in the previous month and way above market expectation of a +US$9 bln rise. Revolving credit, like credit cards, increased by +7.6% on an annualised basis from the previous month. Non-revolving credit, typically auto and student loans, rose by +3.6% on the same basis).

According to the USDA's March World Agricultural Supply and Demand Estimates, the Chinese might be back buying soybean in larger volumes, suggesting the Chinese are struggling with expanding their local output. The same report reveals American beef imports are rising. And that American milk production is slowing.

Canada also released labour force data over the weekend. They added +40,700 jobs in February, following a +37,300 rise in January. This was double the forecasted +20,000 increase. February brought a notable bounce back (and more) of full-time positions, up + 70,600, while part-time jobs decreased by -29,900..

German industrial production rose +1.0% in January (in 'real' terms) from December but that still leaves it -5.5% lower than the same month a year ago.

The UST 10yr yield starts today at 4.08% and down -1 bp from Saturday. 

The price of gold will start today down -US$7 from Saturday at US$2179/oz and just off its record high. But that is a +4.9% rise for the week. Why is the gold price rising just now? Some think it is new demand out of China as investors there start to fret that the economic management by Beijing is leading down a not-so-good path.

Oil prices have stayed down at just over US$77.50/bbl in the US while the international Brent price is now just on US$81.50/bbl. Both are -US$2 lower than a week ago. Weakening demand out of China is getting the blame.

And here's something you might not have expected. Saudi Arabia is in recession. It's GDP shrank -3.2% in Q3-2023, and it has now followed that up with an even sharper -4.3% fall in -Q4-2024. MBS is no saviour. Aramco, which Saudi Arabia partially listed (10%) in 2019, has raised its dividend despite a retreat in energy prices and lower production, a boost for Riyadh as it faces a widening budget deficit.

The Kiwi dollar starts today at just on 61.8 USc and little-changed from Saturday. But it is up +¾c in a week. Against the Aussie we are firmish at 93.3 AUc. Against the euro we have remained at 56.5 euro cents. That all means our TWI-5 starts today at just on 70.5 and unchanged over the past four days.

The bitcoin price starts today at US$69,652 and up +1.2% from this time Saturday. That means for the week it is up +11%. Volatility over the past 24 hours has been modest at +/- 1.3%.

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 we seem to be "not far" from getting interest rate cuts from the central banks in the US and Europe - and perhaps an unusual hike from Japan.

Tomorrow we get the important February US non-farm payrolls report, and today there are more precursor updates.

The number of people claiming unemployment benefits for the first time in the US was 213,000 last week, slightly more than in the previous week. That is down from 238,000 new claims in the same week a year ago. All up, there are now just over 2.1 mln people claiming these benefits, a minor increase from a week ago and a year ago.

US-based employers announced plans to cut 84,638 jobs in February, the most in eleven months, compared to 82,307 in January, and 77,770 a year earlier. It is also the highest February total for the month since 2009. But it is still just a rounding error in the perspective of a 161.2 mln employed labour force.

American export values were little-changed in January, marginally more than in December but marginally less than in January 2023. Their goods and services deficit rose slightly in the month, but over the past year is a massive -17% lower than in the prior year. It has fallen from a manageable -3.5% of GDP to a much better -2.8% of GDP now. (The New Zealand goods and services trade deficit is -4.1% of our GDP.)

There was more Powell testimony to the US Congress today, this time to a Senate committee.

In the US, Google may have had its key AI code stolen and passed to China. And sadly, this case will reinforce nationality stereotyping that is growing in the US-vs-China rivalry.

In Japan, worker earnings rose by 2.0% in January from the same month a year ago, rising from a +1.0% gain in December and posting the highest reading in seven months. That is triggering talk that a central bank rate hike may be in the offing. It did that last seventeen years ago.

China's exports surged higher in the January-February period they report at the start of the year. This is not only good news for them, but it also indicates global demand is rising, and probably by more than we might otherwise have assumed. But we should probably also note it is off a quite low base in the same period in 2023. New Zealand received +7.7% more exports from them, but they bought -14.9% less from us in the period.

One consequence? China's FX reserves inched higher.

The Malaysian central bank kept its overnight policy rate at 3% in its latest monetary policy review.

As expected, the ECB kept its main policy rate unchanged at 4.5%, at its overnight review. And it is keeping up its quantitative tightening program at the same pace. But they lowered their inflation forecast, and their growth forecasts, and signaled that they might cut rates in July.

Meanwhile, German reported that factory orders fell worryingly sharply in January to be -12% lower than the same month a year ago.

In Australia, lending for housing fell more than expected in January, trimming their year-on-year rise to +8.5%. For owner-occupiers, the monthly drop was -4.6% taking the year-ago change to just +3.4%.

Global container freight rates fell another -6% last week but remain +82% higher than year ago levels. The pressures remain even if an easing trend is building. Freight rates for bulk cargoes are still rising however and are now +70% higher than year-ago levels.

The UST 10yr yield starts today at 4.12% and up +3 bps from yesterday. 

The price of gold will start today up another +US$11/oz at US$2156/oz and another new record high.

Oil prices are down -US$1 at just over US$78.50/bbl in the US while the international Brent price is now just over US$82.50/bbl.

The Kiwi dollar starts today at just on 61.7 USc and another overnight gain of +¼c. Against the Aussie we are still at 93.3 AUc. Against the euro we have firmed slightly to 56.4 euro cents. That all means our TWI-5 starts today at just on 70.5 and up about +10 bps.

The bitcoin price starts today at US$67,389 and up +1.0% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.8%.

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 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 US Fed says it needs to see more progress on inflation before it considers a rate cut. But they hinted that a cut could be coming later this year. That was enough to see markets worldwide start pricing that in. Benchmark interest rates retreated everywhere.

But first in the US, there was actually quite a jump in mortgage applications last week after the prior week's unusual fall. And this latest week more than made up for that prior retreat. That came despite the benchmark 30 year mortgage interest rate staying up above 7%.

In its precursor reports, ADP said private businesses in the US hired an extra +140,000 workers in February, following an upwardly revised +111,000 in January, but slightly below forecasts of +150,000. Services companies were responsible for +110,000 of those extra jobs, while goods producers added +30,000.

Meanwhile, the number of job openings went down by -26,000 from the previous month to 8.863 mln in January, the lowest in three months and below the market consensus of 8.9 mln. Still, this data lags current conditions in a way the jobs reports don't.

These American labour market updates came ahead of Saturday's (NZT) February non-farm payrolls report which is currently expected to deliver a +200,000 increase on top of the very strong +353,000 January rise.

It would be appropriate to start reducing the Fed funds rate at some point this year, but only when there is greater confidence that inflation is sustainably moving towards the 2% target, Federal Reserve boss Powell said in his semiannual Monetary Policy Report to Congress. “Reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy to get inflation back to 2%,” he noted. But markets moved past that caution almost instantly, with benchmark rates falling, equity prices rising, and the US dollar easing.

The Fed releases its February Beige Book survey results at 8am NZT and if there is anything notable in that we will update this item.

North of the border, the Bank of Canada delivered the expected no-change rate decision, holding its policy rate at 5% and saying it is in no hurry to cut.

We should perhaps note that the South Korean inflation rate ticked up above 3% again in February. They are having "last mile" problems too.

China has appointed a known hard-man to head its Securities Regulatory Commission who is determined to stamp out unwanted behaviours. Traders are going to have to be very careful they adopt the Party narrative in their trading actions. Only 'up' is now likely to be tolerated.

India says it is looking at a growth rate this year of about +8%.

Perhaps surprising some, the volume (ie real) of retail sales in the EU rose in January from December. But they are still lower than year-ago levels.

Readers of this column will recall us suggesting the the good Australian current account data was likely enough to ensure a good Q4-2023 growth outcome for economic activity (GDP) in Australia. Well that was a misplaced reading. The GDP data today disappointed many, with real economic activity up just +0.2% in the quarter, up +1.5% over the year. Clearly, the contribution from households was lower than expected amid budget and rate pain. And without that strong current account data they may have had to book a contraction.

The global airline industry is claiming that the passenger travel market was nearly fully recovered from the 2020 pandemic in January with 'resilient' growth in both domestic and especially international travel volumes.

The UST 10yr yield starts today at 4.09% and down -6 bps from yesterday. 

The price of gold will start today up +US$19/oz at US$2145/oz and another new record high.

Oil prices are up +US$1.50 at just on US$79.50/bbl in the US while the international Brent price is now just under US$83.50/bbl.

The Kiwi dollar starts today at just on 61.4 USc and an overnight gain of +½c. Against the Aussie we are down -¼c at 93.3 AUc as the Aussie rose more. Against the euro we have risen to 56.3 euro cents. That all means our TWI-5 starts today at just on 70.4 and up +20 bps.

The bitcoin price starts today at US$66,709 and up almost +2.0% from this time yesterday. Volatility over the past 24 hours has been extreme at +/- 6.6%.

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.

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 that with a few notable exceptions, commodity prices are soft across the board.

The overnight dairy auction brought a -2.3% retreat, principally because the powder prices fell. WMP was down -2.8% and SMP was down -5.2%. However cheese was up +4.0%, that only ingredient to show a gain. The overall decline was the first in the first of the year and the only significant one in the past 15 events. Last week's GDT Pulse event's retreat signaled that this correction was on the cards. One retreat in 15 isn't significant however at this point and it is unlikely it will cause any analyst to change their forecast payout levels.

Last week's retail sales in the US rose +3.0% from the same week a year ago, on a same-store basis, just enough to stay ahead of inflation. The American middle class is still creating the core consumer demand that essentially powers the global economy.

But the same was not true for factory orders in January, which were down -1.6% on that same basis. From December they fell at a sharper pace.

However, the American services sector was still expanding in February, even if it was marginally back off the fast pace in January. And this expansion was confirmed in a separate internationally-benchmarked services survey.

And their logistics industry is expanding faster too, indicative of rising commercial demand in February.

Encouragingly, American vehicle sales rose to a 15.8 mln annualised rate in February, an almost +6% gain on January's rate. And that puts them above the recent long run average.

A major set-piece meeting of the People Congress in Beijing has seen them set an "about +5%" growth target for 2024. But even the Premier who delivered the target acknowledged it will be a reach. But analysts see it as a "target without a Plan".  Without such a plan, there is unlikely to be any support for global commodity prices. The sharp retreat of foreign investment is drawing calls for 'action' to reverse the slide.

Lower energy costs (and energy intensity) are still driving down EU producer prices. Industrial producer prices in the Euro Area decreased by -8.6% year-on-year in January, but that was a moderation from a revised -10.7% drop recorded in the preceding month.

Australia delivered a bumper current account surplus in Q4-2023 or +AU$11.8 bln, much more than was expected. This was their best 2023 quarter, taking the annual current account surplus to +AU$31.9 bln. That probably means their Q4-2023 GDP activity will be positive too, helped by a slump in imports and less Aussies making overseas trips. Australian Q4 GDP results will be released later today.

And staying in Australia, their competition authorities have decided not to appeal their loss in the case that overturned their block on the ANZ-Suncorp banking acquisition.

January air cargo data was released overnight and it pointed to rising demand and a strong start to 2024. International cargo demand was +20% higher than year ago levels, even better in the Asia/Pacific region.

The UST 10yr yield starts today at 4.15% and down -8 bps from yesterday. 

The price of gold will start today up +US$9/oz at US$2126/oz. That is another new record high.

Oil prices are down -50 USc at just over US$78/bbl in the US while the international Brent price is now just over US$82/bbl.

The Kiwi dollar starts today at just on 60.9 USc again, marginally softer. Against the Aussie we are holding at 93.6 AUc. Against the euro we have eased fractionally to 56.1 euro cents. That all means our TWI-5 starts today at just on 70.2 and down another -10 bps.

The bitcoin price starts today at US$65,430 and down -2.8% from this time yesterday. At one point it did hit a record high in the past 24 hours but has backed off since. Volatility over the past 24 hours has been high at +/- 3.4%.

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 that non-China Asia seems to be on the rebound, and it is not just India driving it.

Japanese corporate spending on plant and equipment in Q4-2023 jumped an unprecedented (and surprising) +16.4% from the same period a year earlier. It was very much more than was expected and will ease some concerns about weak domestic demand. Companies are clearly looking ahead with optimism. It is not as though it is off a low base; a year ago they reported a very creditable +8% rise. This latest gain is the largest since this data series started in 2009.

In South Korea, their PMI factory survey shows conditions continued to improve during February. They have a sustained expansion in both output and new orders amid the launch and manufacture of new products, while also seeing a boost in confidence. Payrolls are rising too.

In Australia, they got some disappointing building consent data for January, particularly for building new houses. Apartments seem ok. Levels were weaker than expected, recording a -1% decline vs expectations of a +4% rise from the prior month. These consent levels were coming off a sharp fall in December which was revised sharply lower. The absence of a rebound and the approvals detail suggest there has been an underlying weakening, although we should to be careful with housing data over the summer holiday period.

The IEA released its 2023 Global Emissions Report overnight. Emissions increased by +410 million tonnes, or 1.1%, in 2023 – compared with a rise of +490 million tonnes the year before – taking them to a record level of 37.4 billion tonnes. An exceptional shortfall in hydropower due to extreme droughts – in China, the United States and several other economies – resulted in over 40% of the rise in emissions in 2023 as countries turned largely to fossil fuel alternatives to plug the gap. Had it not been for the unusually low hydropower output, global CO2 emissions from electricity generation would have declined last year, making the overall rise in energy-related emissions significantly smaller.

Total advanced economy GDP grew +1.7% but emissions fell -4½%, a record decline outside of a recessionary period. Having fallen by -520 Mt in 2023, emissions are now back to their level of fifty years ago in these advanced economies. Total CO2 emissions from energy combustion in the United States declined by -4.1% (-190 Mt) despite its drought and hydro hesitations, while the economy grew by +2.5%. Two-thirds of the emissions reduction came from the electricity sector. More from the IEA here.

The UST 10yr yield starts today at 4.23% and up +4 bps from yesterday. 

The price of gold will start today up +US$35/oz at US$2117/oz. That is a new record high, eclipsing the previous all-time high of US$2,087 at the end of 2023 by +1.5%.

Oil prices are down -US$1 at just over US$78.50/bbl in the US while the international Brent price is now just over US$82.50/bbl.

The Kiwi dollar starts today at just on 61 USc again, little-changed. Against the Aussie we are holding at 93.6 AUc. Against the euro we have eased to 56.2 euro cents. That all means our TWI-5 starts today at just on 70.3 and down about -10 bps overnight.

The bitcoin price starts today at US$67,311 and up +7.2% from just yesterday. That is another big gain and puts it just about its all-time high in November 2021. Volatility over the past 24 hours has been very high at +/- 4.0%. (It is very volatile as we record this, so it has likely changed again since.)

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 world's factories are signaling quite varied status indications. But overall February saw global manufacturing show signs of renewed vigour. Output expanded for the second successive month, supported by the first increase in new order intakes since June 2022. The outlook remained broadly positive overall, with optimism regarding the year ahead staying close to January's nine-month high.

But first this week, all eyes will be on the US non-farm payrolls report but not until Saturday NZT. Markets currently expect it to expand by another +200,000. Prior to this other American labour market indicators will be release like the JOLTS report and the layoff survey. The US will also deliver factory order data and Fed speakers will be out in force while the Fed itself reports to Congress on monetary policy.

Separately the Bank of Canada and the ECB will deliver rate reviews. Others will report trade, inflation and PMI data. Locally there is not much big data released although the Tuesday release of 2023 household expenditure survey results will be interesting, both for what they say, and what they don't.

In China there were two PMI surveys out. The official factor one wasn't very optimistic but the private Caixin version reports improving and expanding factory conditions. It is more understandable in China why the two might vary. The official one focuses on large state organisations, the Caixin one more on private businesses. Still, the results are opposite to what you might have expected. The official version also covered their services sector and that part reported an improving expansion.

In China, it now seems it is news that a large property developer actually is able to make payments on their bonds. Also in their news is that you can get arrested for asking local government authorities to pay their debts.

It will be no surprise, the Indian PMI rose in February, complementing its economic expansion.

But the Japanese PMI reported 'deteriorating' factory conditions.

After a sharp +18% jump in January, South Korean exports were expected to rise only modestly (less than +2%) in February on that same basis. But they rose almost +5% on the year-on-year basis pointing to resilience in export demand for them. Much lower imports (due to lower oil prices) enabled them to book a sharp rise in their trade surplus.

With an unexpected fall in new order levels, the widely watched American ISM PMI dipped deeper in contraction in February. The companion internationally benchmarked Markit PMI (now called the S&P Global PMI) told a very different story however in the same market, swinging up sharply to an expansion, and one this survey hasn't had since mid-2022. The driver? Well, it was a surge in new orders. The two surveys could not have been more different this month, an unusual set of views.

The widely-watched University of Michigan consumer sentiment survey for February is clearly upbeat however. Although consumer sentiment moved sideways in the month, slipping just two index points below January, it is holding the gains seen over the past three months. Expected business conditions remained substantially higher than six months ago. And long run expectations are much higher too.

EU (Euro Area) inflation fell in February but not by as much as expected. It is now at 2.6% pa on falling energy costs. Like everyone, they are finding the "last mile" hard to achieve. Meanwhile the Euro Area jobless rate fell to a record low 6.2%. But these days, governments get little credit for keeping employment high even when economic activity wavers. But in the sweep of economic history, it is a remarkable factor.

However, the Eurozone PMI does not make for happy reading.

The UST 10yr yield starts today at 4.19% and up a marginal +1 bp from Saturday but down -6 bps from a week ago. In fact that is near a three week low. 

The price of gold will start today at Saturday's higher level of US$2082/oz. And that is also up from US$2038/oz a week ago.

Oil prices are little-changed at just over US$79.50/bbl in the US while the international Brent price is now just under US$83.50/bbl. Both are +US$3 higher than a week ago. In a bid to try and raise the price, OPEC has extended its production cuts.

The Kiwi dollar starts today at just on 61 USc and little-changed from this time Saturday. But that is -1c lower than this time last week. Against the Aussie we are holding at 93.6 AUc. Against the euro we have firmed slightly to 56.4 euro cents. That all means our TWI-5 starts today at just on 70.4 and little-changed from Saturday, but down about -100 bps in a week.

The bitcoin price starts today at US$62,810 and up +1.3% from this time yesterday. But it is up more than +US$10,000 in a week or +25%. Volatility over the past 24 hours has been modest at +/- 1.2%.

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 tomorrow.

China's economy remains mired in a post-Covid hangover like much of the rest of the world, but the technology, catering and tourism sectors are encouraging, according to David Mahon.

Mahon, the Beijing-based Managing Director of Mahon China Investment Management, spoke to interest.co.nz in the latest episode of our Of Interest podcast.

The relative weakness of the Chinese economy, compared to its rapid expansion of recent decades, amid ongoing concerns about the property market and deflation, has been making international headlines. Mahon says some of what's going on isn't dissimilar to elsewhere in the world.

"We're going through a period of the post-Covid hangover that the whole world is still going through. We talk about China in isolation. Look at global consumption, look at New Zealand growth rates. They're not great. This is normal. The pandemic was huge. Even the Second World War didn't touch every human being on the planet with the same hand of fear, with the same uncertainty. So I think we need to be patient with ourselves, we need to be patient with the global economy and therefore a little bit with the Chinese economy," Mahon said.

"The isolation, the closure of China for three years had a huge impact. And there are losses and there are contradictions in the system that have been highlighted that really are a challenge to the Government."

Nonetheless he suggests the technology sector is a good engine for the Chinese economy.

"And also given the fact that China is being isolated on technology, there is a strategic reason why China will push that further. So I can see some strong engines. The other one is catering and tourism. Catering is very good for New Zealand because it means that Fonterra will be selling its products to the food services sector," said Mahon.

I also asked Mahon about New Zealand's new government flirting with joining AUKUS, the Australia-United States-United Kingdom security partnership, and what sort of impact this could have on NZ's relationship with China including our trade relationship. This issue gathered momentum after Foreign Affairs Minister Winston Peters and Defence Minister Judith Collins met with their Australian counterparts in early February.

"If New Zealand were to join AUKUS in any form, whether it was phase one or two, it would have an impact, definitely, and it would be a major sign of a change in [NZ] policy of perhaps two generations. So I think we have to wait to see what [Prime Minister] Christopher Luxon says rather than what Winston Peters and Judith Collins say," said Mahon. 

In the podcast Mahon talks further about the NZ-China relationship, the China-US relationship, the Chinese economy, tensions over Taiwan, the Xinjiang region and the Uyghurs, President  Xi Jinping's power, Chinese consumers, the middle class, the potential for more monetary and/or fiscal stimulus in China and more.

*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 news India is the world's bright economic star at the moment.

But first in the US, the actual number of people claiming jobless benefits fell last week, but by less than expected to 194,000. Continuing jobless claims were unchanged at 2.1 mln, still the highest since November. It was a mixed picture. Seasonally these levels are higher than was expected.

American PCE inflation for January came in at the expected 2.4% which was a dip from the December 2.6%. Core PCE dipped slightly too. Personal income jumped an outsized +1.0% in January from December which puts it +2.1% higher than a year ago (real), while personal spending rose +0.3% on the same basis, also +2.1% higher than a year ago (also real).

The Chicago PMI fell again, its third straight fall. But there was a sharp recovery in the Kansas City Fed factory survey although new order growth was flat.

American pending home sales in January dropped -4.9% as the residential sector stays in the doldrums. The Northeast and West posted monthly gains in transactions while the Midwest and South recorded losses. All four U.S. regions registered year-over-year decreases.

Canada data for Q4-2023 GDP shows them returning to growth.

Japanese industrial production disappointed in January, coming in -1.5% lower than a year ago. Meanwhile, retail sales in Japan rose +2.3% year-on-year in January, slowing slightly from an upwardly revised +2.4% gain in December.

Meanwhile, Taiwanese retail sales grew just +0.3% year-on-year in January, the lowest expansion since February 2022. But Taiwanese industrial production surged in January, up +16% from a year ago.

India released its Q4 GDP results beating both forecasts and the strong Q3 expansion, to be +8.4% larger than the same quarter a year ago. The Indian economic performance is a strong global highlight. It is impressive given how large it is, a famously difficult place to generate change. (But we probably should be a bit sceptical on this data. The Modi Government has a tight control over their stats, and an election is looming. Just saying ...)

But there are never any contested elections in China. China's per capita gross national income declined in US dollar terms for the first time in 29 years in 2023, data released yesterday shows, pulling it further from the World Bank's threshold for a high-income country. The comparison with India will be causing some concern in Beijing now. China's solution to their woes? More state planning and directed SOE activity. They seem a bit lost at the moment.

The -1.4% decline in real German retail sales continued in January. But that seems to be the price they are prepared to pay to get inflation back to where they need it. In February it fell to +2.5%, its lowest since mid 2021. In between it peaked at almost +9%.

In Australia, the January retail sales brought a modest bounce, but not to a level that satisfied anyone.

Container freight rates eased again last week, but remain very high for the usual climate (Panama) and security (Suez) restriction reasons. They are still almost +90% higher than year ago levels. Bulk cargo rates are rising now too, up a sharp +24% in the past week alone.

The UST 10yr yield starts today at 4.25% and down -4 bps from this time yesterday. 

The price of gold will start today up +US$13/oz from yesterday at US$2045/oz.

Oil prices are up +US$1 at just under US$79/bbl in the US while the international Brent price is now just over US$82.50/bbl.

The Kiwi dollar starts today at just on 60.9 USc and little-changed from this time yesterday. Against the Aussie we are down marginally at 93.7 AUc. Against the euro we have firmed slightly to 56.4 euro cents. That all means our TWI-5 starts today at just over 70.3 and little-changed

The bitcoin price starts today at US$62,275 and up +0.82% from this time yesterday. Volatility over the past 24 hours has been high at +/- 3.9%.

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 the New Zealand currency and interest rates have fallen after the RBNZ dovish no-change Monetary Policy Statement as markets removed the factors that had priced in some risk for a rise.

Firstly in the US, mortgage applications fell again last week and are now -12% below year-ago levels. Their benchmark 30 year loan interest rate is still over 7% which keeps this market quiet.

The American merchandise trade balance in January was little-changed at about -US$90 bln for the month. It is always less when services are included.

The second estimate of Q4 US GDP confirmed the early estimate, adjusted an insignificant tick lower. The +3.2% expansion in Q4 came after the +4.9% Q3 expansion and +2.4% expansion for the year prior to that. By any measure that is a very good two year track record. They ended 2023 with an economy generating US$28 tln in economic activity, +US$1.5 tln more than at the same time a year earlier. (For perspective, that rise is about the same as the whole Australian economy for a year. And it is double the expansion of the Chinese economy.)

US inventories seem to be in reasonable shape too, overall. But retail inventories crept up solely due to rising unsold car stocks and we should keep an eye on that

In Hong Kong, a creditor of giant Chinese property developer Country Garden has petitioned a court for a winding up order. Country Garden's fall would be as big an earthquake as that of Evergrande. The implosion of the property development sector in the Middle Kingdom is not done yet.

Authorities are working to encourage buyers back into the sector. Success seems far away at present, but a key enticement are historic low mortgage interest rates.

EU sentiment was broadly stable in February even if both consumer and industry sentiment is still running below their long term averages. However retail, construction and the services sector are all running at about their long term average levels.

In Australia, their monthly CPI indicator in Australia stood at 3.4% in the year to January, unchanged from the previous month and less than market forecasts of 3.6%. Still, the latest reading pointed to the lowest since November 2021.

The UST 10yr yield starts today at 4.29% and little-changed from this time yesterday. The NZ Government 10 year bond rate is down a sharpish -9 bps at 4.82% on the changed OCR view.

The NZX50 ended its Wednesday trade up +0.6% with a good afternoon session, bolstered by the removed risk of higher interest rates.

The price of gold will start today down a mere -US$1/oz from yesterday at US$2032/oz.

Oil prices are little-changed at just over US$78/bbl in the US while the international Brent price is now just under US$82/bbl. But that masks considerable volatility over the past 24 hours.

The OCR no-change has knocked back our currency. The Kiwi dollar starts today at just under 61 USc and down almost -¾c from this time yesterday. Against the Aussie we are down -½c at 93.8 AUc. Against the euro we are down almost -¾c at 56.2 euro cents. That all means our TWI-5 starts today at just under 70.4 and down more than -60 bps. But to be fair that just takes us back to where we were two and three weeks ago.

The bitcoin price starts today at US$61,787 and up another strong +8.2% from this time yesterday. It is now back to where it was more than two years ago. Its record high was US$67,633 in November 2021 - although with the retreat this week in the NZD, the bitcoin price in our current is now over NZ$100,000. And at today's NZ$101,323 that is an all-time high. Volatility over the past 24 hours has been unsurprisingly very high as well at +/- 4.6%.

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.