Economy Watch

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 American labour market data for April seemed to have something for everyone. But first, in the coming week it will be relatively quiet, especially on the US data front. But the Q1 earnings season is in its final weeks and still includes some major reporting. Elsewhere we will get set-piece central bank announcements from Sweden, England, Brazil and Malaysia, and of course from Australia tomorrow. China's CPI and PPI will also be released, but not until Saturday. New analysis shows that American labour productivity is rising and at its quickest rate since the the 1990s, and in 2023 that was its highest pace in half a century. It is too soon to credit AI, so this could be a new and important trend. Rising productivity is an essential precursor for rising standards of living. But over the weekend, the US reported that their economy added only +175,000 jobs in April, on the headline, seasonally adjusted basis, the least since October and a deceleration compared to the upwardly revised +315,000 jobs added in March. It fell short of market expectations for a +243,000 increase. This data underscores a significant slowdown from the brisk pace observed in the first quarter and trails behind the average monthly gain of +242,000 jobs over the preceding 12 months. But between the two months combined the 'slowdown' is quite small. But in fact, on an 'actual' basis employer payrolls rose +803,000 to 158.0 mln and a record high. On a household basis, including the unincorporated self-employed, they rose +234,000 to 161.6 mln and showing the continuing shift from self-employment to company payrolls that we have observed in prior 2024 months. Either way, there are actually significantly more people employed that the headline levels suggest. Full time jobs rose, part time job levels shifted lower. But the American labour force is growing slightly faster than these employed levels show so the jobless rate ticked up, very slightly admittedly, to 3.9% and although that is similar to last month it is at the upper range of what they have had since August 2023. (The New Zealand jobless rate was 4.3% in March 2024.) Average weekly earnings rose +3.9% in April from a year ago, lower than the March level of 4.1%, so there are signs of less labour market pressure. (US CPI is 3.5%.) And we should not forget that labour market data is a lagging indicator. A leading indicator is a metric like the PMIs. And the ISM services PMI for April turned negative, dropping sharply to a contracting 49.4 in April from an expanding 51.4 in March. This is their first contraction in the services sector activity since December 2022, and it surprised markets who had expected a continuing expansion. But before we get too carried away, we should note that the new order component remained expansionary, so this overall drop might be just a blip. The internationally-benchmarked US Markit services PMI is still showing an expansion, albeit a slower one. So despite the headlines of a labour market and service sector undershoot, the markets liked the implications. Risk appetites returned with the S&P500 rising, bond yields falling, and the USD easing. Basically markets now feel US rate hikes are less likely as inflation pressures are easing - just as the US Fed itself seemed have suggested. The expectations of one 2024 rate cut late in the year are creeping back. American vehicle sales came in slightly higher in April and the highest monthly sales rate since December, now at 15.7 mln, up +0.5% from the rate in the same month a year ago. For perspective, it reached an all time high of 21.7 mln units in October 2001 and a record low of 8.5 mln in April 2020. In China, their publicly traded companies took a net profit hit for the first time...

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 the OECD sees a world economy in recovery and about to expand at an increased rate, despite the many challenges. It is a perspective of resilience. But first in the US, jobless claims held at a two month low ahead of tomorrow's April non-farm labour market report. There were +189,000 new claimants last week taking the total to 1.76 mln and that is it’s lowest since October. The very low levels of job cuts reported in April fell from the prior month. Markets expect non-farm payrolls to have expanded +243,000 in April when they are released tomorrow. Although they fell in March from February's record high, American exports are essentially holding at a high level and were unchanged from a year ago on goods and services basis. The American March factory order data was released overnight and that showed another increase, a second consecutive one and up +1.6% from the prior month which was itself up +1.2% on that basis. However these levels are still running -0.9% lower than a year ago. China remains on holiday. One feature of this year's extended Labour Day break is the return of Chinese making international trips. Japan is the focus this week, but that will spread as Chinese travellers regain their appetite for seeing the world. Meanwhile, their real estate sector is making no progress toward recovery. It remained very weak in April with major developers’ sales tumbling -45% year on year and holding new very low month-on-month levels. In Argentina they can sniff real progress in their battle against endemic inflation. So their central bank slashed its benchmark interest rate overnight by -10% to 50%, the fifth change since December and the third in the past three weeks. They see a notable slowdown in monthly inflation and a "rapid adjustment" of inflation expectations. In March, Argentina's monthly inflation slowed more than expected for the third consecutive time, with consumer prices rising by 11% from February to March, below economists' forecast of 12.1%. The new administration has prioritised stringent spending cuts since December to combat inflation, and they now expect monthly inflation to decrease to 3.8% by September. That would take the current inflation rate of 288% down to under 50%. On Monday, the OECD will release an updated assessment of the New Zealand economy and prospects. Today, its global Economic Outlook update sees an "unfolding recovery" and it has raised its global growth forecast to +3.2% for 2025 from 3.1% this year. They see New Zealand rising from a modest +0.8% in 2024 to +1.9% in 2025. For Australia it is a rise from +1.5% to +2.2%. For Japan, from +0.5% to +1.1%. For the US it is a retreat from +2.6% this year to +1.8% next. For China, they see a slip there too from +4.9% to +4.5%. They expect global inflation to ease but unemployment to rise modestly. For a world with wars and severe security stresses, it is a remarkably sanguine outlook. But that inflation outlook, even if it does ease, points to higher-than-wanted sticky levels. Global container freight rates dipped a minor -1% last week to take them to +55% higher than year ago levels. The same drivers of high rates (war diversions, Suez security, and Panama drought) are all still there so immediate relief seems unlikely. Bulk cargo rates however slipped -5% for the week and are down -12% for the year. The UST 10yr yield is now at 4.58% and down -3 bps from yesterday. Oil prices are down another -50 USc from yesterday at just over US$78.50/bbl in the US while the international Brent price is unchanged at just on US$83.50/bbl. The Kiwi dollar starts today up +½c from yesterday at just over 59.5 USc. Against the Aussie we are holding at 90.8 AUc. Against the euro we are firmish at 55.5 euro cents. That all...

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 today's Fed positioning is less hawkish that markets had expected. The US Fed policy announcement today brought no change in their rate targets at 5.25-5.50%. They did note that ongoing inflationary pressures and a tight labour market has stalled progress toward bringing inflation back down to its 2% target in 2024, and they won't shift their rate signals until they actually see progress. In addition they said they will slow their quantitative tightening activities starting from June 1, 2024. That means they will reduce their balance sheet by only US$25 bln per month from the previous US$60 bln per month. In remarks after the policy announcement, Fed boss Powell said their next move is unlikely to be a rate hike. Equity markets like that, yields fell, and the greenback eased. But part of the lack of action could be its desire not to make large policy moves in an election year. Meanwhile the widely-watched ISM factory PMI slipped back into contraction in April, just marginally weaker than the Markit version. The ISM version is usually lower than the Markit one, but both generally move in the same direction. Currently that is a softening. That came as the US JOLTS job openings report declined by 325,000 from the previous month to 8.488 million in March, so really only a very small change. But markets noticed the slowdown. But the ADP Employment Report beat estimates adding +192,000 workers to their payrolls in April, more that the expected +175,000 increase but less than the March gain of +208,000. Hiring was broad-based, they found. All this comes ahead of Saturday's (NZT) US non-farm payrolls report which is expected to record a solid employed labour force gain of +243,000. Because of the widespread May Day holidays around the world yesterday, there is little other international data released overnight. In Australia, their statistics agency released "employee living cost indexes" (LCI) separate from the consumers’ price index (CPI). In March, their CPI came in at 3.6%. But the employee LCI came in at 6.5%, mainly because of the sharp rise in their variable mortgage rates which pass through there very quickly. It was notable that the other groups, especially retirees, did not suffer much of a variation from the CPI in their own LCIs. The UST 10yr yield is now at 4.61% and down -7 bps from yesterday. Wall Street has risen +1.0% the S&P500 after the Fed announcement. The price of gold will start today up +US$9 from this time yesterday at US$2303/oz. Oil prices are down another -US$2 from yesterday at just under US$79/bbl in the US while the international Brent price is now just on US$83.50/bbl and down even more. The Kiwi dollar starts today unchanged from yesterday at just over 59 USc. Against the Aussie we are holding at 90.9 AUc. Against the euro we are also holding at 55.3 euro cents. That all means our TWI-5 starts today just on 68.8 and down -10 bps from yesterday. The bitcoin price starts today at US$57,694 and another -4.3% lower that this time yesterday. And this is a new two month low. Volatility over the past 24 hours has remained very high at just on +/- 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 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 as we await our local labour market report, the global economy is expanding modestly, but inflation isn't killed off yet. First in the US labour costs rose +4.2% in the year to March, up +1.2% from the prior quarter. This is the highest rate of increase since mid-2022 and is more indication that inflation's pressures remain at a stick level - not excessively high, but not tracking down as their central banks needs. American retail sales at physical stores were up +5.5% last week from the same week a year ago, another indicator that consumers are still spending those higher payroll increases, and keeping inflationary pressures on. But the Conference Board survey of consumer sentiment retreated in April. What American consumers say and what they do are diverting again. This time it isn't about present conditions which they think are ok, rather about future conditions which they are more worried about. But there are some interesting differences. Those on modest incomes are more confident than those on higher incomes. Those under 35 are more confident than those older. In Japan, it is becoming clearer that their central bank did in fact intervene in currency markets to support the yen yesterday. In China, the private Caixin factory PMI survey was more bullish that the official version. The modest Caixin expansion held in April, and in fact the sixth straight month of growth in factory activity recorded by this survey (which is concentrated in smaller private sector firms) and even though low, the fastest pace since February 2023. On the other hand, the official factory PMI survey, which is more focused on large State-owned enterprises was less positive even if it was their second straight month of (low) expansion in factory activity. Basically it is just holding. More positive is the official services PMI, but that was less positive in April than March and it came in well below what analysts were expecting, and the softest pace since January, as new orders shrank at a steeper rate. But it is positive still and that streak is now out to 16 consecutive months. In an earnings call comment, the Yili boss said Chinese milk supply has been higher than demand which isn't growing as it once did. But he was optimistic that the back end of 2024 would improve for the Chinese dairy industry. In Europe they said their April inflation was stable at 2.4% (Euro Area), and that their overall economy grew by +0.5% in the year to March (whole EU), which was a bit better than expected. Interestingly, it was led by Spain, Portugal, France and Greece, and held back by Germany. In Australia, retail sales were softer than expected in March, dropping by -0.4% from February and missing market estimates of a +0.2% growth. February was also downwardly revised. It was the first decline since last December as turnover fell in all retail sectors. Locally, we will get our March quarter labour market data later this morning. We will have a full update then (at 10:45am). And the RBNZ releases its important Financial Stability Report prior to that (at 9am) and will have full coverage on that too. And we should note that as speculators unwound long positions, the cocoa price is falling as rapidly as it rose. The UST 10yr yield is now at 4.68% and up +6 bps from yesterday. The price of gold will start today much lower, down -US$46 from this time yesterday at US$2294/oz. Oil prices are down another -US$1 from yesterday at just under US$81.50/bbl in the US while the international Brent price is now just on US$86/bbl. The Kiwi dollar starts today down -¾c at just over 59 USc. Against the Aussie we are holding at 91 AUc. Against the euro we are -½c lower at 55.3 euro cents. That all means our TWI-5 starts today just...

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 today we are in the quiet period before some big news coming up in the rest of the week, starting with our own labour market data out tomorrow, and the US Fed rate review on Thursday (NZT). In the meantime in the US, the pressure from rising petrol prices seems to have completely evaporated. Pump prices reported are just +1.2% higher today than a year ago, and virtually unchanged from a month ago. But we shouldn't overstate the importance of this. Retail fuel prices account for just 4% of their CPI basket. "Shelter" (rent) accounts for more than 30%, and rent inflation is running at 5.6% pa (even though it is far below its recent 8.2% peak a year ago). House insurance has risen by +8.6% in the past year. CPI pressures are shifting Previously we have pointed out Tesla's share price slide in 2024, down more than -40%. But in the past few days there has been a sudden recovery, up +35% on the news that the under-fire company has apparently won approval for its "full self-driving" technology in China. It has struggled to get those approvals in the US due to the perceived poor safety record of those systems. But China made a political decision to approve after a visit to Beijing from Musk, side-lining regulators. In Europe, energy ministers from the Group of Seven (G7) major democracies reached a deal to shut down their coal-fired power plants in the first half of the 2030s, in a significant step towards the transition away from fossil fuels. Germany's consumer price inflation came in at 2.2% in April. This retains its lowest level since May 2021 and was slightly below analyst forecasts of 2.3%. A slowdown in services inflation was offset by a small rise in food prices. A year ago, German inflation was running at 7.2% so this is significant progress since then, and achieved while the separation from Russian energy source reliance was achieved. In hindsight it is an impressive achievement. EU sentiment was largely unchanged in April, but it is still running at a low level. But at least it has recovered from the sag in the middle of 2023 and held that improvement. Yesterday's sudden yen devaluation past 160 to the USD has been reversed today just as quickly, now bank to 155 yen to the USD. That has some wondering whether Tokyo authorities intervened although there is nothing more than suspicion at this point. But the Bank of Japan has a reputation of being unyielding in the face of market and trader pressure so perhaps some of those reversed themselves unable to hold their short positions. It is unclear at this point what drove the pullback. The UST 10yr yield is now at 4.62% and down -4 bps from yesterday. The price of gold will start today a little firmer, back up +US$3 from this time yesterday at US$2340/oz. Oil prices are down -US$1 from yesterday at just under US$82.50/bbl in the US while the international Brent price is now just on US$87/bbl. Gaza ceasefire hopes might be behind this shift. The Kiwi dollar starts today up nearly +½c at just over 59.8 USc. Against the Aussie we are firmish at 91 AUc. Against the euro we are firm at 55.8 euro cents. That all means our TWI-5 starts today just over 69.3 and up a minor +10 bps from yesterday. The bitcoin price starts today at US$63,031 and down -1.1% from this time yesterday. Volatility over the past 24 hours has remained modest at just on +/- 1.1%. 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 that jobs will be in focus this week. In the week ahead, all eyes will be on the US Fed's interest rate decision on Wednesday, followed closely by their April labour market report on Saturday (NZT). And that comes after our own local labour market report for March on Wednesday. The US ISM PMI will come out this week (recalling the internationally benchmarked one has already showed a slowdown). And similar PMIs will come for China, Canada, and South Korea among others. The US JOLTs job openings data, foreign trade figures, factory orders, and Conference Board consumer confidence index are also due this week and any one could be market-moving if it steps out of range. And the US Q1 earnings reporting season reaches its peak this week. Finally, we will get inflation updated for the EU, South Korea, Switzerland, Indonesia, and Turkey. But first, a weekend data release showed profits earned by China's industrial firms rose by +4.3% in the first three months of 2024, much slower than a +10.2% jump in the prior period. But they actually fell in the month of March from the same month a year ago, down -3.5% suggesting their economy’s stronger-than-expected growth early this year might be tough to maintain. The latest result underlined that the government has struggled to get a recovery momentum amid a prolonged property downturn, persistently weak domestic demand, and lingering deflation risks. Profits in state-owned companies fell while those in the private sector sharply slowed on the three-month basis they like to use. But it is masking building near-term weakness. And it is not only the Japanese who have a 'currency problem'. The recent volatility of the yuan, depressed profits and unexpected shifts in external demand are combining to make some Chinese exporters less sure about their business prospects – and more likely to park their cash assets in anything but the yuan. The yuan's value has recovered somewhat since October but exports haven't, and business holders of the CNY are sensing a potential official depreciation is imminent. Markets are also sensing a new official rate cut is imminent in China, and Chinese government 10 year bond yields dropped sharply on Friday - before recovering just as sharply as officials stepped in. And staying in China, there are reports that property market sentiment is improving, and that has property-based equities rose sharply on the Hong Kong stock exchange - on Friday, but oddly, not yet on the Shanghai exchange. One to watch. And in a new stimulatory action, China is offering trade-in subsidies for new car buyers. ICE car owners can get a ¥10,000 subsidy (NZ$2325) to buy a new NEV, or they can get ¥7000 (NZ$1625) for a new ICE car with engines of 2 liters and smaller. The world's largest car market is about to get larger and have its profitability problems 'solved'. But this is bringing louder international calls for action to push back on "Chinese overcapacity'. This issue worries the EU and Japan a lot. The Bank of Japan kept its policy unchanged on Friday, as expectations mount for central bank action to deter further selling of the embattled yen. From the no-change position the yen has continued to fall, primarily against the USD but even against the NZD. At Friday's 93.8 Yen to the NZD, that is now it's 'lowest' since May 1986, thirty-eight years ago. Against the USD, the yen has sunk to 158 to the USD, its 'lowest' since March 1986. Markets are betting that Tokyo is going to have to intervene very soon. While Japanese exports are suddenly much more competitive, a depreciation like this (-15% in the past year) could bring an inflationary shock with it. Across the Pacific, the American PCE inflation index came in at 2.7% for the year to March, back...

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 all about American GDP and reactions to the first quarter results. US economic activity expanded an annualised +1.6% in Q1-2024, compared to +3.4% in the previous quarter and below forecasts of +2.5%. It was the lowest growth since the contractions in the first half of 2022, the advance estimate showed, although there are two more revisions due (an in the Q4-2023 set, they rose with each revision). The result was held back by a decrease in inventories and a rise in imports. However, disposable personal income rose an impressive +4.5% according to today's release. However, the PCE data released with this shows inflationary pressures unabated. So the US 10-year Treasury note yield rose to above 4.7%, the highest since early November, as traders to scale back their expectations regarding the timing of a Fed rate reduction, with the the first cut now not priced in fully until December. We should note that lower growth with still-high inflation equals stagflation, a gnarly public policy problem, as history shows. Further, today's US Treasury 10 year bond auction reveals median yields rise to 4.47% in yet another well-supported offer. That was +37 bps higher that the prior equivalent event a month ago. (But it does seem curious that the secondary market prices these at 4.7% however, especially when demand is so strong in the primary market.) Meanwhile the number of initial US jobless claims fell to just 201,000, a bigger than expected retreat and the second-lowest weekly level in the past 13 weeks. That means there are now 1.82 mln people on these benefits the lowest since mid-December. US mortgage applications fell rather sharply last week, down -2.7% from the week prior and are now -15% lower than the same week a year ago. So it will be a surprise to know that March pending home sales rose +3.4% from February although they are virtually unchanged from a year ago. New orders for durable goods surged by +2.6% in March from February, following a downwardly revised +0.7% growth in February. The March rise was more than expected, but the year-on-year change is still a negative -2.2%. It was the largest monthly advance in durable goods orders since last November, primarily propelled by robust demand for transport equipment. Orders for non-defence capital goods rose too. Canada released retail sales data for February, and in real, inflation-adjusted terms, they fell -0.3%. All eyes are now turning to the Bank of Japan which is meeting today. They have important policies to balance regarding rising inflation, an expanding economy, but a currency that the being depreciated in USD terms, the one relationship that motivates them. But then, many countries are struggling with the rising USD at present. In China, the Shanghai prime office vacancy rate has hit a 20 year high - at over 20% vacant. That is a lot of spare capacity and it will worry policymakers that it is continuing to swell. In Australia, Warren Hogan, who was ranked 2023’s most accurate economic forecaster, predicts their rising economy will force the RBA to lift rates to 5.1% this year. He is an outlier, but part of a growing cohort of analysts who don't see inflation beaten yet and the economic expansion rolls on in many of the world's major countries with its pressures. Better income expectations, economic prospects and a rising 'propensity-to-buy' among consumers has shifted the German GfK Consumer Climate Indicator to it's 'highest reading' in two years (well actually its least negative reading in two years). But they will take the progress. We should note that copper prices have surged recently and now top US$10,000/tonne and that is its highest since April 2022. (It is now only 6% below the all-time high, also in 2022) Global...

With economic growth no longer producing benefits seen in the past such as raising living standards for the middle class, and human activity having exceeded some planetary boundaries, it's time to embrace degrowth, argues Jennifer Wilkins. Wilkins is a researcher and advocate on sustainability in business with a focus on degrowth. In a new episode of interest.co.nz's Of Interest podcast, she discusses the degrowth movement. "Degrowth is normally described or defined as an equitable downscaling of production and consumption. Other people add in other parts of that definition, which is about reorganising the market for a new role in provisioning. So I think about degrowth as being a transition. Starting from the economy that we have now, which is very much about trickle down wealth and extracting from nature, to a future economy which is more about universal wellbeing in an economy within ecology and nature. And degrowth is really the transition from one to the other," Wilkins says. "So I don't think about it as being a very rapid change or a very smooth change. I think about it as being a hybrid of emergence and receding ideas, quite a lot of tension and a lot of mutation in the economy. So it's quite a complex thing, degrowth." She traces degrowth's origins to the 1970s, and Romanian mathematician, statistician, economist and author of The Entropy Law, Nicholas Georgescu-Roegen, "the father of ecological economics." The push for net zero greenhouse gas emissions is needed but not enough, Wilkins says. With a degrowth economy requiring more of a collective than individual approach, Wilkins says "the jury's out on the role of capitalism." And does advocating for a reduction in production and consumption mean people would be expected to accept a lower standard of living? "I think degrowth is definitely looking to raise standards of living for the majority of people around the world. I think standards of living are actually decreasing at the moment. I think around the world, middle class lifestyles are decreasing in quality. And so there's this myth, if you like, that raising growth improves wellbeing. But the evidence shows that there's actually a bliss point. Economic growth improves wellbeing up to a certain GDP per capita, and beyond that, it either doesn't make a difference and/or eventually it begins to reduce wellbeing," says Wilkins. "The bliss point is actually quite a lot lower than New Zealand's GDP per capita. So we have theoretically enough wealth already. We just need to redistribute it. I think people who are very well off will not see a reduction in their wellbeing or their living standards through a redistribution, but I think people who are less well off will see a great improvement in their wellbeing through a redistribution." Wilkins believes degrowth will become public policy, saying politicians who want to run on a degrowth platform have lots of positive things they can say. "It's about redefining what we see as value. I mean, at the moment we think about wealth as value and prosperity, but prosperity is really about things like having more leisure time, having a healthier natural environment around us, having more community health and more community cohesion, having more access to services and assets, and having an increase in our democratic participation. And those are all things that degrowth wishes to grow," Wilkins says. "I think it [degrowth] will become public policy. I think parties will run on it as a platform. It's hard to say when that would happen, but I think in the not too distant future. And I think the thing is that growth as an idea is so embedded as a common sense that it never has to explain itself. And so there's a bit of an unfair playing field in terms of degrowth will have to explain itself to become credible. Whereas growth gets a free pass." "Growth is not producing the effects that we have experienced in the past, like the raising the living standards of the middle class....

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 the world's factories are getting busier, especially in India. But first, the strong run of American retail sales is continuing. Sales at bricks & mortar stores on a same-store basis were +5.3% higher last week than the same week a year ago. This extends the +5% expansion to four consecutive weeks, and the above-inflation streak to eight consecutive weeks. There were American PMI's out for April, the internationally-benchmarked set, but they revealed growth slowing amid signs of demand weakness. The factory PMI slipped to a minor contraction, and the services expansion slowed marginally. However, sales of new-built houses soared +8.8% in March from February, the highest level in six months, and rebounding from a -5.1% drop in February. Demand seems to be returning despite elevated mortgage rates. Meanwhile, building consents and housing starts eased back in the month. This will have the effect of tightening inventories of unsold new-builds. The latest US Treasury bond tender brough rising support, and rising yields. But the push higher seems to be rising. Almost US$184 bln was bid for the US$69 bln on offer. The median yield on these two year Notes was 4.85%, up +31 bps from the prior equivalent event. A year ago the equivalent auction went for 3.92%. In fact investors are now starting to price in the chance of a US Fed rate hike, rather than a cut, in 2024. In Japan, their factory PMI made big gains in April, meaning the sector is now stabilised and no longer contracting. Their services PMI rose at a good rate too, expanding faster. Both are now at 11 month highs. Taiwan industrial production rose +4.0% in March from the same month a year ago, confirming the strong recent export order data we have previously reported. But the retail sales growth impetus is slowing, up only +0.7% in the month. The severe flooding in the Pearl River basin in southern China continues and is predicted to get worse before it eases. Led by its factory sector, Indian PMIs revealed economic growth continued to strengthen in April. Positive demand trends fuelled new order intakes and output. In both cases, rates of expansion were the fastest in close to 14 years. India is in a significant expansion. In fact, it is now enough to topple Japan from being the fourth largest economy globally on a gross basis sooner than expected (although nowhere near on a per capita basis of course). That switch is expected to happen in 2025, a year earlier than previously forecast. The Eurozone recovery is building momentum in April according to the overnight release of their PMIs, but price pressures are also revived. In Australia, their 'flash' PMI rose at a good clip too, expanding for a third consecutive month and at the quickest pace since April 2022. Although most of the rise was from the services sector, like Japan, their factory sector improved sharply too to a 'stable' level. The UST 10yr yield is now at 4.60% and down -2 bps from this time yesterday. The price of gold will start today marginally lower, down -US$4 from this time yesterday at US$2326/oz. Oil prices have risen +US$2 to just under US$83.50/bbl in the US while the international Brent price is up a bit less at just over US$87.50/bbl. The Kiwi dollar starts today up nearly +¼c at just over 59.4 USc. Against the Aussie we are softer at 91.6 AUc. Against the euro we are unchanged at 55.5 euro cents. That all means our TWI-5 starts today just on 69.1 and little-changed from yesterday. The bitcoin price starts today virtually unchanged at US$66,766. Volatility over the past 24 hours has been modest at just on +/- 1.0%. 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...

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 markets are waiting for some big earnings reports, especially from Big Tech in the US. They are waiting in a positive mood. But first in the US, the Chicago Fed's National Activity Index rose for a second consecutive month March, the first time that has happened since mid-2022. The result was more than expected and is the highest reading since last November, build primarily on employment gains. When this index is positive it indicates activity is expanding faster than its long-term average. Canadian producer prices fell -0.5% in March from the same month a year ago, notable because this the smallest fall since February 2023. Raw material prices rose, only the second year-on-year rise in the same timeframe. The People's Bank of China left benchmark lending rates unchanged at the April fixing, in line with market expectations. The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, was maintained at 3.45%. Meanwhile, the five-year rate, a reference for mortgages, was retained at 3.95% for the second straight month. The strong USD limits their ability to cut rates to provide local economic stimulation because doing so would sharply weaken the yuan. Following a weak February, Taiwanese exports jumped in March to their highest level since July 2022 in an impressive performance. They also got a strong rise in export orders in March, although only at the upper end of what they have been getting over the past year. Although it is in a minor improving trend, EU consumer sentiment in April has remained deeply negative, well below its long-term average. Cocoa prices leapt up through an all-time record US$5000/tonne in early February. Three weeks later they hit US$6000/tonne. Two weeks after that it was US$7000/tonne. US$8000/tonne came just a few days later. Then an accelerated surge began in earnest, hitting US$10,000 at the end of the first week of April. Today? Well this price has reached US$12,218/tonne. Where to from here? As hard as it is on chocolate consumers, I hope the West African farmers are getting some long-delayed rewards. The UST 10yr yield is now at 4.63% and up a minor +1 bp from this time yesterday. Wall Street is roaring today with the S&P500 up +1.3% on expectations of strong earnings reports and future guidance that is positive, especially from Big Tech companies. Tesla is likely to star in these releases for all the wrong reasons, however. Overnight European markets all rose, led by London's +1.6% and trailed by Paris's +0.2%. Yesterday, Tokyo ended its Monday session up +1.0%. Hong Kong ended up +1.8%. But Shanghai fell -0.7%, a real outlier in yesterday's trade. Singapore ended up +1.5%. The ASX200 finished up +1.1% and the NZX50 closed up +0.5%. The price of gold will start today sharply lower, down -US$61 from this time yesterday at US$2330/oz. Oil prices have slipped -50 USc again, to just on US$81.50/bbl in the US while the international Brent price is down -US$1 at just under US$86/bbl. The Kiwi dollar starts today up +¼c at just under 59.2 USc. Against the Aussie we are still at 91.8 AUc. Against the euro we are a +¼c firmer too at 55.5 euro cents. That all means our TWI-5 starts today just on 69.1 and up +30 bps from yesterday. The bitcoin price starts today sharply higher at US$66,788 and almost a +3% gain from yesterday. Volatility over the past 24 hours has been modest however at just on +/- 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 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 ongoing rise in the world economy is shifting some key metals prices into a bull-run. But first a look ahead. The American data to be updated this week will be their advance Q1-2024 GDP which is currently expected to come in at +2.5%. That will follow key updates to durable goods orders and new home sales - and advance April PMIs. It will be peak reporting for their earnings season this week too. April PMIs will also come for Australia, Japan and the EU, as will CPI updates in Australia. And there will be key central bank policy decisions for Japan, China, and Turkey this week In the dominant global economy, their central bank reported that sticky inflation and sticky high interest rates were cited as the key risks to financial stability in its survey of key contacts, with geopolitical troubles and the upcoming American presidential election also getting a strong mention. These heightened risks were reported in the US Fed's half-yearly Financial Stability Report. The Fed itself is worried about a steady decline in the liquidity of life insurers’ assets and their use of non-traditional liabilities and other novel funding which would be hard to control in a crisis. They were less worried about American households. Vulnerabilities from household debt were judged as only moderate. Inflation and uncertainty surrounding the direction of federal policy on trade, and government spending are banks' own top financial stability concerns. Meanwhile in the financial world, yet another key voting Fed member is out dampening down prospects of rate cuts. The Atlanta Fed boss said US inflation is only coming down "very, very slowly" and "let's not be in a hurry" on interest rate cuts. In China, and in all of March in all of the country, their incoming foreign direct investment was only +NZ$20.7 bln in March. But that was far better than the tiny +NZ$3 bln in March a year ago. Still the total for the first three months of the year was down a startling -26% compared to Q4-2023, up just +3.9% from the same quarter a year ago which was unusually weak. From Q1, 2022 the current levels are -28% lower. It will worry Beijing policymakers that these levels are bedding in so low. China will review its two Loan Prime rates later this afternoon (NZT). No change is expected this month. And we should note that the large southern Pearl River system is flooding, some of it severe. Over in Germany, March data shows that their producer price deflationary impulse is easing. Their PPI was down -2.9% from the same month a year ago, but that was far less than the February equivalent of -4.1%. And those March producer prices actually rose +0.2% from the prior month and that was better than the no-change expected. It is worth noting that the IMF and the World Bank have been having their annual talkfest Spring Meetings this past weekend. In the real world, we should also note that it is not only the aluminium price that is rising at present (which is up +20% since the end of February), but the copper price is on the move higher too, up +16% in the same timeframe and actually approaching its all-time high set a year ago. Other base metals like nickel, tin, and zinc, have all been rising sharply recently too. But not iron ore, lead, titanium or lithium - or the carbon price. (Even locally, here.) The UST 10yr yield is now at 4.62% and down -3 bps from Saturday but up +10 bps over the past week. The price of gold will start today down -US$3 from this time Saturday at US$2391/oz. Despite continuing Middle East tensions and uncertainties, oil prices have slipped lower to just over US$82/bbl in the US while the international Brent price is up slightly at just under US$87/bbl. Over the past week these prices have fallen -US$2.50...

For open banking to really grab people's attention the focus needs to be on the services it can enable, rather than the technology behind it, says Andrew Dentice. In the latest episode of interest.co.nz's Of Interest podcast, Dentice, a technology lawyer and partner at HudsonGavinMartin, discusses the data sharing that enables open banking, what open banking actually is, why progress towards it has been slow in New Zealand, what's going on with open banking overseas, the threat and opportunity of open banking for banks, the benefits of it for consumers, and more. One of the points he makes is consumers need to be put at the heart of it. "If you're talking about APIs [application programming interfaces] and bank account information, it's not exactly the most sexy conversation to be having," Dentice says. "We have to put the consumer front and centre, have a look at some of these really amazing use cases that are starting to come out, and get people excited about it. And then that drives the [banking] industry to do more as well." "I think you've almost got to separate the open banking technology itself from the stuff that it enables," says Dentice. "That technology itself is actually not that exciting as a consumer. APIs have been around for years. As a consumer, I don't really see that. What I see is the cool new app, the Sharesies, the Monzo, the Wise in market, that when I go and use it gives me a really fantastic, brand new experience." "We're never going to get people excited with the underlying tech around open banking. We're going to get them excited around the use cases that it's driving. So it's kind of an enablement layer rather than new technology in itself," Dentice says. Asked what the banking experience might look like for consumers in five to 10 years time if open banking really takes off in NZ, Dentice says better, more competitive, more interesting product offerings would be a great outcome. "I would hope that there's a range of new, great, innovative New Zealand fintechs that are able to drive their business models off the back of this. I'd also hope that the great companies from overseas see New Zealand as a market that they want to enter. There's some larger [overseas] fintechs like Revolut and others coming into the market. I think if we have that open banking framework all up and running, then it makes New Zealand a much more likely place [where] the big players will come in and offer more competition." He also thinks service from incumbent banks could be better and more competitive. "I saw recently HSBC basically launched a competitor to Wise in that FX [foreign exchange] space. So there's the fintechs kind of coming in cutting [banks'] lunch, and then the banks' trying to cut the lunch back." "And then I think digital first financial services means that people just have a better understanding of their money, their financial position. Financial literacy is really important. There's some great fintechs who are doing things with kids in that space, like SquareOne and Banqer." "So there's a societal benefit to it, as well as a pure kind of competition and innovation benefit as well," Dentice says. *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 that while we weren't watching a few people are making financial bets so large they could hurt us all. In its latest global financial stability report, the IMF says near-term risks have receded as disinflation (that is, the lowering of the positive inflation rate) is entering its "last mile" zone. But they warn that medium-term vulnerabilities are mounting. One of those comes from the hedge fund sector. The IMF says that a small group of very large firms in this sector has built up an enormous short bet on global stability, one so large that if (as seems likely) those bets are wrong that could be a problem for all of us. “Some of these funds may have become systemically important to the [US] Treasury and repo markets, and stresses they face could affect the broader financial system,” they warn (on page 37). Meanwhile in the US, the number of new claims for jobless benefits in the US was was marginally less than in the prior week at 208,500 and this was less than analysts’ expectations. And that means continuing claims were broadly unchanged at 1.865 mln, also less than market expectations. Those waiting for early signs of US labour market stress are still waiting. It has now been a full 2½ years of weekly reports saying broadly the same thing and there are few signs this will change any time soon. One reason the wait may be longer is that the powerhouse Pennsylvanian/New Jersey rust belt manufacturing region seems to be on an upswing. The Philly Fed factory survey for April delivered positive new order and activity activity levels, in fact the best from that region in two years. But there is no sign that the American housing market is improving. US existing homes sales in March were -3.7% lower than a year ago at an annualised rate of 4.19 mln units. They actually fell at a faster -4.3% rate from February. Later today, all eyes will be on the Japanese CPI inflation rate. You may recall it came in at 2.8% in February and it is expected to be at a similar level (2.7%) when the March data is released this afternoon. If that is the case, the Bank of Japan will likely be emboldened to widen its moves to get off its very long-running QE programs. Australia's jobless rate ticked higher to 3.8% in March from February’s five-month low of 3.7% but below analysts’ expectations of 3.9%. The number of unemployed individuals increased by +20,600 to 569,900 while total employment fell -6,600 to 14.3 mln. There are now 9.9 mln people in full-time work, up +27,900, and 4.4 mln people in part-time work, down -34,500. Part-time roles make up 31.1% of their employed workforce. Their participation rate slipped to 66.6%. (The updated New Zealand jobless rate for March will be released on May 1. As at December it was 4.0%.) Global container freight rates fell another -3% last week, making them +53% higher than year-ago levels. Outbound rate from China fell again, but there was some movement up in rates to China even though they remain at very low levels. Bulk cargo rates rose +10% in the past week although they are still only essentially at long-run levels. The UST 10yr yield is now at 4.65% and up +6 bps from yesterday. The price of gold will start today up by +US$11 from this time yesterday at US$2383/oz. Despite continuing Middle East tensions and uncertainties, oil prices have stayed lower at just under US$82.50/bbl in the US while the international Brent price is down -50 USc at US$86.50/bbl. The Kiwi dollar starts today at just on 59 USc and a minor -10 bps softer from yesterday. Against the Aussie we are unchanged at 91.9 AUc. Against the euro we are also marginally softer at 55.4 euro cents. That all means our TWI-5 starts today just on 69 and actually little-changed. The bitcoin price starts today...

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 our meat exports to China face tough conditions, and not just from competition from excess Aussie lamb supply. But first, US mortgage applications rose +3.3% last week even as benchmark mortgage interest rates rose to 7.13% plus points and a four month high. (A month ago it was at 6.84%.) But to be fair, the recent shift higher in application levels is still -10% lower than the same weak week a year ago,so last week's rise is hardly significant. Today's UST 20yr bond auction was another success with the usual excess demand. But just like the mortgage market, the median yield rose again to 4.77%, up from the prior equivalent event a month ago at 4.50%. It seems investors are prepared to accept a lesser rise than they want from home loan rates. Despite these rising interest rate levels, the Fed's Beige Book survey paints a picture of a moderate and broad expansion in recent activity in the country, consistent with other recent data. They said overall economic activity expanded slightly since late February. Ten out of twelve Districts experienced either slight or modest economic growth, up from eight in the previous report, while the other two reported no changes in activity. They still found an expanding labour market, and the economic outlook among contacts was cautiously optimistic, they reported. While most blue-chip professional economists think the US economy is expanding at about a +2% rate, the Atlanta Fed's GDPNow model ingesting current rate thinks it is much faster than that, near +3%. It is an expansion that is driving the global economy, including that of its rivals like China. And Japan, which is on a roll, despite their currency issue angst (in USD terms). Their exports rose by +7.3% in March, following a +7.8% rise in February. It was the fourth straight month of increase for them. In China, meat prices - especially pork prices - are in an extended slump. Pork accounts for almost two thirds of Chinese meat sales and you will recall prices hit a peak in October 2022. But it has been all downhill since, dropping -40% and putting producers at increased bankruptcy risk. It is a crisis that has national attention, even international attention because feed grain imports are falling. Soybean prices are down -23% from a year ago. It is tough for beef and sheepmeats to compete with pork in China at present. The British released their March inflation rate overnight and it eased to 3.2% from 3.4% in February. But remained slightly above the market expectation of 3.1%. It was their lowest rate since September 2021, primarily driven by a slowdown in food prices. The UST 10yr yield is now at 4.59% and down -7 bps from yesterday. The price of gold will start today lower by -US$22 from this time yesterday at US$2372/oz. Despite continuing Middle East tensions and uncertainties, oil prices have dropped a sharpish -US$2.50 to just on US$82.50/bbl in the US while the international Brent price is down at US$87/bbl. Rising US crude stocks as their economy gains energy efficiency is behind the shift lower for oil. The Kiwi dollar starts today at just over 59.1 USc and back up +30 bps from yesterday. Against the Aussie we are firmish at 91.9 AUc. Against the euro we are also firmish at 55.5 euro cents. That all means our TWI-5 starts today just on 69 and back up +20 bps. The bitcoin price starts today lower at US$61,348 and down -1.6% 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 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 the US Fed is telling markets rate cuts from them are not coming soon. First up today, the overnight dairy auction confirmed the recent rises, but didn't add to them in a subdued event. In USD terms overall prices were up +0.1 and in NZD terms up +1.5%. Volumes were seasonally small however. Perhaps of some concern in this data was that foodservice components like butter, cheddar, and mozzarella all fell, by -1.4%, -8.5%, and -3.8% respectively. However, given the overall 'hold', it is unlikely any farmgate payout forecasts will be changed by today's outcomes. US housing starts and new building consents are in the doldrums as this sector continues to fade. March brought steep drops, almost -15% below February levels for new housing starts, -4.3% lower than year-ago levels. The situation isn't going to get much better because residential building consents also fell, down -4.3% from February although marginally up on March a year ago. US retail sales rose +4.9% last week in their Redbook tracker, the tenth week in the past 13 that the rise has bested inflation. The retail expansion is embedded now. US industrial production rose +0.4% from the previous month in March, in line with expectations and following an upwardly revised +0.4% increase in February. A rise in vehicle production was a notable component of the recent up-trend. Meanwhile, Fed boss Powell was out speaking indicating their policy rate will stay elevated for some time yet. They see no pressing need to cut, or in fact make any changes. Meanwhile there was some important Canadian data released overnight. They said consumer inflation rose 2.9% in the year to March with their core rate rising just 2.0% And Canadian housing starts eased slightly in March from February although they were +13.5% higher than year-ago levels. In China, electricity production rose just +2.8% on March from a year ago, a huge retreat from the +8.0% rise in December. This is an important background data that should be reflected in China's economic activity (GDP). But Beijing reported Q1-2024 GDP rose +5.3% (up from 5.2% in Q4-2023) and this was despite retail sales only rising +3.1% and national real estate investment falling -9.5% in official data. They say industry expanded +4.5% (and down from the +6.8% rate in December). While we have raised our eyebrows at how they can deliver a credible GDP result just 16 days after the quarter end (no-one else can), few of the major components show expansions at the level of the claimed overall growth, and readers can draw their own judgements on the credibility of the rising 5.3% growth in Q1. Certainly ex-Premier Li Keqiang did. Meanwhile, China's new home prices dropped by -2.2% in the year to March, faster than the -1.4% fall in February. It was the ninth straight month of decline and the steepest pace since August 2015, despite multiple support measures. For second-hand dwellings none of the 70 largest cities reported any rises, and the average fall over this set is now -5.9% year-on-year. China continues to struggle with youth unemployment. You will recall they withdrew data that reflected badly on them last year and replaced it with 'better data'. But now an official confirms that even this data, the next update yet to be released, shows a situation that "requires a high degree of attention". In Europe, the ECB said that they will likely cut rates soon. She was speaking at the IMF's release of their 2024 growth forecast update, and those revealed that despite gloomy predictions, "the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose". They say: "growth this year and next will hold steady at 3.2%, with median headline inflation declining...

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 bullish American consumers are likely pushing back the likelihood the US Fed will cut its policy rate any time soon. Financial markets now price in only two cuts this year, one in September and one in December and far less than the four priced in at the start of the year. And the conviction for these scaled back indications is easing rather fast. The latest pricing suggest the September one might still happen but there in more of a chance the December one will be skipped. And that is because American retail sales posted impressive results in March, and February's results were revised sharply higher. Those revisions means they were up +2.1% in February from a year ago, up 4.0% in March on the same basis. Consumer spending belies consumer sentiment. What they do is way more positive than what they say. Meanwhile, overall February business inventories remain in good control, holding their relative level to sales. There is no buildup of tensions on this front. On this data, the USD rose yet again, bond yields jumped - again - and equity prices packed a sad that they are unlikely to get the rate cuts they were banking on. It is not all positive however. The New York Fed's local factory survey reported that both new orders and shipments fell significantly in March and unfilled orders continued to shrink. Optimism among these businesses is subdued. And we should note that carmaker Tesla is cutting 10% of its global workforce, or -14,000 jobs, on stuttering sales and profitability issues. Its shar price fell another -5% in today's trading to be down -35% so far this year, down -59% from its peak on November 5, 2021. Canada reported manufacturing gains in February from January, and even small gains from year-ago levels. Those gains, tiny as they are, also came out when inflation-adjusted. In China, a new industry report from a corner of their economy details just how tough it has become to make deals there. Pay at China’s private equity and venture capital firms plunged as much as -40% year-on-year in 2023 as the industry’s downturn showed no signs of abating. Just for the record, the People's Bank of China had its monthly review of its benchmark One-Year Medium-Term Lending Facility Rate, which is the main rate at which the central bank lends to big commercial banks, and it held it unchanged at 2.5%. In Japan, machinery orders jumped +7.7% in February from January, reversing the -0.7% fall in January and far exceeding market expectations for just a +0.8% gain. That put them a healthy +9.4% higher than year-ago levels. In the EU, industrial production rose again in February, making it the third rise in the past four months. Analysts were expecting this type of improvement. But despite this month-on-month rise, they still have some way to go to convert that into year-on-year gains. We should also note that the rise and rise of the aluminium price over the past eight weeks too a sharp turn higher yesterday, taking it back to June 2022 levels. This shift is largely due to sanctions biting on Russian supplies. In Australia, employers and unions are close to a national agreement that will allow workers to take double their holiday time off at half their pay. There are still details to be agreed, but the principle for this flexibility is being set. The UST 10yr yield is now at 4.63% and up +11 bps from yesterday. The price of gold will start today higher by +US$20 from this time yesterday at US$2363/oz. Despite continuing Middle East tensions and uncertainties, oil prices have slipped -50 USc overnight to US$84.50/bbl in the US while the international Brent price is unchanged at US$89.50/bbl. The Kiwi dollar starts today at just over 59.1 USc and down -20 bps from yesterday and a five month...

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 an export setback in China that may signal a tougher path for them in the rest of 2024. But first, this week will kick off the US earnings season which will run for a few weeks until the Q1-2024 results are all in. Bank profits will be early in this set, many key ones coming this week. The Americans will also release retail sales results, and some housing updates. Retail sales updates will also come from China, along with their Q1-2024 GDP outcome, tomorrow. It is "impressive" they can report that, well before any other major economy. Eyes will be on their foreign direct investment data too, along with housing market activity results for March. Australia will release its labour market data this week, and CPI inflation data will some from Japan, Canada, and of course New Zealand (on Wednesday). Over the weekend, China reported its new bank lending levels and they picked up in March from February but the results still disappointed. March is usually a strong month for borrowing because banks tend to extend more credit at the end of each quarter to meet lending targets. But the ¥3.1 tln in new March lending was less than the ¥3.6 tln expected and the ¥3.9 tln in March 2023. Meanwhile, China's exports tumbled in March. They dropped -7.5% from a year ago, reversing sharply from a +5.6% growth in the earlier month. This was very much worse than market forecasts, highlighting the Middle Kingdom's uneven recovery and perhaps suggesting global demand won't drive growth there. It may also be a sign that de-risking from China because of its terrible recent signals to investors is biting harder and earlier than anticipated. It is not all difficult news in China. A survey shows that for the first time since the end of 2021, wage growth rates there are picking up again. India's industrial production rose by +5.7% in February from a year ago, the latest data released over the weekend, but that missed analyst forecasts of +6% growth; however it was a faster expansion than in each of the prior three months. A year ago this expansion was running at 5.8%, so little change on that comparison. It is only about 200 days until the November US presidential election and nervousness about that outcome is starting to show up in sentiment surveys. Consumers are apprehensive that the golden run could be crashed by the vote, or that things could destabilise ahead of it. The University of Michigan consumer sentiment poll is now reflecting some of that apprehension. However it is only off a 33 month high so we shouldn't make too much of this April dip and it remains more than +20% higher than year-ago levels. Still, the shift was noticed by financial markets. Wall Street dipped in their Friday session, bond yields slipped slightly, and the USD surged against all-comers on the risk-off mood. The UST 10yr yield is now at 4.52% and unchanged from Saturday's close. A week ago this rate was 4.39%. The price of gold will start today lower by -US$6 from this time Saturday at US$2343/oz. We should note that this price hit its all-time high of US$2432 at about 4am Saturday morning. But it has been sharply down after that. Despite extreme Middle East tensions, oil prices have been surprisingly stable over the weekend and still just on US$85/bbl in the US while the international Brent price is -50 USc lower at US$89.50/bbl. Both levels are about -US$2 less than a week ago. Interestingly, the head of the IEA strongly criticised European energy policy for "two monumental mistakes" - relying on Russian energy, and shifting away from nuclear power. The Kiwi dollar starts today at just over 59.3 USc and down -10 bps from Saturday. Against the Aussie we are unchanged at 91.9 AUc. Against the euro we are little-changed as well at...

Finance spokesperson Barbara Edmonds says a re-elected Labour Government would have been willing to expand its planned public sector cuts to protect key programmes. The tax lawyer turned MP spoke on Interest.co.nz’s Of Interest podcast about the Coalition’s fiscal policy and her role in rebuilding the Labour Party after its election defeat. Part of that project will be rehabilitating the party’s economic credibility after presiding over a massive cost of living crisis. Ipsos’ February issues poll showed inflation, or the cost of living, was the number one issue facing New Zealand voters and only 23% saw Labour as being best able to deal with it. Only 22% thought it was the best party at “managing the economy” down from 31% a year ago and well below the National Party which has climbed from 42% to 47%. The parties which have formed the Coalition Government campaigned on bringing down spending and therefore inflation, as well as cutting taxes for some groups. Edmonds agreed there was a need to consolidate spending—which had got ahead of revenue during the past three years—but tax cuts were a bad investment. Labour’s fiscal plan asked for up to 2% reductions in public sector budgets, while the Coalition Government is asking for up to 7.5%. She admits her party would have had to make further cuts, given new Treasury forecasts showing tax revenue falling below pre-election forecasts. “If we had to make more cuts, or look at different savings, in order to ensure that lunches in schools kept going … we would have had to make those decisions,” she said. “I wouldn't apologize for making those types of choices. But what I wouldn't have done is promised really unaffordable tax cuts”. Edmonds said the limited money available was better invested in infrastructure, schools, healthcare, public and private transport, and climate action. Which tax? Edmonds said she was out meeting with key sector leaders and listening to new ideas she can carry back to Labour's policy council. Her role was to guide her colleagues through the process of developing a manifesto for 2026 and informing them about the costs and tradeoffs involved. “If I need to say no, I’ll say no. I’m a mum of eight, I know how to say no,” she said. “Ultimately, if I believe that it's going to put Labour into a difficult fiscal position going into the next election, I will make those views very clearly known”. Labour recently voted against a bill put forward by Te Pāti Māori, which would have removed the GST from all food, on the basis that it was too expensive. But the big policy question is about tax. Political opposition to taxes on capital has been the unslayable dragon of New Zealand politics. Tax reform is back on the table but Edmonds won’t be drawn on exactly what kind. She said it was necessary to first ask what the party was trying to achieve and then design a tax model that supported those outcomes. The country will be facing some serious fiscal challenges by 2060 when superannuation could cost 10% of GDP and healthcare could absorb another 7%. “2060 looks like ages away, but that’s the next generation. That’s my kids. So, we need to ask, what is the society that we want to leave this generation and how does tax help us get there?” The Treasury and the International Monetary Fund have both made recommendations about possible reforms, but Labour would be starting from scratch based on its long-term vision for New Zealand. Edmonds said political parties don’t win elections based on tax policy, anyway. “You win on committing to a better health system, better education, making sure the vulnerable are supported, and that our businesses are able to grow,” she said. 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 today's data releases in the shadow of yesterday's highish US CPI release, and there is some talk of rate cuts elsewhere. First up in the US, the number of new jobless claims fell last week, consigning the prior week's jump to the 'anomaly' basket. There are now 1.9 mln people still on these benefits, virtually unchanged from the prior week level. The rise in American producer prices was also less than expected in March, coming in just +2.1% higher than a year ago. A year ago they were rising at a +2.7% rate. Producer price rises are not a major factor in their consumer price inflation. The USDA lowered its price estimates for most key agricultural commodities, especially grains, as good harvests worldwide more than cover global food demand. Global food prices were already running at 3 year lows. Specifically, the Americans are expected to import more beef and produce less milk. China's consumer prices edged up a mere +0.1% in March from a year ago and much less that the market forecasts of +0.4%, and after an annual +0.7% rise in February. The extended flirting with deflation is dangerous and highlights the economic challenges they face. Demand is actually quite weak - and this data all comes from the officially approved series. Meanwhile, China's producer prices shrank by -2.8% in March from the same month a year ago. This was the expected drop and compares to February's drop of -2.7%. It was the 18th straight month of contraction in factory gate prices and the steepest decrease since last November, highlighting the persistence of deflationary forces in their economy. In Japan, a lack of intervention in support of the yen after it weakened beyond 152 to the US dollar for the first time since 1990 has financial markets wondering when or even if the Japanese authorities will step in as has been widely expected. There are many market bets that this would have happened by now. But perhaps Tokyo senses that it is more about the rising USD rather than a weak yen. It certainly isn't that weak against most other currencies. The ECB held its policy interest rates at record-high levels for a fifth consecutive time during its April meeting overnight, at 4.5% (and their deposit rate at 4%), both at 22 year highs. However they did signal that a rate cut could come there soon, perhaps in June. Last week global container shipping rates eased only marginally, staying +64% higher than year-ago levels. Bulk cargo rates fell -7.5% in the week however and are now back at long run averages. The UST 10yr yield is now at 4.57% and up a minor +1 bp from yesterday as things settle in at the new higher level. The price of gold will start today higher by +US$20 from this time yesterday at US$2355/oz and off its all-time high. Oil prices have fallen -US$1 to just on US$84.50/bbl in the US while the international Brent price is down a bit less to just on US$89/bbl. The Kiwi dollar starts today at just over 59.9 USc and little-changed from yesterday. Against the Aussie we are softer at 91.7 AUc. Against the euro we are firmer at 55.9 euro cents. That all means our TWI-5 starts today just on 69.4 and up a minor net +10 bps. The bitcoin price starts today firmer at US$70,258 and up +1.3% from this time yesterday. Volatility over the past 24 hours has also been modest at just on +/- 1.6%. 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 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 it is all about American inflation today, and the consequences of missing expectations. The American annual inflation rate picked up slightly for a second straight month, to 3.5% in March, its highest rate highest six months, and well above the 3.2% rate in February. And also higher than the analyst forecasts of a 3.4% rate. Of some concern is that the month-on-month rate stayed up at +0.4% (and almost a 5% annualised rate). Their core rate (sans food and energy) however, stayed down at 3.8% and unchanged, but a dip was expected here. All up, this shows American inflation is far from beaten. Perhaps the Fed was expecting this because the minutes of its March meeting released today shows them wanting to see progress on the inflation front before they reduce their 5.25% policy rate. They are clearly not there yet as they suspected. The USD rose sharply on the news, as did benchmark bond yields. The S&P500 fell as rate cut hopes for 2024 fade. It may be all about the inflation miss today but there were other indicators out as well. US mortgage applications were barely changed last week from the week prior, holding low to be -23% lower than the year-ago level. No rebound in the American housing markets. Their benchmark fixed 30 year home loan rate moved back up over 7% plus points, a one month high. There was a rise in American wholesale inventories in February, but to be fair these overall levels in relation to sales activity are entirely 'normal' from an historic perspective. As expected, the Bank of Canada rate left its policy rate unchanged at 5% in its overnight review. It says it is confident inflation's trend is easing there. Japanese producer prices rose +0.8% in the year to March, in line with forecasts and marginally higher than in February. Taiwanese exports surged in March, more than making up for the February hesitation. In fact they delivered their best month since July 2022 and their second best March month ever. In the South Korean parliamentary elections, the conservative alliance is suffering a big defeat with the Democratic Party alliance heading for a parliamentary majority. In China, ratings agency Fitch has affirmed their sovereign credit rating as A+, but has shifted its Outlook from Stable to Negative. It cited the growing risks of China's public finance situation as fiscal buffers have eroded, especially from overstretched Local Government Financing Vehicles while Beijing deals with its stuttering property development sector. (Fitch rates New Zealand AA+, Stable. You can see how the various ratings agency codes compare here.) And staying in China, vehicle sales rose a very impressive +9.9% in March from year-ago levels to almost 2.7 mln units in the month, following a -19.9% slump the month before. Consumption recovered following the Lunar New Year holidays and many carmakers slashed prices which has been effective from a sales perspective. China's EV exports, particularly to Europe, continue apace, but there are growing questions about whether these shipments will find buyers. The flood to there is overwhelming local manufacturers and they are not happy. The UST 10yr yield is now at 4.56% and up a sharp +19 bps from yesterday on the US CPI result. The price of gold will start today lower by -US$13 from this time yesterday at US$2335/oz and off its all-time high. Oil prices have risen +US$1 to just on US$85.50/bbl in the US while the international Brent price is up a bit less to just on US$89.50/bbl. The Kiwi dollar starts today at just under 59.8 USc and down -¾c from yesterday all on the USD moves. Against the Aussie we are also +½c firmer at 91.9 AUc. Against the euro we are little-changed at 55.6 euro cents. That all means our TWI-5 starts today just on...