Here’s our summary of key economic events over the weekend that affect New Zealand, with news higher benchmark interest rates are clouding the global economy.
But after last week’s big central bank meetings, this week it will be more about macroeconomic data. In the US, the spotlight will be on the PCE Price Index, as well as personal income and spending data. And durable goods orders, the final reading of the Q2 GDP growth rate, and pending and new home sales are all due. In Europe, September inflation rates will be released for the Euro area countries along with industrial production, retail sales, the unemployment rate, consumer confidence. For Japan we will get more clues from their central bank Monetary Policy meeting minutes. From China, it will be industrial profits. From Australia we will get retail sales, a monthly inflation update, and the usual end of month banking data.
Over the weekend, Taiwan released its industrial production data and it was less weak than expected. In fact, it rose in August from July to make back some of the year-on-year retreats. Meanwhile, Taiwanese retail sales came in with another strong month, especially for food services.
China is finding pork prices are zooming higher again. About sixty percent of all meat sold in the country is pork. But prices are up +30% as their government has been buying aggressively to replenish its strategic food security reserve that was run down in 2022, the culmination of a herd cull in 2018 and 2019 due to ASF. Higher pork prices might we helping farmers recover, but they will also be underpinning beef and lamb prices as pork seems less affordable to city consumers.
Japan said its CPI inflation rate in August was little-changed at 3.2% from 3.3% in July, but that was its lowest reading in three months. Prices continued to rise for food however, up a sharp 8.6%, offset by even sharper falls for fuel, down -12.3%. Outside these, core inflation was unchanged at 3.1% and that makes it 17 straight months core inflation has been above the Bank of Japan’s 2% target. They must be ready to change policy settings. But the central bank met on Friday and didn’t make any headline change in a unanimous decision. The lack of any clear sign of a shift in its policy stance puts a damper on market speculation over the prospects for a near-term interest rate hike. And it is fueling pressure on the yen. Perhaps we will a better indication of their thinking when the minutes of their meeting are released later this week.
The latest Markit PMI for Japan shows factory activity contracted a bit faster in September than the previous month, and sharper than market forecasts, so they now have a fourth straight month of fall in factory activity and the steepest drop since February. But their services sector is still expanding at a healthy rate.
The updated September Markit PMIs for the US paint a steady-state picture of no significant expansions or contractions. Their factory sector is reported to be contracting very slightly but that is its ‘best’ reading in 2 months. Their services sector is marginally expanding, but that is a very light slip from August.
And it isn’t going to improve, with the autoworker’s union expanding its strike to 38 factories owned by GM and Stellantis (Chrysler) sites across the US and Canada – but none for Ford yet.
Meanwhile Republican Congressional squabbles are keeping the potential of a Federal government shutdown a live possibility.
In Canada, retail sales may have slipped very slightly in August, it their overnight update. But they are up +2.0% from a year ago. That wasn’t enough to account for inflation of course, but in Montreal they did. They were weakest in Vancouver.
In Europe, the Markit services PMI reported an improvement even if it is still contracting. The EU factory PMI is also contracting but at an unchanged rate. What is a worry there is that new order levels are falling at their sharpest pace in three years.
Meanwhile in Australia, their services sector shifted out of contraction – just, but their factory sector is still contracting, extending that to a 3 month low.
For all the economic activity shifts over the past week, the most substantial one is the rise in benchmark interest rates, triggered by a hawkish American central bank.
The UST 10yr yield starts today unchanged from Saturday at 4.44%. But that is up from a week-ago level of 4.33%. Their key 2-10 yield curve is little-changed from Saturday at -67 bps. And their 1-5 curve is now at -90 bps and more inverted. Their 3 mth-10yr curve inversion is a bit more too at -96 bps. The Australian 10 year bond yield is now at 4.32% and back -1 bps from Saturday. However, the China 10 year bond rate is unchanged at 2.71%. And the NZ Government 10 year bond rate is also almost unchanged at 5.25%.
Markets now have a full +25 bps priced in for an RBNZ rate rise in early 2024. Globally, higher rates for longer is the trend setting in, and that will continue to weigh on asset price valuations.
The price of gold will start today at just on US$1925/oz and up +US$2 from Saturday.
And oil prices are little-changed at just under US$90/bbl in the US. The international Brent price is just under US$92.50/bbl.
The Kiwi dollar starts today at 59.6 USc, a +¼c rise from Friday and up more than +½c for the week. Against the Aussie we are at 92.6 AUc (remembering we started the week at 91.7 AUc). Against the euro we at 56 euro cents and we haven’t been this high since late July. That all means our TWI-5 starts the week at 69.3 and a 45 day high.
The bitcoin price has hardly moved from this time Saturday, and it is now at US$26,574 and up just +US$8 from then. Volatility over the past 24 hours has been almost non-existent at just over +/-0.1%.
The easiest place to stay up with event risk is by following our Economic Calendar here ».
