Kia ora,
Welcome to Wednesday's Economy Watch where we follow the economic events and trends that affect New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with news it is risk-off today in international markets and the New Zealand dollar has been rated sharply lower.
The latest weekly Johnson Redbook tally of American retail sales shows them stumbling along with the same month-on-month pullback. They are up year-on-year but that is only because the pandemic retreat was biting in 2020. The 2021 retail impulse is not helping their recovery, and there is no sign those stimulus payments are boosting retail activity yet.
Likewise, new home sales in the US are falling away, even if it is off a very high period.
But as we have seen in other recent factory surveys, the latest one from the Richmond Fed is very positive. It is expanding at 'normal' levels with good new orders reported and expected. But like other surveys, they are also seeing a sharp spike in the cost of inputs. Inflating input costs are now nationwide.
The Fed boss is testifying before Congress today and acknowledged inflation is rising. But he also said in response to questions it is likely to be temporary and won't get out of hand. He is more focused on getting a full economic recovery than short term price impacts. Janet Yellen is also testifying as Treasury Secretary. She is saying more needs to be done and that a big push in infrastructure spending is needed, as much a US$3 tln. On top of the already approved $1.9 tln stimulus, that has bond markets worried.
In Taiwan there has been a turnaround in their data with retail sales rising (+13%) and a softening of industrial production (+3%), both on a year-on-year basis, so the onset of the pandemic in 2020 affects these comparisons. Looking through those shows a healthy rising trend is being maintained especially for industrial production.
New Zealand and Australia have jointly expressed support for a sanctions blitz by Western countries against Chinese officials over alleged human rights abuses in western China, despite not imposing penalties of their own.
China is not backing down on confrontations. It has sent a 200+ flotilla of ships to occupy a reef in claimed Philippine waters, 300 kms off their coast.
In Australia, the economic impact of the floods in NSW are still being assessed. They won't be insignificant.
And the Australian government’s AU$90 bln JobKeeper wage subsidy ends next week. While millions of workers have stopped using it, there are still about 1 mln people on the program and the impact for them will be significant.
On Wall Street, their Tuesday session is flat to lower in early afternoon trade. Overnight, European markets were lower by an average of -0.4% but Frankfurt managed a small gain. Yesterday, Tokyo ended with another -0.6% loss, Hong Kong with a heavier -1.3% retreat, and Shanghai ended with a -0.9% loss which wiped out the prior day's rise. The ASX200 was down -0.1% but the NZX50 Capital Index was the outlier, up +0.5%.
The UST 10yr yield is lower by -5 bps at just on 1.64%.
The price of gold starts today down -US$14 in New York at US$1727/oz.
Oil prices have dropped sharply and are now at just under US$59/bbl in the US which is a -US$2 retreat, while the international price is now just on US$62/bbl.
The Kiwi dollar opens today sharply lower at 70.2 and down by more than -1½c, and suddenly outside the long term 71c-73c range it has been in all year. Against the Australian dollar we are down sharply too at 91.6 AUc and a -1c drop. Against the euro we are also -1c lower at 59.2 euro cents. That means our TWI-5 opens today down at 72.4 and it’s lowest since before Christmas 2020.
The bitcoin price will start today at $55,483 and down -2.1% from this time yesterday. Volatility in the past 24 hours has been high at +/- 3.9%.
You can find links to the articles mentioned today in our show notes.
And get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. We will do this again tomorrow.