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 that although American stimulus funds are just now being released, there is nervousness about whether they will really juice up their recovery, or will recipients just pay down debt?

But first up, today's dairy auction has given back some of the prior event's stellar gains. You will recall it rose +15% two weeks ago, but today it slipped -3.8% in US dollar terms, down -2.6% in New Zealand dollar terms. This is actually a sharp variance from what analysts were expected. The average of their expectations was another gain of +9.5% which in hindsight has proven to be quite unrealistic. The key WMP price fell -6.2% and correcting the +20% jump last time. SMP held the line however, up +0.7%. Fewer bidders participated this time, perhaps anticipating those analyst rises. But there were more winning bidders this time.

Although analysts are saying that a broad US economic rebound is shaping up, there has been some disappointing retail sales data reported overnight. In February, sales were down across the board by -3.0% on a seasonally adjusted basis from January, but they are up +6.2% year-on-year, although this is when the pandemic impacts were starting to kick in in 2020.

Last week's Johnson Redbook sales data wasn't positive on a month-on-month basis either.

It may be that anxious American are using their stimulus funds to pay down debt rather than spend, although that conclusion may still be a bit premature.

Adding to the downer mood has been February industrial production data in the US, down a rather sharp -4.2% year-on-year, down -2.2% on a seasonally adjusted basis from January.

The US isn't the only country to report worse industrial production data. Japan was down -5.2% year-on-year although that is pandemic affected. Month-on-month they were up +4.3% and that is probably the more telling indicator of where they are heading now.

In Hong Kong, the South China Morning Post looks like it is the next local media organisation to come under direct Beijing thought-control.

In New York, Wall Street is marking time again today with the S&P500 up just +0.1% in early afternoon trade. Overnight European markets were an average of +0.6% firmer. Yesterday, Tokyo ended its session up +0.5% but Hong Kong rose +0.7% and Shanghai rose +0.8%. The ASX200 ended yesterday up +0.8%, while the NZX50 Capital Index was also up +0.8%. In fact, it is probably worth noting that since Monday last week, the NZX50 Capital Index has risen +4.8% in a series of steady gains.

The UST 10yr yield is up +2 bps from yesterday at just over 1.62%.

The price of gold starts today up +US$3 in New York at US$1732/oz.

Oil prices have dipped about -US$1 and are just over US$64.50/bbl in the US, while the international price is now just under US$68/bbl.

The Kiwi dollar opens today unchanged at 71.9 USc. Against the Australian dollar we are softish at 92.8 AUc. Against the euro we firmish at 60.4 euro cents. That means our TWI-5 opens today unchanged at 74.

The bitcoin price will start today at US$55,277 and down another -1.0% from this time yesterday. In between, volatility in the past 24 hours has been +/- 3.4.

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.