Producer prices jump more than expected in the US. Debt ceiling deal close. China shutdowns spread. EU gas prices hit new record. Aussie business sentiment slips.
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.
Today we lead with news equity markets are nervous about the tapering decisions about to come from the US Fed - but the bond markets don't seem quite as worried.
The pressure is squarely on the US Fed FOMC members "to act" as inflation signals grow louder. Today the US producer price index (PPI) topped estimates, estimates that were already factoring in sharp rises. PPI rose +9.6%, its largest annual increase since this data series started ten years ago. Analysts had expected a +9.2% advance, itself a sharp rise from the October +8.6%. (And core PPI rose in November than October at a much faster rate than expected, so things are well embedded.)
Meanwhile, US retail sales are holding up in the end-of-year holiday selling season. But it is hard to know how much of the strong +16% year-on-year value gains are related to sharply inflated prices. Certainly it will be more this year. Inflation expectations now seem well embedded.
In the US Congress, and in contrast to the usual partisan bickering, later today they are expected to raise their formal debt ceiling government borrowing limit by +$2.5 tln to US$31 tln, or about 34% more than their annual GDP.
In China, there are growing reports of industry closures in a set of key industrial cities, closed to slow the spread of the pandemic. This will be just another problem for global supply chains. It will probably also be just another piece of evidence China is fading as an engine of global economic growth.
In Europe, industrial production rose +1.1% in October from September, up +3.3% from a year ago, rebounding from two consecutive months of contraction. Capital goods output jumped +3.0% and the production of durable consumer goods, such as televisions and washing machines, advanced +1.7% month-on-month. However, despite the apparent overall positive tone, these are not standout results, more like marking time.
EU natural gas prices have raced to new record highs overnight on a building cold snap in the region, and fears of supply disruptions from Russia as it tries to weaken the EU's ties to Ukraine.
In Australia, the widely-watched NAB business confidence survey fell away in November - and the October data was revised lower. But it remains above its long-run average. At least part of that is because businesses report some success in being able to pass on higher costs, and those include faster rising labour costs.
The UST 10yr yield opens today at 1.44% and up +3 bps from this time yesterday.
The price of gold will start today at US$1774/oz and down -US$15 from this time yesterday.
And oil prices start today -US$1.50 lower at just over US$69.50/bbl in the US, while the international Brent price is now just over US$72.50/bbl.
The Kiwi dollar opens today marginally softer at 67.5 USc. Against the Australian dollar however we are marginally firmer at 95 AUc. Against the euro we are little-changed at 59.9 euro cents. That means our TWI-5 starts the today essentially unchanged at 72.2 and still its lowest in four months.
The bitcoin price is soft at US$46,758 but only down -0.5%% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.4%.
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 and we’ll do this again tomorrow.