Canadian house prices fall. Japanese inflation rises. Chinese house prices fall. Australian inflation eases. Australian immigration takes off.
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.
Today we lead with news Australia is opening its doors wider to immigrants to address sharp skills demand.
But first, a reminder that the US is on a long holiday weekend, MLK Day, and financial markets are closed there today.
In Canada, the final data for 2022 shows house prices there fell the most on record for any year, down -12%. Their average dwelling price is now C$626,400 (NZ$732,300). Sales volumes there fell -39%. The New Zealand REINZ December data will be released here tomorrow morning.
And staying in Canada, business sentiment continued to weaken in the fourth quarter and sales grew slower as their downturn bites according to a central bank survey. But firms there still only expect a mild retreat with inflation staying higher for longer.
In Japan, the inflation pressure is still building. Their producer prices surged +10.2% year-on-year in December, exceeding market expectations for a +9.5% rise as high global commodity prices and a historically weak yen continued to inflate costs for imported raw materials. December’s producer inflation also accelerated from an upwardly revised +9.7% price growth in November to the highest in three months. The November to December rate was at an annualised pace of +6.0%, so that suggests a possible easing is at hand.
Japanese machine tool orders rose unexpectedly in December. They slumped -7.7% in November from a year ago and were expected to be -4% lower in December. But in the end they rose +1.0% from a year ago, and were up +4.8% from November.
In China, new home prices in their 70 major cities dropped by -1.5% year-on-year in December according to official data, after a -1.6% drop in the previous month which was the steepest pace since August 2015. All this comes amid a property downturn due to a mounting debt problems among developers as well as the impact of a surge in pandemic cases. 55 of the 70 large cities monitored posted month-on-month declines, and those that didn't recorded just tiny rises in this official survey. There are reasons to believe the actual retreats in home resales are much larger; 63 of these 70 cities reported decreases in December.
China is finding it very tough to restart its property development industry. Almost 80% of residential developments remain idle or have only partially restarted despite multiple government initiatives supporting the sector. "More debt" can't overcome buyer reluctance.
In Europe, retail commissions are banned in both the Netherlands and the UK where they are regarded as a serious conflict of interest by "independent agents" who sell financial products from insurers and banks. Those bans have enabled consumers to realise cost reductions about one third. But insurers and banks are fighting back. They have won the support of the German finance minister who is worried it might hurt German insurers. He is concerned because the EU has suggested the benefits to consumers should probably apply EU wide.
In Australia, the Melbourne Institute’s Monthly Inflation Gauge showed prices eased to a four-month low of just +0.2% in December from November, slowing sharply from a +1.0% rise in the previous month while marking the fourth straight month of increase. On a year-on-year basis, this measure is still recording a +7.3% rate, but the lower month-on-month result should give the RBA some comfort.
And the Australian Treasurer said they now expect 2023 immigration to be much higher than the +235,000 they originally forecast for the year. They are moving decisively to address their skill shortage. At the same ratio, that would be equivalent to New Zealand welcoming +60,000 new migrants, which is double what we actually expect here this year.
The UST 10yr yield starts today at 3.50%, and unchanged from yesterday.
The price of gold will open today at US$1921/oz and little-changed.
And oil prices start today down -US$1 at just under US$79/bbl in the US while the international Brent price is just over US$84/bbl. Natural gas prices are falling now, down to levels last seen in September 2021. Full stocks in China are forcing importers to divert February and March shipments to Europe. Gas storage across Europe is about 82% capacity, up from 50% a year ago and well above the five-year seasonal norm of 70%.
The Kiwi dollar has changed little, now at 63.9 USc. Against the Australian dollar we are firmish at 91.8 AUc. Against the euro we are still at 59 euro cents. That all means our TWI-5 starts today at 70.9, and up +20 bps since this time yesterday.
The bitcoin price is on the move higher, now at US$20,997 and up +0.6% from this time yesterday. Volatility over the past 24 hours has been modest however at just +/- 1.9%.
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 and we will do this tomorrow.