US expansion stays on track. But Japan, China and the EU are all losing momentum. Eyes on the RBA and an expected policy change.
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 that of the world's most significant economic blocks, only the US is still expanding strongly. Japan, China and the EU all seem to be falling away now.
Firstly in the US, the Chicago PMI, a widely-watched factory index in the US manufacturing heartland, surprised with a strong rise of an already strongly expanding result. A small fall was expected.
However the Dallas Fed factory survey did slip as expected. But new order levels held steady at a fast pace, and costs are still rising quickly.
Canadian producer prices were still rising at a very fast clip in December (+16% year-on-year) even if this is marginally lower than for November.
Both Japanese retail sales and Japanese industrial production data for December disappointed. Retail sales rose - just - from December but industrial production fell on that basis. Perhaps the recent 'green shoots' were premature.
In China, their private sector factory PMI contracted in January, a reading that was worse than the official factory PMI. Beijing might be focused on their Winter Olympic celebrations, and most people are on their Spring Festival break. But policy makers must be concerned about the very lackluster economic performance that is dragging on.
Hong Kong retail sales rose +3.4% on a volume basis year-on-year in December but off quite a low base. They will be pleased they are getting some expansion now, but it is still -11% lower than pre-pandemic and -30% lower than before the democracy protests started.
In Germany, their inflation rate fell for the first time in seven months to 4.9% in January from a 1992-high of 5.3% in December.
And the steam is going out of the EU economy. Q4 results posted the slowest expansion since Q1 as Omicron took a rising toll. The German economy shrank (as we have reported earlier) offsetting expansions in France, Italy and Spain. For the full year, the EU GDP rise +5.2%, but only +0.3% in Q4 (or an annualised rate of about +1.2% in that final period).
All eyes are now on the Reserve Bank of Australia and its policy review which comes out at 4:30 pm (NZT) today. It has spent north of AU$300 bln on its money printing stimulus so far, and that program is expected to end today. In addition, there are also lots of other Australian economic data due today.
But we should highlight the NSW Government saying that their economy is expected to shrink -4% from the citizen's lockdown they have imposed on themselves. Politicians urged a free opening up to give the State a boost, but people recognised this as dangerous - and it is having a big economic impact.
The UST 10yr yield opens today at 1.79% and up +1 bps.
The price of gold starts today at US$1796/oz and up +US$7 from this time yesterday.
And oil prices start today little-changed from Saturday at just over US$86.50/bbl in the US, while the international Brent price is now just over US$88.50/bbl.
The Kiwi dollar will open today at little firmer at 65.7 USc. Against the Australian dollar we are more than -½c lower at 93.1 AUc. Against the euro we are little-changed at 58.6 euro cents. That means our TWI-5 starts today down at 70.6, unchanged but still a 14 month low.
The bitcoin price is up just +0.6% since this time yesterday and now at US$38,080. Volatility over the past 24 hours has been moderate at +/- 2.1%.
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.