US inflation data outdated, shutdown impacts spread. Taiwan exports less than expected. China inflation rises. German factory orders fall. G7 decisions awaited.
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 markets are unsure about whether public efforts to calm the financial consequences of the war on Iran will work. Just at the moment, it's a wait-and-see situation.
But first in the US, the latest inflation expectations survey for February is out, revealing very little change. In the absence of subsequent events this stability might have seemed 'positive', but it is now only of historical note.
More currently, across the US, there are sharp rises in petrol prices. Those were responding to US$90/bbl crude prices. They are now up from there.
Meanwhile, we should probably note that there is a partial US shutdown underway. Among other impacts, security screening staff at airports are in layoff, not being paid. That is making travel in and through the US particularly messy.
Across the Pacific, Taiwanese exports fell in February to 'only' US$50 bln in the month, and up only +20.6% from the same month a year ago. But much of this can be explained by how the Chinese New Year holiday occurred this year,
China's CPI inflation rate jumped +1.0% in February from January to be up +1.3% from February a year ago. That takes them to a three year high. These were much sharper rises than expected and rises were expected. If both the US and China are now in a sharp-rising inflation period (and this data preceded the Iran crisis), then there is little chance New Zealand will be avoiding this pressure. Their beef prices are up +9.6% from a year ago, lamb prices up +6.6%. (Dairy prices there are down -1.1% on the same basis however.)
Now of course, an oil shock is likely to juice their inflation with a new burst.
Meanwhile China's producer price pressure eased in February, down just -0.9% from a year ago after their third [small] consecutive rise in month-on-month. Oil prices here will have an even larger impact.
Japan’s leading economic index, which gauges the outlook for the months ahead using indicators such as job offers and consumer sentiment, rose in January to its highest level since July 2022, confirming their improving economic outlook.
And here's something we don't normally look at. Business is picking up in Japan, enough that there is a notable rise in overtime pay there, the most since 2022.
In Europe, German factory orders slumped -11.1% in January from December, far worse than market expectations for a -4.3% drop. And December was downwardly revised as well. It was the first decline since August, largely driven by a -39% plunge in fabricated metal products after large orders in the prior month created a high base. Demand also weakened for machinery and equipment. However, from a year ago, German factory orders were up +3.7% in January. (All this German data is inflation-adjusted.)
In Australia, Commonwealth Bank has reported two mortgage brokers and a string of accountants to police as it works to unravel a gigantic loan fraud using fake documents and international funds that could extend to AU$1 bln, the AFR is reporting.
On the commodities front, the big overnight mover is sulphur, a key fertiliser ingredient, up another 6%, and which has now doubled from a year ago.
The UST 10yr yield is now just on 4.12%, down -1 bp from yesterday.
The price of gold will start today down -US$69 from yesterday at US$5103/oz. Silver is little-changed however at US$84.50/oz today.
American oil prices are up +US$3, at just under US$94/bbl, while the international Brent price is up +US$6 to be now just on US$99/bbl. In between they have been very volatile, at one point reaching US$116/bbl. Relative calm came after G7 ministers started discussing releasing some strategic oil reserves. But there is no agreement or action on that yet, only 'possibilities'.
The Kiwi dollar is up +30 bps against the USD from yesterday, now just on 59.3 USc. Against the Aussie we are unchanged at 84 AUc. We are up +50 bps against the yen. Against the euro we are up +20 bps at 51.1 euro cents. That all means our TWI-5 starts today up +20 bps at just over 62.9.
The bitcoin price starts today at US$69,073 and up +3.3% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.7%.
You can 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.