Wall Street waits for Fed nervously. US data positive. South Korea posts good growth. Some commodities in crazy runups. Aussie inflation up.
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 investors are awaiting the outcome of the US Fed meetings underway which will be known tomorrow. They are nervous that the lateness of their response may bring an abrupt and unsettling policy shift. Wall Street is showing that nervousness with a renewed sell-off.
Meanwhile, US retail sales are holding with their good gains, but they are over a year-ago base that was pandemic affected.
And that is confirmed by the Conference Board tracking of US consumer sentiment.
In their factory sector, the Richmond Fed's latest survey was positive, but less so. Not going away are the cost and price pressures however.
Today's UST 5 year bond tender has brought sharply rising yields, with the median now 1.49% pa whereas a month ago at the prior equivalent event it was 1.21%. Demand for this bond remains very strong.
In South Korea, they reported their Q4 GDP result yesterday and it was impressive, up +4.1% and its fastest annual pace in 11 years.
German business sentiment is recovering, which follows other recent positive indicators. Although the improvement remains small it is off a ten month low.
But some key commodity prices are just getting excessively frothy. Tin is at a new all-time high with another huge jump today. Nickel is even more frothy. Dr Copper is doing nothing however, although aluminium is making another run at it. Iron ore is beholden to China's slowdown (a bit like copper) so isn't faring in all this froth although labour shortages in Australia and resulting supply issues might get it moving higher again.
The final air cargo data is in for 2021 and it reveals a healthy sector ending a dramatic and turbulent year on a strong note. International trade was +9.4% higher in December than for December 2019. For the Asia/Pacific region it was up +8.8% on the same basis. A consequence of high demand, and capacity stunted because passenger services were weak, meant that freight rates were sky-high, underpinned by very high container shipping rates which are a partial alternative.
About the best thing you can say about international passenger air travel is that it is 'recovering' at the end of 2021. But it is still in a life-and-death crisis.
The IMF is saying that the world economy is facing multiple challenges, including rising pandemic caseloads, a disrupted recovery, and higher inflation. But they are optimistic; they say "inflation should gradually decrease as supply-demand imbalances wane in 2022 and monetary policy in major economies responds."
Australian December CPI came in higher than anticipated, but not hugely higher. They say their consumer prices rose 3.5% in 2021, above the expected 3.2% and higher than the annual rate in September of 3.0%. Given how much CPI increases have beaten forecasts in other countries, this Aussie report isn't extreme. But it is above their RBA target level, and rising. And it is the highest rate there since 2014.
Australian business confidence fell sharply in December, according to the widely-watched NAB business sentiment report, as the spread of the Omicron variant threatened to dampen their economy’s post-lockdown momentum.
The UST 10yr yield opens today at 1.75% and up +3 bps from this time yesterday.
The price of gold starts today at US$1848/oz and +US$14 higher than this time yesterday.
And oil prices start today having recovered yesterday's drop and up by +US$2.50/bbl at just under US$84.50/bbl in the US, while the international Brent price is now just on US$87/bbl.
The Kiwi dollar will open today unchanged at 66.7 USc and holding its lower level. Against the Australian dollar we are lower at 93.4 AUc. Against the euro we are a little firmer at 59.1 euro cents. That means our TWI-5 starts today at 71.3, and off its recent lows.
The bitcoin price has recovered today, back up to US$37,036 and a +9.0% bounce-back. Volatility over the past 24 hours has been very high at +/- 4.8%.
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.