US inflation expectations retreat. Fed balance sheet shrinks fast. EU sentiment rises. NZ dairy exports to China now tariff-free.
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.
And today we have a quick news wrap-up so you can get back to your 'time-off'.
Firstly, for those who missed yesterday's update, we now expect the Barfoot December results tomorrow (Wednesday).
We start today in the US, with lower inflation expectations for both food and rent that are depowering price increases there. Consumer inflation expectations for the year ahead fell for a third consecutive month to 3% in December from 3.4% in November and the lowest level since January 2021.
American consumer debt levels are due later this morning and only a modest +US$9 bln rise is anticipated.
Meanwhile, the US Fed balance sheet was reduced by a net -10% to US$7.7 tln in 2023, and this was despite the emergency addition of almost US$400 bln in March to cover their SVB/regional banking crisis. That lost them three months of progress.
And we should perhaps note that in the wake of the latest Boeing 737MAX troubles and fleet grounding, Air New Zealand does not have any of these aircraft. Boeing's stock suffered a sharp -10% fall yesterday but no more today.
In the EU, overall sentiment recorded a moderate gain in December, perhaps a surprise given their lackluster recent economic performances. The rises were driven by higher confidence among consumers, and managers in retail trade, services, and construction, while confidence in industry remained broadly unchanged.
Maybe part of that improvement can be attributed to a good rise in November exports from Germany, and a modest rise in November factory orders there.
We should also note that from the start of 2024, all Chinese tariffs on New Zealand dairy products expired and these exports are duty-free into China now. China is our largest export market, taking more than 34% of dairy exports. Likewise, New Zealand is China’s largest source of dairy imports, accounting for 46% of China's total dairy imports. Chinese firms have bought up Westland Milk, Oceania Dairy, as well as being involved in exporting both fresh milk and infant milk powder products, and these direct ownership links have powered these exports.
The UST 10yr yield starts today at 3.98% and down -7 bps from this time yesterday.
The price of gold will start today down -US$12/oz at just on US$2033/oz.
Oil prices are sharply lower, down -US$4 at just over US$70/bbl in the US. The international Brent price is now just under US$75.50/bbl. A surprise price cut by Saudi Arabia has jolted this market - mainly because the Saudi's feel they have been gamed by Iran, Russia, and a number of other intermediate producers like Angola and Nigeria.
The Kiwi dollar starts today at 62.5 USc and marginally firmer from yesterday. Against the Aussie we are holding at 93 AUc. Against the euro we are softer at 56.9 euro cents. That all means our TWI-5 starts today just under 70.8 and little-changed from this time yesterday.
The bitcoin price starts today higher again, rising to US$44,972 and a further gain of +2.4% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.4%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.