Eyes on Xi-Trump talks. US data suggests stagflation. California declares El Niño emergency. Canada sees growth halving. Copper in new push higher.
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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 more policymakers are bracing for dealing with stagflation.
But first, in the leadup to the Xi-Trump talks in Washington, there is a focus on AI and its risks. And there is some pre-celebration from both sides of how good it is going to be. We recently noted that the May Beijing version of these talks has seen the announced 200 plane order for Boeing apparently die. It also seems that the May deal to buy US grains has never materialised either. So you should be sceptical of any current claims about the Washington DC meeting outcomes.
The Chicago Fed's National Activity Index dipped in August from July, suggesting US economic growth is no longer rising. In four of the last six updates, this measure has decreased. New orders are no longer rising in this data, production is contracting.
So that points to increasing stagflation.
Meanwhile Chicago Fed President Austan Goolsbee warned that bringing inflation back down to the 2% target may not be painless and could require pushing employment below target. "This is exactly the painful trade-off between employment and inflation that stagflationary shocks always impose on a central bank. Unfortunately, in environments like that, the only way back is the hard way."
And staying in the US, California has declared a state of emergency as a strengthening El Niño raises the threat of damaging storms, widespread flooding and mudslides across the state for their upcoming autumn and winter.
In Canada, their central bank boss has also been speaking, and warning that their trade difficulties with the US could cut Canadian growth in half to below +1%. It is actually oddly impressive that a dispute this large with an economic adversary as big as it gets can be navigated with any expansion.
In Australia, Reserve Bank Assistant Governor Sarah Hunter was on a Nine Network podcast this morning and emphasised that the RBA is worried about inflation and fighting that threat is where their energies currently are focused.
The copper price is making another push up towards its record high (reached on September 9), this time driven by growing logistics issues.
The UST 10yr yield is now just on 4.96%, down -4 bps from yesterday.
The price of gold is at US$4345/oz, and down -US$38 from yesterday. Silver is at just over US$66/oz and little-changed.
Oil prices have fallen -US$4.50 to at just on US$95.50/bbl in the US, while the international Brent price is down -US$4 to US$100/bbl. There is a bit of hopium involved here as traders watch diplomatic efforts to end the US-Iran war and watch for signs of oil cargo movements. But they are not significant, yet anyway.
The Kiwi dollar is unchanged from yesterday, still at 57.2 USc. Against the Aussie we are holding at 80.3 AUc. Against the euro we are up +10 bps at just under 49.9 euro cents. That all means our TWI-5 starts today at just under 60.7 and little-changed.
The bitcoin price starts today at US$88,791 and up a sharp +5.8% from yesterday. (And we should note that it has risen back to NZ$150,000 for the first time since late January.) Volatility over the past 24 hours has been high at just over +/-3.4%.
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.
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