Episode Details

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.

And today we lead with news China's rapidly changing demographics are weighing heavily on the country.

But first, and maybe related, today's dairy auction was a weak one. Prices were only very marginally lower in USD terms, but they fell -2.2% in NZD terms as our currency rose overnight. The key WMP price was up +1.9% in USD terms, but SMP fell a sharpish -3.8% and cheddar cheese fell a whopping -9.7% from the same event two weeks ago. That speaks to extended weakness in foodservice markets, probably in China. That leaves prices -10% lower than last year’s level which themselves were -18% lower than the year prior. The long slide continues, hurt by both China's continuing weakness, and the USD's new0-found weakness.

Meanwhile, American retail sales are managing to rise at inflation's level however. They were up +3.4% in the latest Redbook survey of bricks & mortar stores on a same-store basis.

But things remain weak in America's real estate market with existing home sales down -4.1% in October from September to be -15% lower than year-ago levels. Average prices are inching up however, even if the inventory of unsold properties is growing..

The American National Activity Index monitored by the Chicago Fed fell in October to its lowest in seven months. All four major categories they monitor retreated.

The AtlantaFed's GDP Now monitor is suggesting American Q4-2023 economic activity is expanding at a +2% rate. It is worth keeping an eye on this indicator; it was one of the few that correctly predicted the strong Q3 gains. It turned out far more positive than most private sector forecasts.

In Canada, CPI inflation is easing back now. It came in at 3.1% in October, down from 3.8% in September. It was a larger fall than expected. That means they are getting close to their central bank's target range of 1%-3%.

In Hong Kong, the weak Chinese housing market is affecting them too, with a new development offering new homes at prices that are a six year low.

As anticipated, China’s birth rate reached a new low last year, with the number of newborns falling to 9.6 mln, the first reading below 10 mln since 1950.

We should note that EV battery manufacturers are buying much less lithium carbonate, and the price of that raw material continues its sharp retreat. Much like the nickel price we noted earlier in the week. Lithium is down -75% in a year, which was when it peaked. Nickel is down more than -50% in 2023.

The UST 10yr yield is little-changed from yesterday, now at 4.43%. 

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