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.

Today we lead with news the IMF seems the global economy in a "sticky spot".

But first up today we can report that the overnight dairy auction defied recent trends and the futures market. Instead of another retreat, in fact it held, virtually unchanged (+0.4). But the two key powders did decline, just not as much as expected. SMP was down -1.1% (less than the -2% expected) and WMP was down -1.6% (much less than the -6% expected). The event was rescued by the +6.2% rise in Cheddar cheese and to a lesser extent the +0.8% rise in the butter price. The small +0.4% gain in USD was enhanced to +0.8% in NZD.

Now all eyes will turn to the New Zealand consumers’ price index for the June quarter, which will be released at 10:45am today. Check back then because we will have full coverage of data that could well be market-moving.

Overnight, American retail sales rose +2.3% in June from a year ago, not quite enough for this to be a 'real' gain, but closer than recently. There was no change between May and June, because car sales took a breather.

So far in 2024, American car repossessions are up +23% compared with the same period last year, according to data from Cox Automotive. That comes after a long low period however, but they are up +14% from pre-pandemic levels.

And last week, retail sales as measured by the Redbook Index for physical stores rose much less than recently, although the year-on-year gain was still an impressive +4.8%. But is was the weakest gain since late March.

Slowing American retail sales growth its putting upward pressure in business inventories, although again, this is relatively minor in the grand scheme of things. In May they were +1.7% higher than a year ago, but related to current sales levels they are unchanged.

In Canada, CPI inflation for June was released overnight and it eased to 2.7% from 2.9% in the prior month. This wasn't expected because markets ad assumed it would remain at the 2.9% mark. The Canadians have already started their easing cycle in their policy interest rate, even though they target a 2% midpoint in a 1-3% range.

Perhaps the 'early start' is needed because they had a rather sharp drop in new housing starts in June, down by more than -20,000 or -9% from May. Vancouver fell -13%, due to sharp falls in multi-unit starts; Toronto crashed -37% for the same reason.

The IMF expects the global economy to grow 3.2% in 2024, the same as in the April outlook but the 2025 growth forecast was revised higher by 0.1 percentage point to 3.3%. For 2024, they revised their forecasts for the US down to 2.6% (vs 2.7%), reflecting the slower-than-expected start to the year. In Europe, growth for the Euro Area is seen higher (0.9% vs 0.8%). In Asia, growth forecasts were a