Episode Details

Kia ora,

Welcome to Monday’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 economies of most major powers are in good shape and their companies are prospering.

But for those who follow such things, we should note that President Biden has decided not to run in the Presidential election in November, stepping aside. The race for the Democratic nomination is now open at their convention in Chicago starting on Tuesday August 20 (NZT) even though Biden endorsed Kamala Harris.

Well before then and ahead this week will be some early PMIs for July released for many key economies. Although there are no major June CPI due for release, the US's important PCE inflation data is due on Saturday NZT and that will be keenly awaited. The US will also release its first estimate of Q2 GDP on Friday and markets expect real growth there to be +2% from Q1. Good recent data might well see it above that.

Canada is reviewing its policy rate on Thursday, and market now expect a -25 bps cut to 4.5%

China is set to announce its policy interest rate decision this week, and it should be releasing its troubled FDI update soon, both possibly later today.

Over the weekend, the big overnight news was that a "faulty channel file" from CrowdStrike took down Windows computers everywhere, including in New Zealand. Outages were widespread, including for many bank services. It was a spectacular own-goal and not a malicious strike. We have more details here. And our review shows how you can recover if you were affected.. But be careful; within hours scammers had launched new domains hoping to trick users into 'response scams'. CrowdStrike made its name fixing tech problems. Now it has caused a doozy. The echoes are lingering and may do for some time yet.

And the situation isn't going to do anything for tech company valuations generally. US$13 bln CrowdStrike's share price was down -11% on Friday alone, down -18% for the week.

Interestingly, China seems to have escaped the issue, largely due to its self-sufficiency policies. But it has hit Hong Kong.

A new research note by the New York Fed is pointing out that since the GFC, American factory productivity improvements have stalled. Tech has been no saviour to this sector. Prior to that, large firms built innovative advances. But since even the leading firms haven't got productivity gains. They call the change a 'mystery'. Even shifting low-wage production offshore didn't have the effect of raising it. Nor competition, it seems. And all this come as their employed workforce hit record highs.

In Canada, their expected May retreat in retail sales after the strong April gain came in deeper than expected. If it wasn't for good car sales, it would have been much worse. June is expected to be -0.3% lower too. Now their year-on-year gain is only +1.0%, much less than their inflation of +2.7%.

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