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 Bank of Japan will grab the headlines later today.

But first up, there was another dairy auction event overnight, the shorter Pulse event of SMP and WMP only. This one delivered results very little-changed from the prior event last week, essentially locking in those earlier price dips.

In the US retail sales at physical stores rose +4.5% last week from a year ago, the smallest rise since late March. But at least it is still well better than inflation.

Meanwhile, job openings in June were little-changed from the prior month - but that is better than it sounds because May was revised higher. Both levels are better than analysts had expected. And their quit rate fell to its lowest since November 2020.

Remember, we get the July non-farm payrolls data on Saturday (NZT) this week and markets now expect a +175,000 gain. There is nothing in the JOLTS data to suggest this is at risk - if anything perhaps an upside chance.

Perhaps supporting that is that the widely-watched Conference Board survey of consumer sentiment rose in July and by more than expected. However, this survey shows that consumers are less upbeat about the present than they are about the future. Election jitters are at play now. (But despite the overall gains, the levels in this survey are still quite low.)

And there was a follow-up from the US oil patch. The Dallas Fed services sector survey came in much less negative in July than June, and much less negative than their factory survey.

Later today we will get the Bank of Japan monetary policy decisions. Most analysts see them holding with a +0.1% policy rate. But a growing cohort see a rise to +0.25% today as wages and inflation rise there. Also of interest is what they do with their bond buying program. It would not be a surprise if they signal they will be reducing it from about NZ$65 bln per month to about half that.

And now we can report the June foreign direct investment data for China. And no wonder they held it back. It was terrible. They attracted only a net +¥1.6 mln in the June month from May. That is their worst level almost ever. In June 2023 it was a worryingly low +¥13.6 bln. In June 2022 it was ¥24.2 bln. In NZD the June inflow was virtually nothing - NZ$350,000 ! Even for New Zealand that would be very low. For the second largest economy in the world, it is a stunningly negative result. Beijing will be worried that these flows have dried up. Now their worry is that a net outflow by foreign investors beckons.

We have noted this recently, but it is worth updating again. The fall in Chinese steel rebar prices is turning into a rout with sharp daily drops now. They are now at eight-year lows. It is hard to know where tis will end.

In Europe, their Q2-2024 GDP expansion came in low again, but a +0.7% gain from the same period a year ago, similar to Q1-20