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 investors globally are having a re-think about the valuation rises that have gotten embedded since the pandemic. Warren Buffett is now cashed up.

But before that, although it will be a relatively quiet week for international economic data releases, it is a big week at home. The important Q2-2024 labour market report gets released on Wednesday and there will be more real estate market data early in the week. Plus there is a full dairy auction on Wednesday morning.

There will be living cost data released in Australia. And before that we will get the RBA's rate review decision late tomorrow. And inflation expectations survey results will be released this week across the ditch. China will update its CPI and PPI. Plus there will be slew of services PMIs out everywhere too. Wall Street will start to wrap up its Q2 earnings season reports with some big later reports. By the way, Warren Buffet's Berkshire Hathaway reported its Q2-2024 position late last week - and it has about US$270 bln/NZ$450 bln in cash (or cash equivalents) on hand. See page 3 here. That is actually more than the NZ$409 bln NZ GDP over the past year.

But basically it is the Northern Hemisphere holiday season, so financial market activity will be relatively light for the rest of the month. (In fact, it is a public holiday in Canada today.) This tends to accentuate any changes more than they would otherwise be.

In China, their central bank said it will be pushing commercial banks to "do more" for the "real economy". It wants to shift the financial sector’s focus to "benefiting people’s livelihoods and boosting consumption" over the coming months. This change in emphasis follows pressure from the CCP Third Plenum meeting chaired by President Xi earlier in the week. The practical impact? Perhaps more debt issued for projects that have immediate effects but little long-term gains.

There are calls for monetary authorities to allow higher inflation as some sort of spur to 'growth'. Meanwhile, commodity prices keep on sinking as the overall stall extends. None of this is coming at a good time for China and they take their summer break. That tends to be when the leaders 'relax' at their seaside compound. If they don't return with better plans and actions, there will be some grumpy countrymen.

One initiative underway is to boost its urban living. In 2012, a bit over half of China's population lived in cities. In 2023 that had risen to two-thirds. Their new goal is to get it to 70% by 2029 thereby generating a surge in new economic activity. But there will be issues from this drive, not the least of which is food security.

Meanwhile, flooding pressures are not easing. And that too has implications for food security and agricultural output, especially for gains.

Singapore's widely-watched local PMI was modestly positive in July, but far less positive than the internationally-benchmarked version.

The US economy added