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 last few days of the northern summer holiday period that is quiet but basically positive.

First, American retail sales at physical stores were up +5.0% last week from the same week in 2023, another pointer that the consumer side of the American economy hasn't stumbled yet.

But there are of course pockets of regional variation. The Richmond Fed's factory survey wasn't so flash in its August survey with a tenth straight contraction. The service sector in the region was stable however.

But the Texas Dallas Fed service sector survey is contracting just as we reported yesterday its manufacturing sector was.

But these regional business sentiment pockets might be outliers. As we noted for the Redbook retail survey, consumers seem upbeat. And that is reinforced by the latest Conference Board survey of consumer sentiment. The rise in optimism on a national level contrasts with a few pockets of business pessimism.

A very well supported US Treasury 2yr bond auction brought a median yield of 3.83% overnight, down more than -50 bps from 4.39% at the prior equivalent event a month ago. It's a bond rally directly related to the Fed signals at Jackson Hole.

Across the Pacific, China said profits at its largest industrial firms (mostly SOEs) rose +3.6% in the first seven months of 2024. This was little-changed from June. They were up +4.1% in July from the same month a year ago. That they are still profitable overall is a good sign, and they are not getting worse.

As China returns from its summer holidays, one thing may be missing - childcare. The sharp demographic shifts are moving faster now and a nationwide causality is childcare centers. Businesses providing these services closed for summer and a rather large number of them aren't re-opening. Enrolments are diving reflecting the swift shift in attitudes from the 'last generation'. (Of course, China doesn't have this problem on its own, but it is particularly fierce there.)

Taiwan however has reported a continuing