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 expectations of flatter demand are hurting commodity prices. And that includes some key food prices which are also impacted by healthy supply levels.

But first, this coming week will bring more attention to inflation rates. We will get monthly updates from the US, China, and India. And we will get industrial production data from India. There will also be sentiment data from the US and Australia. The ECB meets again this week and the results will be released Friday morning (NZT). Most see a -25 bps cut coming then, to 4.0%. And locally the focus will be on Wednesday's migration and tourism data.

Over the weekend the data showed the US economy created fewer new jobs in August than expected, adding +142,000 in August, and below market expectations of +160,000. July's increase was revised sharply lower. Most job gains occurred in construction and healthcare while manufacturing employment declined. But their jobless rate edged lower to 4.2% in August from 4.3% in July.

But we do need to note that the +142,000 rise is the seasonally-adjusted number. The actual rise is +263,000 from July which is pretty healthy, it must be said. From a year ago, payrolls are +2.3 mln larger. The economic impact of +2.3 mln more people employed is not insignificant. And that is after the March revision.

Weekly earnings are up +3.5% from a year ago, hourly earnings up a bit more, and that was better than expected.

The US job market is cooling, but not cracking. This fact will give the US Fed more room to maneuver at their meeting on September 19, in ten days time.

Separately, Canada said it added +22,000 jobs in August, a recovery from the small dip in July. Almost all the August increase was for women.

But their local, and widely-watched Ivey PMI fell sharply in August, down to its lowest level since December 2020. However it wasn't matched by the internationally benchmarked S&P/Markit version which reported a stable situation. One of them isn't right.

In China, the end is nigh for struggling developer China Vanke. They reported terrible July metrics, and their liquidity situation worsened notably. Not helping them, China's regional banks are moving faster to quit nonperforming real estate loans. That is leaving the majors holding the bag as the government urges them to lend more to support a weak housing market. It is hard to see how the management of their real estate crisis won't end very badly. China's neighbours are increasingly concerned.

Germany reported a very tough situation for industrial production in July, down -5.3% from the same month a year ago and worse than the June result. But at least