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 of some major emergency moves in China to reinvigorate their economy.

But first, there was a good GDT Pulse auction result earlier this morning, although the reverse of what the futures markets had signaled. There was no gain in SMP prices, holding its recent higher levels. But the important WMP price rose +2.8% from the full auction a week ago and back to levels of a year ago.

This is a good backdrop to this morning's Fonterra 2023/24 results announcement.

The expansion of American retail sales at physical stores rose +4.1% last week from the same week a year ago. That is good but a slowing from the gains since August. A year ago they were rising +3.6%.

But the widely-watched Conference Board consumer sentiment survey for September has brought a hesitation, slipping to the lower end of the narrow range it has been in for the past two years. Worries about job security seems to be a key factor here, although we probably shouldn't make too much of a range-bound shift.

Election jitters have hit the Richmond Fed's factory survey covering the mid-Atlantic states, all "battle-ground states" where uncertainty of the outcomes is pronounced.

There was a very well supported US Treasury 2 year bond auction today, delivering a median yield of 3.47%. That is down from 3.83% at the equivalent event a month ago. In both more than US$100 bln in bids went unsatisfied.

And ratings agency Moody's has warned that a downgrade for the US Federal Government is a live possibility unless it tackles its growing deficits. This comes a year after it placed the AAA rating on 'negative outlook'. Clearly it is watching this with some unease.

Across the Pacific, Japan's business activity continues to rise, largely based on a service sector that is now expanding at its fastest pace since April. Factory activity isn't expanding however, according to this PMI survey.

Taiwanese export orders rose +9.1% in August from the same month a year ago, to a nine month high.

In China, "a leading Chinese economist" and politician has called for Beijing to launch a ¥10 tln stimulus package (NZ$2.2 tln) equivalent to 8% of Chinese GDP, to tide their economy over through the rest of 2024, as credit growth and domestic demand remain drained of energy. The economist calling for this is Liu Shijin, deputy-direct