Episode Details

Kia ora,

Welcome to Tuesday’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 we are into Q4 now and it is starting out modestly in most places, despite an eye-popping rise on the Shanghai stock exchange.

First in the US, the Chicago PMI improved marginally in September although the gain was probably insignificant.

Meanwhile the Dallas Fed factory survey for the US oil patch in September eased further, although again, not a significant change.

But in October, this may all be affected by a looming East Coast and Gulf waterfront strike. And there is similar strike action underway in Canada. Workers are reacting to productivity changes from a new automation push.

China's National Day Golden Week holiday period starts today, kicking off one of the year's busiest travel periods as the country marks the 75th anniversary of its founding as a communist state. But their tourism industry is bracing for sluggish activity with bookings down -20%, even as regional governments begin to distribute cash vouchers to boost flagging consumer spending.

It is not only discretionary travel that is soft. The official Chinese factory PMI contracted at a lesser pace in September. And the companion Caixin factory PMI slipped from a minor expansion into a minor contraction.

Further, the official services PMI expansion ended in September with their lowest reading since December 2022.

But not everyone is looking ahead with trepidation there. Investors in Shanghai drove their equity markets up a remarkable +8.1% yesterday. After that exchange touched its lowest level in a decade on September 13, it has now suddenly shot up to its highest since April 2023. It is all about how Beijing is rolling out its stimulus - essentially guaranteeing investors that they won't lose (the Beijing 'put'). And they are all-in, filling their boots.

Much of this is driven by a belief that Chinese construction will be getting a big boost. The steel rebar price rebound shows that.

In the EU, the German CPI inflation rate fell to just 1.6% in September, its lowest since February 2021 when it was about to go on a tear, peaking at 8.8% in October 2022.

In Australia, they are claiming its 'first back‑to‑back surpluses in nearly two decades'.

The UST 10yr yield is now at just on 3.78% and up +2 bps from yesterday.

The price of gold