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 an expansion and the inevitable retaliations in the Israel/Gaza/Lebanon/Yemen flashpoints are now having an impact on global oil prices. It is also casting a pall over global sentiment as fears mounts for an even wider conflict. The shift toward safe-haven currencies has hurt the NZD.

But first, the overnight dairy auction brought a +1.2% rise in USD terms, on the back of a +3.0% rise in WMP. There were good (+3.8%) gains for cheddar cheese as well. But most other products fell. In NZD terms, overall prices slipped -0.3%. Volumes sold were good. But this full auction broadly reflected last week's Pulse event for SMP and WMP.

In the US, their retail impulse bounced back last week to be +5.3% higher than the same week a year ago.

The September ISM factory PMI is still contracting slightly, little-changed from August. The dockworker strike isn't helping sentiment by American manufacturers. The S&P Global/Markit PMI for the US was more negative. Both report lower new order levels.

But the Logistics Managers Index (LMI) jumped to its highest growth rate in the logistics sector in two years. They see rising demand for these services, but the transportation component was unchanged.

Job openings rose in August from the July lower levels, but even though that rise was more than expected they are still in an easing trend, one that started in early 2022. Their quit rate fell.

Yesterday we reported a soft factory report for the Texas manufacturing sector and its oil patch in September. Today we can note that the region's service sector was expanding, and by a bit more than expected.

And we should note that Fed boss Powell yesterday emphasised that the recent 50 bps rate cut was probably just a one-off and that future changes will be "a more neutral stance" after that 'recalibration'.

China is now on holiday, and will be for the next week.

Eurozone inflation fell quite quickly in September, to just 1.8%, its lowest level since April 2021. Mostly this was driven by sharply lower energy costs.

In Australia, retail sales rose in August more than expected to be +3.1% higher than a year ago - which is their best result for more than a year. But it is not that great because inflation is running at 2.7% there. But at least is is better than inflation finally.