Episode Details

Kia ora,

Welcome to Friday’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 China is wrestling with how to respond to its slowdown, with the measures announced so far causing volatility.

But, first up today, and as expected, the American CPI inflation rate fell in September but by less than expected. It came in at 2.4%, down from August's 2.5%, but above the expected 2.3% rate. For three consecutive months. the month-on-month rise has been +0.2%, so it is tracking at the annual rate as well.

Rents dipped to that +0.2% month-on-month rise but from a year ago they remain +4.9% higher. But food prices were up +0.4% in September from August, the most in a year, even though the year-on-year change was only +2.3%. So one to watch.

However, the overall inflation situation remains pretty benign. No-one will be overly worried about this data. But it will reinforce the Fed that outsized rate cuts at this time are probably not warranted.

Initial US jobless claims however spiked sharply last week, coming in at +235,000 actual (more on a seasonally adjusted basis). There are now 1.62 mln people on these benefits, and virtually no increase from the prior week. The spike probably has more to do with the Florida storm impacts, and perhaps the Boeing strike, than any meaningful slowdown in the US labour market.

In China, money flows around their surging equity markets are creating issues for policymakers. Huge amounts have flowed out of WMP (wealth management products) chasing the expected equity market gains. But foreigners and some local professionals seem to have taken the opportunity to cash out in the rising market. And as the rises haven't been sustained, there may be a lot of very disappointed local investor/speculators.

But help may be on the way. The central bank yesterday announced the start of a key operation to prop up the stock market. That put a floor under the market, embedding the Beijing 'put'.

And all eyes will be on an announced weekend briefing by Beijing authorities on their next economic policy moves.

The rise in Japanese producer prices in August matched the pace in the prior four months, and is embedding at about a +2.5% annual rate. Again, little to morrow policymakers here.

German retail sales unexpectedly rose in August for a second straight month to now be +2.1% higher than year-ago levels, something few saw coming. That is actually their best year-on-year growth since April 2022. Further, this is a 'real', after inflation result. So it is quite strong. Food and travel volumes rose the strongest.

In Australia, it seems that the stage is being set for a new Federal election. On emust be held before the end of Septem