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 China's deflation Pressures keep on coming. And in the US disinflation rolls on, which they hope will end soon.

This coming week will be another one with chunky data releases. The biggest will be on Wednesday, our own CPI result for the Q3-2024 period (Markets expect 2.0%). That that will follow the Tuesday's update of the September REINZ results.

We won't be the only country reporting inflation data; we also get that from Canada, India and Japan this week. At the end of the week, the ECB will be reviewing its policy interest rate. And all week we will be getting American Q3 earnings reports.

China will report its Q3-2024 GDP result on Friday, likely to fall well short of its 5% target.

Over this weekend, China released sets of key data. The tiny bit of consumer price inflation they had disappeared in September, up now only +0.4% from a year ago. Beef, lamb, and milk prices all went backwards again. Their producer prices deflated at a faster rate. And we are now waiting for their new yuan loan data which isn't expected to be very strong (about +¥1 tln, and less than half the June level. So far, debt-induced growth hasn't worked).

Meanwhile Chinese Ministry of Finance officials announced some more modest steps to "support the economy" and signaled much more is to come. It was a much-anticipated set-piece that left observers, and markets, underwhelmed.

Key banks made simultaneous coordinated moves - signaled a while ago to be fair - to cut mortgage borrowing costs, as a practical measure to reduce the pressure on homeowner household budgets. They will come into effect in the last week of October.

And coming up some time this week, the Chinese central bank is expected to signal lower wholesale borrowing costs in its 1-Year MLF announcement.

In South Korea, they have started cutting their policy rates too, although not as aggressively as New Zealand. The Bank of Korea policy rate is now 3.25% after its first rate cut (-25 bps) since May 2020. That came after data showed their GDP shrank in Q2-2024 and their September inflation slowed to 1.6%, the lowest since February 2021.

India's industrial production took a surprise drop in August from a year ago, its first retreat since October 2022. Few saw that coming. And they downwardly revised the +4.7% rise in July.

Interestingly, the Indian currency is under pressure, and outflow levels have been high. The Indian rupee has hit a record low against the US Dollar, (but against the NZD it has been pretty flat since 2020).

In the US, producer prices