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 that signs of economic under-achievement seem to be cropping up everywhere.

First though, at the end of this week we have the long weekend holiday, for Labour Day. But first, the week ahead will feature October 'flash' PMIs from all over and the third week of Wall Street Q3 earnings results. In the US they will release September durable goods order data. Canada will chime in with a central bank rate decision (probably a -50 bps cut), and there will be confidence survey results from all over. Finally South Korea will release its Q3-2024 GDP growth rate, expected to be a bit north of +2%.

Over the weekend there were no surprises in US housing start data for September, coming in just as expected and the general level it has been at for most of 2024.

And Wall Street's Q3 earnings season reporting is building with 14% of S&P500 companies reporting so far, and the results are quite positive, reinforcing investor risk appetites.

The US also reported its federal budget deficit for September over the weekend. It was a surplus of US$64 bln for the month. For the month, receipts jumped +13% from a year earlier, while outlays sank by -23%. But for the full fiscal year, it ended -US$1.8 tln in deficit (with interest costs exceeding US$1 tln for the first time). At that level the total deficit is equivalent to -6.3% of one year's economic activity in the country. This is up from -6.1% of GDP in 2023.

Across the Pacific, China’s new home prices in their 70 major cities fell -5.7% in September from a year ago, more than the -5.3% fall in the previous month. It was the 15th straight month of decrease and the steepest pace since May 2015. Second hand houses seem to have fallen by much more, by -10.7%. This sector won't be helping China's "wealth effect".

Meanwhile China said its Q3-2024 GDP expanded by +4.6%, marginally better than the +4.5% expected but less than Beijing's 5% target. They also said industrial production improved by +5.4% and retail sales were up +3.2%, on the same basis. Their jobless rate fell slightly, to 5.1%.

Later today, China is expected to cut its Loan Prime Rates by -20 bps, their tenth consecutive cut since the pandemic, and to a record low. The have never raised these rates since they introduced them on 2019 - only ever cuts.

And China's support of equity markets has almost hit ¥2 tln. With the Beijing 'put' in play, it is now not possible to read anything into Chinese equity market signals, especially when they rise. That may only indicate the size of the manipulation.

Japan said its inflation rate fell to 2.5% in September from 3.0% in August. This was its lowest level since April. (It was also 3.0% in September 2023.)

The regular ECB survey of professional forecasters

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