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 the focus is turning to Q1-2025 now and the twists & turns the world's largest economy will deliver. It is probably no coincidence that post-election, Warren Buffett is selling.

But first, in the week ahead we will get data on our producer price inflation, and an update on our population, not to forget a full GDT dairy auction on Wednesday which should confirm the recent higher USD prices are extending. And remember, in a week from Wednesday, the RBNZ will review the OCR for the final time in 2025. This review has to hold them until February 19, 2025, so the look ahead will dominate.

We have had a 4% one year swap rate, essentially unchanged, for seven straight weeks now. The 90 day bank bill rate has been stable at about 4.5% for three straight weeks. On one hand OIS pricing sees a -50 bps OCR cut coming. On the other, some short markets aren't flagging any change. Our longer rates have been rising (in response to expected Trump inflation), so our 1-5 swap curve is suddenly no longer inverted. And our 1-5 NZGB curve has also turned positive for the first time since 2022. It isn't known what the RBNZ thinks of the ending of inverted rate curves although it is unlikely they will be disappointed.

In Australia, expect their 'flash' November PMI on Friday, but not much light is expected in that.

This week will also deliver more US regional activity updates. China will review its official interest rate benchmarks. Japan will get some flash PMI data too, as well as its export data. And there will be a range of rather meaningless European data out too.

And financial markets will continue digesting what Trump 2.0 will mean for them. They seemed to have a reality check on Friday; coming inflation, sharp job losses, and a capture of the regulatory rules for a few in their favoured elite isn't a recipe for the current healthy American economy to continue.

And in the US, it seems the Fed is in no hurry to cut interest rates. “The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said on Friday in Dallas. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.” And NY Fed boss Williams said essentially the same thing.

Retail sales in the US rose +4.6% (actual) in October from year-ago levels, following a +0.2% rise in September. Reported seasonally adjusted levels were less that these. Rising car sales (+6.6% actual) were a large part of this gain.

But US industrial production actually decreased -0.3% in the same year to October. This is a volume-based survey. The Boeing strike got most of the blame for this, and was expected in the data.

In the New York region, the Empire State factory survey surprised analysts with strong new order flows, and rising optimism, far greater than expected. Factory activity rose sharply too.

In Canada they also released factory data but it was for September and the Boeing strike squished its data too. But

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