Episode Details

Kia ora,

Welcome to Thursday’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.

And today we lead with news Australia has been assessing their exposure risks to upcoming Trump tariffs - and they are nervous.

But first in the US, their November CPI rate came in without any surprises. It rose for a second consecutive month to 2.7% in November from 2.6% in October. But the rise is partly influenced by low base effects from last year. Core inflation, without food and energy, was stable at 3.3%. Food prices rose +2.4% and rents +4.7% (which will please landlords, like The Trump Organisation). Petrol costs fell -8.1%.

For a fifth straight week, US mortgage applications rose, and by +5.4% from the week before, driven by a surge in refinancing (loans for new homes actually fell), putting them +4% higher than year-ago levels. At the same time, mortgage interest rates dipped, but it was a minor move.

Another very well-supported UST 10yr bond auction this morning delivered a median yield of 4.19%, down from 4.29% at the prior equivalent event a month ago.

As expected, the Bank of Canada cut its key interest rate by -50 bps for a second consecutive time in its December meeting, to 3.25% and make -175 bps of cumulative rate cuts from this cycle’s peak of 5%. Still, rhetoric from policymakers suggested that there will not be any more outsized rate cuts next year, and officials dropped the statement that borrowing costs are due to be lowered should their base case hold. The sharp interest rate cut followed data showing that the Canadian GDP grew an annualised +1% in the third quarter, below the central bank’s projections, and shrank on a per capita basis, and growth in the fourth quarter poses the risk of also missing forecasts.

In Japan, producer prices rose +3.7% in November from a year ago, higher than in October and exceeding market estimates of +3.4%. It was the 45th straight month of producer inflation, marking the highest figure since July 2023. These pressures will eventually show up in consumer prices. And that in turn will encourage the Bank of Japan to raise its +0.25% policy interest rates. They next review it on Thursday, December 19, 2024, when a +25 bps rise is anticipated by financial markets.

In China, Reuters is reporting that officials are open to let the value of the yuan slide in 2025 as a way to push back against the expected Trump tariffs.

In Malaysia, retail sales rose +7.1% in October from the same month a year ago, rising from a +5.5% rise in the previous month. It was the strongest growth in retail sales there since June. Malaysian

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