Episode Details

Kia ora,

Welcome to Tuesday’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 analysts are now starting to estimate the costs to the US economy of some upcoming tariff policy.

But first, the S&P Global American services PMI rose in December to its strongest expansion since March 2022. But their manufacturing downturn deepened with manufacturers reporting falling output and higher prices. New factory orders fell sharply, extending the decline to a sixth consecutive month. The divergence makes the services sector jump look like a sugar-rush, one that could come with a hangover.

The December factory survey in the New York region reflects the factory pullback - although that is from an unusually strong November.

A New York Fed study of whether large tariff hikes protect US firms has found the opposite in a detailed survey. This is no surprise to economists, and they suggest that the next round is also likely to hurt American firms further. Further own-goals for American manufacturing are on their way. Others say it will shrink US GDP by -1%. That would be a US$300 bln hit.

North of the border, Canadian housing starts came in particularly strong in November, and surprisingly so.

And Canadian house prices are on an extended uptrend, boosted by more sales activity as interest rates come down there.

But in a surprise political move in Canada, their Finance Minister has suddenly resigned, "throwing its economic agenda into a tailspin". Disagreement on how to frame Canada's policies when Trump comes to power in the US seems to be at the heart of the matter.

Across the Pacific in Japan, their November PMIs revealed that their factory sector is now barely contracting (an improvement from October), and their services sector is now expanding faster. They had their strongest rise in private sector activity in the past three months. So perhaps it is no surprise to know that machinery orders are on the rise, after a lean period.

China’s new house prices in 70 cities shrank by -5.7% year-on-year in November, following the steepest decline in over nine years of 5.9% in the previous month. This marked the 17th consecutive month of decreases, suggesting that Beijing’s extended attempts to mitigate the prolonged downturn in the property sector, such as reducing mortgage rates and slashing ho