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.

And today we lead with news we are ending the year with mostly a strong international economy, but worries are growing about prospects for 2025. If both China and the US turn down together, then all bets are off.

But right now, it's going to a relatively quiet week ahead as you would expect with major holidays in some of the largest financial markets. But we will get data from Singapore (CPI), Thailand (exports), Taiwan (retail sales and industrial production), China (industrial profits and their MLF interest rate), Canada (PPI), and the US (durable goods orders, new home sales, jobless claims and some regional factory surveys). So enough to keep an eye on while we relax. Nothing locally of course except the November data dump from the RBNZ tomorrow.

In the US, there was a last-minute avoidance of their shutdown as conservative Republicans were not prepared to give the incoming President the blank cheque of a suspension of their debt limit. Trump lost that one by quite a wide margin, so it may not be plain-sailing for the Trump/Musk presidency.

Meanwhile, the widely-watched US PCE measure of inflation came in at 2.4% in November, up a tick and to its highest since July. Core PCE inflation stayed even higher at 2.8%. But these results were actually a tick less than expected. The 2.8% inflation level is what the University of Michigan consumer survey also reported.

American personal disposable income rose +2.6% from a year ago, a slight undershoot. But personal spending remained strong, up +2.9% and similar to the gains over the past six months. Personal saving as a percent of disposable income rose marginally to 4.4% from the prior month and ending the longish decline from the start of the year when it ran at 5.5% of personal disposable income. The 4.4% level is where it ran for most of 2023.

Across the Pacific, Taiwanese export orders stayed elevated, up +3.3% from the same month a year ago which itself was elevated.

China reviewed its loan prime rates on Friday and kept them unchanged - at record lows. It's MLF rate will be announced this coming week.

In China, there have been recent reports of officials calling in bond traders to lecture them about 'responsible trading' - and the consequences for not. Chinese bond yields had fallen to record lows, as readers here who tracked our monitoring of the Chinese 10yr yield below will know. But today, the fear of losing money is winning out over the fear of officialdom's wrath.

China’s one-year bond yields broke below levels last seen in the GFC to the lowest since 2003, driven by bets on aggressive policy easing and demand for haven assets. The yield on one-year government debt plunged 17 bps yesterday to