Episode Details

Kia ora,

Welcome to Wednesday’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 American economic data continues to impress.

But first up today there was a full dairy auction, one that brought slightly lower prices overall in USD terms (-1.4%), and slightly higher results in NZD terms (+0.6%). The milk powders slipped -2.2% while the milk fats (cheese and butter) were firmer. Demand was lighter despite lower production reports in both the US and China. Although analysts will have noted these softer results, it seems unlikely the high farmgate payout forecasts will be altered by this result alone. But prices today are on the downside from recent highs.

In the US, their Redbook monitoring of retail sales continued its very elevated rise from a year ago, up +6.8% and off a positive base. So this metric is still quite impressive.

US exports continued their rise, up +5.2% in November from a year ago for goods, up +9.3% for services. Imports were up too, but probably distorted by a pre-tariff surge, a surge that will continue into December.

US ISM services PMI was very expansionary, and more so that the internationally benchmarked S&P/Markit one. New order growth was strong, but it was current business activity levels that drove this rise.

And that is reflected in the November JOLTS report. Analysts had expected a slip back, but in fact a surge in job openings was found in this survey, and quits were lower than expected. We are just three days away from getting the December non-farm payrolls report and today's release suggests there may be upside coming to the +154,000 gain expected.

So it will be no surprise to know that their logistics sector is expanded fast in December. But an effort by firms to keep inventories under control meant that the latest fast expansion was less than in November.

Today's UST 10yr bond auction brought a median yield of 4.62% at the well supported event, although less so than last time. But that was much higher than the 4.19% at the prior equivalent event a month ago.

The Canadian Ivey PMI came in strong too with a solid expansion reported and its best in six months, although not quite up to the expansion analysts had expected.

Canadian exports rose too in November.

In China, an update by major developer Country Garden shows just how damaged the property sector is. In December it sold only 50% of the level it