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 long term rates just keep on rising ahead of the change in the US Administration. And now the USD is slipping back.

First up however, the overnight GDT dairy Pulse auction brought the expected changes. The SMP price extended its recent rises, and the WMP price essentially held its full auction recovery. This event didn't signal any changes or concerns.

In the US, their Redbook retail pulse index rose 'only' +5% last week from the same week a year ago, but to be fair the base was strong. No unusual signals here either.

There were tow January sentiment surveys out overnight. The NFIB one for SMEs was quite bullish and at a six year high. But the RCM/TIPP investor one went backwards unexpectedly, although it was off a 40 month high.

As expected, overall American producer prices rose, rising +3.3% from a year ago, although the rise wasn't quite as much as the +3.4% expected. While the lid was kept on by the unchanged services component, we need to keep an eye on the goods rise in December from November, which jumped +0.6% in the month, an unusually high shift. They won't want that to repeat.

In a new report, the US Congressional Budget Office is projecting a sharp change in American demographics if the cap in migration is enforced. American will join Japan, China and Europe by growing older quicker - and much quicker than previously expected. And while this aging is going on, population growth will stall out at 370 mln in 2055. The viability of safety net programs will involve difficult choices.

In China, their December new yuan loan data was released overnight and there is some impact from their recent stimulus efforts showing up here. It was expected to show a weak borrowing impulse, and it did, just not as weak as was anticipated. Chinese banks extended ¥990 bln in new loans in December, above ¥580 bln in November (which was the lowest since 2012) and above forecasts of ¥850 bln. Still this was the lowest rise since 2017.

China is making a "stable yuan" a core policy objective. It is a stability against the USD they are managing.

A sidebar update for once highflying Evergrande Property development company; A Chinese court has ruled it must make payments it hasn't the resources to make. And a Hong Kong court has ordered its liquidation. The next saga will be the legal proceedings against its auditor PwC by the liquidator.

And we should note that today is the start of their enormous internal annual migration. January 14 is the kickoff of their Spring Festival travel rush, as workers begin to head home for the long vacation over the Lunar New Year. The Golden Week holiday a