Episode Details

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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.

Today we lead with news global financial markets are little-changed at near historic highs even though economic data releases seem to be still giving weaker signals.

This week will be dominated by the Fonterra annual result and dairy payout finalisation, a big dump of RBNZ lending data, and some credit card activity data.

In Australia, the week will be headlined by the August jobs data release which is expected to show +20,000 jobs growth.

Elsewhere, China is heading into its Mid-Autumn Festival which starts on Friday and runs through to Sunday.

In Japan it will be Silver Week with markets closed there today through Wednesday.

China made no changes to their Loan Prime Rates over the weekend. Ahead this week there will be many such decisions in Switzerland (no change at 0%), Sweden (no change at 1.75%), Norway (no change at 4.25%), Mexico (no change at 6.5%), and Indonesia (no change at 5.75%).

And there will be a major diplomatic set piece this week with Chinese President Xi visiting the US on Friday and Saturday (NZT). Don't expect much other than photo opportunities, although with Trump there is always the capacity for something to go badly wrong during or after the meeting. In May, China agreed to buy 200 Boeing jets during Trump’s visit to Beijing but no actual deal has been done so far, so anything announced at these summits doesn't mean anything will actually happen.

In the US they will release durable goods order data and most observers think they will fall in August from July.

From everywhere will will be getting PMI updates. And from Taiwan we will get its export order data.

All this, plus whatever happens in the Middle East wars.

Over the weekend we learned that, China posted another weak foreign direct investment result for August, down -5.3% on a year-to-date basis. But the incremental flows were tiny in August. up just +US$7 bln from July and virtually unchanged from year ago levels. From two years ago there is a large drop. For all the official propaganda about how well the Chinese economy is doing, it isn't enticing investment in. A key reason these flows are so low is that sovereign wealth funds are now on the sidelines.

Japan's CPI inflation rate held at +1.9% in August as it was in July, and their core inflation rate eased to 1.7%. Both results were at the bottom end of expectations, and should have taken pressure off the Bank of Japan who were meeting as this data was released. But they have other issues weighing on them including defending the yen, and facing bullying pressure from the Trump Administration. All the same, inflation this low when the global price pressure is high is an achievement, even if Japan is only one many Asian economies that are managing to replicate that result.

As universally anticipated and earlier implied, the Bank of Japan delivered its +25 bps rate hike on Friday, taking its policy rate to 1.25% which is a 31 year high. They said they will "continue to raise the policy interest rate and adjust the degree of monetary accommodation, in response to developments in economic activity and prices as well as financial conditions."

Mea