Episode Details

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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.

Today we lead with news  the bond market is shouting louder warnings at US policymakers. And China is rolling out more stimulus and subsidies to counter a growing slowdown there.

First today, the overnight Pulse dairy auction delivered mixed results although both the SMP and WMP prices rose from the prior event, up by about +1.6% in USD terms. But as the NZD took a bit of a thrashing overnight, these prices were up more than +3% in local currency terms.

Also mixed were the August US JOLTS labour market data. While much of it was little-changed, the number of job openings fell by an outsized -256,000 to just over 7 mln, the lowest in five months. Analysts had expected them to rise to 7.23 mln so this is a notable miss. And the fall was broad-based in most sectors and most regions, although the South did manage to book a small rise.

The US Conference Board reported a sharp fall in consumer sentiment in September, in fact taking it to its lowest since 2014. While it isn't as low as the University of Michigan survey yet, it is tracking in the same negative direction, both for its Present, and Expected monitoring of sentiment.

Yesterday we reported a positive Dallas Fed factory survey, even if it is suffering high cost challenges. But today's update on the Texas services sector is not so bright with a 'stall' reported and their first decline in four months. They also reported increased strain in input and selling prices.

Canada reported that their August economic activity rose, their tenth rise in the past twelve months and through a difficult period. That likely puts their GDP up +1.7% real from a year ago. Their 'resilient economy' may be enough for the Bank of Canada to start hiking rates again to contain the inflation pressures building again. The next rate review there is on October 28 (the same as the RBNZ).

In China, businesses there are said to be facing weak demand ahead of their Golden Week holiday. And that has pushed the Chinese central bank to lower a technical interest rate. And Beijing is to start subsidising mortgage interest rates for low income borrowers, aiming to create demand in their housing markets.

EU business and consumer sentiment sagged in September, but to be fair the overall level is still sitting close to its long-run average. The movement is basically due to lower confidence by consumers as they look forward to winter and an uncertain energy outlook.

In Australia, the RBA delivered the expected +25 bps rate change. That raises th