American CPI to set the tone

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 American inflation is in the spotlight this week and will set the tone for markets worldwide.

But first up in China, we got an indication of just how serious Beijing is to restart their economy after the pandemic. China's banks extended +¥4.9 tln in new yuan loans in January, well above market expectations of +¥4.0 tln and the largest amount of new loans ever. It is a monumental amount of new lending for just one month, +NZ$1.15 tln and for perspective for all of 2022, the approved a record +¥21.3 tln. In just January 2023 alone it raised that by almost a quarter! They aren't doing things by halves here and won't die wondering.

China also reported January inflation at a +2.1% rate although the rise from December was at an annualised rate exceeding +9%. Still, this was very much as markets expected. The producer price deflation however seems to be staying minor.

That is not the case in Japan where January producer prices came in +9.5% higher than a year ago (as expected), although in the December to January period they vanished.

And staying in Japan, they are about to get a new, and somewhat unexpected Governor of their central bank. He is said to be "Japan's Ben Bernanke". The government's preferred candidate declined the promotion and the actual nominee has analysts searching for his likely policy preferences.

India released December industrial production data and that revealed a solid if 'modest' rise in the context of what they had in the rest of 2022.

In the US, the widely-watched University of Michigan consumer sentiment survey jumped to a thirteen-month high and beating market forecasts. It is just another brick in the evidence pile that a recession is some ways off yet.

On Wednesday, we get the January CPI data and it isn't expected to dip much. It was running at a +6.5% rate in December and is expected to dip to +6.2% in January. But maybe the December to January rate will have moved up at a slower pace, possibly less than a +5% annualised rate. Anyway, markets will be focused on this American CPI data for much of the week.

Across the border, the Canadian economy added +150,000 jobs in January, the most since February 2022 and much more than the market expectations of just a +15,000 increase. It is another impressive Canadian economic metric.

Meanwhile, the Canadian loan officer survey reported improved lending conditions. In fact their non-housing lending conditions turned positive for the first time since 2020 when monetary conditions were much looser.

In Australia this week, they will release their labour market data on Thursday and it is expected to be positive (adding +20,000 new jobs). But this news will probably be overshadowed by the central bank's governor giving testimony at their Federal parliament to a largely unsympathetic audience who wants to know why he has turned suddenly hawkish. His seven year term is up in September 2023 and it is increasingly unlikely the new federal Labor Government will reappoint him.

The UST 10yr yield starts the week at 3.74% having risen +21 bps last week. 

The price of gold will open today at US$1866/oz and up +US$3 from this time Saturday.

And oil prices start today unchanged at just under US$80/bbl in the US. The international Brent price is now just over US$86/bbl.

The Kiwi dollar is still just under 63.1 USc. Against the Australian dollar we are little-changed at 91.2 AUc. Against the euro we are also unchanged at 59.1 euro cents. That all means our TWI-5 starts today at 70.6 and actually very little-changed over the past week.

The bitcoin price is now at US$22,025 and up +1.5% from this time Saturday. Volatility over the past 24 hours has remained modest at +/- 1.1%.

We trust you remain safe during Cyclone Gabrielle's landfall.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we will do this again tomorrow.