Global rates rise as some Chinese data improves

Kia ora,

Welcome to Tuesday’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 of some improved data out of China, but it isn't all 'good'.

But first in the US, the factory survey for the New York region has maintained its strong situation. New orders and shipments posted substantial increases, and unfilled orders rose. Delivery times were significantly longer. Employment grew at its fastest pace on record, and the average work week increased. The prices paid index held near its record high, and the prices received index reached a new peak. Firms planned significant increases in capital and technology spending.

In Canada, with the re-election of the Trudeau Government, a campaign promise is about to be enacted with a special 3% increase in the tax on financial institutions who make more than C$1 bln in annual profits. They are also about to collect a special fee from them too, called the Canada Recovery Dividend. Both are expected to raise C$2.5 bln per year over the next four years with the monies going into a housing fund to ease affordability.

In Japan, the first look at their Q3 GDP data isn't flash, falling at a -3.0% annual rate after a +1.5% rise in Q2. And that poor result was matched by Japanese industrial production data for September. Since September, however, most Japanese data has improved however.

China's retail sales rose by +4.9% in October 2021, faster than a +4.4% increase in the previous month and beating market expectations of +3.5%. This was the strongest pace of growth in 3 months, as consumption strengthened after pandemic outbreaks in some regions eased. But in a longer perspective, this is ho-hum for China.

Industrial production also shifted slightly higher, and that also beat a tame expectation and the economic expansion remains quite tepid.

Electricity production fell again and has been falling since July. But at least it was +3.0% higher than the pandemic damaged month a year ago. Generation from coal was up +5.2%, from nuclear up +17%, but a big -12% decrease was reported for hydro power generation.

But easing back were Chinese house prices which rose +3.4% in October from a year ago, down from +3.8% in September. But that means they fell in October from September, something that hasn't happened there since 2015. And new construction starts in January to October also fell -7.7%, compared to a year earlier. So both supply and demand eased lower in October, quite unusual for this huge housing market.

Certainly, Chinese steel futures are trading very much lower and the wind goes out of the Chinese property market.

We should also note that farm fertiliser prices are rising and fast, now sitting at record high levels in North America. The same is happening everywhere, and may well spill over into food prices if high input costs curb supply.

The UST 10yr yield opens today at 1.62% and +5 bps higher than this time yesterday. 

The price of gold will start today down -US$2 to US$1863/oz.

And oil prices are lower at just under US$79/bbl in the US, while the international Brent price is now just under US$80.50/bbl and down -US$1 from yesterday.

The Kiwi dollar opens today a little firmer at 70.6 USc. Against the Australian dollar we are soft at 95.9 AUc. Against the euro we are firmish at 61.8 euro cents. That means our TWI-5 starts today at 74.8 and slightly higher than this time yesterday.

The bitcoin price has firmed slightly since this time yesterday, up +0.7% to US$64,116. Volatility over the past 24 hours has been moderate at just over +/-2.1%.

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’ll do this again tomorrow.