Inflation spreads

Kia ora,

Welcome to Thursday’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 higher inflation is spreading everywhere.

But first, new housing starts in the US were unchanged in October from September, but a small rise was expected. That extends the 2021 tailing off that began in the second quarter, probably due to supply-chain issues mostly. However, building permits did rise in October after an unexpected drop in September.

This constrained supply is driving up US house prices. And now both their huge mortgage guarantors are having to back mortgages of sharply increased size.

The Canadian inflation rate in October came in at 4.7% as expected, but that is up from 4.4% in September. That's a 19 year high.

The flooding in British Columbia isn't easing and Vancouver is largely cut off; certainly its rail link is.

Data out yesterday for Japanese machinery orders for September didn't rise from August and that wasn't expected - although it is probably due to supply-chain issues rather than demand. However, it is expected to recover over the next three months.

Japan's exports for October were slightly softer than expected with their growth slowing, but again, probably due to manufacturers supply-chain issues. It was still +9.4% higher than the same month in 2020. The imported +19% more from New Zealand, but exported +59% more to us for an expanding surplus with us.

In India, they have an air pollution crisis, one that is shutting down cities, including New Delhi. Even their rich are frustrated now.

In the UK, CPI inflation rose to 4.2% in October, up from 3.1% in September and above the expected October rate of 3.9%. That's a ten year high. What was startling about this data is that it was up +1.1% in October from September, a pace that surely can't be repeated. The main upward pressure came from electricity, gas and other fuels.

In Australia, the iron ore price has fallen further, now a -63% drop since its recent peak and now back to levels it was at in 2019-2020.

The UST 10yr yield opens today at 1.60% and -3 bps softer than this time yesterday. 

The price of gold will start today up +US$11 to US$1867/oz.

And oil prices are weaker by about +US$2 at just over US$78/bbl in the US, while the international Brent price is now just on US$80.50/bbl.

The Kiwi dollar opens today marginally weaker at just on 69.9 USc. Against the Australian dollar we are +½c firmer at 96.2 AUc. Against the euro we are little-changed at 61.8 euro cents. That means our TWI-5 starts today at 74.4 and unchanged since this time yesterday.

The bitcoin price has slipped again since this time yesterday, down -0.4% to US$60,338. Volatility over the past 24 hours has been moderate at just over +/-2.3%.

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.