Optimism seeps back

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.

And today we lead with news all eyes will be on the 2pm RBNZ announcement of its Monetary Policy update where it is widely expected that a +50 bps rate increase will be announced.

But first up today there was another dairy auction earlier today and it was a lame affair. Overall prices fell -1.5% in USD terms, but were virtually unchanged in NZD terms (+0.3%) because of a shift lower in our exchange rate. The key WMP price fell -2.0% and SMP was down -2.4%. But there were offsetting gains for butter (-3.8%) and cheddar (+1.5%), indicating returning demand from the Chinese foodservice sector. The recent storms here that will curtail overall milk supply seemed to have very little impact on the attitude of buyers.

In the US there was a surprising improvement in their services PMI, shifting from contraction in January to and expansion in February according to the internationally-benchmarked Markit version. Their factory sector is still contracting however, but at a lesser rate this month than last. The growth in new orders is slowing, but just at a slower rate. This is more evidence they may either only have a soft landing, or possibly no recession at all.

Major retailer Walmart said it is gaining market share in the grocery sector. And that includes among higher-income households that are spending cautiously.

However their existing home sales market is still retreating. In January it fell -0.7% after a December -2.2% fall. That has been a disappointment because a +2.0% rise was anticipated. These volumes are -37% lower than a year ago now, and the January activity is now a 12th straight month of decline.

Canada release its inflation rate for January today, coming in lower at 5.9% when a 6.1% rate was expected and December was at 6.3%.

Canadian retail sales for December ran +7.3% ahead of year ago levels, so ahead of inflation there.

In Hong Kong, HSBC released a sharp rise in earnings for 2022. But it is also provisioning sharply higher for its exposure to the Chinese commercial property sector. They said that they expected credit losses and other impairment charges were raised to US$3.6 bln for 2022, sharply higher than the US$1.1 bln for the first half and a reversal from a positive US$928 mln for 2021.

There were flash PMI results out for the EU and Germany overnight too, and both were similar to the US, showing a strengthening services sector and a stable or slipping factory sector.

However, German economic sentiment is definitely improving.

In Australia, the latest RBA minutes show clearly that they never considered pausing their string of rate hikes in their campaign against their stubborn inflation impulse.

And staying in Australia, job site Seek has shifted its guidance for its full-year revenue and profit to the lower end of the forecast range, as the pandemic-fueled hiring spree loses steam.

The UST 10yr yield starts today at 3.94% and up +8 bps from yesterday and its highest since mid-November. 

The price of gold will open today at US$1834/oz and down -US$7 from this time yesterday.

And oil prices start today little-changed US$76.50/bbl in the US. The international Brent price is still just over US$82.50/bbl.

The Kiwi dollar is at 62.2 USc, a tad lower than this time yesterday. Against the Aussie we are little-changed at 90.5 AUc. Against the euro we are lower at 58.3 euro cents. However that all takes the TWI-5 below 70 for the first time since November, now at 69.9.

Bitcoin has stayed up over the US$25,000 level today and is now at US$25,243 and up +0.9% from this time yesterday. Volatility over the past 24 yours has been modest at +/-1.9%.

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.