Pullbacks everywhere

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 American data is weaker today, and China is on a sharp turn inward.

But first we should note bitcoin's sharp rise in price. However the surge seems to have run out of steam as you read this. But it is enough to note that prices are back to November 2021 high levels.

In the US, durable goods orders slumped in January, primarily driven by sharply lower aircraft orders. That makes them -0.8% lower than the same month a year ago. A pattern of surges and slumps interspersed by 'no-change' months, has developed over the past year. However, non-defense capital goods orders actually rose slightly in January from December but these too were lower year-on-year.

American retail sales at physical stores (on a same-store basis) were up +2.7% last week from the same week a year ago, not really enough to account for inflation.

Consumer sentiment as measured in the Conference Board survey retreated in February, although they noted it is essentially range-bound. It is in a range that is lower than before the pandemic, but at about the same level as pre-GFC.

The US Richmond Fed factory survey reported a sluggish situation in February although expectations for better order levels rose sharply. But the service sector in the same district took a sharpish dip.

However the Dallas Fed services survey for February reported a notable improvement.

The latest US Treasury bond auction for their 7 year Note again brought very good solid support, but the median yield rose from 4.05% a month ago to 4.27% today.

Across the Pacific, Japanese consumer price inflation was expected to slow in January, and that is what happened, falling to 2.2% from 2.6% in December. But core inflation fell slightly less to 2.0% from 2.3%, and that is down from over 3% a year ago. They will be nervous that their long-run deflation tendency is not yet beaten.

Taiwanese export orders recovered from their December dip to be +1.9% higher in January than the same month a year ago.

China has widened its national security laws to include anything Beijing claims is a 'secret', including company information within a foreign owned company. There are harsh penalties for finding out you have shared such information with company bosses who reside outside the country. Obviously the law is wider than just this, but that is one important aspect and it will cast an even darker pall over foreign investment plans. And through the new 'national security' laws in Hong Kong, which extend Beijing laws into the City, businesses there will be concerned too.

The overnight GDP Pulse auctions delivered lower prices for both WMP (down -4.2% from the last full GDT auction and down -3.4% from the prior Pulse event), and SMP (-2.6% and -2.0% respectively). These lower results will have surprised the derivatives market.

The UST 10yr yield starts today at 4.29% and little-changed from this time yesterday. 

The price of gold will start today up +US$6/oz from yesterday at US$2033/oz.

Oil prices are up +US$1 at just over US$78/bbl in the US while the international Brent price is now just over US$82/bbl.

The Kiwi dollar starts today at 61.7 USc and unchanged from this time yesterday. Against the Aussie we are at 94.3 AUc. Against the euro we are still at 56.9 euro cents. That all means our TWI-5 starts today at just under 71.1 and little-changed.

The bitcoin price starts today at US$57,114 and up a spectacular +7.1% from this time yesterday. It is now back to where it was more than two years ago. Volatility over the past 24 hours has been high at +/- 3.9%.

Join us at 2pm this afternoon for full coverage of the RBNZ's February Monetary Policy Statement and OCR review. Financial markets don't expect any rate change, but of more interest is hearing how the RBNZ views the medium term inflation risks.

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

You can 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.