World divides into a fast-track and slow-track set

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 investor risk sentiment continues to improve as the prospect for stronger interest rate rises.

More inflation data was reported overnight but it is clear there are two global tracks emerging, depending on the state of the economic recovery.

Canadian inflation has been reported at 4.4% and slightly higher than expected. Core inflation is up to 3.7% and also higher than expected. Inflation is running at an 18 year high in Canada now.

US CPI inflation has already been reported at 5.4%.

They join the EU where inflation was reported at 3.4%, as expected and above August levels. It was held up by Germany (+4.1%) and Spain (+4.0%), and restrained by France (+2.7%) and Italy (+2.9%).

India reported almost 4.4%.

Australia has reported 3.8%, and New Zealand of course surprised with its 4.9% leap.

But not all large economies are getting high levels of price rises at the consumer level - just those where economic activity is expanding at healthy levels.

Those where recovery is waning or a bit of a struggle are not getting strong price increases. That includes British inflation slipped to 2.9% and that was not only lower than in August, it was lower than expected. Demand conditions are tough there making price increases hard to stick. That also includes Japan (-0.4%)  and China (+0.7%).

China also released its official data on house prices and that recorded a stall in growth, but not the sharp falls others have noted in regional pockets. But it is very noticeable from the city data released, more than half are showing declines in September from August. And 15% of the cities reported now have year-on-year declines in this official data.

Separately in China, Evergrande’s plan to sell it's property services division for US$2.6 bln to ease its liquidity crunch has collapsed at the last minute. The whole situation is very opaque in a country where transparency for investors is rare.

Meanwhile, China also reported foreign direct investment data and it was healthy, especially from countries linked to it via its Belt & Road initiative. The September increase is off a low base however.

Taiwanese exports keep going from strength to strength, up more than +24% from September a year ago and a new all-time record high. And they are now +40% higher than in September 2019.

The UST 10yr yield opens today up +1 bp at 1.64%. 

The price of gold has risen +US$18 to US$1787/oz, a +1% gain mainly because of the depreciation of the greenback.

And oil prices are little-changed at still just under US$83/bbl in the US, while the international Brent price is also still just under US$85/bbl.

The Kiwi dollar opens today further on the rise and now at just over 72 USc and up another +½c since this time yesterday. Against the Australian dollar we are now at 95.9 AUc. Against the euro we are up again at 61.8 euro cents. That means our TWI-5 starts today at just on 75.4, and now well over the top of the 72-74 range of the past eleven months. We have now appreciated +1.4% since the surprise CPI result on Monday.

The bitcoin price has risen a sharp +5.5% from this time yesterday and is now at US$66,429. That is now a new all-time high. And that puts it at NZ$92,225, also a record, and also the first time over NZ$90,000. Volatility over the past 24 hours has been high at just over +/-3.3%. The arrival of derivative products around cryptos is driving this latest surge.

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.