US economic dominance rolls on

Economy Watch

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.

And today we lead with news the American economic juggernaut rolls on, dominating global markets.

American new home sales levels in February missed estimates, but ~7% mortgage interest rates basically explain that. They eased by a minor -0.3% from January to an annualised rate of 662,000, and below market expectations of a 675,000 rate.

Although the Dallas Fed factory survey eased back a bit in March, it is still at levels better than for most of the past two years. A contracting oil patch doesn't really qualify as 'news' any more.

Nationally, the US Chicago Fed's National Activity Index expanded in February and pushing past the January retreat. But to be fair it is in a bit of a yo-yo pattern and has been since the end of the pandemic.

Recent estimates of American economic activity generally agree its economy is expanding at about a +2% (real) clip in Q1-2024. For an economy as large as their, this represents the bulk of the global economic expansion, adding more than +US$1 tln in nominal economic activity at an annualised pace. Nowhere else comes close.

Interestingly, today's UST 2yr bond auction has brought slightly lower yields. It ended with a median 4.54% yield today, compared with the equivalent event a month ago at 4.64%. Investors are not demanding higher yields from these benchmark bonds despite the rise in issuance. The doomsters are still waiting for their moment – it’s been a very long time for them.

In China, the IMF has noted that China needs to take a different path to recovery. It's "fork in the road" comments challenge China's standard paybook to stimulus. Presently they are using their considerable reserves to support the yuan against market challenges.

In Taiwan, retail sales grew an eye-catching +9.3% in February from the same month a year ago, a sharp rise from January on the same basis. This was their sharpest growth in retail activity since June 2023. Clothing and food drove the expansion.

But things aren't so bullish for Taiwanese industrial production which fell -1% from year-ago levels in February darta released overnight.

We have noted the rise and rise in cocoa prices before, but they reached new extreme levels overnight, based on recent poor harvest results in West Africa. US$10,000/tonne (NZ$17/kg) beckons.

The UST 10yr yield will today at 4.26% and up +6 bps from this time yesterday.

The price of gold will start today firmer by +US$10 from yesterday at US$2175/oz.

Oil prices have risen +US$1 to US$81.50/bbl in the US while the international Brent price is now up at US$86/bbl.

The Kiwi dollar starts today at just on 60 USc and marginally firmer that this time yesterday. Against the Aussie we are -¼c lower at just over at 91.8 AUc. Against the euro we are still just on 55.4 euro cents. That all means our TWI-5 starts today under 69.3 and little-changed.

The bitcoin price starts today up strongly at US$70,247 and a +7.4% rise since this time yesterday. Volatility over the past 24 hours has been very high at just on +/- 4.3%.

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.