Here's our summary of key economic events overnight that affect New Zealand with news forecasts for global economic expansion are being downgraded on the consequences of the Russian invasion, the Chinese slowdown, and the worrying rise in food prices globally.
But first, China reported that its economy expanded at an annual rate of +4.8% in the March 2022 quarter, better than analysts estimates of +4.4% and the +4.0% rate in the prior quarter.
But this result defied electricity production that actually shrank marginally in March (-0.2%). It also defied retail sales that also shrank in March (-3.5%). And housing sector activity was unusually weak in the period. Further, household incomes were reported up +4.2% and less than the rise in household expenditures which were reported up +6.1% over the year-ago equivalent quarters. Their jobless rate rose sharply to 5.8% in March from 5.5% in February and now back near its pandemic highs.
Chinese industrial production did rise +5.0% above the same quarter a year ago but that was despite their capacity utilisation rate being its lowest since the pandemic hit in 2020. Overall, it is a tough ask to reconcile their 'good' reported Q1 GDP outcome with a general slide in most factors that go into it.
Things are unlikely to have improved in April. And because of the tough actual trading conditions, China has pulled the trigger on more generous credit expansion settings. As expected it has cut its reserve ratio, this time by -25 bps. After this cut, the weighted average deposit reserve ratio of financial institutions becomes just 8.1% - that is, on average their financial institutions now only need 8.1% of reserves backing up their all their new lending activity. China's prime loan rates are expected to fall soon too, and their term deposit rates could fall too. But in the grand scheme of things, it has been a modest set of moves so far.
Far more impressive is its rush to get big new infrastructure projects approved and underway. They have already approved 32 projects worth NZ$120 bln for new transportation, energy, and high-tech activity. In all of 2021 they approved 90 projects worth NZ$180 bln, so the pace is startlingly faster in 2022. And the private sector is getting regulatory encouragement too. "Multiple tools" is now the catch-cry for how they are dealing with the slowdown.
They need it right now, because the pandemic lockdown in Shanghai is close to causing a widespread business stall there. (Also see this and this.)
In Japan, updated its population statistics to show it has recorded its largest fall ever. There were 125.5 mln people in the country, down -644,000. Tokyo's population shrank for the first time in more than 25 years, and every prefecture recorded a decline, except Okinawa.
In India, wholesale price inflation was recorded as +14.6% in the year to March, higher than expected. Within that, food inflation was up +8.7%. These are troubling rises for a country like India, but not a total surprise given the global situation.
The price of rice rose to a two year high, and the price of corn rose to an all-time high overnight. The price of soybean and wheat remain unusually high too. The grip of high food prices isn't going to work out well unless they normalise soon.
In Europe, there appears to be a building consensus in Europe that they can cut dependence on Russian energy supplies much quicker than they imagined even a month ago. But that will come with higher costs.
The IMF and World Bank are meeting and about to update both their economic forecasts, and its financial stability analysis. They are widely expected to downgrade expectations of economic expansion later today from +4.1% to +3.2% for 2022, effectively signaling that the world is entering a stagflation phase.
The UST 10yr yield starts the week on the shoulders of the +14 bps Friday gain and up another +3 bps today to 2.86%. That is its highest since December 2018. The UST 2-10 rate curve is steeper at +39 bps. Their 1-5 curve is still at +103 bps. Their 30 day-10yr curve is a little flatter at +250 bps. Just about all the other minor curves are quite 'positive' again. The Australian ten year bond is now at 3.03% and unchanged. The China Govt ten year bond is up +3 bps at 2.86%. And the New Zealand Govt ten year still at 3.43%.
On Wall Street, the S&P500 has started its week up +0.3%. Overnight, European markets were all closed for Easter Monday. Yesterday Tokyo ended its Monday session down a sharpish -1.1%. Hong Kong was closed. Shanghai ended down -0.5%. Obviously both the ASX and NZX were closed.
The price of gold starts today at US$1978/oz and up +US$4 since this time yesterday.
And oil prices are +US$2.50 higher at just over US$108.50/bbl in the US while the international Brent price is now just over US$113.50/bbl.
The Kiwi dollar will open today a little softer at 67.3 USc. But against the Australian dollar we are unchanged at 91.5 AUc. Against the euro we are marginally softer at 62.4 euro cents. That all means our TWI-5 starts today at 73.5 and a little lower.
The bitcoin price is up +0.8% from this time yesterday at US$40,416. Volatility over the past 24 hours has been moderate at just over +/- 2.4%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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