Dairy prices slip again; US retail up, industrial production up; Canada CPI down; German sentiment down; China suffers heat and low rainfall; UST 10yr 2.82%; gold and oil drop; NZ$1 = 63.4 USc; TWI-5 = 71.9

Here's our summary of key economic events overnight that affect New Zealand, with news the next risk to global supply chains may come from drought in China.

But first up today, there was another dairy auction this morning and prices were lower again, for the fifth consecutive time, and the 10th time in the past eleven events. That means from its recent peak in early March, overall prices are now down by more than a quarter, a bear market for dairy products. They were down -2.9% this time from the prior event, but worse, down more than -4% in NZD terms. If there are any positives, they come from the "at least it wasn't as weak as markets expected" variety. Analysts will be less committed to their early 2022/23 farm gate milk payout forecasts now. Then again, there were some below-the-line positives in SMP and cheese especially, so perhaps they will see this as the bottom of the current market.

Elsewhere, global data on offer was also less than positive.

Perhaps bucking the trend was the recovery in the weekly US retail pulse monitoring by the Redbook survey, with good same-store year-on-year growth above inflation and putting behind it the prior week's dip.

But American housing starts sagged badly, down almost -10% in July from June to be -8.1% lower than year-ago levels. This was much weaker than expected. Building consent levels were weaker too. It may not be much consolation, but the Americans don't have this trend on its own - it has shifted to a global trend where housing is sagging on all fronts now, and may well do for a while yet.

But picking up some of the pace, and perhaps more than expected, was American industrial production in July. June's data was revised up too. This is now +3.9% above year-ago levels (real), and puts behind it two weakish months.

Their CASS freight index of trucking activity softened in July, although still within the elevated range it has been in since early 2021. Their rail traffic data is suggesting a softening as well. Some observers see these softening trends spreading out ahead into Q4-2022. One reason is that supply chains are now 'full' and inventory holders are nervous they have the right goods in stock. If these expectations come to pass, the rise in industrial production might falter.

Canada reported its July CPI data today, at 7.6% which was as expected and lower than the June 8.1% rise. It is another inflation data point that suggests the peak is passed for inflation. But this is not expected to slow their central bank's push to raise their policy rate.

And Canada reported better than expected housing starts for July, so that is a positive for them.

The German ZEW sentiment index isn't improving however, coming it at its lowest since the GFC.

In the UK, down-market supermarket chain Iceland is selling groceries on a buy-now-pay-later basis, one of the world's first supermarkets to offer the 'service' as households there wrestle with rising food bills. 

In China, normally at this time of year we note excessive flooding along the big river basins like the Yangtze. But this year it is the opposite with very low flows and very high temperatures. This does not bode well for farming, nor the industry relying on hydro-electric power from their river systems. There is now talk of factories closing due to electricity shortages. Brands like Apple and Toyota are having supply issues.

There are no updates on yesterday's reports China is about to block Australian and New Zealand beef imports.

In Australia, an unsurprising RBA set of minutes from the last meeting has most observers convinced they will raise their policy rate another +50 bps again in early September to 2.35%. Some sections of these minutes reflected concerns of downside risks, but the overall tone was hawkish, especially relating to their strong labour markets.

The UST 10yr yield starts today at 2.82% and up +3 bps from this time yesterday. The UST 2-10 rate curve is more marginally inverted today, now at -43 bps and their 1-5 curve is also fractionally less inverted at -30 bps. Their 30 day-10yr curve is now at +63 bps and a little steeper from this time yesterday. The Australian ten year bond is down -1 bp at 3.28%. The China Govt ten year bond is down -3 bps at 2.65%. And the New Zealand Govt ten year will start today up at 3.39% and down -8 bps from yesterday's levels. Don't forget we have a full RBNZ MPS at 2pom today, certain to deliver another +50 bps rise.

Wall Street is higher today, with the S&P500 gaining +0.5% in later Tuesday trade. Overnight European gained about +0.5%. Yesterday, Tokyo ended unchanged. Hong Kong fell -1.1% with a sharpish selloff, and Shanghai closed with another minor slip. The ASX200 ended its Tuesday session up another +0.6% and that was almost matched by the NZX50's +0.5% rise.

The price of gold will open today at US$1776/oz which is down -US$2/oz from this time yesterday.

And oil prices start today down another -US$2.50 at just over US$86/bbl in the US, while the international Brent price is now just over US$92/bbl. These prices are now near six-month lows.

The Kiwi dollar will open today at 63.4 USc which is -¼c lower than this time yesterday. Against the Australian dollar we are a bit lower at 90.3 AUc. Against the euro we have also slipped to 62.3 euro cents. That all means our TWI-5 starts today at 71.9, and down -20 bps.

The bitcoin price is down -0.9% from this time yesterday at US$23,894. Volatility over the past 24 hours has been modest at just over +/-1.2%.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».