OECD sees slowdown in 2023, not recession; US exhibiting that slowdown already; China's pandemic struggles spread; eyes on RBNZ; UST 10yr 3.77%; gold and oil up; NZ$1 = 61.4 USc; TWI-5 = 70.7

Here's our summary of key economic events overnight that affect New Zealand, with news interest rate markets are betting on a change of tune by the US Fed.

But first up today, the OECD says global economic growth will likely slow to +2.2% pa in 2023 from +3.1% this year, as the world economy faces persistently high inflation levels, rising borrowing costs, energy supply shortages, and the ongoing war in Ukraine. Europe and the US are set to be the hardest hit, they say, with economic growth rates in both areas easing to only +0.5% from +3.3% and +1.8% respectively.

For New Zealand, they say real GDP growth is projected to slow to +2.1% this year but just +1.0% in 2023 and +1.2% in 2024. Private consumption will weaken with lower employment growth and rising mortgage-servicing costs, they say. Tighter credit conditions and weakening demand will weigh on business investment. Unemployment will increase and headline inflation will fall throughout the projection period. They reckon there is a risk that house prices fall more than assumed, accentuating the downturn. Most of this will come just as the election campaign gear up.

For Australia, they say their real GDP will grow by +4% in 2022, +1.9% in 2023 and +1.6% in 2024. Elevated inflation is eroding households’ purchasing power there. As growth slows, the tightness in their labour market is expected to subside. Inflationary pressures will diminish as those labour market cool and supply chain bottlenecks ease. A stronger than expected decline in house prices is a key risk to their growth outlook too.

And separately, the OECD says G20 merchandise trade fell for the first time in two years in value terms in Q3 2022, retreating from the recent high levels in Q2 2022. In current US dollars, exports and imports contracted by -1.3% and -1.1%, respectively, as global demand began to slow and most commodity prices receded from their peaks.

Meanwhile in the US, retail sales on a same-store basis improved in the latest survey for last week, but rising on a year-on-year basis only by the CPI rate.

Factory activity in the Richmond Fed's district remained quite subdued, changing little in October from the overall negative situation in September which was its lowest point since May 2020. New order levels were weakest, but commitments to capital spending remain very high, so firms do expect improvement. Wage rate gains remained unusually high.

There are no updates on the Chinese Covid situation today. But the restrictions are extended as the case numbers continue to rise.

As a side note to the Qatari football World Cup, we should note that most of the big sponsors are Chinese companies, the key construction companies were Chinese, and the Chinese support the anti-diversity stance of the hosts. The Chinese national team may not have qualified to play in the tournament, but the "Chinese national team" has definitely "qualified" to be one of the biggest "players" in this tournament.

We should also note that there is no resolution to the deadlocked Malaysian election.

In Europe, despite some improvement in both November and before that October, consumer confidence remains at a very low level in the EU, and well below its long-term average. Still the continuing improvement was unexpected in the broader war-facing circumstances.

Today of course, all eyes will be on the RBNZ, Adrian Orr, and their final Monetary Policy Review for 2022 at 2pm today (NZT). The decisions they announce have to carry them through to February 23, 2023. Local analysts are anticipating a +75 bps rise to 4.25%. Offshore analysts are generally anticipating another +50 bps rise to 4.00%. Remember, one year ago, the Official Cash Rate (OCR) was 0.50% and this was raised by +25 bps at that year-ago meeting. The current hiking cycle started on October 6, 2021 when the OCR had been 0.25% since the start of the pandemic in March 2020.

The UST 10yr yield starts today at 3.77% and down -5 bps from yesterday. The UST 2-10 rate curve is little-changed at -74 bps. And their 1-5 curve is more inverted at -84 bps. And their 30 day-10yr curve is also more inverted at -9 bps. The Australian ten year bond is down -2 bps at 3.57%. The China Govt ten year bond is little-changed at 2.85%. And the New Zealand Govt ten year will start today down -4 bps at 4.20%.

Wall Street has started its Tuesday session up +1.0% on the S&P500. Overnight, European markets all ended higher too, mostly by +0.5% although London was up more than +1%. Yesterday Tokyo ended its Tuesday session up +0.6%, Hong Kong ended down another -1.6% and Shanghai ended flat. The ASX200 ended up +0.6%, but the NZX50 posted a -0.2% dip.

The price of gold will open today up +US$7 at US$1742/oz.

And oil prices start today up +US$3/bbl from this time yesterday at just on US$82/bbl in the US while the international Brent price is just over US$89/bbl.

The Kiwi dollar will open today at 61.4 USc and and still oscillating +/-½c. Against the Australian dollar we are a tad higher at 92.6 AUc and a new high since April 2022. Against the euro we are up at 59.7 euro cents. That all means our TWI-5 starts today at 70.7 and up +30 bps.

The bitcoin price is now at US$16,171 and up +1.3% from this time yesterday and off a two year low. Volatility over the past 24 hours has stayed moderate at +/- 2.6%.

There will be no video version today, or podcast due to Covid.

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