China still battling deflationary forces; China food price rises stay high; Japanese households pull back; Taiwanese trade healthy; American sentiment positive; UST 10yr at 4.30%; gold and oil lower; NZ$1 = 59.7 USc; TWI = 68.8

Here's our summary of key economic events overnight that affect New Zealand with news China's battle with deflationary pressures shows no sign of being won.

But first, in the week ahead locally, we will get the REINZ result for October some time this week. And September migration data on Wednesday. Internationally, all eyes will be on American consumer and producer inflation data, retail sales, and speeches by Fed officials, as investors seek clues on their monetary policy outlook in the wake of 2nd Trump Presidency.

In China, new yuan loans, fixed asset investment, industrial production, retail sales, and the house price index will be all be released this week. In Australia, their October labour force data will come out, the NAB business confidence survey, and Westpac consumer confidence indexes are expected. Finally, we should watch Indian inflation data.

Over the weekend, China said its inflation rate came in at +0.3% in the year to October (and half the modest August level), still giving them disinflation as they stare deflation in the face. Deflation is already in producer prices, and it got slightly worse in October, at -2.9%. That's their fastest fall in almost a year. Both movements were small but they are going the wrong way for them.

Among the CPI items, we can see that food prices rose +2.9% in the year to October, so households are feeling some noticeable inflation pressure. Costs eased for fresh vegetables but they are still +22% higher than a year ago, fresh fruit was up +4.7% on that same basis, and pork up +14%. Prices fell however for eggs (-2.5%), milk (-1.7%), beef (-13%), and lamb (-5.9%). So not much for us to be encouraged about here.

And China has sharply raised (+40%) their local governments’ debt ceiling to ¥35.5 tln (NZ$8.3 tln) when they announced the total value of the current program increase will by ¥10 tln (NZ$2.3 tln). But officials did not announce additional measures to directly stimulate domestic demand, probably disappointing markets that had been hoping the package would also help consumers. They did say however they are 'studying' such moves, probably waiting to see the impact of the challenge from Trump.

Japanese households aren't feeling all that great either. Household spending fell by -1.1% in September from a year ago, a smaller decline than the -1.9% drop in August and better than market expectations for a -2.1% decrease. This marks the seventh month of reduced household spending in 2024.

Foreigners love the place however, not only as tourists, but as investors too, raising their equity investment stakes in each of the past six months.

Taiwanese exports rose +8.4% from a year ago in October, building from a +4.5% rise in the previous month. Imports were up +6.5%, a slower rate of increase than we have seen in the prior four months. Robust Taiwanese trade contrasts with what its unfriendly and jealous neighbour is able to achieve.

Across the Pacific, Americans remain cautious taking on new personal debt. That rose by only +US$6 bln in September, a slowdown from the almost +$9 bln rise in August and well below the expected +US$14.5 bln increase. Now the average balance is US$23,087, up from US$18,008 four years ago. These are not actually high levels. (The divisor we used is the total population 18 years and older.)

For the first time since May 2020, the US Fed saw its balance sheet assets fall below US$7 tln last week. That is a -US$53 bln fall in a month, a -US$2 tln fall since it peaked at US$8.96 tln in April 2022.

Before their election, consumer sentiment as tracked by the University of Michigan survey, rose for the fourth consecutive month, rising 3.5% to its highest reading in six months. While current conditions were little changed, the expectations index surged across all dimensions, reaching its highest reading since July 2021.

The November WASDE report from the USDA sees 2025 with more world wheat, slightly less coarse grains, and more rice. The world's ability to feed itself seems stable, without unusual price pressures. They expect to import more beef from Oceania. In a change they now expect more US milk production even though cow herd numbers might slip slightly. Access to this market now depends on the incoming capricious Administration.

The October Canadian labour market report showed a +14,500 rise in jobs, less than expected. But full-time jobs rose more than +25,500 and part-time jobs slipped -11,000, a virtuous twist.

In Australia, they released life expectancy data at the end of last week - and it declined for a second straight year. An Aussie born today is expected to live to 83.1 years (boys less, girls more). The years 2022-2023 saw the highest number of COVID-19 deaths with 15,982 in Australia, which was up by 4,100 from 2020-2022. (The emergence of the antivax movement and weird alternative approaches won't be helping either.) As a result, life expectancy has fallen by 0.1 years for men and 0.2 years for women over this period. Despite this decrease, Australians still have a higher life expectancy than many comparable countries, like New Zealand (82.8 years), the UK (82.2 years), the US (77.6 years), and Canada (81.5 years). Today, a 60-year-old Australian man can expect to live another 24.2 years, and a woman another 27.1 years.

The UST 10yr yield is now at just on 4.31% and up +1 bp from Saturday. A week ago it was at 4.37%. The key 2-10 yield curve is now less positive, by +6 bps. Their 1-5 curve inversion is inverted by -12 bps. And their 3 mth-10yr curve inversion is still inverted by -28 bps. The Australian 10 year bond yield starts today at 4.56% and down -3 bps. The China 10 year bond rate is little-changed at 2.12%. The NZ Government 10 year bond rate is also unchanged at 4.67% but up +18 bps from a week ago.

The price of gold will start today at US$2684/oz and down -US$1 from this time Saturday.

Oil prices are +50 USc firmer at US$70.50/bbl in the US while the international Brent price is now just under US$74/bbl.

The Kiwi dollar starts today at 59.6 USc and down -10 bps from this time Saturday. Against the Aussie we are down -10 bps at 90.6 AUc. Against the euro we have dipped -10 bps as well to 55.6 euro cents. That all means our TWI-5 starts today at just on 68.7, and down -10 bps from Saturday but unchanged from a week ago.

The bitcoin price starts today at US$79,831 and up +4.9% from this time Saturday. Volatility over the past 24 hours has been moderate at just on +/- 2.9%.

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