Of ruts, twists, stalls & downgrades

Kia ora,


Welcome to Monday’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 China is still stuck in its rut, the US twisted by tariff talk, Japan sees progress, and Russia's currency gets a big downgrade.


But first, this coming week will end with the US non-farm payrolls report, and analysts expect a sharp recovery to +183,000 added jobs, far higher than the unusual (pre-election) October report of just +12,000. Before that they will deliver their JOLTs report, and there will be factory order data, more PMIs, and more sentiment surveys.


India will review its official interest rate. South Korea and Turkey will report CPI inflation rates. Australia will report its Q3-GDP on Wednesday. And there will be many other PMI reports.


In fact, over the weekend, China said (www.stats.gov.cn/sj/zxfb/202411/t20241130_1957624.…) its official factory PMI made a tiny improvement to maintain its small expansion. It was its second 'positive' result in a row and its best since April. At the same time the minor positive reading for its services sector disappeared. Taken together, this paints a picture of an economy without any expansion. We will get the Caixin PMI data tomorrow, and that has tended to be marginally more positive recently.


In Japan, their central bank boss said (asia.nikkei.com/Editor-s-Picks/Interview/Japan-wag…) they are "approaching" a decision with a view they will raise their policy rate from the current 0.25% to 0.50%. They like their current data track, but they hesitate because they don't have a firm fix on the damage the incoming US Administration will do.


"I am not worried much about Japan's financial system because ample capital, stable deposits and access to liquidity have been ensured," he said. In contrast, he noted that "non-bank financial institutions are posing a grave problem" in the US and added that "they deserve to be closely monitored."


Japanese consumer sentiment recovered somewhat (www.esri.cao.go.jp/en/stat/shouhi/shouhi-e.html) in November, still positive, but nothing like what they had from December to March earlier in the year.


Japanese retail sales rose +1.6% (www.meti.go.jp/statistics/tyo/syoudou/result/sokuh…) in October, recovering from the weak September expansion, but still much lower than what they have achieved monthly since early 2022. At least it is back heading in the "right" direction.


And Japanese industrial production rose (www.meti.go.jp/statistics/tyo/iip/result-1.html) +1.6% in October from a year ago, ending two months of retreat


South Korea's industrial production rose (kostat.go.kr/board.es?mid=a10301010000&bid=216&act…) in October at a very strong +6.3% pace from a year ago, after the unusual stumble in September, returning to the average expansion they have had since September 2023. So it will be no surprise to learn that their exports kept rising strongly in October, as did their imports.


However Korean retail sales slipped (kostat.go.kr/board.es?mid=a10301010000&bid=214&act…) in October to be -0.8/% lower than a year ago


India's economic expansion is 'consolidating', delivering (www.mospi.gov.in/sites/default/files/press_release…) a somewhat disappointing Q3-2024 result. Their economy rose +5.4% from the previous year, slowing from the +6.7% expansion in Q2-2024 and well below market expectations of a +6.5% increase. It was their softest pace of growth since Q4-2022. Still, even at the latest lower rate, it is rising on a per capita basis.


This miss adds pressure on the Reserve Bank of India to cut its policy interest rate which currently stands at 6.5% (www.rbi.org.in/) . They review it next on Friday.


The Indian currency fell on the news to a record low (tradingeconomics.com/inrusd:cur) against the USD. Although not a record low against the NZD, it is has been close to that since the whole period from end of 2020.


In the US, early reports (newsroom.mastercard.com/news/press/2024/november/m….