Kia ora,

Welcome to Tuesday’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 today will be dominated by the RBA rate review, especially as US financial markets are on holiday (Presidents Day).

Meanwhile, Canadian housing starts rose in January from December and came in +3.7% higher than year ago levels. Montreal and Vancouver demand drove the increases.

Across the Pacific, the Japanese economy continues its good rebound with their growth rate beating estimates, and by quite a bit. Japan’s GDP grew by +0.7% qoq in Q4-2024, accelerating from an upwardly revised +0.4% expansion in Q3. This marked the third consecutive quarterly growth, on the back of a strong rebound in business investment. Year on year it is up +2.8% which was very much better than the +1.0% expected. This is very good for Japan, who has struggled to expand for a long time. And don't forget this is the world's fourth largest economy. (Japan is als one of those economies that looks better in PPP terms.)

Singapore's exports actually fell in January and by -3.3% - and that was much more than the -0.3% dip expected.

Chinese new vehicle sales slipped in January from December. Not only was it the usual seasonal dip, it was more than expected, and the year-on-year change also dipped slightly which is not something we have seen since the pandemic.

It was a similar story for Indian exports, which fell in January from December, to be -1.3% lower than the same month a year earlier. India is not a powerhouse exporter, with theirs only about 10% of China's, and less than Taiwan. They export at about the same level as Australia and Vietnam. Those weak exports meant its trade deficit widened.

At 4:30pm we will get the latest update to the RBA's cash rate target. Markets expect a -25 bps cut to 4.10% but you have to say the conviction in the market is not high. All three possibilities are still live; a cut, no change, or even a hike given their highish inflation levels. We will know soon enough.

The UST 10yr yield is at 4.49%, up +1 bps from yesterday at this time.

The price of gold will start today at just under US$2898/oz and up +US$15 from yesterday.

Oil prices are up +50 USc at just over US$71/bbl in the US and the international Brent price is unchanged at US$75/bbl.

The Kiwi dollar is now at 57.4 USc and unchanged from yesterday. Against the Aussie we are down -10 bps at 90.1 AUc. Against the euro we are up +20 bps at 54.8 euro cents. That all means our TWI-5 starts today just over 67.2, and down -10 bps from this time yesterday.

The bitcoin price starts today at US$95,470 and down another -1.7% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.0%.

You can find links to the articles mentioned today in our show notes.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston. And we will do this again tomorrow.

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