Business
Kia ora,Welcome to Tuesday's Economy Watch where we follow the economic events and trends that affect New Zealand.I'm David Chaston and this is the International edition from Interest.co.nz.Today we lead with news China is facing a major energy crisis that could have worldwide implications just as it tries to deal with its Evergrande property crisis.But first in the US, American durable goods orders rose more than expected in August, up +10% above the July level, and up +25% above the pandemically-affected August 2020 level. A more relevant comparator is the August 2019 level and they were +5.3% higher than that. So, overall a very positive result.Further, new orders for capital goods were similarly impressive and also a new record high. Boardrooms seem to be investing heavily again. But with both sets of data you can't help but wonder what the impact of higher prices has been on the results.However, the Dallas Fed factory survey, while still expanding, did pull back in terms of overall general business conditions. In fact, the forward outlook turned negative in the face of hesitating order levels and sharply rising costs.Meanwhile the latest update of the US federal budget shows a narrowing of their large deficits, down -7% lower than last year and down to -12.5% of US GDP from -16.1% in 2020. By the way, there is still no resolution to the US debt limit crisis.Taiwanese industrial production is still rising at a fast clip, but their retail sales shrank again in August, but not be as much as they did in July. As the northern hemisphere heads into its winter season, and with coal burning unfashionable these days, the pressure is on natural gas prices and supplies. In fact prices are already up +125% since the beginning of June and the sky seems to be the limit. Russia will be the main beneficiary in Europe. Australia will also be a huge beneficiary. China will also be paying the price of their relative energy deficiencies and inefficiencies.In fact, the Chinese electricity crisis may turn out to be more important that the Evergrande crisis. High demand and soaring energy prices have forced some Chinese factories to shut down, adding further problems for already snarled global supply chains. And commodity prices are starting to show the impact of a sudden drying up of demand from Chinese buyers as their plants shut down. Nickel and bauxite are already feeling the squeeze. Coal may get a lifeline.We have previously noted skyrocketing US margin debt levels issued by brokers to their customers. At the end of June, it was up to US$600 bln. Well, it has grown sharply higher since the and by the end of August it has risen to US$910 bln, an unprecedented growth of +50% in eight weeks and approaching US$1 tln. Reverse repo activity has blown past the US$1 tln level which it reached at the end of July. Now it is more than +30% higher in just eight weeks.The UST 10yr yield opens today at just over 1.48% and up +3 bps from this time yesterday. At one point it hit 1.50%. The price of gold will start today marginally firmer again, up +US$2 at US$1750/oz.And oil prices have moved higher again and by +US$1 to now just over US$75/bbl in the US, while the international Brent price is even higher at just under US$79bbl. The Kiwi dollar opens today at just on 70.2 USc and little-changed since this time yesterday. Against the Australian dollar we are soft at just on 96.3 AUc. Against the euro we now just under 60 euro cents. That means our TWI-5 starts today at 73.6 and like yesterday, still below the top of the 72-74 range of the past eleven months.The bitcoin price has slipped today but only by -0.5%, and is now at US$42,978. Volatility in the past 24 hours has been modest at just over +/- 1.9%.You can find links to the articles mentioned today in our show notes.And get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston and we’ll do this again tomorrow.