Debt, debt, and more debt

Kia ora,Welcome to Thursday’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 have a quick news wrap-up so you can get back to your 'time-off'.First, after the sharp fall in the two week Christmas holiday period, American mortgage applications recovered as strongly last week. Average mortgage rates were little-changed at 6.81%, plus points.More generally, Bloomberg is reporting that most large economies are about to issue very large volumes of bonds in 2024, almost US$2.1 tln worth and a +7% rise from 2023. This comes at the same time central banks are selling down their own holdings. It will be up to private investors to take up these unprecedented volumes and there is likely to be strong upward pressure on interest rates as a consequence. European bond sales have already hit a record this week at more than €108 bln, and there’s still two days of issuance to go.Meanwhile, an ECB official says the eurozone needs to be ready for another downturn.Tomorrow we will get the US CPI data and that is expected to come in little-changed at 3.2% and well above its policy targets. This, along with still-strong labour markets probably means the bond market pricing of five -25 bps rate cuts in 2024 might be somewhat aggressive.And we are also likely to get China's new bank loan data for December which is widely expected to come it at +¥1.4 tln (+NZ$315 bln) and a sharp increase from the November ¥1.1 tln. That would take the 2023 bank debt increase to a massive +¥23 tln (+NZ$5.2 tln) which incidentally is more bank debt issued than the 2023 GDP of countries like the UK. Beijing is pushing out new debt at scale as a way to keep its economic activity expanding, using its five big policy banks as the funnel for most of it.In Australia, they released their November monthly CPI indicator which rose at a 4.3% rate. That however is down from 4.9% on October and 5.6% in September; going the right way but still far above where they need it to be.Interestingly, the fastest rises were for insurance premiums, up more than +16%. And a new report out overnight noted that more than 0.5 mln Aussie homes will be uninsurable by 2030.That same report identified the top five risks for New Zealand, in order, as the cost-of-living crisis, rapid and/or sustained inflation, natural disasters and extreme weather events, an asset bubble burst, and a debt crisis.Locally, we will get November building consent data later this morning. Yesterday, ANZ said 2023 ended with a little momentum in card spending in their monitoring of customer card use. However they noted that spending on durables and clothing was particularly weak, while spending on utilities and miscellaneous spending is growing faster than other types of spending. However they put some of this 'strength' down to outsized inflation.Meanwhile commodity prices ended the year on the up. The ANZ World Commodity Price Index gained +2.4% in December from November, seeing it end the year down just -1.8% from a year ago. Dairy prices improved to drive the index higher, more than offsetting weaker aluminium prices. In New Zealand dollar terms, the index lifted a lesser +1.9% from November as the NZ dollar gained +2.4% against the trade weighted index.With job ads falling rather quickly locally it is perhaps surprising that the latest employment data for November reveals an expanding workforce. Most of the recent growth was from the primary and factory sectors, also somewhat unexpectedly given the economic struggles in both. The slowdown in earnings per filled job growth reflects a labour market that is loosening from its tight stance earlier in 2022 and early 2023, with the war for talent more or less over and reducing the pressure for higher wages from “high” to “moderate”.Globally, demand for air cargo seems to be recovering well. No doubt it will be getting a further boost with the Red Sea / Suez problems. Volumes were up +8.1% in November from a year ago and now down only -3.1% from November 2019. Asia Pacific volumes are up +9.8% from a year ago, but have more to climb to get back to equivalent 2019 levels.Global passenger traffic seems fully recovered. Total traffic in November rose almost +30% compared to a year ago. And that almost matches its November 2019 levels. But there is still some way to go in the Asia/Pacific region where we still lag -17% for international travel, almost all due to Chinese tourists staying at home.The UST 10yr yield starts today at 4.00% and down a mere -1 bp from this time yesterday. The price of gold will start today down another -US$4/oz at just on US$2026/oz.Oil prices have slipped -50 USc to be now just over US$72/bbl in the US. The international Brent price is now just over US$77/bbl.The Kiwi dollar starts today at 62.2 USc and -20 bps softer from yesterday. Against the Aussie we are down -¼c at 93.3 AUc. Against the euro we are -¼c softer too at 56.8 euro cents. That all means our TWI-5 starts today just under 70.7 and and -20 bps lower from this time yesterday.The bitcoin price starts today lower, now at US$45,494 and down -2.9% from this time yesterday. Volatility over the past 24 hours has been quite high at just under +/- 4%.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.