The policy landscape is in ferment

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 we start the week with current data that is almost certainly not indicative of what's to come. The policy landscape is in ferment.First in the week ahead however, locally it will be all about migration, retail sales, and a look a second look at 2025 inflation levels. In Australia their data releases will be about business and consumer sentiment, and industrial production.Elsewhere, India will release a CPI update. Canada's central bank will review its policy rate on Thursday (NZT) and is expected to cut it by -25 bps to 2.75%.In the US, upcoming updates will be for CPI and PPI, the Michigan consumer sentiment survey, and January JOLTS job data.But first up today, weekend data releases from China confirmed they have slipped into a deflationary funk. Consumer prices fell -0.7% in February from a year ago (-0.5% was expected), and producer prices were down -2.2% (-2.1% was expected).China's consumer price decline was their first consumer deflation since January 2024, amid fading seasonal demand following the Spring Festival in late January. Food prices fell the most in 13 months, down -3.3%, dragged by a steep decrease in cost of fresh vegetables and a sharp slowdown in pork prices. Beef prices are down -13.3% from a year ago, lamb prices by -6.6%. Milk prices are down -1.4% on the same basis.China's producer prices are falling faster than consumer prices, but not really at an accelerating rate.Earlier in the weekend, China said its exports rose +2.3% in February, but that was notably less than the +5% rise expected. China's imports fell -8.4% when a +1% rise was expected. That means their merchandise trade balance rose to +US$170 bln, well above the January +US$142 bln and spiked by reactions to US trade and tariff policies. Their data shows a -US$1.1 bln February deficit in their trade with New Zealand. With Australia it was a -US$8.4 bln deficit.We may also get China new yuan loan data at the end of this week, although it is coming in a bit later, and weaker, these past few months.Despite all the US, China and global trade woes, the New York Fed's tracking of global supply chain pressures is reporting a pretty sanguine situation. Of course, that will undoubtedly change going forward.In the US, the February non-farm payrolls report showed the US economy added +151,000 jobs in February, slightly below the +160,000 expected. The January data was downwardly revised to +125,000 from the original +143,000. Their jobless rate ticked up to 4.1%. We should note that virtually none of the DOGE cuts are reflected in this data. Their participation rate fell.The actual unadjusted rise in February from January was +891,000 in this payroll survey data, but that was less than seasonal factors would have usually delivered and less than the +1,065,000 gain in the same period in 2024. Including the unincorporated self-employed, the total number of employed people was 162.5 mln, and that was less than in January. The shift to company payrolls is still happening but slower, and the total number of people actually employed actually dropped. Average weekly earnings were up +3.4% from a year ago and that was their least in more than a year. (Over the past 12 months, that rise has averaged +3.7%, so a notable tailing off in February.)The US Fed boss Powell talked about the outlook for the US economy over the weekend, and commented that they see no reason to be cutting their policy rates any time soon.The US Fed's tightening process continues with their balance sheet now down to US$6.75 tln, down by -US$782 bln in a year and eating into its pandemic surge now. Pre-pandemic, it was a balance sheet equivalent to 19.0% of US GDP. It peaked at 35.4% in April 2022. Now it is back to 22.5% of GDP. So normalisation looms. (For reference the RBNZ balance sheet is also currently at 22.5% of our GDP.)In Canada, their February labour force data wasn't that flash. Full-time employment fell -20,000 while part-time employment rose +21,000. But their average hourly wages rose +4.0%. Their participation rate fell too. No-one expects this labour force data to improve while the tariff war hostilities build in 2025.The US president has threatened Canada again, this time with 'reciprocal' tariffs on dairy and timber. If he goes ahead, it will almost certainly backfire on Americans. Canada is already the US dairy industry's second largest export market and that market will almost certainly reject US goods. And Canadian timber is well-embedded into US house building. Trump wants US national forests harvested to replace Canadian supplies but that will take time to build volumes, and come at higher prices.In Australia, plans to call an April federal election have been shelved, partly because of the expected physical and financial clean up after tropical cyclone Alfred. There are now still more than ¼ mln people without electricity this morning, and the storm is lingering longer than expected and the flooding heavier. The new expected election date will be sometime in May. There will be a new Budget update there in three weeks, on Tuesday, March 25, 2025.In Western Australia, their incumbent Labor government won with a thumping majority, way better than anticipated.Today the UST 10yr yield is now at 4.30%, down -2 bps from Saturday at this time. Here is an update of Wall Street earnings for Q4-2024. It is pretty positive.The price of gold will start today at just over US$2911/oz and up +US$3 from Saturday.Oil prices are still just on US$67/bbl in the US and the international Brent price is just under US$70.50/bbl.The Kiwi dollar is now at 57.1 USc and up +10 bps from Saturday. Against the Aussie however we are down -10 bps at 90.5 AUc. Against the euro we are up +10 bps at 52.7 euro cents. That all means our TWI-5 starts today just over 66.6, and up +20 bps from Saturday.The bitcoin price started today at US$82,620 and down a net -5.6% from this time Saturday. That means it is given up all its gains after the US election in November. Volatility over the past 24 hours has been moderate at +/- 2.4%.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. Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI