US retail rises but overall growth slips

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Kia ora,

Welcome to Friday'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 markets have had a shot in the arm from good December American data.

The advance estimate of US retail sales in December came in at the levels markets expected. This was stated as a +0.3% rise month-on-month, seasonally adjusted. A modest gain. But if you look at the actual trading data, December 2019 was a full +6.0% higher than December 2018 while November was +2.8% higher on the same basis. For all of 2019, retail sales were up +3.6% from 2018. So you have to say this advance December data is quite positive - the American retail impulse in a key holiday shopping period was strong.

Also strong is the latest regional Fed survey from the Philadelphia region. It was up much more than was expected, a bit of an outlier among most of the other Fed regions.

But none of this was enough to improve the US growth prospects. The latest version of their GDPNow analysis has Q1-2020 growth slowing to +1.8% pa, down from a prior estimate of +2.3% for Q4 2019. And there is doubt about the actual impact of the US-China trade deal.

However today's good retail data has helped the S&P500 rise today, up +0.6% and that means for all of 2020 it is now up a cumulative +1.5%. Overnight European markets weren't as positive, nor were the key Asian markets, although Tokyo is up +3.1% so far for all of 2020. Yesterday both the ASX200 and the NZX50 each rose about +0.6%, cementing in a strong +5.2% gain so far for Aussie equities, but a much less +1.2% for the NZX50 Capital Index.

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In China, new home prices in their large tier one cities rose slower in December but that caps a year where rises wre about +5%. In second tier cities the rises were similar, and also slowing at the end.

Also slowing in December was the growth on bank debt. Chinese banks extended fewer new loans in December, but the country's overall credit growth held up after the central bank eased policy to support the slowing economy. December new loans were -18% less than November and -4% less than analysts were expecting. But they were +12% higher than December a year ago - and +12% higher in 2019 than 2018.

And pollution in China seems to be getting worse overall and spreading, despite noticeable gains in Beijing and Shanghai. An uptick in coal and oil consumption coupled with rising industrial output drove pollution increases outside the two main centres.

In Australia, lending for housing rose strongly in November for owner-occupiers. The +6.6% jump from a year earlier was attributed to better access to credit and rising house prices across the eastern states. But for investors, lending commitments fell -5.7% on the same basis.

The UST 10yr yield is holding at 1.81% after dropping as low as 1.78% earlier.

Gold will start today unchanged at US$1,551/oz.

US oil prices are firmer today, now just over US$58.50/bbl and the Brent benchmark is now just over US$64.50/bbl.

The Kiwi dollar is little-changed at 66.4 USc. On the cross rates we are much firmer at 96.3 AUc. Against the euro we up to 59.6 euro cents. That puts our TWI-5 at 71.5.

Meanwhile, bitcoin has held on most of its recent gain, but is about -1% lower today from this time yesterday at US$8,646.

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

Get more news affecting the economy in New Zealand from interest.co.nz and subscribe to receive this podcast in your favourite podcast app - we're on Apple Podcasts, Google Podcasts, Spotify or subscribe on our website.

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