2023 dismisses optimists

<p>Kia ora,</p><p>Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the holiday edition from Interest.co.nz, and our first for 2023.</p><p>Today we lead with news that 2023 is starting with wobbles.</p><p><a href="https://www.bloomberg.com/news/articles/2023-01-03/bodies-pile-up-in-china-as-covid-surge-overwhelms-crematoriums?srnd=premium-asia" target="_blank"><strong>China's pandemic stresses</strong></a> are growing and are the primary cause of the year starting with downbeat notes.</p><p>But first up today, <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>the first 2023 dairy auction</strong></a> was another retreat, down -2.75% from the prior event on December 21, which itself was down -3.8%. This time, 33,478 tonnes were sold, the most at one of these events in more than two years. Butter (-2.8%), cheese (-2.7% and SMP (-4.3%) were the hardest hit this time, probably a reflection of stuttering demand out of China's food service industry. WMP fell -1.4%. This time, the currency came to the rescue to some extent, limiting the overall decline to -1.6% in NZD.</p><p>Dairy prices aren't the only commodity in retreat.</p><p>Perhaps this is what we are going to have to expect in 2023. The head of the IMF <a href="https://www.cbsnews.com/video/full-interview-imf-managing-director-kristalina-georgieva-on-face-the-nation-with-margaret-brennan/" target="_blank"><strong>said</strong></a> the new year is going to be “tougher than the year we leave behind. Why? Because the three big economies – the US, EU and China – are all slowing down simultaneously,” she said.</p><p>She is not wrong.</p><p>The internationally-benchmarked <a href="https://www.pmi.spglobal.com/Public/Home/PressRelease/fd49c3c51d79418b9622ad78993a762b" target="_blank"><strong>American manufacturing PMI reports</strong></a> are sharpish contraction in their factory sector, with operating conditions deteriorating at