Eyes on Fed as risks won't fade

<p>Kia ora,</p><p>Welcome to Tuesday’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 international edition from Interest.co.nz.</p><p>And today we lead with news we are entering the shadow period before the next US Fed review on Thursday (NZT) and activity is restrained. The Bank of Japan is also doing its regular review and expectations of changes driven by its new governor are uncertain now.</p><p>But we can first report that the NAHB/Wells Fargo American <a href="https://www.nahb.org/news-and-economics/press-releases/2023/09/high-mortgage-rates-continue-to-weaken-builder-confidence" target="_blank"><strong>Housing Market Index</strong></a> slipped for a second month in September and it is now at its lowest in five months. Quarter-century-high <a href="https://www.freddiemac.com/pmms" target="_blank"><strong>high mortgage rates</strong></a> are clearly taking a toll on both builder confidence and consumer demand, as a growing number of buyers are electing to defer a home purchase. Rising unaffordability of housing is a growing problem.</p><p>However, across their northern border, <a href="https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/housing-data/data-tables/housing-market-data/monthly-housing-starts-construction-data-tables" target="_blank"><strong>Canadian housing starts are holding relatively high</strong></a>.</p><p>Staying in Canada, the recent bump up in energy prices has seen their <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/230918/dq230918a-eng.htm?HPA=1" target="_blank"><strong>August producer prices</strong></a> jump by +1.3% over the previous month, the first rise since October 2022. This was much higher than expected. This upturn in producer prices is similar to what they had in consumer prices and raises the chance that the Bank of Canada will hold its <a href="https://www.bankofcanada.ca/2023/09/fad-press-release-2023-09-06/#:~:text=Bank%20of%20Canada%20maintains%20po