Fragilities make markets cautious

<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 International edition from Interest.co.nz.</p><p>Today we lead with news markets have turned more cautious today even as some key commodity prices keep on rising.</p><p>And today, we start with a warning from the US Fed in their <a href="https://www.federalreserve.gov/publications/files/financial-stability-report-20211108.pdf" target="_blank"><strong>Financial Stability report</strong></a>. They say (<a href="https://www.federalreserve.gov/publications/files/financial-stability-report-20211108.pdf" target="_blank"><strong>page 60</strong></a>) China’s commercial real-estate sector bond market woes could spread around the world including to the US if the situation deteriorates there. China Evergrande Group’s grace period has now ended and it now faces its biggest payment test yet. (They need to make a US$148 interest payment this week, and it looks like they just sold a subsidiary for about US$140 mln to Tencent, another large Chinese company.)</p><p>In the same report, they also pointed to a worsening of the US's public health situation as a near-term risk.</p><p>Americans are, however, using their credit cards more, <a href="https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2021Q3.pdf" target="_blank"><strong>an updated report</strong></a> on total household debt showed. But credit card debt is tiny compared to mortgages, and lower than both car loans and student debt. Still credit card use is more volatile and a marker for consumer confidence. Overall total household debt not totals just over US$15 tln, and represents 66% of US GDP. That is marginally higher than the 65.5% level two years ago, and well below the 75% level ten years ago.</p><p>American <a href="https://www.bls.gov/news.release/ppi.nr0.htm" target="_blank"><strong>producer prices</strong></a> came in +8.6% higher in October than a year ago,