How deep will the 2023 reversal be?

<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 it’s all about the size of the coming 2023 global economic reversal.</p><p>But first, overnight the US Fed boss was out speaking about how they will stick to their mandate. <a href="https://www.federalreserve.gov/newsevents/speech/powell20230110a.htm" target="_blank"><strong>He said</strong></a> specifically "without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals. We are not, and will not be, a climate policymaker."</p><p>The <a href="https://www.redbookresearch.com/" target="_blank"><strong>American retail impulse</strong></a> weakened sharply last week on a same-store basis, up only +5.3% from the same week a year ago and a gain far less than inflation. This comes after a strong 2022, and is their lowest weekly result since early 2021.</p><p>However, Americans are still <a href="https://www.federalreserve.gov/releases/g19/current/default.htm" target="_blank"><strong>accessing additional consumer debt</strong></a> at a sustained pace, increasing these obligations by +US$28 bln in November from October. That was more than the +US$25 bln expected but less than the +US$28 bln in October.</p><p>Market eyes are now firmly on Friday's US CPI data release. They expect no inflation rise in December from November which will take the annual rate down from 7.1% last month to end the year at 6.5%. Significant variation from these expectations will have outsized repercussions in financial market pricing.</p><p>China's <a href="http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4761016/index.html" target="_blank"><strong>new loan growth</strong></a> came in slightly more than expected, but in an expansion that looks very much like prior month. T