Rising NZD undermines higher dairy prices

<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 of a rising risk mood among investors and that is generally 'helping' commodity producers.</p><p>But for us, the overnight <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>dairy auction</strong></a> brought mixed results. Overall prices were up +2.2% in USD terms, but with the fast-rising NZD, they actually <a href="https://www.interest.co.nz/charts/commodities/dairy-prices" target="_blank"><strong>slipped -0.5% in local currency</strong></a> terms. It is obvious from the results that demand is highest for foodservice commodities with butter up +4.7%, cheese up +2.9%, and SMP up 2.5%. WMP only rose +1.5% in USD terms. This was the fifth straight auction that has avoided a fall in USD prices. Nothing in today's event will change the forecasts of the new season <a href="https://www.interest.co.nz/rural-data/dairy-industry-payout-history" target="_blank"><strong>farmgate milk payout</strong></a>.</p><p><a href="https://www.census.gov/construction/nrc/pdf/newresconst.pdf" target="_blank"><strong>US housing starts</strong></a> in September were little-changed from August, but they didn't push on ahead to the extent expected. And building permit levels were also much softer than expected. Behind both trends are supply-chain woes - no builder needs the weight of partially built houses they can't sell.</p><p>And speaking of property developers, in China, Evergrande made an interest payment due for some of its local currency debt. But concerns continue to linger about the developer’s huge overall debt load. And foreign holders look like their investment will be worthless.</p><p>The OECD has updated its long term global fiscal outlook and <a href="https://www.oecd-ilibrary.org/docserver/a112307e-en.pdf?expires=1634667184&id=id&accname=guest