China pivots from pandemic control to economic repair

<p>Kia ora,</p><p>Welcome to Thursday’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 China is scrapping their tough pandemic restrictions as the economic toll mounts. It was a broader back-down than expected as their stagnant economy now demands remedies.</p><p>But first in the US, <a href="https://www.mba.org/news-and-research/newsroom/news/2022/12/07/mortgage-applications-decrease-in-latest-mba-weekly-survey" target="_blank"><strong>mortgage applications</strong></a> and mortgage interest rates fell last week in an extended retreat reflecting a weakening of an already weak housing market.</p><p>However, there are signs in the US that holiday season retail sales may not be as weak as feared. Many retailers are <a href="https://www.wsj.com/articles/some-retailers-are-learning-to-love-bulked-up-inventories-11669841467?mod=hp_minor_pos13" target="_blank"><strong>embracing their higher inventory levels</strong></a> and see it as a competitive advantage. Consumers seem to be responding.</p><p>In Canada, their central bank <a href="https://www.bankofcanada.ca/2022/12/fad-press-release-2022-12-07/" target="_blank"><strong>raised its policy rate by +50 bps</strong></a> to 4.25% earlier today. It is also shrinking its balance sheet in a continuing tightening phase. However, it has opened the possibility that they may be near the end of their rate hike cycle for now.</p><p>In Beijing, their National Health Commission set out <a href="http://www.nhc.gov.cn/xcs/gzzcwj/202212/8278e7a7aee34e5bb378f0e0fc94e0f0.shtml" target="_blank"><strong>10 new measures</strong></a>, less than a month after it started the reopening process with 20 guidelines for officials to minimise social disruption. Despite a buildup in expectations in recent weeks, markets appeared to be taken aback by how far-reaching these moves were. An initial rally fizzled as investors worried about a spi