Economic growth rises despite the challenges

Kia ora,

Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the international edition from Interest.co.nz.

And today we lead with news the OECD sees a world economy in recovery and about to expand at an increased rate, despite the many challenges. It is a perspective of resilience.

But first in the US, jobless claims held at a two month low ahead of tomorrow's April non-farm labour market report. There were +189,000 new claimants last week taking the total to 1.76 mln and that is it’s lowest since October.

The very low levels of job cuts reported in April fell from the prior month.

Markets expect non-farm payrolls to have expanded +243,000 in April when they are released tomorrow.

Although they fell in March from February's record high, American exports are essentially holding at a high level and were unchanged from a year ago on goods and services basis.

The American March factory order data was released overnight and that showed another increase, a second consecutive one and up +1.6% from the prior month which was itself up +1.2% on that basis. However these levels are still running -0.9% lower than a year ago.

China remains on holiday. One feature of this year's extended Labour Day break is the return of Chinese making international trips. Japan is the focus this week, but that will spread as Chinese travellers regain their appetite for seeing the world.

Meanwhile, their real estate sector is making no progress toward recovery. It remained very weak in April with major developers’ sales tumbling -45% year on year and holding new very low month-on-month levels.

In Argentina they can sniff real progress in their battle against endemic inflation. So their central bank slashed its benchmark interest rate overnight by -10% to 50%, the fifth change since December and the third in the past three weeks. They see a notable slowdown in monthly inflation and a "rapid adjustment" of inflation expectations. In March, Argentina's monthly inflation slowed more than expected for the third consecutive time, with consumer prices rising by 11% from February to March, below economists' forecast of 12.1%. The new administration has prioritised stringent spending cuts since December to combat inflation, and they now expect monthly inflation to decrease to 3.8% by September. That would take the current inflation rate of 288% down to under 50%.

On Monday, the OECD will release an updated assessment of the New Zealand economy and prospects. Today, its global Economic Outlook update sees an "unfolding recovery" and it has raised its global growth forecast to +3.2% for 2025 from 3.1% this year. They see New Zealand rising from a modest +0.8% in 2024 to +1.9% in 2025. For Australia it is a rise from +1.5% to +2.2%. For Japan, from +0.5% to +1.1%. For the US it is a retreat from +2.6% this year to +1.8% next. For China, they see a slip there too from +4.9% to +4.5%. They expect global inflation to ease but unemployment to rise modestly. For a world with wars and severe security stresses, it is a remarkably sanguine outlook. But that inflation outlook, even if it does ease, points to higher-than-wanted sticky levels.

Global container freight rates dipped a minor -1% last week to take them to +55% higher than year ago levels. The same drivers of high rates (war diversions, Suez security, and Panama drought) are all still there so immediate relief seems unlikely. Bulk cargo rates however slipped -5% for the week and are down -12% for the year.

The UST 10yr yield is now at 4.58% and down -3 bps from yesterday. 

Oil prices are down another -50 USc from yesterday at just over US$78.50/bbl in the US while the international Brent price is unchanged at just on US$83.50/bbl.

The Kiwi dollar starts today up +½c from yesterday at just over 59.5 USc. Against the Aussie we are holding at 90.8 AUc. Against the euro we are firmish at 55.5 euro cents. That all means our TWI-5 starts today just on 68.9 and up a mere +10 bps from yesterday.

The bitcoin price starts today at US$59,164 and up +2.5% from this time yesterday. Volatility over the past 24 hours has moderate at just on +/- 2.5%.

You can find links to the articles mentioned today in our show notes.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston. And we will do this again on Monday.