The hits to global trade keep coming

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.

Today we lead with news global container freight rates are rising to ridiculous levels now, just another element that is stifling world trade.

But first up, we should note that it is a public holiday in the US; Independence Day. And it is likely that many will take tomorrow off as well to make a four-day weekend. To data from the world's largest economy is absent today.

But there will be the non-farm payrolls results for June released tomorrow.

In the US, car buyers are back despite elevated interest rates, but the June vehicles sales level probably fell to a 15.8 mln annualised rate. That is because of an industry-wide cyberattack in June that hobbled many major dealerships. The May sales level was 15.9 mln, and a year ago it was 16.1 mln. But the effect of the cyberattack is over now and there could well be a sharp catch-up in July.

We are also awaiting China vehicle sales data for June, and there are no early indications in that market - which is almost twice as large as the US one. They expect to sell more than 30 mln vehicles in the year to June, with nearly half as NEVs. But given their rush to invest in manufacturing, they still have a serious over-capacity problem even at that sales level.

And the EU says it will impose tariffs of up to 37.6% from today on their imports of electric vehicles made in China. That is expected to cost NZ$6.5 bln in lower trade between the two blocs.

In Germany, factory orders eased by -1.6% in May from April, missing market estimates of a +0.5% expansion. That puts them -8.6% lower than the same month a year ago. And that is not insignificant in an economy as large as Germany.

Of course there are elections in two European countries over the next few days. The British have voted and results are awaited. It will be a huge surprise if the opposition left-wing party doesn't win in a landslide. In France however, the expected far-right triumph looks like it isn't going to happen.

In Australia, drought in the heart of Victoria's dairy country is putting a sharp squeeze on output there. Production is down sharply, and this could not come at a worse time. Dairy farmers are facing a -15% drop in the price they get from processors too that went into effect at the start of July.

In Canada, they are suffering sharply lower real estate sales as well. In Toronto, volumes were down more than -15% in June from the same month a year ago. In Vancouver, the drop is -19%.

The rise in global container freight rates isn't easing, according to the latest data for this week. These rates were up another +10% from last week to be three times higher than year-ago levels. The same causes are still there, with the highest increases for freight from China to Atlantic ports. Bulk cargo rates are up a net +5% for the week although they have eased slightly in the past few days. These are rates are +90% higher than year-ago levels.

The UST 10yr yield is now at 4.37% and up +1 bp. 

The price of gold will start today virtually unchanged from yesterday at US$2357/oz and holding its higher level.

Oil prices are +50 USc firmer from this time yesterday at just over US$83.50/bbl in the US while the international Brent price is up +US$1 at US$87.50/bbl.

The Kiwi dollar starts today +¼c firmer from yesterday and back up at 61.2 USc. Against the Aussie we are still softer at 91 AUc. Against the euro we are also holding at 56.6 euro cents. That all means our TWI-5 starts today at 70.4 and unchanged from yesterday.

The bitcoin price starts today at US$58,246 and down -3.2% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.2%.

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.  Go the ABs !