US expansion milder than expected, bond selloff arrested

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 weaker US data has halted the bond selloff.

But first, the actual number of US initial jobless claims rose marginally last week, and the number of people on these benefits was actually unchanged from the prior week at 1.7 mln although that was a small increase from year-ago levels.

However, Q1-2024 GDP was revised lower to +1.3% in their second estimate, from +1.6% in the first and this was more of an adjustment than was expected. The main change was due to less consumer spending that originally estimated.

Both retail and wholesale inventories rose in April, but the changes were in fact very small. And the US continues to be a magnet for imports with a larger trade deficit. However some of this will be markets reacting to impending tariff rises and may be temporary. But their trade deficit as a proportion of total economic activity is little-changed.

US pending home sales fell sharply in April, down a whopping -7.7% from March in a dive that surprised analysts. It was the largest retreat since February 2021. Only a small -0.6% correction from a good march was anticipated. Getting the blame was the impact of "escalating interest rates" throughout April dampened home buying, and that left more inventory in the market.

Canada said weekly earnings in March were +4.2% higher than a year ago, a slight slowing of the pace in February when they rose +4.3%.

Taiwan also reported Q1-2024 GDP growth overnight and that came in much better at +6.6% higher than year-ago levels. And you will notice that is better than China's equivalent +5.3% in the same period.

In Australia, there was a small rise in residential building consent levels in April from March (+1.3%) but also lower when seasonally adjusted for Easter. Markets weren't expecting that dip. Year-on-year however, these consent levels are more than +13% higher.

And staying in Australia, major bank NAB is forecasting Perth residential prices to zoom almost +14% higher in 2024. That is the high outlier; Sydney is expecting a +4.5% rise, Brisbane almost +9%, but Melbourne will be the laggard at +2.5% in 2024.

Already high container freight rates rose another +4% last week to push them more than +150% higher than year-ago levels. The same drivers are at play; security risks, canal disruptions, and now plus the rush to beat new US tariffs on some Chinese goods. It is outbound from China rates that are being most affected. However, bulk cargo rates are immune to these rises, unchanged again this week and still at their long-run average levels.

The UST 10yr yield is now at 4.56% and down -7 bps from yesterday. 

The price of gold will start today unchanged from yesterday at US$2343/oz.

Oil prices are down -US$2 at just on US$77.50/bbl in the US while the international Brent price is now under US$82/bbl.

The Kiwi dollar starts today marginally firmer from yesterday at just under 61.3 USc. Against the Aussie we are -¼c lower at 92.2 AUc. Against the euro we are also marginally softer at 56.5 euro cents. That all means our TWI-5 starts today at just under 70.6 and little-changed.

The bitcoin price starts today at US$69,480 and up +3.0% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.

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.