The US expansion pushes on, carrying the world's trade flows

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 the American economy continues its remarkable run, although corporate earnings guidance is showing some hesitation.

US jobless claims last week came in at +200,000, a decrease and more than expected. Interestingly, this is the same level it was a year ago for the same week. There are now 1.62 mln people on these benefits, also lower than expected.

Tomorrow's US non-farm payrolls are expected to grow just +113,000, but today's data on initial jobless claims, job cut data, and yesterday's ADP data all suggests the analyst estimates are well undercooked. Certainly markets think so and see the strong labour market and the pressure it puts on the economy as a reason the US Fed may defer its next rate cut.

Today's release of personal income, and personal spending levels both indicate faster rises than expected, also a flag for Fed caution. Core PCE inflation is still running at 2.7%. Real disposable personal income is up +3.1% from the same month a year ago. Real personal consumption expenditures are up the same. It is surprise 'strength' and markets are wary.

But not showing strength however was the October edition of the Chicago PMI.

The latest update in Canada for average earnings has them rising a rather remarkable +4.6% from a year ago. That is its highest rate since the pandemic, and before that since before the GFC in 2007. This was also quite a data surprise.

China's manufacturing activity snapped a five-month contraction in October, as the recent fresh stimulus measures boosted production. But only just. The country's official PMI came in at 50.1 for the month. Their services sector came in at 50.2, also only a minor expansion. It may only just be the start of their expansion, but they are probably disappointed at these early indicators.

And a new stimulus measure has been announced in China. Home loan borrowers have been given the right to renegotiate their loan interest rate lower as/if interest rates fall. It's China; a contract is only enforceable if Beijing says it is.

The Bank of Japan left its policy rate unchanged at 0.25% on Thursday as political uncertainties hang over the economy after an inconclusive national election result. They also kept their three-year inflation projections unchanged, confident their economy is expanding as they want. They say inflation should stay near 2%.

Japanese September retail sales were quite a disappointment, rising just +0.5% from a year ago when a +2.3% rise like they have had for a while, was expected. One to watch.

In the EU, the Euro Area CPI inflation rate ticked up slightly to 2.0% in October, again restrained by lower energy costs.

In a piece of humourous dystopian theatre, a Russian court has fined Google more than there is money in the world, because YouTube won't disseminate their state misinformation. The amount (in US dollars) is US$$20,000,000,000,000,000,000,000,000,000,000,000. I have no idea how to pronounce that.

Breaking a 17 week trend, container shipping freight rates actually rose last week, up +4% from the prior week, to be +126% above pre-pandemic levels. Bulk cargo rates fell -3.5% on the same prior-week basis, to be very similar to what they were a year ago.

The UST 10yr yield is now at just under 4.27% and down -2 bps from this time yesterday. 

Wall Street has started its Thursday with the S&P500 down -1.7%. Earnings guidance from some majors is causing the re-think.

The price of gold will start today at US$2739/oz and down -US$37 from yesterday and well off its high.

Oil prices are up +50 USc US$69/bbl in the US while the international Brent price is unchanged, still at US$72.50/bbl.

The Kiwi dollar starts today at 59.6 USc and down -20 bps from this time yesterday. Against the Aussie we are also down -20 bps at 90.8 AUc. Against the euro we are down -20 bps too at 54.9 euro cents. That all means our TWI-5 starts today at just on 68.6, and - no surprise - down -20 bps from yesterday at this time.

The bitcoin price starts today at US$70,389 and down -2.4% 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.