Oil up on strong demand projections

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 supply-chain pressures are about to hit global trading patterns again.

But first, US jobless claims were relatively low last week. In fact, seasonally, new claims fell to levels we last saw in September 2022, and continuing claims down to October 2023 levels. Those losing jobs in the US are clearly having a relatively easier time in finding new positions. No sign of labour stress here yet.

US December housing starts have come in better than expected although not quite to the November levels. But they were +7.6% higher than year-ago levels. And there was a big jump (+6.1%) in residential building consents being issued, so the future looks ok for this sector.

But the latest Philly Fed factory survey was downbeat, a bit like from some other regions. New order levels are shrinking but perhaps at a slower pace than previously. But shrinking all the same. This report covers an important and very large heartland manufacturing region.

Yesterday the US Fed released its Beige Book summary of all these surveys for December and overall it reported little-change from an uninspiring position.

In China, analysts are waiting for the official December foreign direct investment data - to see how 'bad' it is. But we have to keep in mind it is not career-enhancing in China these days to report news that doesn't show the Party in a good light.

Australia shed -65,000 jobs in December from November, with a huge -107,000 retreat in full time jobs and only +41,000 extra part time jobs replacing them. Their December jobless rate stayed at 3.9%. (NZ releases its December quarter labour force data on Wednesday, February 7. The September level was 3.9%)

Australian inflation expectations have settled in at 4.5%, the same in December as November. It has been sticky between 4.5% and 5% since March 2023 - at a level that the RBA is unlikely to feel comfortable with given their target is "between 2% and 3%" and there is no evidence they are moving toward that.

The IEA has updated its forecasts for oil demand and they are higher for 2024, both from the Suez supply chain disruption, and from rising demand by China. Global inventories are lowish at present, especially in the US. This report, and a similar outlook from OPEC, raised oil prices today.

And in China, despite the official rhetoric about becoming carbon-neutral, their coal mining output hit a new record high again in 2023, and they have plans to boost it much larger than present levels.

The spreading of Middle-East tensions and fights has resulted in another very sharp rise in ocean container freight rates. They were up a stunning +23% last week and have now increased by +82% when compared with the same week last year. That is now even affecting outbound trans-Pacific routes where they rose +38% last week. Capacity demand for avoiding the Suez Canal and Red Sea have jerked things around a lot. China's factories won't be enjoying the cost consequences. Meanwhile, bulk cargo rates continue to ease.

The UST 10yr yield starts today at 4.14% and up another +2 bps from this time yesterday. 

The price of gold will start today up +US$9/oz from yesterday at just on US$2014/oz.

Oil prices are a lot firmer, up +US$2.50 at just under US$74/bbl in the US and the international Brent price is now at just over US$78.50/bbl and up US$2.

The Kiwi dollar starts today at 61.1 USc and little-changed from this time yesterday. Against the Aussie we are down -¼c at 93 AUc. Against the euro we are unchanged at 56.2 euro cents. That all means our TWI-5 starts today just on 70.1 and virtually unchanged.

The bitcoin price starts today lower again, now at US$41,808 and down another -1.2% from yesterday. Volatility over the past 24 hours however has remained modest at +/-1.4%.

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.