The US economy grew by +US$1.4 tln in 2023

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 giant US economy grew by +US$1.4 tln in 2023, shrugging off all recession predictions.

US initial jobless claims rose last week, and by more than expected, but were still at near the bottom of their ranges. There are now 2.06 mln people on these benefits, lower than last week but there were 1.86 mln on these same benefits a year ago. The seasonal retreat isn't as strong as last year, so the overall level is creeping up.

US durable goods orders came in in December less than expected and continuing their recent yoyo pattern. They were virtually unchanged in December 2023, after a +5.5% rise in November and missing market expectations of a +1.1% rise. Excluding aircraft, new orders increased +0.6%. Capital goods orders however were up a very strong +9.8% in December from a year ago, and holding November' very good level.

The big news however is that the US economy expanded at a +3.3% rate in Q4-2023, much better than forecasts of a +2% rise, and following a stellar +4.9% rate in Q3. Consumer spending on goods slowed while consumption of services rose faster. Also helping were a rise in exports. For all of 2023, the giant American economy rose +2.5% in real terms and generated US$27.9 tln in economic activity in the year, up an additional +US$1.4 tln or +5.8% more nominally, +2.5% in real terms. That is a larger expansion in volume terms than China's in the same period and is like adding two thirds of Australia over the past twelve months.

The current manufacturing sector isn't delivering its share of this expansion however. The Chicago Fed's National Activity Index fell slightly in December, after being downwardly revised slightly in November, indicating activity contracted during the last month of the year. All four broad categories of indicators decreased from November, and three of them made actually contracted.

And the Kansas City Fed manufacturing survey retreated rather sharply in January too.

US new home sales came in +4.4% higher in December than a year ago, and residential building consents were up +1.8% in the same month

China is going through a crisis of confidence, one triggered by tightening State control and lackluster economic performance. Their 'security' push to suppress news that isn't positive for the Party is corroding confidence inside and outside the country. It is particularly obvious in a transformed and chilled Hong Kong.

South Korea reported a GDP expansion of +2.2% in Q4-2023 over the same quarter a year ago. This was better than expected and the +1.4% rate in Q3-2023.

As expected, the ECB kept its hawkish hold position in the face of continuing inflation pressures, and it kept its quantitative tightening program. It claims credit for reducing inflation however due to its set of 2023 rate hikes.

Today is a public holiday in Australia, "Australian Day". (Monday is a public holiday in Auckland.)

Globally, container freight rates rose by another +5% last week as the latest supply chain pressures in the Red Sea (and the Panama drought) continue to bite. A feature of the latest changes is that trans-Pacific shipping rates are making a sharp catchup even though they are not directly involved. But still, there is no equivalent rise in rates for bulk cargoes.

The UST 10yr yield starts today at 4.14% and down -2 bps from this time yesterday. 

The price of gold will start today up +US$2/oz from yesterday at just on US$2014/oz.

Oil prices are up another +US$1 at just over US$76.50/bbl in the US while the international Brent price is now just over US$81/bbl.

The Kiwi dollar starts today at 61.1 USc and unchanged from this time yesterday. Against the Aussie we are little-changed at 92.9 AUc. Against the euro we are marginally firmer at 56.4 euro cents. That all means our TWI-5 starts today just on 70.1 and essentially unchanged in a day.

The bitcoin price starts today a little lower. It is now at US$39,703 and down -1.1% from this time yesterday. Volatility over the past 24 hours has been low to modest at just on +/- 1.0%.

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.