US labour market stays very tight. US retail rises, but US industrial production weakens. China weaker again. Japan posts huge trade deficit. Aussie jobs expand.
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 of China stumbling and central banks fiercely focused on controlling high inflation, the chances of a global recession in 2023 seem to be building.
But last week only +156,000 Americans made jobless claims, taking the total number on these benefits to just 1.275 mln, an historic low. Whatever else might be going on, the Americans have a very tight labour market still.
And American retail sales rose more than expected in August from July, and bouncing back from the disappointing prior month. These sales are now +10.4% higher than year-ago levels, so more than keeping up with inflation.
However there were two regional Fed surveys out overnight and neither were especially positive. The Philly Fed one for September was the weakest, with new order levels no longer driving an expansion. The New York Empire State one came back from a deep August retreat with a small rise in new orders. Neither noted that businesses see a positive outlook.
In fact the Fed's national monitoring of industrial production reported a small retreat in August, one that wasn't expected. This activity is up +3.7% for the year, but to be fair the main weakness is in mining activity. Consumer goods production is lackluster. But production of business goods remains quite strong, except perhaps for construction activity.
It looks like a deal has been reached in the nationwide rail labour dispute, one that should avoid strike action. That has been a big threat hovering over near-term economic activity.
In China, their seven largest banks dropped term deposit rates in coordination. It was their first decrease in seven years and strongly hints at fast-weakening loan demand, probably led by mortgage demand. But with many economists now forecasting 2022 Chinese growth to be only about +3%, business loan demand is likely much lower too.
And China has again deferred tax payments for SMEs, the third time in 12 months they have taken this emergency action.
Japan ran its biggest single-month trade deficit on record in August as imports surged on high energy costs and a slump in the yen, exposing the economy's vulnerability to external price pressures. Imports rose +50% in a year driven almost exclusively by energy imports. Their cost in yen ballooned because the value of the yen fell. Exports rose +22%.
In Australia, the Melbourne Institute survey of year-ahead consumer inflation expectations fell to 5.4% in August from 5.9% in July.
Australia reported its August labour market data yesterday and that showed a good +59,000 expansion in full-time jobs, and a fall in part-time jobs. The AUD firmed. It also showed a small rise in their jobless rate to 3.5%.
A new study by the World Bank says a recession is possible next year if monetary tightening and the focus on beating inflation remains the goal of central banks.
Container shipping costs are falling even faster now, down -8% from last week alone to be now -50% lower than year-ago levels, which were admittedly high. The key Shanghai-Los Angeles rates are collapsing, down -11% last week alone and are down by two thirds from year-ago levels. Against the grain, shipping rates for bulk cargoes are rising recently, although they are only back to pre-pandemic levels.
The UST 10yr yield starts today at 3.46% and up +5 bps from this time yesterday.
The price of gold will open today at US$1665/oz and dropping -US$32 from this time yesterday. That is a 2 year low.
And oil prices start today -US$4 lower at just on US$85/bbl in the US while the international Brent price is now just on US$90.50/bbl.
The Kiwi dollar will open today at just on 59.8 USc and nearly -½c lower than this time yesterday. For the week it has been a -1.2% devaluation. Since the start of the month a -2½% devaluation. And since the start of 2022 the devaluation has been -12½%. Against the Australian dollar we are marginally lower than yesterday at 89 AUc. Against the euro we are lower at 59.8 euro cents. That all means our TWI-5 starts today at 69.5 and a new two year low.
The bitcoin price is now at US$19,833 and another -1.4% fall from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.2%.
You can find links to the articles mentioned today in our show notes.
And get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston and we’ll do this again on Monday.