US jobless claims at historic low. Online prices rise. Freight costs stop easing. Chinese PPI still extreme. Chinese lending bounce-back weak.
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 financial markets have virtually dismissed Omicron threats now.
But first, US jobless claims spiked last week but in a seasonal pattern, and if you look past that they remain low, and lower than pre-pandemic. On that basis they are at a 50 year low. There are still less than 2 mln people on these benefits and the lower trend is still in place. Last week's levels were about what analysts were expecting.
The widely-watched USDA WASDE report is now suggesting that the world wheat harvest will be better than previously indicated - and wheat price slipped. But despite upward revisions to global stocks this month, they are still at a 5-year low. The same report suggests the US will be importing more beef at higher prices, and that US dairy production is slipping and prices are rising.
The one part of consumer spending that has delivered lower prices consistently has been online shopping, which is one reason it has boomed recently. In the US now one dollar of every four is spent online. But for the first time since it has been tracked starting in 2014, online prices are rising fast, up +3.5% in the past year and extending the rises to 18 straight months. The supply-chain pressures are building inflation everywhere now.
Worse, the expected easing of container freight rates has stopped, with overall costs rising last week. Bulk cargo freight is back in a rising trend as well.
And it is not just a problem for urban consumers. Soaring energy prices make fertiliser more expensive and farmers globally are scrambling for organic manure, including biosolids. There's money in muck.
Meanwhile, in the financial world, the Fed is reporting that US household wealth rose to a record US$144.7 tln at the end of the third quarter, though the +$2.4 tln gain over the period was the smallest since the rebound from the pandemic began.
China's consumer prices rose in November by 2.3%, and up from 1.5% in October and its highest in a year. It was led by rising pork prices although beef, lamb and milk prices all remain well contained.
China's producer prices remained very high in November, up +12.9% in a year, but there was actually no rise from October. Still they are at record modern highs.
In China's financial markets, loan growth is slowing. Their new yuan loan growth was expected to bounce back in November from the unusually low October level, and they did. But the bounce back was far less than expected and embeds the declining trend evident in 2021. Beijing can 'force' banks to lend, but it can't 'force' businesses to borrow. The central bank also raised its foreign exchange reserve ratio overnight, trying to dampen the yuan's recent surge. The Chinese central bank has never been 'independent' but Beijing Party officials are exerting closer control these days.
And still in China, global ratings agency Fitch has declared that both Evergrande and Kaisa have defaulted on their bond obligations.
The UST 10yr yield opens today at 1.50% and retracing -2 bps overnight.
We should also note that equity market reactions to the series of pandemic shocks are becoming shorter and less severe.
The price of gold will start today at US$1777/oz and down -US$5 overnight.
And oil prices are about -US$1.50 lower at just over US$71/bbl in the US, while the international Brent price is down to just over US$74.50/bbl.
The Kiwi dollar opens today weaker at 67.8 USc. Against the Australian dollar however we are down at 94.9 AUc. Against the euro we are unchanged at 60.1 euro cents. That our TWI-5 starts today lower at 72.3. We should also note that the Chinese yuan rose to another 3 year high against the USD as the Chinese central bank has stopped intervening in this market - for now at least.
The bitcoin price has slipped to US$48,671 and down another -3.4% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.9%.
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.