US jolted by Omicron jobs shock. Canadian building permits drop. IMF sees unbalanced China. EU inflation at record high. Lowe concedes 2022 rate hike 'plausible'.
Kia ora,
Welcome to Thursday’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 economic bite by Omicron might be much worse that feared, even as recently as yesterday.
Yesterday's warning on what this weekend's US non-farm payrolls report may have been a timely one. Today, the precursor ADP employment report said US payrolls fell in their system by -300,000 in January on the Omicron impact. (A gain of +200,000 was expected.) The main cutbacks (half) were in the hospitality and leisure industries. Most other industries cut back too, although not all. But half the rest were declines in the logistics sector, vulnerable to the pandemic because they seems reluctant to accept the mask mandate. They are paying the price. The estimated +150,000 January gain in non-farm payrolls now looks far, far too optimistic.
This news caused risk aversion in the bond market. But the equity markets are still more focused on very good earnings reports coming through.
Going the other way, there was a surge in mortgage applications last week in the US. That is despite US mortgage interest rates rising to two year highs.
Meanwhile, their total gross level of public debt hit US$30 tln as at the end of January, although $6.5 tln of that is owed to other Federal agencies, so the amount owed to the public is $23.5 tln, about 100% of current US annual GDP. Of that, less than $6 tln (a quarter) is owned to people or institutions outside the US.
Canadian building permits fell in December and by more than expected. A -1.2% decline was expected by analysts, but in the end a -1.9% was reported. But at least it does come off a very strong November.
Although China is on holiday, the latest IMF review of their economy notes it is unbalanced and needs for fiscal support. It especially wants to see more social services spending. Meanwhile, the Chinese property market is off to a terrible start in January. Sales from the top 100 developers fell -40% year-on-year, and are set to get worse in February.
The EU's 5.0% December inflation rate was expected to ease back to 4.4% in January. But in fact it rose marginally to 5.1%, a record high and well above the ECB's target of 2%. However, their core inflation rate - without food or energy - did retreat, to 2.3% although not quite to the level expected (1.9%). So there is real pressure on the ECB to act on inflation now.
India's finance minister has said the country will launch a digital version of the rupee as early as this year. They follow China which already has a trial under way. India also plans a 30% tax on income from digital assets.
In Australia, the boss of the RBA was out explaining their current policy positions overnight. In informal remarks later he conceded that rate hikes there are 'plausible' this year if wages growth rises.
The UST 10yr yield opens today at 1.75% and down -4 bps.
The price of gold starts today at US$1809 and up another +US$6 from this time yesterday.
And oil prices start today little-changed from yesterday at just on US$87/bbl in the US, while the international Brent price is now just overUS$88.50/bbl.
The Kiwi dollar will open today little-changed at 66.3 USc. Against the Australian dollar we are also little-changed at our lower level at 93 AUc. Against the euro we are softer at 58.6 euro cents. That means our TWI-5 starts today at 70.8 and a small net slip.
The bitcoin price is down -4.4% since this time yesterday and now at US$37,299. Volatility over the past 24 hours has been moderate at +/- 2.8%.
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 tomorrow.