US jobless claims at 17-month low. Pandemic hospitalisation hurting US. China shipping congestion worse. Global carmakers to cut output.
Kia ora,
Welcome to Friday's Economy Watch where we follow the economic events and trends that affect New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with news that behind the 'good' economic news are increasing signs the pandemic spread is corroding demand globally.
In the US the weekly jobless claims report was actually quite a good one with 'only' 308,000 new claims last week, its lowest level since the start of the pandemic in March 2020. There are now under 2.8 mln people on these benefits in a steady trend lower.
Also positive is that mortgage delinquencies in the US are dropping to post-pandemic lows.
The Philly Fed August survey brought a marginally downgraded sentiment result but new orders rose sharply. However firms still report supply bottlenecks and rising cost pressures, so sentiment is taking a hit over how they will get out of these pressures.
The turn lower in sentiment is also evident in financial markets with the US Treasury 30 year TIPS yield turning more negative than it was at the last equivalent auction in February. At US$9 bln it is not a large event however.
But what is really turning financial markets lower is the pandemic situation in the US as delta infections start to over-run hospitals. The road ahead is particularly bumpy because some large-state policies have down-played the threats of delta with weak or non-existent responses and populations who remain willfully blind to the risks, and their chickens are roosting now. In Florida, Mississippi, Georgia and Texas, they are all using more than 90% of their ICU capacity. COVID-19 patients take up about half of ICU beds in those states, an extraordinary amount for a single diagnosis.
Analysts are starting to downgrade US economic prospects as a result.
In Canada, their ADP employment report for July revealed positive jobs growth, and was quite a surprise and a big turn-around from the June decline.
In China, that Shanghai port partial closure is snarling shipping schedules and the consequential congestion is getting worse. International container shipping rates are moving higher after a two week pause in the rises. The Baltic Dry index surged higher yesterday. Meanwhile, the iron ore price is leading the hard mineral set sharply lower. China's steel demand is sinking.
China seems blind to the consequences of all these mounting risks.
Some major global carmakers are announcing there will be production cutbacks in September due to semiconductor chip shortages. This includes Toyota and Volkswagen.
China's impending retrenchment will be Australia's loss and the impact there could be sharp. And analysts are looking ahead with concern. Falling commodity prices don't help Australia.
But in the meantime, Australia's jobless rate fell to 4.6% in July and a 12 year low and there was a small employment rise. Both these were unexpected. But it was driven by part-time employment, so it is not really that great. And increasing numbers of Aussies are leaving the labour force in 2021, which isn't great either.
The UST 10yr yield starts today at 1.25% and down -3 bps.
The price of gold is down -US$10 from this time yesterday, and now at US$1780/oz.
Oil prices are sliding rather sharply and another -US$2.50 lower from this time yesterday, so in the US they are just under US$63/bbl, while the international Brent price is just over US$65.50/bbl.
The Kiwi dollar opens today lower again, down to 68.3 USc, down more than -½c and its lowest since November 2020. Against the Australian dollar we are actually firmer at 95.5 AUc. Against the euro we are lower at 58.5 euro cents. That means our TWI-5 starts today at 72.3 and little-changed since this time yesterday.
The bitcoin price has weakened slightly again today and is now at US$45,705 and down just -0.3% from this time yesterday. Volatility in the past 24 hours has been moderate at just under +/- 2.3%.
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.