American jobs and pay expand. US factory PMIs contract less. Caixin PMIs expand in surprise. EU PMIs weak. Aussie property lending very weak.
Kia ora,
Welcome to Monday’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 of a slight easing of labour market pressure in the US, but the long predicted recession still seems far away.
But first in the week ahead, it will get started slowly with the US currently on its long end-of-summer Labor Day weekend. We won't see them back in international financial markets until Wednesday, NZT. Then they will deliver their ISM Services PMI, factory order data, and foreign trade data. Elsewhere, Australia and Canada will announce interest rate decisions. Also, inflation rates will be released in Turkey, South Korea, the Philippines, Mexico, and Russia. GDP growth figures will be released for Australia, South Africa, and Switzerland. Additionally, we will get service sector PMI readings for China from their private Caixin series..
Over the weekend their August non-farm payroll report showed that American labour markets are still expanding although not as fast as previously.
The US economy added +187,000 jobs in August, compared to the downwardly revised +157,000 in July and more than market expectations of +170,000. These are the headline, seasonally-adjusted changes. It was the third consecutive month with job gains falling below 200,000, indicating a gradual easing of American labour market conditions, largely attributed to the Federal Reserve's significant interest rate hikes aimed at cooling inflation. There is a downshift, but it is a smooth one - so far at least
However as regular readers know we also look at the original data and that rose +268,000 to 156.4 mln people on company payrolls, a new record high and up +3.0 mln from a year ago. Meanwhile there are 161.4 mln employed when you also account for the unincorporated self-employed, up +2.7 mln in a year, so that indicates a shift into company jobs. It is this overall longer-term and sustained surge in employment that is making the American economy so resilient.
Over the past year, average weekly earnings rose +4.0%, and while that is still rising faster than inflation, it is at a slightly slower pace than in previous months.
Meanwhile, the widely-watched ISM factory PMI 'improved' slightly, meaning it contracted less. In fact it has now contracted for a tenth consecutive month. Recall on Friday the internationally-benchmarked Markit PMI came in with a very similar result. Basically their factory sector is in a shallow trough and analysts are suggesting it will climb out of it from here.
Also in a trough is the Canadian economy. Their Q2 GDP data was released over the weekend and it did not grow from Q1. It is however now +2.2% higher than year-ago levels.
In China, the Caixin factory PMI surprised with a small expansion, when a small contraction was anticipated. Given the official factory PMI out earlier showed a contraction, this is a double surprise. The Caixin survey has been volatile about the 50 point mark for a number of months now. Their survey noted a rise in new orders overall and the downturn in new export orders easing. This wasn't what the official factory survey found however. But both surveys noted that selling prices are still falling.
Out soon will be the official data on Chinese home sales. The anecdotal evidence is that volumes will be very weak. But the official stats are unlikely to suggest anything but a 'stable situation', trying to keep the risk of market panic under control.
In Hong Kong and the Pearl River delta, they are bracing for a second typhoon in less than a week. The cost of the first one is being counted in the billions.
EU factory PMIs don't look flash at all, with factory orders shrinking disarmingly fast. But this is essentially a German and French problem. Country-level data showed that positive sentiment was strongest in Ireland and Italy, followed by Greece, offsetting the pessimistic outlooks at firms in Germany, France and Austria. Meanwhile in the UK, their factory situation is absolutely terrible.
In Australia, new home loan lending fell -2.3% in July from June to be -14% lower than a year ago. This same metric fell -3% in June and was expected to bounce-back in July, but that didn't happen. Lending for commercial property dived -33% on the same basis as lenders took fright at how that sector could hurt bank exposures.
The UST 10yr yield will start today still at 4.18%.
The price of gold will start today at just under US$1940/oz and back down a mere -US$1 from Saturday.
And oil prices are holding higher at just over US$85.50/bbl in the US. The international Brent price is now at US$88.50/bbl.
The Kiwi dollar starts today unchanged from Saturday, still at 59.4 USc. Against the Aussie we are very slightly firmer at 92.2 AUc. Against the euro we are also marginally firmer at 55.2 euro cents. That all means the TWI-5 is still at about 68.7.
The bitcoin price is up +1.1% today from this time Saturday, and is now at US$25,885. Volatility over the past 24 hours has been very low at just on +/- 0.5%.
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 tomorrow.