US PPI rise stays high. China hit by Omicron, supply chain woes deepen. Non-ferrous metal prices leap. Australia struggles with virus impact.
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 the Omicron surge in Australia is decapitating their workforce. It is about to do the same in China.
But first, US jobless claims rose last week and by more than was expected seasonally. There are now more than 2 mln people on these benefits - although on a seasonal and population adjusted basis this is the lowest level in almost 50 years (1973). And below pre-pandemic levels.
US producer prices didn't rise in December quite as much as feared, and the big +9.7% year-on-year was lower than the November level. Both results suggest that there is some topping out in the wholesale price pressure.
Meanwhile, a top Fed official confirmed they are fully engaged in fighting the inflation threat, confirming they have abandoned the 'transitory' view. And that may mean three rather than two rate hikes in 2022, with the first in March when their bond buying will probably end. One Fed member sees four increases in 2022.
China's foreign direct investment inflows are starting to slip, according to the December data released late yesterday.
Meanwhile, Omicron is spreading in China and another port city is now in lockdown. The global impacts on supply-chains won't be helped by this as congestion is growing at the world's biggest port as shippers try to re-route goods. The threat to global trade from this is actually enormous.
And it is not just Chinese ports that are getting more snarled. The giant US West Coast ports, especially in Los Angeles are still struggling to clear long-embedded backlogs.
Outbound freight rates for containerised cargoes from China are rising again, which is not a good sign. Freight rates for bulk cargoes however are falling again, now down to year-ago levels.
Japan's machine tool orders stayed high in December, up +40% from year ago levels to just under ¥140 bln (NZ$1.8 bln) in the month. This is a historically high level even if it is slightly lower than for the prior two months and is +16% higher than for December 2019. This data is important because it confirm that global manufacturers are investing heavily in productivity again.
In the meantime, we can note that the copper price has risen above US$10,000 per tonne again, tin is now above US$40,000/tonne for the first time ever, and nickel is back over US$22,000 and a decade high. Lithium carbonate is now over US$48,000 and rising fast. The leap in non-ferrous metal prices is a long-term signal that price pressures will remain tough to mitigate
In a similar vein, we should note that the local price of carbon (NZUs) has jumped to NZ$71/tonne in the past few days. (That compares with the EU's carbon permit price at NZ$133/tonne and flatlining in 2022.)
More than 10% of the Australian workforce may be off the job due to Omicron isolations now the Australian Treasury is estimating and that is having a serious impact on basic services, including supplying supermarket shelves. Some say their entire food chain is "out of whack".
The UST 10yr yield opens today at 1.72% and unchanged.
The price of gold starts today at US$1819/oz and down -US$6 since this time yesterday.
And oil prices start today back firmer, up +US$1.50 to just on US$82/bbl in the US, while the international Brent price is now just over US$84.50/bbl.
The Kiwi dollar opens today firmer again at 68.8 USc and a further +¼c rise. Against the Australian dollar we are firmer at 94.3 AUc. Against the euro we are firm at 60 euro cents. That means our TWI-5 starts the today up at 72.8.
The bitcoin price has essentially moved sideways since this time yesterday, down a bit less than -1% to US$43,179. Volatility over the past 24 hours has been modest at +/- 1.8%.
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 on Monday.