Dairy prices rise closer to all-time highs. Warning on Omicron's impact on jobs. US factories slow. US retail holds but not so in Germany or Australia.
Kia ora,
Welcome to Wednesday’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 Omicron is now bending global economies, undermining expansions everywhere.
But first, we can report that dairy prices rose strongly again in the overnight auction. They were up +4.1% in USD terms and up +6.4% in NZD terms. This time, the rise was led by the key WMP price. Volumes offered were marginally more than at the same auction a year ago. Overall prices however are up +28% over the same time frame, and that is leading the FAO world dairy price index which is up +17% in the same period. (But having noted that, they are not quite yet back to their 2008 all-time highs. And the highest GDT level was at an auction in April 2013 and we are still -8% below that.)
In the US, there is a warning that the January jobs numbers will be 'ugly' as Omicron sweeps over the country. Illness absences count as job losses in their upcoming non-farm payrolls report, and that will have an outsized impact on the numbers due on Saturday NZT. Jobs growth under these conditions will be stunted, perhaps as low at +150,000 in the month.
The latest factory PMI readings indicate American factories got off to a slower start in 2022 with both the main indexes reporting a drop in their expansion levels. The widely-watched ISM PMI noted they are still in a "a demand-driven, supply chain-constrained environment" but that new order growth is slowing and backlogs are easing. The internationally-benchmarked Markit one pointed to "soft demand conditions and labor shortages".
The Dallas Fed factory survey retreated more than these national measures.
However, the American retail impulse rose last week, as measured by the Redbook survey. The year-ago base is lowish, so that colours the results, but it is a continuing good result for them.
But German retail sales stumbled in December as Europe's largest economy struggles to come to terms with the Omicron pandemic.
In Australia, retail sales dropped -4.4% month-on-month in December as Omicron kept consumers from spending on goods and services, posting its biggest monthly fall since April 2020.
And late yesterday, the RBA confirmed it is about to stop its QE bond buying program. But it did push back on expectations that rate hikes are about to start there in 2022.
The UST 10yr yield opens today at 1.79% and unchanged.
The price of gold starts today at US$1803 and up another +US$7 from this time yesterday.
And oil prices start today little-changed from yesterday at just under US$87/bbl in the US, while the international Brent price is now just under US$89/bbl.
The Kiwi dollar will open today +½c firmer at 66.2 USc. Against the Australian dollar we are unchanged at our lower level at 93.1 AUc. Against the euro we are firmer at 58.9 euro cents. That means our TWI-5 starts today down at 70.9 and a small recovery.
The bitcoin price is up just +2.4% since this time yesterday and now at US$39,004. Volatility over the past 24 hours has been modest at +/- 1.4%.
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.