US awaits non-farm payrolls report with strong PMI results; China, India and Japan post lame expansions; China reaches out to join TPP
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.
And we should note that this is the 500th edition of Economy Watch. Thank you for joining us.
Today we lead with news normal service seems to be been resumed, with the giant American economy regaining its role as the engine of global growth.
In the US, the number of recorded job layoffs in May is now down to about -25,000 among large reporting companies and very much back to pre-pandemic levels.
The level of initial jobless claims came in lower than expected, but only slightly so. There are now 3.5 mln people on these benefits, still more than pre-pandemic, but far far less than a year ago when there were 19 mln people dependent on them.
Tomorrow we get the official non-farm payrolls report for May and it is expected to show a modest improvement (+650,000) from the unexpectedly weak April result (+266,000). Today we got the precursor ADP Employment Report and it came in much better than expected with a +978,000 rise in jobs with gains across the board, except in the IT industry. Half those overall gains were in the hospitality sector.
The two large PMI surveys reported their May data for the large services sector and both describe booming conditions. The ISM one and the Markit one have the expansion pegged at its strongest since these surveys were started.
These results feed into a global PMI and that shows the international economy expanding across all sectors at a 15 year high.
But in China, their services sector isn't contributing much to that global expansion. In India things are dire as their pandemic bites hard, both in manufacturing and services.
It is the US that is the global engine now, supported by the EU but not Japan. South Korea and Taiwan are however.
And so is Australia. In addition, Australia recorded a strong trade surplus of +AU$8.0 bln in April (for both goods and services), due to an increase in exports and a decrease in imports. The export strength was on the back of rises in commodity and rural exports. Services exports increased, partly due to the trans-Tasman travel bubble, which opened in mid-April. This April result is the third highest surplus in their history, and better than expected for the month.
Today is the anniversary of the 1989 Tiananmen Square massacre in Beijing. It is no longer being marked in Hong Kong with a vigil, as Chinese authorities crack down worldwide on remembrances of the brutal crushing of a student protest. Beijing has used those 32 years to rewrite history. But one photo and thousands of records at the time can never erase the crime.
Meanwhile, China has reportedly reached out recently to both New Zealand and Singapore to try and find a way to join the TPP. Of equal interest is whether the US will attempt to revive its interest in joining the trade zone it initiated.
The UST 10yr yield starts today up +3 bps at 1.62%.
The price of gold starts today at US$1872/oz, a sharp -US$36 drop from this time yesterday. Silver prices fell even harder, down -2.6% in a day.
Oil prices start today unchanged at yesterday's higher US$68.50/bbl in the US, while the international Brent price is still at US$71/bbl, and holding at a two year high.
The Kiwi dollar opens today at 71.3 USc and a full -1c drop overnight. About half of this is greenback strength and about half a flight from commodity currencies. Against the Australian dollar we are down marginally to 93.2 AUc. But against the euro we are almost -½c lower at 58.8 euro cents. That means our TWI-5 starts today at 73.2 but this is only back to where it was two weeks ago.
The bitcoin price is now at US$38,813 and another +2.1% rise from this time yesterday. Volatility in the past 24 hours has still been high again at +/- 3.0%.
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.