Positive US economic data. China loses momentum. ECB tapers, Bank of England raises its rate. Turkey cuts theirs again. Aussie jobs jump.
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 of the US is ending 2021 on strong economic notes, while China seems to be on the skids.
New US jobless claims fell slightly last week to +267,500 and the number of people on these benefits fell to 1.713 mln, and back below pre pandemic levels.
US housing starts rose strongly to their highest since March and their second highest level ever.
However, the American industrial production gains slipped back in November after a very strong October and to an expansion rate we had been used to seeing. Still they are +5.3% higher than year ago levels.
The regional Philly Fed factory survey came in much weaker for December than expected, while a similar survey conducted in the Kansas City Fed region was unchanged at a modestly healthy level.
All this makes the slowing results in the Markit December factory PMI for the US understandable - expanding strongly from an historical perspective, but actually its slowest expansion in the past 12 months. It was always going to be hard to keep the pace up.
The US services PMI is expanding at a similarly high pace, but slowing too, at a three month low in December.
In China, there has been another twist in the property development sector woes. One company, China Fortune Land Development, that has now had to default, says it has 'lost' NZ$460 mln in a get-rich-quick scheme it had with a murky investment fund.
And Beijing is promising a reprise of its stimulus programs and many firms, especially SMEs start to struggle with the slowdown. Reinvigorating their property sector seems to be an aim.
Japan's latest December PMIs show both their factory and services sectors expanding still but at slower rates.
Yesterday, there were central bank rate reviews in Indonesia (3.5%), the Philippines (2%) and Taiwan (1.125%). Taiwan did raise its GDP forecast for 2022 and said rates may rise next year. All three report a strengthening recovery.
The PMI expansion is slowing in the EU, although they too are still at good levels. In Germany, it is all about a fast-slowing of their services sector. Their factory sector is on the up again in December.
The ECB left its interest rates unchanged butsaid it is reducing the pace of bond buying, closing down purchases under its pandemic emergency scheme and shutting that down by March. But it said it would offset some of that wind-down with increased buying in its more restricted Asset Purchase Program stimulus program.
The Bank of England raised its policy interest rate from +0.1% to 0.25%, their first rise in three years.
In Turkey, their central bank bowed to political pressure to cut interest rates, defying soaring inflation and deepening a currency crisis that has dogged their economy. Of course, their currency fell sharply as a result which will be even more inflationary. At the same time they raised their minimum wage by +50%.
The December PMI reports for Australia also report small slip-backs in December from the strong expansions reported for November. No issues are flagged in this report.
The Australian workforce rebounded by +366,000 jobs in November, much more than the +205,000 expected and dropping their jobless rate to 4.6% from 5.2%. However, +208,000 of those new jobs were part-time. So, the full-time rise of +128,000 was only half of the overall increase expected.
The UST 10yr yield opens today at 1.43% and a -1 bps slip from this time yesterday after the US Fed signals.
The price of gold will start today at US$1798 up +US$31 from this time yesterday, a +1.8% gain.
And oil prices start today +US$2.50 higher at just under US$72.50/bbl in the US, while the international Brent price is now just under US$75.50/bbl.
The Kiwi dollar opens today firmer at 68.1 USc and up +¾c from this time yesterday. Against the Australian dollar we are firm at 94.7 AUc. Against the euro we are up at 60.2 euro cents. That means our TWI-5 starts the today up +60 bps at 72.6 and off its recent lows.
The bitcoin price is firmer at US$48,483 and up +3.3% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.8%.
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.