US labour market strong. US consumer spending holds up. Chinese PMIs contract. Container shipping rates fall.
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 US labour market keeps on delivering positive momentum.
There were 195,000 new jobless claims in the US last week, low and taking the total people on these benefits down to 1.675 mln, and an all-time low in a record that goes back to the 1960s. Markets expect the March non-farm payrolls grown to be released tomorrow showing an increase of +490,000, a lower jobless rate, and higher pay.
Job layoffs might have risen in March but they are at a tiny level still.
The bellwether Chicago PMI for March came in strongly after an outlier February dip, an expansion that remains impressive and supports the low labour stress data.
These labour pressures are contributing to inflation. But personal spending rose +0.2% in February from January on an inflation-adjusted basis, but below analysts’ expectations of a +0.5% rise. But January was revised up to a surging +2.7%. The February result reflects an increase of +$94 bln in spending for services, namely food services and accommodations as Covid-19 infections from the Omicron variant faded. Meanwhile, spending on goods, mainly cars declined by -$59 bln. Yet, high inflation is likely to continue to weigh on spending in the coming months, forcing consumers to cut down on many items to afford more expensive petrol, rent and food. The PCE price index jumped 6.4% from a year ago, the largest increase in 40 years. Excluding food and energy, prices were up +5.4%, the biggest rise since 1983.
Updated mortgage rate data has their benchmark 30 year fixed-rate loan jumping to 4.67% (plus points) and within sight of 5% for the first time in four years. That is hurting their real estate sales industry.
Data for Japanese housing starts impressed in February, rising more than +6% from year ago levels. But Japanese industrial production data was weaker than expected, but at least it grew after the January shrinkage.
South Korean industrial production grew much more healthily in February and that followed a good January expansion.
But in China, their official PMI's (factory, services) both sank into contraction in March. These were faster retreats than were expected. Spreading pandemic lockdowns are not helping.
And Shanghai's ports are 'freezing up' as pandemic measures restrict movement in the area. Growing uncertainties in the overall Chinese economy has most observers expecting significant stimulus soon, starting from their central bank.
German retail sales actually rose in February, a better result than expected, and that was even on an inflation-adjusted basis. And despite the immediate security issues, jobs expanded in the month and the jobless rate was an unchanged and low 3.1%.
Global container shipping freight rates have slipped to nine-month lows in the latest assessment for last week. Bulk cargo rates slipped last week too.
The UST 10yr yield opens today at 2.32% and down a further -3 bps from this time yesterday.
The price of gold starts today at US$1944/oz and up another +US$12/oz from this time yesterday.
And oil prices are down -US$3.50 to just on US$102.50/bbl in the US. And the international Brent price is now just under US$107.50/bbl. These falls are because the US has ordered its largest-ever release of strategic reserves. Meanwhile, Russia and Europe are heading for a head-butting moment over whether payments will be made in rubles. The arrival of warmer weather in Europe comes at a good time for them.
The Kiwi dollar will open -½c weaker than at this time yesterday at 69.3 USc. Against the Australian dollar we are down a similar amount at 92.5 AUc. Against the euro we are just a little firmer at 62.6 euro cents. That all means our TWI-5 starts today at just under 74.5 and -40 bps lower in a week.
The bitcoin price is lower today, down -3.5% from this time yesterday to US$45,798. Volatility over the past 24 hours has been moderate at +/- 2.1%.
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.