US jobless claims rise, PPI falls. China's debt problem hits one province hard. Chinese exports in surprising jump. Aussie jobs strong, inflation expectations stay high.
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.
And today we lead with news the long-anticipated weaknesses in the American labour market may now be starting to show. But the signals are still faint.
US jobless claims rose last week by +235,000 which a notably higher than we have seen in a while. There are now 1.8 mln people on these benefits, and while that is little-changed, it is the 'shift on' that we should track because these benefits only last a limited amount of time and there are always claimants who max out and are no longer qualified.
American producer prices rose +2.7% in the year to March, a sharpish drop from the February +4.9% on the same basis. It was also lower than the +3% expected. More interestingly, the annualised rate of change between February and March was a deflationary -6.0%, a twist no-one saw coming. Core PPI didn't shift as sharply, but it did still record a small deflation of about -1%. These were the biggest month-on-month falls since the pandemic. Maybe somewhat surprisingly, it was services that recorded the biggest shift lower, not goods.
In China, overwhelming debt problems have caught up with one southern province. Things are so tight they have had to appeal to Beijing for help - in now-deleted online post. Researchers in landlocked Guizhou province (population 40 mln, so much larger than Australia) surveyed some of the province’s most indebted cities and found it ‘impossible’ to solve their debt problems at local levels. The relief valve of land sales have dried up completely leaving no revenue to service the legacy debt load. Things are unlikely to work out well for the Party boss and governor of the province.
But that might be an extreme isolated issue. China's exports unexpectedly surged in March, driven by solar products, new-energy vehicles and lithium batteries and as supply chain conditions continued to improve from their pandemic paralysis. Exports rose almost +15% year-on-year when a -7% fall was anticipated like in February. It isn't clear why analysts got this so wrong.
China's imports however did fall. And with New Zealand they are down -18.7%. Our imports from them (and that includes Teslas from the Shanghai factory and other EVs) are also down in March, but by less. The same data shows that Australian exports to China, and its imports from there, are each up more than +10% in March from a year ago. So perhaps 'being friends' with China isn't a great benefit because being in their bad books, like Australia, isn't hurting them in overall trade.
In Australia, the Melbourne Institute's inflation expectations survey shows it dipping from 5.0% in March to 4.6% in their April survey.
And Australia added +53,000 new jobs in March, with full-time roles rising +72,000 and the number of part-time roles falling -19,000 in the month. Their jobless rate stayed unchanged at 3.5%. Their participation rate was also unchanged at 66.7%. The continuing strength of their labour market puts more RBA rate rises back on the table as they may have turned dovish too soon.
International container freight rates were virtually unchanged this week, maintaining their below-average levels as world trade remains weak, especially out of China. Bulk cargo rates were little-changed as well.
The UST 10yr yield starts today at 3.45%, and up +4 bps.
The price of gold is at US$2044/oz and up +US$31 from this time yesterday. That puts it at its highest since August 2020.
And oil prices are down -US$1 at just on US$82/bbl in the US. The international Brent price is up to just on US$86/bbl. And perhaps we should also note that natural gas prices are back to very low levels, levels we had prior in the 1990s. Suppression of Russian energy prices may have a lot to do with this.
The Kiwi dollar is almost +1c firmer against the USD and now at 63.1 USc. Against the Aussie we are have firmed slightly to 92.9 AUc. Against the euro we have risen more than +½c, now at 57.1 euro cents. That means the TWI-5 is at 70.5 and up +60 bps from this time yesterday.
The bitcoin price is again little-changed, still at US$30,452 and up a mere +0.7% from this time yesterday. Volatility over the past 24 hours has remained low at +/- 1.4%.
You can find links to the articles mentioned today in our show notes.
You can 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.