US data mixed but commodity prices and Wall Street rise. China data tough especially for jobless youth. ECB hikes. Aussie labour market jumps.
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 hard data on the coming economic retreat is only marginally easier to find. Equities and commodities are up today.
But US jobless claims rose by +249,000 last week, about the expected seasonal rise. There are now 1.65 mln people on these benefits, the first actual rise since the end of February.
Meanwhile, retail sales unexpectedly rose +0.3% in May from April, following a +0.4% increase in April, and beating forecasts of a -0.1% slip. But these sales are only +2.8% higher than year-ago levels and far less than can be accounted for by inflation.
US industrial production however fell -0.2% in May from April when a small +0.1% rise was expected. This is a volume-based measure and year-on-year it is an insignificant +0.2% higher.
There are a wide variety of experiences at the regional level. The Philly Fed factory survey of that industrial heartland reported a small decline even if some sub indicators turned up. New orders weren't one of them. However the large New York state factory survey was more positive, and they did reveal a good rise in new orders.
China released a set of May economic activity data and it was relatively weak for them. Even the retail sales gain of +12.7% from year ago levels needs to be seen in context of the very low year-ago base. Real estate investment fell -7.2% year-on-year. But electricity production rose +5.6%. While their jobless rate remained unchanged at 5.2%, their troubling youth jobless rate worsened, hitting 20.8% at the end of May, up from 20.4% in April. The weak data triggered another unexpected cut to a key interest rate tied to their property development sector. The People's Bank of China announced it is trimming the rate on ¥237 bln (NZ$53 bln) worth of one-year, medium-term lending facility loans to banks by -10 basis points to 2.65%.
Against this dour data and somewhat unexpectedly, Japanese exports edged higher in May. That may be because Japanese machinery orders rose in April, according to data released today.
In Europe, the ECB raised interest rates by another +25 bps at its overnight meeting. That takes its key policy rate to 4%, the highest level since the 2008 GFC. It was the eighth consecutive rate hike, even though the region entered recession at the beginning of 2023. Both the headline and core inflation rates remain significantly above the ECB's target of 2%. They also revised their inflation forecasts higher and lowered their growth projections. They signaled they would likely raise rates again in July.
In Australia, there was an unexpectedly large surge in employment in May, with more than +76,000 new jobs added. Analysts had expected a gain of only +15,000. Their jobless rate dipped to 3.6% (from 3.7%). +62,000 of those new jobs were full time, +14,000 were part-time. Analysts now think the RBA will raise rates again to rein in the expansion.
Meanwhile, migrants are pouring into Australia. Their 2022 population topped 26.2 mln, up a fast +½ mln in the year, or +1.9%. That's their fastest growth since 2008. +387,000 of them were migrants.
Globally, container shipping freight rates fell a rather sharp -5% last week, continuing their long retreat and now at a faster pace. However, they are still +20% higher than pre-pandemic levels which themselves were unusually low. Bulk cargo rates are holding their recent minor recovery however.
The UST 10yr yield will start today at 3.73% and down -8 bps. Bond markets don't seem to be buying yesterday's Fed projections.
Wall Street is up more than +1.4% on the S&P500 in Thursday trade.
The price of gold will start today much recovered, up +US$16 at US$1960/oz.
Oil prices are up +US$2 today to now be just under US$71/bbl in the US. The international Brent price is now up at just under US$75.50/bbl.
The Kiwi dollar starts today unchanged at 62.3 USc and back to a three week high. Against the Aussie we are -¾c lower at 90.6 AUc. Against the euro we are lower as well at 56.9 euro cents and almost a -½c retreat. That means the TWI-5 is now down -20 bps to 69.8.
The bitcoin price is lower since this time yesterday at US$25,043 and down -3.3% from yesterday at this time. Volatility over the past 24 hours has been moderate at just on +/- 2.6%. Overnight, two small South Korean crypto platforms halted withdrawals in quick succession, another reminder of the outsized risks even small knocks can give to this wild-west sector.
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 will do this again on Monday.