Kia ora,

Welcome to Thursday’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 world's economy seems to be ending the year in a flat funk. Momentum has leaked away and financial markets are sensing a fairly bleak 2024.

However American mortgage applications rose by +2.8% last week from the prior week, marking the fifth consecutive weekly increase and pushing applications to their highest level in ten weeks. Helping was the continuing fall in home loan interest rates with the benchmark 30 year fixed rate now down to 7.35% plus points.

Private businesses in the US hired +103,000 workers in November, below a downwardly revised +106,000 in October and well below the expectation of +130,000. That is according to the ADP survey. The November result brought the expected rise in services hiring, but an unexpected fall in manufacturing job levels. However, expectations for Saturday's (NZT) non-farm payrolls have firmed and are now at a +180,000 gain.

US exports of goods and services came in little different in October than September (-1.0%), but were +1.3% higher than year-ago levels.

In Canada, they too delivered a hawkish hold in their overnight monetary policy decision. They held its target for the overnight rate at 5% for a third consecutive meeting, in line with market expectations, leaving borrowing costs at a 22-year high. The Canadian economy currently seems stalled.

Canadian exports were also little changed in October from September (+0.1%), and almost the same year-on-year.

In Japan, sentiment at big manufacturers there surged, improving for a second straight month as the vehicle sector continued to recover from last year's semiconductor shortage and supply chain woes.

China is really battling that flu outbreak we noted a week or so ago. Hospitals are crowded, healthcare employees very stressed. Authorities are worried, using language that is easily decoded by their population.

Moody's put Hong Kong, Macau and lots of China's state-owned firms and banks on downgrade warnings overnight as it wasted little time in following up on an identical move the previous day on the mainland government's rating. The Hong Kong government isn't happy.

EU retail sales volumes rose in October from September but not by as much as expected. In the end the rise was trivial, but at least it is a volume rise. However, from a year ago, these volumes are -1.2% lower, although that is much better than the -2.9% decrease in September.

But German factory orders were unusually weak in October. They fell -3.7% in October from September, following an upwardly revised 0.7% rise in September. Analysts had expected a gain, but their industrial sector remains fragile. The biggest drag came from orders for machinery and equipment. These October order levels were -7.3% lower than year-ago levels. For an economy as large as Germany, that is a lot.

In Norway, their parliament has backed deep-sea mining in the Arctic Ocean. This is a bit of a surprise given they have a center-left government.

Yesterday’s independent Aussie PMI from the Australian Industry Group was also something of a depressing read. Their Index sank deeper into contraction in November on the back of falling demand and activity. It is now back at levels last seen in the depths of the pandemic. The activity/sales, new orders and input volumes indicators all materially fell in the month. Employment increased marginally. November's was the lowest reading since June 2020. On a trend basis, all four activity indicators point to contractionary conditions.

Australia released at Q3 GDP data yesterday, showing their economy grew +2.1% in the September quarter from the same period in 2022. That is better than the expected +1.8% year-on-year expansion, and the same as their Q2 expansion. Having noted all these year-on-year changes, we should also note that the change from the June quarter came in softer than anticipated - and it is this softness that is grabbing headlines across the ditch, especially the lower household incomes. It is a sharp contraction in per capita terms.

The UST 10yr yield is down -7 bps from yesterday at 4.11% with the slide extending.

The price of gold will start today just on US$2,030/oz and up +US$13 from yesterday.

Oil prices are -US$3.50 USc lower in a notable drop at just on US$69.50/bbl in the US. The international Brent price is now at US$74.50/bbl. These are new 5 month lows.

The Kiwi dollar starts today at 61.6 USc and up +¼c from yesterday. Against the Aussie we are up +10 bps at 93.7 AUc. Against the euro we are up +¼c to 57.1 euro cents. That all means our TWI-5 starts today just on 70.7 and up +2 bps from this time yesterday.

The bitcoin price starts today at US$43,815 and up another +2.6% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.

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 tomorrow.