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 a quick news wrap-up so you can get back to your 'time-off'.

First, the closely-watched US ISM factory PMI contracted again in December, but by less than expected and less than in November. But the number of months in contraction is now mounting; now its 14th straight month, the longest string since 2000-2001. New order levels remained weak.

But despite a key strike, and chip shortages earlier in the year, America's General Motors came out on top in their 15.5 mln vehicle sales market in 2023, edging out Toyota for the top spot - again.

US job openings eased slightly in November from October to 8.8 mln. This caught the attention of financial markets because this is now a 13 month low, but to be fair it is very little changed from October and has been hovering at this level since July.

Also falling, and quite sharply, were mortgage application levels in the US. And that was even after adjusting for the holiday period. Mortgage interest rates were stable at 6.76% plus points.

But expanding, and at a faster pace now were retail sales at traditional outlets. They were up +5.6% from the same week a year ago in a rising pace, solid real increases and much more than can be accounted for by inflation.

India's factories ended 2023 with a good but easing expansion. However that expansion remains above its long-run trend levels. They had substantial rises in new orders and production, and managed to keep its input cost inflation down, now its weakest rise in more than three years.

In China, it is now very tough being a new graduate and looking for work. Average starting pay offered to new hires in 38 key Chinese cities fell -1.3% to ¥10,420 per month (NZ$2,350/month) in Q4-2023 from a year ago. That was their worst drop since at least 2016 when this data started to be collected, according to data from a national online recruitment platform. And it is worse in some very big centers. In Beijing, starting salaries decreased -2.7% from a year ago and they have been falling all year. In Guangzhou they fell -4.5%.

In Australia, the house price juggernaut seemed to run out of steam in December. Sydney prices were little-changed and Melbourne prices actually fell. But for all of 2023 they did manage an +8.1% rise overall, with Sydney up +11.1%, Melbourne up a much more modest +3.5%, Brisbane was up +13.1% and Perth roaring ahead, up more than +15% for the year. Although Brisbane, Adelaide and Perth maintained the pace in Q4, that was not the case in either Sydney or Melbourne and questions are rising about a 2024 reversal.

Rising, and at a faster pace is the price of iron ore, now up at US$145/tonne, a gain of +18% in a little over a month, and up +30% in six months. Australia's budgets (state and federal) are all being fattened by this rise.

The UST 10yr yield starts today at 3.90% and down -5 bps from this time yesterday. 

Wall Street has started today down -0.3% in Wednesday trade on the S&P500. The Nasdaq is down another -0.6% so far. Overnight European markets all fell sharply, with London down -0.5%, Frankfurt down -1.4% and Paris down -1.6%. Yesterday Tokyo did not trade as it is a standard holiday there. They should be back today. Hong Kong fell another -0.9%. Shanghai however rose +0.2% as the home team came out to stabilise things. On the other hand, the ASX200 fell -1.4% yesterday. In its first day of trading this year, the NZX50 closed down a more modest -0.3%.

The price of gold will start today down -US$29/oz at just on US$2033/oz.

Oil prices are +US$2.50 higher at just under US$73/bbl in the US. The international Brent price is now just over US$78/bbl.

The Kiwi dollar starts today at 62.4 USc and only marginally different from this time yesterday. Against the Aussie we are nearly +½c higher at 92.8 AUc. Against the euro we are marginally firmer at 57.2 euro cents. That all means our TWI-5 starts today just on 70.7 and up +10 bps.

The bitcoin price starts today much lower at US$42,945 and retreating -4.8% from this time yesterday, suggesting yesterday's surge was overdone. Volatility over the past 24 hours has been extreme at just under +/- 5.7%.

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.