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 financial markets in the US have the jitters ahead of a key speech by Fed boss Powell tomorrow at the Jackson Hole central bank shindig. Equities fell, bond yields rose, and the USD firmed and expectations grew Powell will make the case for only a gradual pace of rate cuts.

Meanwhile, US jobless claims actually fell last week and by about what was expected. But the seasonally-adjusted level rose and that wasn't expected and that grabbed the headlines in the absence of any other major economic news. There are now 1.86 mln people on these benefits, also a fall.

The 'flash' US PMIs from S&P/Markit shows their factory sector contracting slightly but their services sector expanding faster. New order levels are problem for their manufacturing sector. But service sector activity grew at a solid and increased rate in August, and because that sector is far larger than the factory sector, that points to robust GDP growth in excess of 2% annualised in the third quarter, which should help allay near-term recession fears.

The Chicago Fed's National Activity Index for July basically confirmed the manufacturing slowdown.

But the Kansas City Fed factory survey held on with an improvement in August, showing there are some regions still improving in their manufacturing sector.

Also improving were the July existing home sales which rose modestly at about the expected level and that ended a four month retreat. But despite that, the sales volume levels essentially remained at the low levels they have had since early 2023. And on a broader perspective, sales volumes at this level were first achieved in the mid-1970s, and were the levels in the GFC. So July's rise is a very low bar.

In Canada (and the US), all eyes are on a stoppage in their key rail network due to industrial action. It is a lockout, and it will have many spillover impacts in both countries.

In India, the expansion rolls on for both their factory and services sectors in an impressive way, with them shrugging off capacity issues in their factory sector with a notable rise in job creation. 'Growth' is creating many more employment opportunities.

In Japan, although it rose, its August factory PMI is still contracting, slightly. On the other had Japan's service sector is expanding at a good rate. That is the seventh consecutive expansion in their services sector.

In China, Reuters is reporting that regulators there will likely impose a six-month business suspension on a big part of PwC's auditing unit in the mainland as a penalty for its work on troubled property developer Evergrande.

In Europe, business activity rose at faster pace in August, but the rate of new order intake continued to ease. The uptick in business activity is largely due to the Paris Olympics however, so that probably won't last.

In Australia, their August PMI's sort of mirrors Japan but at a slightly lower level. The factory PMI is up but still contracting. Their services PMI is expanding although only at a modest rate.

Global container freight rates slipped another -2% is a continuation of the minor moves down from the extreme July heights, with the basic pressures unresolved. These rates are still almost three times higher than pre-pandemic and pre-canal-pressure levels. There is no real sign of a proper normalising. Bulk freight rates rose slightly last week.

The UST 10yr yield is now at just on 3.86% and up +8 bps from this time yesterday.

The price of gold will start today down -US$27 from yesterday at US$2482/oz.

Oil prices are recovered yesterday's US$1.50 drop, now back at US$73/bbl in the US while the international Brent price is now just under US$77/bbl.

The Kiwi dollar starts today down -30 bps from yesterday at 61.3 USc. Against the Aussie we are up +10 bps too at 91.5 AUc. Against the euro we are still at 55.3 euro cents. That all means our TWI-5 starts today at 69.4 and little-changed.

The bitcoin price starts today at US$60,305 and up +0.7% from this time yesterday in its recent yoyo pattern. Volatility over the past 24 hours has been modest at just under +/- 1.6%.

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.