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 Australian labour market is now shedding jobs in an unexpected development.

But first, US jobless claims came in almost exactly as expected at +255,000 last week so there are now 1.95 mln people currently on these benefits. This 'canary' metric isn't yet showing the expected labour market shift to tougher conditions.

However, American producer prices rose in January by +6.0% from a year ago, which was a lesser rate than in December but not the pullback markets were expecting. The annualised rate between December and January was at a more than +8% rate however and the most in seven months, so inflation isn't beaten in this data and it maintains pressure on the Fed. Equity markets fell after this data. Bond yields rose.

And that is despite a very weak factory survey from the Philly Fed's heartland manufacturing area. It was an unexpectedly sharp and deep retreat with weaker new order levels.

American housing starts fell in January from year ago levels and from prior month levels to a 31 month low, but new building consent levels were unchanged from the prior month even if they too are down steeply from a year ago. Both metrics were pretty much in line with what was expected however.

Officially, prices for new houses in China fell -1.5% in January from a year ago. But given this market is in the doldrums with few sales (and low demand), it is doubtful this tells the real story. Re-sales are probably harder hit, with official data showing only six of 70 large cities recording prices the same as or higher than the same month last year. This is unusually low for them. A private survey showed that these sales volumes fell -14%.

In Hong Kong, their population decline is easing. The city’s 7.3 mln population fell by a net -12,900 people in the second half of 2022, down from a decrease of -55,400 in the first six months. The total 2022 decline is less than originally feared, but it is unusual.

Australian consumer inflation expectations are proving sticky. The latest Melbourne Institute survey shows them at 5.1% and while this is down from 5.6% in January, it has now been a year where it has oscillated between 5% and 6%.

In Australia, their labour market is wavering. It shed workers for the second month in a row in January, in a sign the nine consecutive official rate rises are starting to bite. They were expected to record +20,000 new jobs added but in fact they lost -11,500 jobs. Their unemployment rate rose to 3.7% (from 3.5%), adding 21,900 to the jobless rolls.

Aussie tourism has also recovered strongly, quickly. It is now back to 75% of its pre-pandemic levels, and back to full 2015 levels. Kiwis are the largest group visiting. New Zealand is also their largest destination, but that was from where only 17% of all Aussies returned.

Global container shipping freight rates edged down again last week to take them -27% lower than the ten year average. Bulk freight rates are in the doldrums too and now threatening all-time lows.

The UST 10yr yield starts today at 3.84% and up +4 bps from yesterday. 

The price of gold will open today at US$1841/oz and up +US$3 from this time yesterday.

And oil prices start today back up +US$1.50 at just on US$79/bbl in the US. The international Brent price is now just under US$85.50/bbl.

The Kiwi dollar is unchanged at 62.8 USc. Against the Australian dollar we are softish at 91 AUc. Against the euro we are also softish at 58.7 euro cents. That all means our TWI-5 starts today back at 70.5 and marginally.

The bitcoin price is now at US$24,969 and up a very strong +9.6% from this time yesterday. It is pushing towards the US$25,000 / NZ$40,000 levels quickly now which we last had eight months ago. Volatility over the past 24 hours has been extreme at +/- 5.5%.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and I'll be back again on Wednesday.