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 Australia may be facing more rate hikes.

But first, the tight American labour market is still showing its resilience. The number of Americans filing for jobless benefits fell slightly last week to 258,000 when a seasonal rise was anticipated. However the number of people on these benefits rose to 1.89 mln as they are staying on longer now. But these overall levels are very low given their employed workforce is 161.6 mln.

The factory survey in the huge Pennsylvanian rust belt did not improve as expected in July. The Philadelphia Fed Manufacturing Index was little changed and continuing to point to an overall decline in manufacturing activity in the region. New order inflows remained negative.

Existing-home sales dropped -3.3% in June from May to an annual rate of 4.16 mln. Sales were down -18.9% from one year ago.. Sales declined in the South (-5.4% and the West (-5.1%), held steady in the Midwest and rose +2% in the Northeast.

So it will be surprise that a key leading indicator index fell in June. And it wasn't its first fall. The decline was driven by gloomier consumer expectations, weaker new orders, an increased number of initial claims for unemployment, and a reduction in housing construction. This index is pointing out a slowing economy and that it isn't about to pick up.

In China, their central bank left its Loan Prime Rates unchanged after cutting them in June, with the medium-term lending facility used for corporate and household loans still at 3.55%; while the five-year rate, a reference for mortgages still at 4.2%.

Japanese exports rose +1.5% in June, compared with market forecasts of a +2.2% rise after a +0.6% gain in May. This was the 28th straight month of growth in shipments.

Taiwanese export orders sank a whopping - 25% in June from a year ago, coming worse than market expectations of a -20% drop and a -17.6% fall in the previous month. It marked the tenth consecutive month of deteriorating orders as demand continued to decline for all product groups, particularly electronic products.

Although it is still deeply negative, European consumer sentiment continues to improve and did so again in July with a solid gain again.

Meanwhile, German producer prices were little-changed in June from both May and from a year ago. That signals that at the producer level at least, they are getting on top of inflation.

In Turkey, their new leadership of their central bank is moving to unwind the disastrous policies of recent years, raising their policy interest rate by +250 bps to 17.5%. But that was less than the 20% rate markets were expecting. The Turkish lira stabilised at its sharply devalued state in a wait-and-see attitude.

The Australian labour market added +32,600 jobs in June, double the +15,000 expected. +39,300 of those were full time positions, and part-time positions fell -6,700. Their jobless rates stayed unchanged at 3.5%. In NSW their jobless rate fell to a remarkably low 2.9%. (New Zealand releases its June quarter labour market data in two weeks on August 2, 2023. Our jobless rate in March was 3.4%.)

And staying in Australia, their prudential regulator has told it superannuation funds that they must reassess the value of their unlisted assets every quarter. That could be an earthquake for that funds industry as they have AU$650 bln in these illiquid unlisted asset classes, especially commercial property.

Unless inflation falls in Australia, the strong jobs market could well mean another RBA rate hike, and that will compound those super fund valuation miseries.

In global shipping we may be at the bottom for freight rates. Rates for containerised shipping rose slightly last week, a second week that has happened. But rates for bulk cargoes are slipping again although they remain near their long run average (which is actually very low because that average doesn't adjust for inflation).

The UST 10yr yield will start today at 3.85% and up +10 bps from this time yesterday. 

The price of gold will start today at US$1970/oz and down -US$8 from yesterday.

And oil prices are unchanged from this time yesterday at just under US$75.50/bbl in the US. The international Brent price is still just under US$79.50/bbl.

The Kiwi dollar starts today down slightly from yesterday at just under 62.3 USc. Against the Aussie we are lower at 91.9 AUc. Against the euro we are firmish at 56 euro cents. That all means the TWI-5 has slipped -10 bps from yesterday to 69.9.

The bitcoin price is still in in its recent yoyo pattern and now is at US$29,748 and down -1.0% from this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 1.3%.

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 on Monday.