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 we seem to be "not far" from getting interest rate cuts from the central banks in the US and Europe - and perhaps an unusual hike from Japan.

Tomorrow we get the important February US non-farm payrolls report, and today there are more precursor updates.

The number of people claiming unemployment benefits for the first time in the US was 213,000 last week, slightly more than in the previous week. That is down from 238,000 new claims in the same week a year ago. All up, there are now just over 2.1 mln people claiming these benefits, a minor increase from a week ago and a year ago.

US-based employers announced plans to cut 84,638 jobs in February, the most in eleven months, compared to 82,307 in January, and 77,770 a year earlier. It is also the highest February total for the month since 2009. But it is still just a rounding error in the perspective of a 161.2 mln employed labour force.

American export values were little-changed in January, marginally more than in December but marginally less than in January 2023. Their goods and services deficit rose slightly in the month, but over the past year is a massive -17% lower than in the prior year. It has fallen from a manageable -3.5% of GDP to a much better -2.8% of GDP now. (The New Zealand goods and services trade deficit is -4.1% of our GDP.)

There was more Powell testimony to the US Congress today, this time to a Senate committee.

In the US, Google may have had its key AI code stolen and passed to China. And sadly, this case will reinforce nationality stereotyping that is growing in the US-vs-China rivalry.

In Japan, worker earnings rose by 2.0% in January from the same month a year ago, rising from a +1.0% gain in December and posting the highest reading in seven months. That is triggering talk that a central bank rate hike may be in the offing. It did that last seventeen years ago.

China's exports surged higher in the January-February period they report at the start of the year. This is not only good news for them, but it also indicates global demand is rising, and probably by more than we might otherwise have assumed. But we should probably also note it is off a quite low base in the same period in 2023. New Zealand received +7.7% more exports from them, but they bought -14.9% less from us in the period.

One consequence? China's FX reserves inched higher.

The Malaysian central bank kept its overnight policy rate at 3% in its latest monetary policy review.

As expected, the ECB kept its main policy rate unchanged at 4.5%, at its overnight review. And it is keeping up its quantitative tightening program at the same pace. But they lowered their inflation forecast, and their growth forecasts, and signaled that they might cut rates in July.

Meanwhile, German reported that factory orders fell worryingly sharply in January to be -12% lower than the same month a year ago.

In Australia, lending for housing fell more than expected in January, trimming their year-on-year rise to +8.5%. For owner-occupiers, the monthly drop was -4.6% taking the year-ago change to just +3.4%.

Global container freight rates fell another -6% last week but remain +82% higher than year ago levels. The pressures remain even if an easing trend is building. Freight rates for bulk cargoes are still rising however and are now +70% higher than year-ago levels.

The UST 10yr yield starts today at 4.12% and up +3 bps from yesterday. 

The price of gold will start today up another +US$11/oz at US$2156/oz and another new record high.

Oil prices are down -US$1 at just over US$78.50/bbl in the US while the international Brent price is now just over US$82.50/bbl.

The Kiwi dollar starts today at just on 61.7 USc and another overnight gain of +¼c. Against the Aussie we are still at 93.3 AUc. Against the euro we have firmed slightly to 56.4 euro cents. That all means our TWI-5 starts today at just on 70.5 and up about +10 bps.

The bitcoin price starts today at US$67,389 and up +1.0% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.8%.

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.