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 that is impressive out of North America.

First up today, the Americans have delivered a stellar Q3-2023 GDP expansion, far higher than the optimistic forecasts, and far higher than the very good Q2-2023 expansion of +2.1%. In Q3, the giant American economy grew +4.9% according to their advance estimate. Better, this was built on stronger than expected consumer spending.

Their PCE price index, an inflation measure the US Fed takes note of, rose +2.9% from a year ago, with the 'core' measure up +2.4% and less than expected.

That was just the start of their 'good economic news'. US durable goods orders rose a startling +6.0% in September from a year ago, up at a +4.7% rate from the prior month. No one saw this surge coming either. Capital goods orders were hit out of the park, up +16% from the same month a year ago.

New initial jobless claims for last week came in at 192,000, and while still very low, it was marginally higher than a week ago. But there are now only 1.58 mln people on these benefits, also unusually low.

US exports rose +2.9% in September from August, but that still leaves them -2.2% lower than the same month a year ago. Their merchandise trade deficit rose marginally.

Also somewhat unexpected - and positive - was that American pending home sales rose in September from August when analysts were bracing for another fall. But even after that bump, they remain historically weak.

Canada said weekly earnings there were up +4.2% from a year ago in August, an unchanged rate from July. Given inflation there is running at 3.8% pa, workers there are keeping up, even making real gains.

In China, international banks are reporting sharply higher provisions and losses for their business there. Standard Chartered led these reports, Japanese banks exposed there too are reporting a similar profit hit. American banks are noting similar stress in their Chinese operations.

There has been quite a turnaround in Singapore as well. Industrial production jumped more than +10% in September from August, although that was largely just making back the dire August result. But it has shrunk the year-on-year shortfall to just -2.1%, much better than the expected -4.8%.

In Europe, the ECB hit the 'pause' button after a series of ten consecutive rate increases since July 2022. It claims it sees a gradual easing of price pressures. It is also looking at an impending recession. Still, this leaves their policy rate at 4.5%, its highest in 22 years. Its quantitative tightening program - selling off its bond holdings - continues unchanged.

In Turkey they raised their policy interest rate by +500 bps to 35% earlier today. That's up from 8% in June. An eye-watering policy about-face. They have inflation running at over 60% pa now.

Global containerised freight rates fell another -2% last week, taking them down -57% from a year ago. Rates to and from China are the weak links; rates across the Atlantic actually showed rate increases. Bulk cargo rates topped out over the past week and are now falling.

The UST 10yr yield has fallen -10 bps from this time yesterday, now at 4.85%. 

The price of gold will start today at US$1984/oz and up +US$7/oz from yesterday at this time.

Oil prices have ticked back down -50 USc today to be now at just over US$83.50/bbl in the US. The international Brent price is now just over US$87.50/bbl.

The Kiwi dollar starts today at 58.1 USc and down -10 bps from this time yesterday after dipping sharply in between. Against the Aussie we are up marginally to 92.1 AUc. Against the euro we have risen slightly to 55.2 euro cents. That all means our TWI-5 starts today slightly firmer at 68.4.

The bitcoin price starts today at US$33,812 and down -2.2% from this time yesterday and off its eighteen month high. Volatility over the past 24 hours has been modest at just on +/- 1.5%.

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.