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 global economic impulse seems to be weakening further.

US jobless claims rose last week to +219,000. When seasonal factors are added, this rise was significant. Seasonally, there should have been a decrease. Perhaps we are now getting the American labour market reaction to the slowing economy other data has been pointing to. The bond market is wondering and benchmark rates fell on the data. But there are still only 1.6 mln people on these benefits which is little-changed in a week.

One place the effects of an economic slowdown might show up is in inventory holdings. And while they have been rising on an inventory:sales ratio basis for more than a year, it has been off an unusually low base - and inventories actually fell in the April data released earlier today from March. So no confirmation of a slowdown there.

Japan reported a strongish +0.7% GDP advance in Q1-2023 over Q4-2022. But that only leaves them +1.3% ahead of year-ago levels. However the more recent bursts higher is a good sign for them. And their current account surplus in Q1-2023 has been impressively high as well.

The recent round of deposit interest rate cuts by state-owned Chinese banks is being seen as a harbinger for an official rate cut by the Chinese central bank later this month. They need to do more to try and get some economic momentum back into their economy, especially their factory sector.

The EU economy unexpectedly shrank -0.1% in Q1-2023 from the prior quarter. The expectation was that it would rise +0.1%. Data for the final quarter of 2022 were also revised to show a -0.1% fall, instead of a flat reading, which means the eurozone has now entered a small technical recession. A decrease in household expenditures led the retreat.

When New Zealand trade negotiators deal with the EU, we end up having to take what they will give, which hasn't been much. That is because we don't have anything they really need. It is not the case with Australia however. The Aussies are warning Europe that it risks losing access to critical minerals unless it sweetens a free trade deal for Australian farmers. Hopefully our MFN clauses will allow us to benefit if the Australians win that one.

In April, the Australian trade surplus was huge again, but less than expected. Goods exports shrank -7.0% from March but were down a lesser -3.2% from the same month a year ago. Rural exports were the hardest hit in April. Services exports (largely travel and education) are however recovering very rapidly. And imports rose +1.2%.

We should note that coal prices have fallen dramatically in 2023. From the start of the year, they are down by two thirds but that is only back to levels we last had in July 2021. Analysts see large falls ahead, still to come.

Global container shipping freight rates were stable last week, unusual because this is the first week in the past 82 that they haven't fallen.

The UST 10yr yield will start today at 3.72% and down -7 bps from yesterday. 

The price of gold will start today at US$1963/oz and recovering +US$19 from yesterday.

And oil prices have fallen -US$1.50 today from yesterday at just on US$71.50/bbl in the US. The international Brent price is now just over US$76/bbl.

The Kiwi dollar starts today +½c higher at 61 USc. Against the Aussie we are unchanged at 90.8 AUc. Against the euro we are firmish at 56.6 euro cents. That means the TWI-5 is up to 69.1 with a +30 bps rise and off its six month low.

The bitcoin price is virtually unchanged since this time yesterday at US$26,487. Volatility over the past 24 hours has been modest at just on +/- 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 again on Monday.