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.

Today we lead with news we need to get ready for a +3o future and start adapting for it.

But first, initial jobless claims in the US came in at just 203,000 last week, much lower than expected. There are now 1.635 mln on these benefits. We are about a week away from getting the US non-farm payrolls report and current estimates are that it expanded just +140,000 in October. That may be conservative.

But the Chicago Fed's monitoring of their National Activity Index reveals a slip in September.

But in October that may have picked up, and substantially. The S&P/Markit US factory PMI contracted its least in three months, and their services PMI is still expanding at a good pace and has been for six months now. This helps explain why employment has been stronger than expected for some time.

The other encouraging feature of these PMI reports is that inflation pressures seem absent now.

The Kansas City Fed's regional factory survey showed these trends; factory activity barely contracting now which was a sharp improvement from September. And their services sector was expanding still.

Although firms in both regional and national surveys are increasingly optimistic about the future, they seem to be ignoring - or looking past - the damage the extended Boeing strike will cause. More here.

Also encouraging for them is that American new home sales were on the rise in September, rising to a 738,000 annual rate, its highest since the outlier May 2023 spike. The September level is +6.3% higher than a year ago. This time, new home sales seems to be on a rising trend.

In Japan their flash October PMI report shows a contraction too in their factory sector, but also only a minor one. But output and new order levels slipped at a slightly faster rate. Their services sector isn't expanding either according to this same report, a slip from the prior month. Apparently Japanese businesses are struggling to adapt to their modest inflation pressures.

Korea reported its Q3-2024 GDP yesterday, revealing a +1.5% growth rate, lower than the +2% expected at the +2.3% in Q2-2024.

India's October PMIs stayed strongly expansionary. New order levels were high. But there are signs of serious overheating, and inflation in India is a building concern

There is no overheating in the EU with everything ticking lower in October. But at least their service sector is still expanding.

In Australia, their October PMI survey reveals that their factory sector is at a 53 month low with a moderate contraction. Their services sector however is holding its own - just.

An updated UN report shows that we have essentially run out of time to cut greenhouse gas emissions. We are on track for a +3% rise in global temperatures and that will radically change how the planet operates, most of it not good. The difference between rhetoric and action is stark. China (+5.2% rise in emissions) and India (+6.1%) are overwhelming the US (-1.4%) and EU (-7.5%) restraint. Together China and India released 20,140 MtCO2e of greenhouse gas, 38% of the global total. Together the US and the EU released 9,200 MtCO2e or 17%. Neither China nor India are likely to heed the evidence, and if Trump is elected, the US will likely switch sides - so it will now be all up to how we adapt. Fortunately, New Zealand is in a relatively good position (or less-bad position).

Container freight rates fell another -4% last week but are still +118% higher than the 2019 pre-pandemic average. Again it was outbound China routes that fell but there was also a slip in rates from the US to China. Bulk cargo rates fell a sharper -12.5% last week, to be -28% lower than a year ago and back to pre-pandemic levels.

The UST 10yr yield is now at just on 4.19% and down -6 bps from this time yesterday.

The price of gold will start today at US$2732/oz and up +US$12 from yesterday.

Oil prices are -50 USc softer at just on US$70/bbl in the US while the international Brent price is now just over US$74/bbl.

The Kiwi dollar starts today at 60.1 USc and up +10 bps from this time yesterday. Against the Aussie we are also up +10 bps at 90.6 AUc. Against the euro we are down -10 bps at 55.6 euro cents. That all means our TWI-5 starts today at just on 68.9, and down -10 bps from yesterday at this time.

The bitcoin price starts today at US$67,558 and up +2.5% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.1%.

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.