Kia ora,

Welcome to Monday’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 world's factories are signaling quite varied status indications. But overall February saw global manufacturing show signs of renewed vigour. Output expanded for the second successive month, supported by the first increase in new order intakes since June 2022. The outlook remained broadly positive overall, with optimism regarding the year ahead staying close to January's nine-month high.

But first this week, all eyes will be on the US non-farm payrolls report but not until Saturday NZT. Markets currently expect it to expand by another +200,000. Prior to this other American labour market indicators will be release like the JOLTS report and the layoff survey. The US will also deliver factory order data and Fed speakers will be out in force while the Fed itself reports to Congress on monetary policy.

Separately the Bank of Canada and the ECB will deliver rate reviews. Others will report trade, inflation and PMI data. Locally there is not much big data released although the Tuesday release of 2023 household expenditure survey results will be interesting, both for what they say, and what they don't.

In China there were two PMI surveys out. The official factor one wasn't very optimistic but the private Caixin version reports improving and expanding factory conditions. It is more understandable in China why the two might vary. The official one focuses on large state organisations, the Caixin one more on private businesses. Still, the results are opposite to what you might have expected. The official version also covered their services sector and that part reported an improving expansion.

In China, it now seems it is news that a large property developer actually is able to make payments on their bonds. Also in their news is that you can get arrested for asking local government authorities to pay their debts.

It will be no surprise, the Indian PMI rose in February, complementing its economic expansion.

But the Japanese PMI reported 'deteriorating' factory conditions.

After a sharp +18% jump in January, South Korean exports were expected to rise only modestly (less than +2%) in February on that same basis. But they rose almost +5% on the year-on-year basis pointing to resilience in export demand for them. Much lower imports (due to lower oil prices) enabled them to book a sharp rise in their trade surplus.

With an unexpected fall in new order levels, the widely watched American ISM PMI dipped deeper in contraction in February. The companion internationally benchmarked Markit PMI (now called the S&P Global PMI) told a very different story however in the same market, swinging up sharply to an expansion, and one this survey hasn't had since mid-2022. The driver? Well, it was a surge in new orders. The two surveys could not have been more different this month, an unusual set of views.

The widely-watched University of Michigan consumer sentiment survey for February is clearly upbeat however. Although consumer sentiment moved sideways in the month, slipping just two index points below January, it is holding the gains seen over the past three months. Expected business conditions remained substantially higher than six months ago. And long run expectations are much higher too.

EU (Euro Area) inflation fell in February but not by as much as expected. It is now at 2.6% pa on falling energy costs. Like everyone, they are finding the "last mile" hard to achieve. Meanwhile the Euro Area jobless rate fell to a record low 6.2%. But these days, governments get little credit for keeping employment high even when economic activity wavers. But in the sweep of economic history, it is a remarkable factor.

However, the Eurozone PMI does not make for happy reading.

The UST 10yr yield starts today at 4.19% and up a marginal +1 bp from Saturday but down -6 bps from a week ago. In fact that is near a three week low. 

The price of gold will start today at Saturday's higher level of US$2082/oz. And that is also up from US$2038/oz a week ago.

Oil prices are little-changed at just over US$79.50/bbl in the US while the international Brent price is now just under US$83.50/bbl. Both are +US$3 higher than a week ago. In a bid to try and raise the price, OPEC has extended its production cuts.

The Kiwi dollar starts today at just on 61 USc and little-changed from this time Saturday. But that is -1c lower than this time last week. Against the Aussie we are holding at 93.6 AUc. Against the euro we have firmed slightly to 56.4 euro cents. That all means our TWI-5 starts today at just on 70.4 and little-changed from Saturday, but down about -100 bps in a week.

The bitcoin price starts today at US$62,810 and up +1.3% from this time yesterday. But it is up more than +US$10,000 in a week or +25%. Volatility over the past 24 hours has been modest at +/- 1.2%.

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 tomorrow.