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 the giant US economy is putting most other major economies in its shadow, expanding while others stumble.

But first, the number of people claiming unemployment benefits in the US fell by -12,500 from the prior week to 222,000, firmly below market estimates. It was the lowest reading in nearly one month, adding to the latest jobs report that indicated historical tightness in the US labour market, and so maintaining the leeway for the Federal Reserve to remain hawkish.

But American retail sales fell -0.8% in January from December, reversing December's rise, and worse than market forecasts of a -0.1% fall. It is the biggest decrease in retail sales since March last year, primarily driven by the aftermath of the holiday shopping season and cold weather. Car sales were notably weaker.

Business inventories rose, but in relation to sales they remain stable and slightly below historical averages.

But they need to be cautious; industrial production edged slightly lower in January from December, missing market expectations of an expansion after recording no change in December. And that meant there was zero change from a year ago. Frigid weather got some of the blame for the January result.

But things may be on the improve. Both the Philly Fed's factory survey, and a similar one in New York both recorded sharp improvements in their February surveys.

Canadian housing starts came in lower than expected in January, and by quite a bit.

Official data in Japan suggests their economy was in recession in the second half of 2023. Japan's GDP unexpectedly shrank -0.1% in Q4 from Q3, missing market forecasts of a +0.3% growth and following a revised -0.8% fall in Q3, flash data showed. That is a big miss for the world's third largest economy. That is their first recession in five years, as private consumption, which accounts for more than half of the economy, declined for the third successive quarter. What is off about this is that the granular data that makes up the result was relatively positive in the period.

This Japan retreat was enough to sink it from the world's third largest economy, to #4 behind Germany. But while Japan's nominal economic activity slipped below Germany, the country's growth rate has surpassed that of China for the first time in almost half a century (on a nominal basis).

India reported very strong growth in car sales in January, driven in large part by sales in rural communities. In fact, they "smashed" the previous record, up almost +14% year-on-year.

The British economy contracted -0.3% in Q4 from Q3-2023, following a -0.1% decline the previous period. That was worse than market forecasts of a -0.1% fall. Their economy entered recession (if you use the two-quarter rule) amid a broad-based decline in output, including in services. This is election year in the UK.

The euro zone economy will grow slower than expected in 2024 according to updated forecasts from the European Commission. But they also expect to face reduced inflation pressure.

For the first time in two years, the Australian jobless rate has risen above 4%. The actual 4.5% rate means they now have 654,000 people without jobs, the highest level since October 2021. (The headline rate is the 4.1% seasonally adjusted rate.)

Australian inflation expectations held unchanged in February at 4.5% in this Melbourne Institute survey. Their central bank would have been disappointed in that.

Globally, container shipping freight rates slipped slightly last week but are still unusually high. The risks keeping them high are basically unchanged. Bulk cargo rates are again little-changed, and low.

The UST 10yr yield starts today at 4.24% and little-changed from yesterday. 

The price of gold will start today up +US$10/oz from yesterday at US$2001/oz.

Oil prices are back up +US$1.50 at just over US$78/bbl in the US while the international Brent price is up a bit less to US$82.50/bbl.

The Kiwi dollar starts today at just on 61 USc and little-changed from this time yesterday. Against the Aussie we are still at 93.8 AUc. Against the euro we are still at 57.7 euro cents. That all means our TWI-5 starts today at just under 70.6 and little-changed.

The bitcoin price starts today at US$52,232 and another +1.0% from this time yesterday. 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.