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 global trade networks seem to be fracturing at a faster pace now.

But first, there was an outsized jump in initial American jobless claims last week, up to +286,000 and pushing the total number of people on these benefits to just under 1.6 mln. The insured jobless rate jumped to 1.1% and while this is still incredibly low, it may well signal the economic slowdown is starting and starting to hit the American labour market.

But their latest update for consumer debt isn't indicating households are pulling back. It rose at a moderate pace in October, and there weren't any credit card red flags in this data.

And it looks like some major components of American inflation are starting to ease. Mortgage interest rates fell last week, back under 7% and back to September's levels. Rents are falling. American petrol prices are too and back to year-ago levels. These three are large enough categories to be noticeable in household budgets.

But markets don't think these reduced pressures will bring a change in inflation-fighting attitude at the Fed, and still see them raising rates from here.

China is cosying up to Saudi Arabia, shoring up its energy supplies and going its own way on global trade. While the Xi's trip there is mostly theatre, it does underscore the fracturing of the previous integrated global trade network. It isn't a great time for China to try this however. Its new grouping with Russia and the Middle-East looks more fragile than the US-Japan-EU network. India wants to be seen as a major power too, but is unlikely to join up with a China-dominated bloc.

In China, more evidence of the economic cost of their Covid-Zero policies are coming to the fore. More than 40% of their car dealers went out of business in November, and car sales dipped sharply.

The establishment of new not-China advanced computer-chip manufacturing facilities is gathering pace as China pushes ahead with its own. And India says it will do the same. This key industry is emblematic of a hardening of the trade fault-lines.

But trade is still going on, especially in basic commodities.

Australia reported another jumbo trade surplus in October of AU$12.2 bln for the month.

Container shipping rates continue to ease fast, down another -6% last week from the week before. Again, it is China-related trade that is taking the heaviest reductions. They are now -77% lower than year-ago levels, and -21% below the ten year average. But bulk cargo rates are not showing the same retreats.

In fact, there is little evidence of demand falls for key commodities, either mineral or food (although perhaps wheat prices are well passed their peak).

Back in Australia, their Federal Parliamentary Budget Office warned that unless the government addresses bracket creep, more and more taxes paid by fewer and fewer taxpayers will eventually undermine their tax system (see section 4.3) by encouraging "tax planning" by many, and lower workforce participation rates by other groups.

The UST 10yr yield starts today at 3.49% and up +5 bps from this time yesterday. 

The price of gold will open today at US$1790/oz and up another +US$7.

And oil prices start today down another -50 USc from this time yesterday at just on US$72.50/bbl in the US while the international Brent price is down to just over US$77.50/bbl.

The Kiwi dollar will open today at 63.8 USc, and again a little firmer than this time yesterday. Against the Australian dollar we are -½c softer at 94.2 AUc. Against the euro we are at 60.4 euro cents and down slightly. That all means our TWI-5 starts today at 72.1 and very little-changed.

The bitcoin price is now at US$16,838 and up a mere +0.1% from this time yesterday. Volatility over the past 24 hours has also been low at just +/- 0.6%.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again on Monday.