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 full employment just goes on and on, and is calling into question some of the ways we measure economic activity

First in the US, Americans are in the last week of their summer holidays and heading toward the crucial final third of 2022 with rising economic uncertainty. Much of that is because their housing markets are slowing quickly, and mortgage interest rates are rising. In fact rates for this past week turned up again after a few weeks relief. But like most consumers, negative news weighs heavier than positive news, but there are positives, and even in the global circumstances, a lot of them. The mood should be upbeat, even if it isn't.

New American jobless claims fell yet again to only 184,400 and well below what was expected. There are now 1.4 bln people on these benefits, a new modern low. Just one year ago, there were 12 mln people on these benefits, so the improvement has been epic. It is not a metric reported much these days, but we shouldn't lose sight of the achievement.

Meanwhile, the second estimate of the US GDP result for the second quarter was released and that brought a small improvement (actually a lower decline of -0.6% from Q1) than in the first estimate revealed. Interestingly they also released data for "Gross Domestic Income", which is the same data as GDP, just from a mirror perspective: one person's spending is another's income. And that shows GDI rose +1.4% in Q2, even if it was down from +1.8% in Q1. Obviously one of GDP or GDI is wrong and increasing numbers of economists now think that history will show that GDI is closer to the actual situation.

Away from this geeky data, all eyes are on the Powell speech at Jackson Hole, WY, in a central bank gathering organised by the Kansas City Fed. Actually the same regional Fed branch released their factory survey for its District and that showed a weakening expansion in August.

We will have details of the Powell comments, and the market reaction, in tomorrow's briefing.

In Canada it is probably worth noting that weekly earnings there are rose faster than expected June and a notably faster pace than for May. The overall gains are not keeping up with inflation though. But some are however, with factory wages up +6.9% year-on-year, and wages for people in professional and technical jobs were up almost +11%.

China has rushed out more economic stimulus with a further ¥1 tln set of policy measures to try and rebuild some growth, guard against the effects of their pandemic policies and try to fix the corrosion of their property market crisis. A 19-point policy package announced yesterday included another ¥300 bln that SOE banks can invest in infrastructure projects, on top of ¥300 bln already announced in June. Local governments will be allocated ¥500 bln of special bonds although this is not all strictly 'new'.

Overnight rains swept across parts of Sichuan, which has been suffering from a prolonged drought as a result of the worst heatwave in 60 years. But no-one is saying the impact of drought is behind them yet. They will need rain for a month to catch up.

The Bank of Korea raised its base rate by +25 bps to 2.5% during its August meeting, as widely expected, citing persistent inflationary pressures and high inflation expectations. This move came after they delivered an unprecedented +50 bps rate increase in July and as they try to prevent capital outflows amid more rate hikes in the US. The latest decision was also the 7th increase in borrowing costs since they lifted their base rate for the first time in August 2021. South Korea's inflation rate to hit 5.2% this year, the highest level since 1998.

Germany also reported its Q2 economic activity and in contrast to the US, it expanded, and expanded a bit more than expected. Having said that the growth was a low +1.7% year on year, just better than the +1.4% expected. Germany might be struggling with energy pain, and angst levels high. But in fact history will show they are handling the challenge well in the circumstances.

Freight rates for container shipping fell at a faster pace last week. But although it is -40% lower than the September 2021 peak, these rates are still +60% above the five-year average. Freight rates for bulk cargoes fell even faster last week.

The UST 10yr yield starts today at 3.03% and down -8 bps from this time yesterday and awaiting Powell's speech. 

The price of gold will open today at US$1758/oz which is up +US$9/oz from this time yesterday.

And oil prices start today at just over US$93/bbl in the US which is a -US$1.50 USc fall, while the international Brent price is still just over US$99/bbl.

The Kiwi dollar will open today at 62.3 USc and +½c higher than this time yesterday. Against the Australian dollar we are lower at 89.3 AUc and while it is only a small slip since yesterday, it is in fact our weakest against the Aussie since October 2017, a 5 year low. Against the euro we have risen slightly to just on 62.4 euro cents. That all means our TWI-5 starts today at 71.3 and a +30 bps firming.

The bitcoin price is now at US$21,572 and a tiny -0.3% slip from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.1%.

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.