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 the death of their monarch in the UK will be grabbing all the headlines today, but the global economy is "carrying on". Here are those economic events.

In the US jobless claims were lower last week, both from the prior week and from what was expected. There are now 1.4 mln Americans on these benefits and still hovering near its all-time low.

In remarks at a monetary policy conference, Fed boss Powell doubled-down on outsized rate hikes in bullish comments. That reinforces market expectations that their September hike will be another +75 bps.

The recent expansion of American consumer credit in July has come in at a tame level and well below what was expected - and well below the inflationary impulse, so a 'real' decline. This is an indication that the Fed's higher interest rates are working to suppress demand.

In Hong Kong, Evergrande's local headquarters has been seized by its bankers, probably state-owned CITIC, after the struggling Chinese property developer defaulted on a loan and twice failed to sell the building. The prime-located 26-story building was valued at US$1.2 bln.

Across China, local governments are getting tough on developers who have stalled projects. Fire sales are about to happen.

In Beijing, they seem to have drawn a line under their exchange rate with the US dollar, working hard to avoid the ignominy of the CNY falling above 7 to the greenback. Their faltering exports and falling FX reserves aren't helping.

The Q2-2022 GDP data for Japan was released yesterday (the second estimate) and economic activity came in better than expected. It was +3.5% higher than a year ago when a +2.9% expansion was expected, boosted by a strong pickup in private consumption and a faster rise in government spending. (Don't forget, this is after inflation has been removed.)

After its +50 bps rate hike in July, the ECB raised them today again, and by an unprecedented +75 bps. The main refinancing rate is now at 1.25%, the marginal lending facility at 1.5% and the deposit facility one at 0.75%. Policymakers also said that interest rates should rise further over the next several meetings. Bank boss Lagarde said the ECB is far away from the rate that will get their inflation rate back to the 2% target. They have significantly revised up their inflation projections to average 8.1% in 2022, 5.5% in 2023 and 2.3% in 2024. And they sharply revised growth estimates lower to +3.1% in 2022, just +0.9% next year and +1.9% in 2024.

In Britain, a change of monarch is underway. They have just changed their Prime Minister. And change at the UK Treasury Department is also underway with the immediate sacking of its top official.

Meanwhile the country said it will cap household energy costs for two years, a substantial bailout aimed at staving off a deep recession and bringing down inflation that is running at more than +10% and the highest rate among large developed economies. But energy cost support for businesses facing the same stresses didn't eventuate.

In Australia, the RBA Governor was been speaking yesterday and left his audience with a dovish message, implying that their next rise might be just +25 bps. These comments moved both rates and currency markets locally. He was expected to be a bit dovish, but in the end he was more so than expected.

Continuing the theme of big numbers being reported yesterday, Australian exports plunged in July from June mainly due to sharp falls in the export of minerals and coal. That tanked their trade balance sharply, in fact the June to July fall was their largest ever, falling almost -AU$11 bln in one month resulting in a surplus of only +AU$8.5 bln (the previous record monthly fall was -AU$6.7 bln in January 2017.) Within this data was the note that Australia's rural exports rose +3.9% on a 'healthy'(?) grain market.

Container shipping costs are falling ever faster now, down -5% last week alone. But the costs of shipping bulk cargoes seem to have stopped falling, and back to pre-pandemic levels.

The UST 10yr yield starts today at 3.29% and up +2 bps from this time yesterday. 

The price of gold will open today at US$1710/oz and down -US$7 from this time yesterday.

And oil prices start today +US$1.50 higher at just under US$83.50/bbl in the US while the international Brent price is now just over US$89/bbl. 

The Kiwi dollar will open today just over 60.6 USc and little-changed since this time yesterday. Against the Australian dollar we are unchanged at 89.7 AUc. Against the euro we are also unchanged at 60.7 euro cents. That all means our TWI-5 starts today at 70.4 and the same as this time yesterday.

The bitcoin price is now at US$19,210 and a 1.1% firmer than this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.3%.

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.