Kia ora,

Welcome to Thursday’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 chances of a global recession are receding in 2023.

First up today, the US Federal Reserve announced the expected +25 bps rate hike, taking its upper bound rate to 5.25% and a 16 year high. Their short Statement reinforced their focus on getting inflation back down to its target 2% range. Their decision was unanimous. But compared to previous pledges, this Statement no longer refers to the potential need to raise rates from here. The Fed doesn't see a recession coming for the US.

The data today confirms their assessment that the American "economic activity expanded at a modest pace in the first quarter" and is continuing like that. The widely-watched ISM services PMI for April rose to a slightly faster and modest expansion with new orders strong. The internationally-benchmarked Markit one reported a similar expansion in their services sector.

The US ADP employment report signaled a much faster expansion in their April labour market than expected, also confirming the Fed's view of a strong labour market there. The ADP report was expected to show of +148,000 in April, but it came in twice as strong at +296,000. On Saturday NZT we will get their official non-farm payrolls report and analysts still expect their employed labour force to grow by +180,000 in April. There has to be upside to that now.

We should probably also note that American car sales are rising again, now running at a 15.9 mln annual rate in April, a sharp improvement from the 14.8 mln rate in March.

The American housing markets are still not sharing in this expansion however. Mortgage applications fell -1.2% last week, following a +3.7% rise in the previous week. They are -32% lower than year-ago levels. The benchmark 30 year mortgage interest rate held at 6.50% plus points.

India's services sector is firing on all cylinders, with a sharp improvement in April to a fast expansion built on strong new order flows. Among developing countries, the contrast with China will be annoying Beijing.

The European labour markets are tighter for them too. The bloc's jobless rate fell slightly to 6.5% in March, and this is now the lowest rate on record and coming in just below market expectations of 6.6%. A year ago, this rate was 6.8% so the improvement since has been slow.

International trade by air cargo is still easing back but the decline moderated in March. The levels were -8% lower than a year ago (and about -8% lower than pre-pandemic levels too). However Asia Pacific volumes were down a bit more. The only region posting increases over pre-pandemic activity is North America.

The UST 10yr yield starts today at 3.40%, and back down another -3 bps from this time yesterday. 

The price of gold will start today at US$2023/oz and up another +US$11 from this time yesterday.

And oil prices have fallen sharply again, down another -US$3 from yesterday to be just under US$68.50/bbl in the US. The international Brent price is just on US$72/bbl.

The Kiwi dollar is marginally firmer against the USD and now at 62.4 USc. Against the Aussie we are also marginally firmer at 93.4 AUc. Against the euro we are up marginally at 56.5 euro cents. That means the TWI-5 is now at 70.3 and up +20 bps since this time yesterday.

The bitcoin price is virtually unchanged today, now at US$28,456 and a mere -0.4% lower than this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.3%.

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.