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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.

Today we lead with news OPEC has sided with Russia and approved an outsized production cut of 2 mln bbd in a bid to raise oil prices sharply.

But first, the US services sector continues to expand at a healthy clip, according to the widely-watched ISM survey for September. New order flows remain strong. This was enough to cause bond yields to rise. However the ISM survey was a much more positive survey than the internationally-benchmarked Markit one which says the sector is improving but not really expanding.

We get a US non-farm payrolls report on Saturday and the expectation is that another +250,000 new jobs will have been created in September. Today the ADP Employment Report said their survey points to +208,000 new private sector jobs. They see the US services sector expanding at a moderate pace, but the manufacturing sector shedding jobs at a minor pace.

Last week, American mortgage applications resumed their downward track, mainly because mortgage interest rates continue to push higher. Their benchmark 30 year fixed rate is now up to 6.75% plus points, its highest level in sixteen years.

The US trade deficit is also on a lower track. It came in at -US$67.4 bln in August in data out today, and its lowest since May 2021. Exports are holding but imports are falling.

Interestingly, the Atlanta Fed's GDP Now real time monitoring suggests that American economic activity has been picking up to a healthy +3% pa rate over the past few weeks.

Canada reported a smaller trade surplus for August, at about half its expected level. In their case, exports fell more than imports.

But Canada also reported building permit levels for August and they were very much higher than expected, driven by multi-family units

Japan reported its September service sector activity and that improved to a good expansion after a brief dip in August.

Australia reported a small rise in retail sales in August from July, but not by enough to be more than inflation. However, year-on-year it is, with this retail activity up more than +19% on that basis. The August result would have been better if sales in Victoria and Queensland had been better, and if clothing and cars had been better. Outside of those, the August expansion was pretty good, especially for household goods and department store retailing.

And Australian regulator ASIC is suing Harvey Norman and Latitude Finance for promoting “no deposit” and “interest-free” payment methods that saddled some customers with an extra $537 in fees.

The UST 10yr yield starts today at 3.76% and up +13 bps from this time yesterday. 

The price of gold will open today at US$1715/oz. This is down -US$7 from this time yesterday.

And oil prices start today up +US$1.50 from yesterday at just under US$87.50/bbl in the US while the international Brent price has risen to be just over US$93/bbl.

OPEC+ (which includes Russia) made deep cuts to its oil output targets, double what was expected, curbing supply in an already tight market despite pressure from the United States and others to pump more. The US is especially unhappy with the size of the cut. This cut is spurring a rise in oil prices that have dropped from US$120 three months ago.

The Kiwi dollar will open today at 57.1 USc and nearly -½c lower than where we that this time yesterday. Against the Australian dollar we are soft at 88.2 AUc. Against the euro we are firm at 57.9 euro cents. That all means our TWI-5 starts today at 67.2, and little-changed since this time yesterday.

The bitcoin price is now at US$20,274 and up another +1.4% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.8%.

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 tomorrow.