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 that generally isn't positive, but the data and sentiment seems to be remarkably resilient.

US durable goods orders rose more in September than August, but not be as much as was expected. But the rise from a year ago was an impressive +11.5%. Orders for capital goods rose +13.6% on the same basis which is actually quite impressive in itself and indicates a broad commitment by firms there to new capital spending.

The US economy grew an annualised +2.6% in Q3-2022, beating forecasts of a +2.4% rise and rebounding from a contraction in the first half of the year. Helping was strong business investment and a smaller current account deficit. Hurting was a fall in residential construction and marginally slower consumer spending. But this actually was the bit that held better than expected. This result is the first of three estimates, so is subject to revisions.

There were +183,000 new claims for jobless benefits last week, another low level and taking the total to 1.225 mln and a small increase but really, still bumping along near record lows. Next week's October non-farm payrolls are likely to to remain very solid.

Not so positive is the next regional factory survey, this one from the Kansas City Fed district. This one points to a sharpish softening in production, shipments, and new orders. Still, employment rose mainly because those surveyed expect a pickup because "the economy is still decent". That is borne out by remarks by one very large business in the region, Caterpillar.

In China they reported that industrial profits slipped in October. Apparently foreign firms made losses in the month, as did local privately owned businesses. But State-owned businesses reported improved or holding profits.

In Taiwan, the trifecta of an invasion fear, rising inflation and interest rate hikes, saw consumer confidence there drop to a 13-year low in October.

As expected the ECB raised its policy rates by +75 bps earlier today, taking the key one to 2.0%. They tweaked a few of their support programs, but didn't change them significantly. In just three months, they have raised rates by +200 bps, the fastest pace of tightening in the bank's two-decade history. They are presiding over a set of economies on the brink of recession while trying to tame raging inflation, a very tough ask. They want to shrink their bloated balance sheet, but haven't started that yet.

German consumer sentiment improved in October according to the widely-watched GfK survey. It was a very minor improvement, but going into winter and with a war on their doorstep, this is perhaps a somewhat surprising outcome. It still is however at a quite depressed level.

Global freight rates for shipping containers fell faster last week than in the prior one, down another -7% in this latest survey. It is rates out of China, especially to Europe, that drove this latest fall. Rates from China to the US also continued to fall. Trans-Atlantic rates are actually now rising. Rates for bulk cargoes slipped again too.

The UST 10yr yield starts today down another -6 bps at 3.96% and back to where it was two weeks ago. 

The price of gold will open today at US$1659/oz. This is down -US$8 from this time yesterday.

And oil prices start today +US$1 firmer than this time yesterday at just under US$89/bbl in the US while the international Brent price is just over US$95/bbl.

The Kiwi dollar will open today at 58.4 USc and little-changed from this time yesterday. Against the Australian dollar we are up +½c at 90.3 AUc. Against the euro we are up a bit more than +½c at 58.5 euro cents. That all means our TWI-5 starts today at 68.5, and another +30 bps firmer than yesterday.

The bitcoin price is now at US$20,567 and -1.0% lower than 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.