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 trade may still be happening, but it seems to be happening at a slower pace.

But first, last week new US jobless claims were 206,000 which was a small decrease from the prior week and now 1.45 mln people are on these benefits, a small rise but still near a record low. Tomorrow we get the July non-farm payrolls report and that is expected to report a gain in employment of +250,000.

Job layoff activity was lower in July than June and still at a much lower level than pre-pandemic.

The trade deficit in the US narrowed by -US$5.3 bln to a six-month low of US$79.6 bln in June. Total exports were up +1.7% from the prior month to an all-time high of US$261 bln and up +23% in a year. Meanwhile, imports went down -0.3% to $340 bln in June from May to be up +20% from the same month a year ago. Their trade deficit with China seems stable at about -US$27 bln/mth.

Part of the reason imports are staying high is to guard against future shortages. Retailers and logistics operators are struggling to find space to store the flood of goods that have swamped warehouses and weighed on their balance sheets. Warehouse owners say more retailers are looking to add storage capacity, both for goods now reaching their networks of stores and distribution centers and as they prepare to keep more inventory on hand long-term to guard against stock-outs.

The American 30-year fixed-rate mortgage rate is 4.99% this week. Rates have fallen swiftly from their 13-year high of 5.81% in June.

Canada's trade surplus widened to +C$5.0 bln in June from a downwardly revised C$4.8 bln in May. This was their largest monthly trade surplus since August 2008.

And staying in Canada, house prices are retreating sharply in both Toronto and Vancouver.

The Bank of England raised its policy rate by +50 bps to 1.75% during its overnight meeting, the sixth consecutive rate hike, and pushing borrowing costs to the highest level since 2009. It was a unanimous decision and the rise was as markets expected even if it was their biggest rate increase since 1995. They have inflation running at 9.4% pa. They say the country is about to enter a recession in 2022.

The star of the trade data reported overnight was Australia who recorded an all-time record high trade surplus in June of +AU$17.7 bln for both goods and services. That takes its annual surplus to +AU$136.4 bln and a rather remarkable +6.3% of GDP. Exports rose almost +38% in a year, with the June activity up a stunning +5.1% from May alone.

In China and hard on the heels of a regional banking scandal that saw customers take to the streets in protest, the same province is now investigating a massive fraud involving "missing" copper.

The cost of shipping containers by sea continues to fall, down again last week to be almost -30 lower than a year ago. Bulk cargo rates slumped as well.

But there are signs of a strong recovery in global passenger travel. That said, it is still miles below pre-pandemic levels.

The UST 10yr yield starts today at 2.67% and down -6 bps from this time yesterday. 

The price of gold opens today at US$1792/oz in New York which is up +US$29 /oz from this time yesterday.

And oil prices start down another -US$3 at just over US$88/bbl in the US, while the international Brent price is now just under US$94/bbl.

The Kiwi dollar opened today up +½c from this time yesterday to 63.1 USc. Against the Australian dollar we are marginally firmer at 90.4 AUc. Against the euro we are unchanged at 61.6 euro cents. That all means our TWI-5 starts today at just under 71.3.

The bitcoin price has moved lower from this time yesterday, down -3.6% to US$22,633. Volatility over the past 24 hours has been moderate at just over +/-2.2%.

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.