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 economic weaknesses except in some key labour markets.

We follow American jobless claims, looking for early signs of labour market stress. But despite other weakish economic signals, this key sector isn't showing that yet. There were just 199,600 new claims last week, a very low level. There are now 1.237 mln people on these benefits, also historically low.

But there were weak signs continuing from their housing markets. New housing starts slipped again last month to be -8.8% lower than year-ago levels. Building consent levels -10% lower on that basis. But it is worth noting that both are still above pre-pandemic levels. And overall these October falls were less than was expected.

Also weak were the survey results from factories in the Philadelphia Fed region, primarily in Pennsylvania where a grim partisan election took place recently. It swung strongly to the Democrats, and that was despite their factories giving this survey a downbeat assessment, one taken right as votes were counted or immediately after.

But not quite so downbeat were factories in the Kansas City Fed survey. Here earlier declines in metrics slowed noticeably.

Meanwhile, the St. Louis Fed boss has called for more front-loading of the Fed's rate hikes, wanting it above 5% to get meaningfully on top of their inflation threat. The upper-bound of the Fed's current policy rate is currently 4%. Fed policy makers next meet on December 15, 2022 NZT

In China, Bloomberg is reporting that regulators there have told banks to report on their ability to meet short-term obligations after a rapid selloff triggered a flood of investor withdrawals from fixed-income products. The unscheduled regulatory queries coincided with the biggest decline in China’s short-term government bonds since mid-2020. The slump, spurred by a shift toward riskier assets including stocks, prompted retail investors to pull money from wealth-management products, fueling a spiral of price declines and accelerating withdrawals. Losses also spread to top-rated corporate bonds, stoking a record surge in yields this week.

In the UK, their "Autumn Statement" is a tough one, recognising that they are already in a deep recession essentially from own-goals, and that their jobless numbers will likely rise by another +500,000 soon. They unveiled £55 bln of tax rises and spending cuts, which they hope will lead to a "shallower downturn" with "fewer jobs lost" that the track they are currently on. Living standards are about to be rest sharply lower there.

Australia added +32,000 jobs in October and their jobless rate dipped to 3.4% from 3.5% in September. Better yet, there were +47,000 new full time jobs, and a fall of -15,000 part-time jobs here. These better-than-expected and solid labour market results will likely mean the RBA will add another +25 bps to their official rate in early December, taking it to 3.10%. Markets have priced in slightly less than that prior to this jobs data release.

And locally, Fonterra has announced it has finally sold its Chilean Soprole business, for about NZ$1 bln.

Container shipping rates continued their fast fall last week, down another sharp -7% from the prior week to be more than -70% lower than year-ago levels and are now -30% lower than five-year averages. It is still rates out of China, and now especially to Europe, that are driving this collapse. It is now almost just a third of the price to ship from Shanghai to Rotterdam, than it is to ship from Rotterdam to New York. That is highly unusual. Bulk freight rates are back to their pre-pandemic levels.

The UST 10yr yield starts today at 3.78% and up +6 bps from yesterday. 

The price of gold will open today down -US$17 at US$1759/oz.

And oil prices start today down -US$2/bbl from this time yesterday at just under US$82/bbl in the US while the international Brent price is just under US$89.50/bbl.

The Kiwi dollar will open today at 60.9 USc and down -½c. Against the Australian dollar we are firmer at 91.5 AUc. Against the euro we have slipped back slightly more to 58.9 euro cents. That all means our TWI-5 starts today at 69.9 and down another -20 bps.

The bitcoin price is now at US$16,672 and up +1.4% since this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.0%.

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.