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 the start of Summer in the northern hemisphere brings excessive heat and ominous food security and immigration implications.

But first, initial US jobless claims slipped slightly last week after the prior week's rise. They remain low at +227,000 even if the level is its highest since February. There are now 1.734 mln people on these claims, little-changed from the prior week. No real sign of building labour market stress here yet.

Meanwhile, housing starts in the US fell -5.5% to an annualised rate of under 1.3 mln in May, the lowest since July 2020. April was downwardly revised.. This unexpected decline shows that high interest rates are still weighing on their housing market. New building consents fell slightly too. This result came before the slight easing of mortgage interest rates in June.

The Philly Fed's Business Outlook June survey showed general activity edged lower but remained positive, while shipments and new orders remained mildly negative. These results were slightly less than expected.

We noted the extreme heat in northern India and the Middle East in yesterday's report. Well, it has extended into the eastern US as well with a major heat dome there too. It too is life threatening for some.

And we have noted before that severe drought and heat waves are gripping much of China's key agricultural areas. It is not getting any better there either.

China's loan prime rates remained unchanged at record lows after yesterday's China central bank review.

Across the Formosa Strait, Taiwanese export orders rose +7% year-on-year in May, more than expected but slowing from the +11% growth in April. The tech powerhouse country continues to benefit from a surge in AI applications, but demand also rose for chemical products.

The steady improvement in consumer sentiment in the EU was evident again in their June survey, although the improvement was slightly less than anticipated.

Staying in the region, the Swiss central bank cut its key policy rate by -25 bps to 1.25% at their June meeting overnight, following a similar move in the previous meeting. This was as expected. Underlying inflationary pressure is easing and the Swiss franc is strengthening, so it is an easy decision for them.

Meanwhile the English central bank also held a review and kept policy settings pat (and at a 16 year high), as expected. But they did indicate that rate cuts are coming there soon, mainly because of progress in getting inflation down.

Last week, the rise in container shipping freight costs accelerated again, up +7% from the prior week to be +233% higher that year-ago levels. China to Europe rates were especially hard hit last week. Bulk freight rates were up +6% last week to be up +80% from this time last year (but that was an unusual low point, to be fair).

The UST 10yr yield is now at 4.26% and up +3 bps from this time yesterday. 

The price of gold will start today up +US$26 at US$2355/oz.

Oil prices are up +50 USc at US$81/bbl in the US while the international Brent price is now just on US$85/bbl.

The Kiwi dollar starts today a little softer at just under 61.2 USc. Against the Aussie we are marginally firmer at 92 AUc. Against the euro we are unchanged at 57.1 euro cents. That all means our TWI-5 starts today unchanged at 70.7.

The bitcoin price starts today at US$64,672 and down -0.6% from this time yesterday. Volatility over the past 24 hours has again been modest at just on +/- 1.5%.

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 on Monday.