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 American resilience is on full display today.

First up, our weekly look at the up-to-date stress index of the American labour market shows ... nothing. Weekly jobless claims fell last week and fell more than expected. On a seasonally adjusted basis it is a 9-month low. There are now only 1.87 mln people on these benefits, -7% fewer than a year ago. There may be a recession coming in the US in 2023, but it won't be led by their labour market.

However, the tech-sector layoffs keep building, and news about them is everywhere. But demographics and their widespread labour shortages in skilled positions isn't meaning their labour market is buckling. Not yet, anyway.

And there is no sign in America's factories either. Durable goods orders soared +5.6% in December from November, the sharpest gain since July 2020 and well above market forecasts of a healthy +2.5% rise. From a year ago these orders are +11.2% higher, more than accounting for inflation. Capital goods orders were up +25% year-on-year. No sign of recession in this factory order data.

But this data is for the immediate future. We are coming off a flat period in American factories however. The National Activity Index produced by the Chicago Fed, reported little change. And the next Fed district to report its factory activity said it was "mostly flat".

New home sales rose in December from November, but they still languish -16% below year-ago levels. American real estate agents probably think there is a recession in their sector.

Still, despite these apparent 'flat' indicators, overall their economy is still expanding. The advance estimate of Q4 American economic growth came in better than expected, recording an annualised +2.9% expansion which was better than the +2.6% expected although it was a slowing from the +3.2% expansion in Q3. But for such a large economy, and in this part of the business cycle, +2.9% is a Goldilocks outcome.

Another reason to be impressed is that personal disposable income rose +6.5%, faster than personal spending, which allowed personal savings to rise. Of course the distribution won't be even, or even 'fair', but it is better than decreases.

PCE inflation cooled to 3.2% pa, well lower than the 4.8% rate in Q3.

Hong Kong's exports are really struggling now, down -29% from a year ago. But other nations are rising. Singapore's industrial production rose faster in December than a while. And the Philippines reported strong GDP expansion.

After their Australia Day holiday, Aussies are supposed to return to work today. But that seems unlikely. Market activity there is probably going to be very light today.

Global container freight rates changed little last week, but what change there was, were slips, especially in freight out of China. Bulk cargo rates fell further and are now well below their long term average levels - and after inflation, at lowest-ever levels.

The UST 10yr yield starts today at 3.47%, and up +1 bp from this time yesterday. 

And we should note that markets have sharply pared back their bets on a +75 bps rate hike from the RBNZ now. +50 bps is currently how the market prices that possibility, which is a very sharp change in just a few days. Swap rates have followed them down. That may all change again however if the labour market data stays strong when it is reported next week. New Zealand inflationary impulses are certainly not beaten yet.

The price of gold will open today at US$1927/oz and down -US$9 from this time yesterday.

And oil prices start today up +50 USc, at just under US$81.50/bbl in the US while the international Brent price is up +US$1 at US$87.50/bbl.

The Kiwi dollar is little-changed from this time yesterday, now at 64.7 USc. Against the Australian dollar we start today at 91.2 AUc. Against the euro we are at 59.2 euro cents. That all means our TWI-5 starts today at 71.3, and also little-changed.

The bitcoin price is firmer, now at US$23,022 and up +1.8% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.8%.

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 will do this again on Monday.