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.

And today we lead with news US policy making has now become so chaotic, businesses are holding off making decisions. That can only have negative consequences.

Firstly, US jobless claims rose modestly last week from the week before but this was less than seasonal factors would have suggested. There are now 2.23 mln people on these benefits and back up near the October 2021 levels. The current consensus forecasts for tomorrow's release of the February non-farm payrolls is a rise of 160,000.

But there might be some downside, if not in tomorrow's data, in the following set. The level of announced job cuts in February jumped to pandemic levels, and prior to that, to GFC levels. The Musk razor gang is getting some of the blame.

The January American trade balance of both goods and services came in double the deficit of a year ago and an all-time record. Tariff policies have driven the change. For the year to January, their total trade deficit was -US$982 bln with a real surge from September to January and blowing it out to -3.4% of US GDP and a record high.

Overnight the US announced delays on tariffs against Mexico. It is a never ending series of confusing 'definite' signals, none of which inspire confidence or allow for orderly business decision making. With Mexico, the situation has turned on its head in just four days. With Canada, Trump is ignoring what his Commerce Secretary said just one day ago, and US carmakers are in a real bind now.

US wholesale inventories rose in January and their inventory to sales ratio rose too, ending a long period of improvement.

Folding this data in gives the latest reading of Atlanta Fed GDPNow forecast for American Q1-2025 performance is now a -2.4% decline. Apart from the pandemic they won't have seen anything quite this dramatic since the GFC.

Since its peak in December, the Tesla share price is continuing its fall, and it is only notable today because the value loss now exceeds -US$660 bln in that period. In NZD that is -$1.15 tln! That price is down another -5.6% so far today and filings show Tesla insiders are now selling.

Going the other way, Canada's exports and their trade balance came in sharply positive. Exports were up +20% in January from a year ago and their trade surplus was its best since a brief spike in May 2022, and prior to that, best ever.

The Malaysian central bank held its key interest rate at 3% for the tenth consecutive review during its overnight meeting, and that was in line with market expectations.

In China, nothing meaningful or unexpected has come from their National People's Congress meetings.

In Europe, the ECB cut its three key interest rates by 25 basis points, as expected, reducing the main refinancing rate to 2.65%. It was their sixth cut since the peak in September 2023 of 4.5%. Economic growth forecasts were revised downward to +0.9% for 2025 and +1.2% for 2026, reflecting weak exports and investment.

EU retail sales volumes fell -1.6% in January from the same month a year ago.

In Australia, tropical cyclone Alfred has slowed its move toward the Brisbane coast but is still generating damage and will do for longer, even if it actually losing some of its destructive power. Tens of thousands of people are without power now.

Container freight rates fell another -3% last week from the week before to be -30% lower than year ago levels and now 'only' +76% above pre-pandemic levels. Bulk freight rates were up +13% in the week however but down -36% from a year ago.

Today the UST 10yr yield is now at 4.29%, up +1 bp from yesterday.

The price of gold will start today at just over US$2917/oz and little-changed from yesterday.

Oil prices are down -50 USc to under US$66/bbl in the US and the international Brent price is just under US$69/bbl. Lower expected demand expectations are the reason.

The Kiwi dollar is now at 57.5 USc and up +50 bps from yesterday. Against the Aussie however we are up +10 bps at 90.5 AUc. Against the euro we are down another -20 bps at 53.1 euro cents. That all means our TWI-5 starts today just over 66.7, and up +10 bps from yesterday.

The bitcoin price started today at US$90,265 and up a net +0.3% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.5%.

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.