Here's our summary of key economic events overnight that affect New Zealand, with news the giant US economy is actually showing few signs of slowing, despite the 'talk'.
Markets were expecting a +268,000 increase, but the seasonally adjusted American non-farm payrolls rose +372,000 in June from May to be +6.3 mln higher than a year ago, and +1.1 mln higher than in the pre-pandemic June 2019. By this measure, this June 2022 data records substantial progress. But it is actually better than that. As regular readers know, we also look at the actual, rather than seasonally adjusted numbers, and June's employed labour force is actually +944,000 higher than May's and continuing a trend that exposes a very sharp rise in actual hiring.
High inflation in a strong labour market is sure to keep the US Fed in its rate hiking mood, the next of which will come on July 28 (NZT), now probably +75 bps. Two of the Federal Reserve's most vocal hawks said they would support another big interest rate increase but a downshift to a slower pace afterward, even as both downplayed the risk of higher borrowing costs pushing the US into recession.
The American jobless rate held at 3.6%. Average weekly earnings rose +5.1% to US$1,106.76 (NZ$1790/week).
For perspective, there are now 158.7 mln people employed in the US, with 6.3 mln unemployed (including 'between jobs'). In China, there are 745.3 mil people employed, with 46.7 mln unemployed (5.9% jobless rate) and average weekly earnings of US$306/wk.
The rise in American wholesale inventories continued in May, but at a slower pace than for April. Their inventory-to-sales ratio remains low from an historical perspective, but as we have noted before, firms are moving to actively reduce this buildup, and that is affecting factory new orders worldwide.
The US reported that consumer debt (not housing) rose by +US$22 bln in May, less than expected (+US$32 blb), and much less than the April rise of +US$36 bln. They now collectively owe US$4.54 tln in consumer debt, a per capita rate of US$13,660 each. For perspective, New Zealanders owe NZ$2,600 each on a per capita average.
Canada also reported jobs numbers for June, shedding -43,200 jobs in the month although almost all of those were part-time jobs. Canada has been shifting from part-time to full-time for most months in 2022, although this month there was not compensating growth in full-time jobs. Canada's jobless rate fell to 4.9% which is a record low for them. The US is at 3.6%. Australia is at 3.9%. New Zealand is at a 3.2% unemployed rate.
The big background news from yesterday has been the Abe assassination in Japan. Markets are stable.
In Taiwan, export data for June was very strong, rising more than +15% year-on-year to US$42.2 bln in the month, far better than the +13.6% rise expected and the +12.5% rise in May. The Taiwanese export juggernaut rolls on. They even managed to keep import growth lower than expected and lower than for May, even with the oil price pressures. The trade balance stumble in May is behind them now.
In China itself, nationalist fervour is building ahead of the CPC party Congress. But as we have reported before, their economy is struggling and major announcements on vast new stimulus are expected soon. Local authorities are already distributing helicopter money to keep retail activity bubbling along. But in the industrial heartland things are serious. China’s steel mills are sounding the alarm over crisis conditions in the industry as margins plunge due to weak demand. The starkest warning yet has come from Hunan Valin Iron & Steel Group, which met this week to discuss the rapid downturn in the sector and the measures it needs to take to ensure the company’s survival, including halting unprofitable production. Citing industry experts, the mill based in southern China, said it expects the crisis to persist for five years. Iron ore prices fell again on Friday, weighed by the gloomy demand outlook in China.
In Australia, the insurance costs of their on-going flood catastrophes in NSW are already at AU$100 mln. Some insurers are calling on immediate restrictions on rebuilding on flood plains. That may affect more than 15% of households there, perhaps thousands who can't return. New Zealand premium costs are sure to feel the impact from stressed Aussie insurers.
The UST 10yr yield starts today back up at 3.08% and a +8 bps rise from this time yesterday. A week ago it was at 2.89%, so up +19 bps since then. The UST 2-10 rate curve has stayed negative - just, at -1 bp. Their 1-5 curve is little-changed at +18 bps. Their 30 day-10yr curve is noticeably flatter at +153 bps. The Australian ten year bond is +7 bps higher at 3.58%. The China Govt ten year bond is unchanged at 2.86%. However the New Zealand Govt ten year will start today up a mere +1 bp at 3.64%. A week ago we were at 3.71% so a -7 bps retreat since then.
Wall Street has accepted the non-farm payrolls and moved on already, up +0.2% in Friday afternoon trade and heading for a weekly rise of +3.5%. (Last week it fell -2.4%.) Overnight European markets ended strongly with Frankfurt up +1.3%, Paris up +0.4%, but London level pegging, up just +0.1%. All cemented modest weekly gains. Yesterday Tokyo ended up +0.1% for a weekly rise of +1.7%. Hong Kong rose +0.4% to end its week up +0.2%. And Shanghai ended down -0.3% for a weekly fall of -0.8%. The ASX200 ended its Friday session up +0.5 for a strong weekly fain of +2.1%. The NZX50 ended up +0.5% on Friday for a very creditable weekly gain of +3.9%.
The price of gold is staying lower but up another +US$3 from this time yesterday at US$1743/oz. A week ago it was at US$1808/oz, so it has fallen -US$65/oz since.
And oil prices have moved back up today, up +US$2 at just under US$103/bbl in the US, while the international Brent price is just under US$106/bbl. A week ago these levels were US$107 and US$111/bbl, so a small shift lower this week.
The Kiwi dollar will open today marginally firmer at 61.9 USc. Against the Australian dollar we are unchanged at 90.3 AUc. Against the euro we are also unchanged at 60.8 euro cents. That means our TWI-5 starts today at just over 70.6. That is a minor +25 bps higher in a week.
The bitcoin price has risen since this time yesterday and is now at US$21,831 and up +4.5%. For the week it is up +13% off its recent low. Volatility over the past 24 hours has been moderate at +/-2.9%. The US Fed is keeping a close eye on the crypto sector, watching the various forces at play; regulatory evasion to tech innovation.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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