China books some unsteady gains; US jobs gains impress; US service sector recovers; German factory orders up; air cargo growth lame; UST 10yr 3.64%; gold up and oil unchanged; NZ$1 = 62.8 USc; TWI-5 = 70.5

Here's our summary of key economic events over the long weekend that affect New Zealand, with news we return from our long holiday weekend with the rest of the world delivering improved economic performances.

The Chinese Lantern Festival has ended China's New Year celebrations and shows that the feared aggressive surge in infections did not hold back their re-opening. Hospitals and health services are swamped, but the relief drove Spring Festival travel and spending. However long this momentum will last is still an open question. And it seems likely the benefits will be spread unevenly across the country.

China's big state-owned banks are being co-opted into offering unsecured credit card loans for as low as 3.6% to try and keep the holiday momentum going. Worryingly for China, such lending is nowhere near where it was before the pandemic originally hit in early 2020. Mortgage rate cuts for new house buying are spreading too. Perhaps unsurprisingly in retrospect, mortgage loan growth in China was almost non-existent in 2022 (+1.5%, item #6). But that is a huge shift.

The private services PSI survey for China confirmed the official PSI rebound in their services sector in January. (Recall this same private survey did not confirm the factory improvement.)

The end of pandemic restrictions is restarting a migration of China's wealthy to move overseas taking their money with them. Canada is the most favoured destination but the shift to Singapore is substantial too. Other countries will get this flow too. A feature of the 2023 flows is the urgency that these migrants bring with their desire to leave.

Meanwhile, Hong Kong retail sales fell -0.7% in December on an inflation-adjusted basis, but that was a lesser decline that the -5.3% drop in November. For the whole 2022 year, sales fell -3.4% on an inflation-adjusted basis.

In the US there were positive surprises all over the place over the weekend. The biggest was from their labour market where the headline gain in non-farm payrolls came in very much higher than anyone expected, up +516,000 in January. That's its best January increase ever. Only a +185,000 gain was expected. And this data is from the usual "Establishment Survey" of employers. The data from the "Household Survey", which in the past has been less positive, is in fact even more positive this month, up +894,000 employed on the same seasonally adjusted basis. Unadjusted both surveys give a January level the best in more than a decade, probably longer.

Their unemployment rate is now its lowest since 1969.

Any way you look at this, it is strong. More people are in paid employment than ever before; either 160.1 mln in the Household Survey, or 155.1 mln in the employer survey (and the difference is probably unincorporated sole traders).

Also 'positive' in an economics way, wage growth is slowing. Average weekly earnings in January were up +4.7% from a year ago.

But the strong American results don't end there.

The widely-watched ISM services PMI reported a strong recovery in January, up from a small retreat in December. New order levels were the star here. The January level reports a healthy expansion again, and largely confirms the non-farm payrolls report. This is in contrast to the US Markit services PMI we reported earlier last week, which didn't show these gains; a rise to be sure, but that report was contracting still.

We should perhaps also note that the US Federal Government deficit is now less than 5% of GDP, a stunningly quick correction from the -15% level when Trump left office. (When Obama left office it was -3.4% of GDP.) If is also back well below the GFC levels. And not to be ignored, the State governments are now running record surpluses. Of the big states, California brought in a record a +US$42 bln surplus in 2022. Texas is starting 2023 after recording a +US$33 bln surplus. Florida had a +US$22 bln surplus. New York, New Jersey and Illinois are other big states also with big surpluses. All up, American states delivered a 2022 surplus of more than +US$250 bln. That takes a full -1% off the US public deficits. American public finances are actually in relatively good shape, especially when you realise that 21% of their Federal debt is actually owed to itself (agencies like the Fed, or Social Security Administration). Messing with their 'debt limit' is just beat-up partisan politics and both sides understand that - but it plays well to the 'deplorables'.

In Canada, housing sales in their largest city, Toronto (population 6.3 mln), "collapsed" to just 3100 in January, -40% below year-ago levels and prices down -20%.

In the EU, their producer price data didn't come down in December as it had trended earlier. In fact it rose unexpectedly, but 'only' at a +13% annualised rate from November, about half the year-on-year rate.

But German factory orders unexpectedly rose +3.2% in December from November, topping market forecasts of +2% and reversing a downwardly revised -4.4% fall in November. However, as positive as the December gain was, it is still -10% lower than year-ago levels.

Retail sales in Australia fell by -3.9% in December from November, unrevised from the flash data but reversing from a +1.7% rise in the prior month. This was their first decline in their retail trade in 2022 following eleven straight monthly rises.

Retailers are hurting and will be one factor behind the collapse of listed BNPL firm, OpenPay. (Maybe Canstar's 'Outstanding Value" shield masks a bitter truth; it has never been profitable selling its service for less than it cost. Few BNPL firms are profitable. It's chicken-roosting time.)

In Australia, the value of new home loans for owner-occupied homes in Australia fell -4.2% in December from November, sliding for the seventh straight month and coming in worse than forecasts for a -2.75% decline. Refi is strong there however.

And here's an interesting factoid in the nationalist bragging rights corner; Australian GDP (on the up), is about to overtake Russian GDP ( which is falling now). Russia won't qualify for the G20 any more.

Air cargo volumes sagged in December and didn't get back to 2019 pre-pandemic levels as expected. And if it wasn't for strong North American gains the situation would have been a lot worse. China's weakness is still showing in this activity.

Passenger volumes are recovering with momentum, but are still miles below pre-pandemic levels even if the recent trends are strongly up. Again, the drag here is China, although nowhere, including North America, is back to the old normal.

The UST 10yr yield starts today at 3.64% and up a sharp +12 bps from this time Saturday. Markets are changing their tune on what the strong labour market data means for the Fed. The UST 2-10 rate curve is slightly more inverted at -82 bps. But their 1-5 curve is less inverted at -108 bps. However, their 30 day-10yr curve is a lot more inverted at -119 bps. The Australian ten year bond is up +5 bps at 3.54%. The China Govt ten year bond is little-changed at 2.92%. The New Zealand Govt ten year is starting today at 3.96% and unchanged and still its lowest since September 2022.

Wall Street is ending its Monday session down -0.6% on the S&P500 on the same jobs market implications. Overnight, both London and Frankfurt fell about -0.8% but Paris fell -1.3%. Yesterday, Tokyo ended its Monday session up +0.7%. However, Hong Kong fell another sharp -2.2%. Shanghai ended down -0.8% yesterday. The ASX200 ended down -0.3% yesterday and of course the NZX50 didn't trade for the holiday.

The price of gold will open today at US$1867/oz and up +US$5 from this time Saturday.

And oil prices start today little-changed, still at just under US$74/bbl in the US. The international Brent price is now just over US$80/bbl.

The Kiwi dollar is softer as the greenback surges. It is now at 62.8 USc and down another -¾c from Saturday. That's its lowest in a month. All commodity currencies are on the move down. Against the Australian dollar we slightly firmer at 91.5 AUc. Against the euro we are little-changed at 58.6 euro cents. That all means our TWI-5 starts today at 70.5 and down -20 bps from Saturday.

The bitcoin price is now at US$22,999 and down -2.6% from this time Saturday. Volatility over the past 24 hours has been modest at +/- 1.1%.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».