Bond market stops fighting the Fed

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 bond interest rates pushed higher overnight on a backdrop of stubborn inflation signals.

But first, last week American jobless claims slipped slightly to +201,000 and taking the total number of people on this support to just under 1.9 mln. A rise was expected. So far, this leading indicator isn't showing any changed labour market stress. It has been widely expected for months but just hasn't surfaced yet.

Meanwhile, American labour productivity is rising. Output rose +3.1% while hours worked rose +1.4%, giving a boost to a key economic metric. However, this is Q4-2022 data so a little dated.

US car sales ran at a 15.7 mln annual rate in January, a fifth straight month of increase. Easing supply chain pressures are getting the credit as manufacturers are able to deliver more. The US is the world's second largest car market, well behind the expanding Chinese market.

Across the Pacific, there was again no useful data released by Chinese authorities. But a survey by the Shanghai-based American Chamber of Commerce in China, found that most members plan to stay engaged, but worryingly a quarter said they had started disengaging in some way, up from 14% a year ago.

In Hong Kong retail sales bounced back strongly in January, although the timing of the New Year holiday embellished the data this year. And it was off a weaker than usual base a year ago.

Singapore's PMI however didn't change much, still in a steady state of neither expanding nor contracting. Still, that is a small improvement for them, away from contracting.

In Europe, while energy inflation slowed, food inflation rose. Their CPI dipped to 8.5% in February, the lowest since last May, but above market expectations of 8.2%. This latest data reinforces that inflationary pressure remains high in Europe and bolstered expectations that the ECB will remain hawkish for longer. 

In Australia, building consents collapsed in January. They slumped -28% month-on-month to 12,065 units, reversing from an +18% rise in December and coming in worse than market expectations for an -8% drop. That is a decade low. Year-on-year they are down -8.4%. This was also among the steepest declines on record as higher interest rates dampened economic activity. A -40% drop in multi-unit dwellings was the main drag.

Although it has dropped fast to a low level, the cost of international containerised freight fell even more last week, down -2%. Outbound rates from China are the weakest. Rates are now more than -30% lower than ten year averages - averages that include the very high two year pandemic peak. Rates for bulk cargoes however are recovering fast from their unusually low mid-February trough. That have doubled since that unusual point.

The UST 10yr yield starts today at 4.08% and up +9 bps and its highest since November. 

The price of gold will open today at US$1836/oz and down -US$5 since yesterday.

And oil prices start today up +US$1 at just under US$78/bbl in the US. The international Brent price is now just over US$84/bbl.

The Kiwi dollar is down -½c at just under 62.1 USc. Against the Aussie we are little-changed at 92.4 AUc. Against the euro we are unchanged at 58.6 euro cents. That all takes the TWI-5 to 70.6 and down -20 bps.

The bitcoin price is a little softer today, now at US$23,269, and down -1.9% from this time yesterday. And volatility over the past 24 yours has been modest at +/-1.3%.

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’ll do this again on Monday.