Global economy in a purple patch

Kia ora,

Welcome to Monday’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 the world is flush with positive economic data, but consumers seem very wary and uncertain about their prospects and outlook.

China released trade data for October overnight and it was impressive. Exports grew +27% year-on-year to US$300 bln, slowing from a +28% surge in September but beating market expectations of +24.5% increase. Global demand is clearly very good. Imports had a different profile, rising +21% to US$216 bln, below market expectations of a +25% gain but much better than the +18% rise in September.

That meant their trade surplus rose to a record +US$84.5 bln in October. The politically sensitive surplus with the US actually narrowed slightly to +US$41 bln. Their deficit with Australia was -US$6.1 bln in October and down sharply from -US$9.1 bln in September, and with New Zealand the October deficit was -US$162 mln and down from -US$516 mln in September.

The bigger surplus also means that their foreign reserves rose slightly, by +US$17 bln to US$3.218 tln in September.

But part of their increase in imports was for more coal to run their electricity-generation plants. They almost doubled from October 2020 and have been running very high all year. But at least they can claim the power crisis is now behind them.

Over the weekend, Chinese President Xi and Prime Minister Ardern had a phone meeting, largely about an upcoming APEC summit. It was a 'friendly' engagement in contrast to China's one with Australia. In fact, New Zealand is now the third largest exporter of food to China, after Brazil (#1) and the US (#2), and Australia has sifted from second to fourth in this market. Separately, Ardern is claiming a 'mature' relationship with China.

Taiwanese inflation was unchanged in October from September, and is running at +2.6% year-on-year.

In something of a surprise, Japanese household spending jumped +5% in September from August. That is a large move for them. It has reined-in the year-on-year decline quite a bit. A rise was expected in September from August, but the one delivered was about twice that expectation.

In the US, Congress has passed a US$1.2 tln infrastructure measure and the President has signed it into law, a delayed victory after splitting the US$1.75 tln for healthcare, education and climate change programs out of the overall measure to be worked on later. The infrastructure deal is a measure that won't hurt their labour market.

In any event, US non-farm payrolls came in better than expected with +531,000 new jobs added. This happened despite a shrinkage of -73,000 in public payrolls. A gain of +450,000 was expected. US employment has increased by +18.2 mln since low point in April 2020 but is still down by -4.2 mln from the pre-pandemic level in February 2020. Their participation rate is unchanged at a low 61.6%.

Average hourly earnings rose the expected +4.9% in October from a year ago, basically keeping pace with headline inflation.

And there has been more confirmation that the US expansion has legs with the release of September consumer credit data showing a much stronger than expected +8.3% rise at an annual rate.

North of the border, Canada's job expansion slowed in October, rising +31,200 and below expectations, and well below the +157,000 gain in September. But at least they have returned to pre-pandemic levels of employment.

Meanwhile, the RBA’s latest statement on monetary policy said it expects a rapid economic recovery in Australia and has lifted its GDP forecast to +3% for 2021, then +5.5% for 2022, before returning to around +2.5% in 2023.

The UST 10yr yield opens today at 1.46% and up +2 bps since where we left it Saturday. 

The price of gold will start today at US$1818/oz and another +US$5 rise from this time Saturday. For the week it is up +US$35/oz.

And oil prices are little-changed since Saturday at just on US$80.50/bbl in the US, while the international Brent price is now just on US$82/bbl.

The Kiwi dollar opens today little-changed at just over 71.1 US. Against the Australian dollar we are marginally firmer at 96.3 AUc. Against the euro we are also marginally firmer at 61.6 euro cents. That means our TWI-5 starts today the same at just on 75.

The bitcoin price has risen modestly since this time Saturday, and now at US$62,142 and a +1.9% rise. Volatility over the past 24 hours has also been modest at just over +/-1.4%.

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 tomorrow.