Hong Kong exports slump to 70 year lows

Kia ora,

Welcome to Tuesday’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 we are in that transition zone where 'gains' and 'losses' are offsetting each other.

First, American durable goods orders retreated in January from December. A fall was expected mainly because there was an outsized rise the prior month, but it was more than anticipated. However the retreat was mainly due to a drop in orders for commercial aircraft. Excluding that, there was a rise. And on the same basis, capital goods order rose as well, suggesting boardrooms are still in 'invest' mode. (It is likely that February orders will jump, based on some very large recent aircraft orders.) Year on year, durable orders are up +3.0% and non-aircraft capital goods orders are up +5.3%. (As an aside, it is notable how small defence orders are in the scheme of things. They represent less than 5% of total orders and are pretty stable. You might have thought the defense of Ukraine would have supersized these, but it hasn't been the case.)

In the US oil patch, the Dallas Fed's factory survey is weak in February. We have noted it declining for some time, but now it is lower than year-ago levels for the first time since May 2020. The non-month run of declining new orders has caught up with them. This is a specialised region, so it is hard to draw national conclusions from it.

But nationally, in what their sector suspects is a turning point, the number of pending home sales in January rose more than expected from December, and by quite a bit more. A +1% rise was anticipated but the actual increase was +8.1%. This surprise gain comes on top of the stronger new home sales we noted last week.

Hong Kong reported a huge retreat in merchandise trade activity for January. Exports fell -37% from year-ago levels while imports retreated -30%. These were worse levels than for December. The export drop was their largest in 70 years. It is sad to watch the life being squeezed out of what has been a globally important city.

In the UK, they seem to have tidied up their deal with the EU on trade with Northern Ireland, a revised side deal called the Windsor Framework. Both sides claim 'victory' which is usual in these sorts of negotiations.

In Australia, their prudential regulator APRA has kept its pandemic extra's, the 1% capital buffer for risk weighted assets, a buffer in bank capital for stress, and a 3% serviceability buffer "to maintain prudent lending standards". That's +3% above the rate banks will lend at. Borrowers must meet lending standards at that extra higher level.

The UST 10yr yield starts today at 3.92% and down -3 bps. 

We should also note that the two year swap rate hit its highest level yesterday since November 2008.

The price of gold will open today at US$1817/oz and up +US$6 since yesterday.

But oil prices start today soft at just under US$76/bbl in the US. The international Brent price is just over US$82/bbl. Both remain little-changed in a week.

The Kiwi dollar is still at 61.6 USc, and unchanged since yesterday even if it is still close to a three month low. Against the Aussie we are also little-changed at 91.6 AUc. Against the euro we are soft at 58.2 euro cents. That all takes the TWI-5 to 70 and down -20 bps.

Bitcoin has within its recent narrow range, now at US$23,387, up +0.9% from this time yesterday. And volatility over the past 24 yours has remained modest at +/-1.5%.

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.