Searching for some wins in the inflation battle

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 inflation's track has everyone's attention everywhere.

But first, US jobless claims rose last week by +235,000 which was a small but significant rise and might signal the start of a weakening labour market there. And it was more than expected. Many will no doubt say the shift is too small to be significant, but it is a turn from the long string of declines in this leading metric. There are now 1.935 mln people on these benefits, also a minor increase.

Staying in the US, we probably should note that despite the high-drama headline-grabbing brinkmanship surrounding their debt limit and resulting "extraordinary measures", their bond markets remain very calm with Treasury issues trading normally and ignoring the Congressional theatre.

Meanwhile, the US Treasury says cloud computing poses risks to their financial sector. they say reliance on Amazon, Microsoft or Google could have broad consequences. They are flagging "all eggs in one basket" risks.

Fitch Ratings has revised its forecast for China’s economic growth in 2023 to +5.0%, from +4.1% previously, reflecting evidence that consumption and activity are recovering faster than initially anticipated after the authorities moved away from their “dynamic zero Covid-19” policy stance in late 2022.

China will announce its January CPI inflation later today and it is expected to be at +2.2%, and up from +1.8% last month.

Taiwanese inflation rose and by more than expected. To be fair, it is only from +2.7% to +3.0% in January so still very low in a global context. And their wholesale price growth actually fell in January from December, from a +7.1% rate to +5.6%. So the consumer price change may be just noise.

German inflation however came in lower than anticipated at +8.7% when a rise to +8.9% was expected (from +8.8%). Again, these are small shifts so probably not really indicating that inflation is shifting lower there yet. A work in progress considering it peaked at 10.4% in October. 

The OECD reckons real household incomes are now rising in much of their bloc, principally because real incomes are rising in most of Europe and the US. Exceptions however are Canada, and especially the UK where there is a fierce fall of real household incomes underway. Brexit isn't working out for them.

Global container shipping rates were little-changed again last week and remain well below their ten year average levels, and a huge drop from the pandemic spike. There is no sign of them turning up any time soon. Bulk cargo rates are also unchanged this week, and also low. Both are a sign that global trade is in a soft patch as big-power rivalries keep relations at arms length.

The UST 10yr yield starts today at 3.60% and down -8 bps from this time yesterday. Rate inversions are getting serious now.

The price of gold will open today at US$1873/oz and down another -US$2 from this time yesterday.

And oil prices start today little-changed at under US$78/bbl in the US. The international Brent price is now just over US$84/bbl. They fell away in between but are now almost back to yesterday's level.

The Kiwi dollar is up +20 bps at just under 63.5 USc. Against the Australian dollar we are up the same at 91.2 AUc. Against the euro we are up slightly more at 59.1 euro cents. That all means our TWI-5 starts today at 70.7 and +30 bps higher than yesterday.

The bitcoin price is now at US$22,535 down -1.7% from this time yesterday. Volatility over the past 24 hours 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 will do this again on Monday.