US ending 2021 with positive economic momentum

Kia ora,

Welcome to Thursday’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 American household spending rose in October and savings fell as prices paid by households surged.

But first, the headline news in the US is that jobless claims there fell to +199,000 last week, the lowest since the start of the pandemic. In fact, they are celebrating that as a 52 year low. But as regular readers here know, we track the actual number which has been running far lower than the reported seasonally adjusted data. Last week, actual claims however actually rose to +259,000 and making 1.814 mln people now on these benefits. At that level, they are in fact back to pre-pandemic levels. They got there a few weeks ago as we reported earlier, but it has taken a while for the seasonally adjusted data to catch up.

US durable goods orders aren't catching up however, falling -4.4% from September but are up +11% from October 2020. They are +3.2% up from October 2019. These are also 'actual' numbers as the seasonally adjusted data seems to sanitise the shifts. New orders for capital goods weren't strong either in October.

The American merchandise trade deficit fell sharply in October from September's all-time record. On a year-on-year basis, American exports were +24% higher while their imports were +14% higher.

New data for personal income and personal spending in October saw both rise, but spending is still rising slightly faster. That means the diminution of their savings rate continues and it is now its lowest since before the pandemic started. Part of that is because inflation is stealing from their wallets, now up to +5.0% year-on-year as measured by their PCE index (the one the Fed supposedly prefers, than CPI which is at 6.2%).

The widely-watched University of Michigan consumer sentiment survey results were released with their full data for October and that confirmed the retreat in their preliminary release, but in the end the retreat wasn't as large as they had originally reported. They also released data of their surveys of American's confidence in their financial system institutions - and all remain quite negative.

US new home sales were little changed in October from September but that was less than was expected.

In a major announcement, chip-maker Samsung has selected a site in Texas near the state capital in Austin to build a US$17 bln chip-making plant. Like several of its rivals, it is racing to expand chip making in the US to tackle supply chain issues. Re-shoring activities like this are gathering steam and will be an economic driver over the next decade.

In Germany, the closely-watched IFO business climate survey was lower in November from October. Companies were less satisfied with their current business situation, and expectations became more pessimistic. Supply bottlenecks and the fourth wave of the pandemic are challenging German companies.

In the latest "Global Power City Index", the top three were unchanged as London (falling), New York (rising) and Tokyo (rising). But Hong Kong fell sharply out of the top ten, and Melbourne #11 rose while Sydney #12 fell.

The UST 10yr yield opens today at 1.65% and unchanged since this time yesterday. 

The price of gold will start today a little firmer at US$1789 and up +US$7 since this time yesterday.

And oil prices are little-changed at just over US$78/bbl in the US, while the international Brent price is now just over US$81/bbl. 

The Kiwi dollar opens today -c lower at just under 68.8 USc which is its lowest since mid October. Against the Australian dollar we are lower at 95.5 AUc. Against the euro we are fractionally lower at 61.4 euro cents. That means our TWI-5 starts today at 73.7 and also its lowest since mid October.

The bitcoin price is lower since this time yesterday, down to US$56,631 and down -1.4%. Volatility over the past 24 hours has been modest at just over +/-1.7%.

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.