US Fed says their economy 'downshifted'

Kia ora, 

Welcome to Thursday's Economy Watch where we follow the economic events and trends that affect New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead with news American economic data is softening now, but there is a sense the Chinese economy may have bottomed out.

In the US, the number job openings in the rose by +749,000 to a record high 10.9 mln in July. That was well above analyst expectations of 10 mln and it reinforces the notion that firms face significant labour market constraints. Those jobless don't seem to have either the skills or qualifications for what the post-pandemic economy needs. The largest shortages are in health care, finance, and hospitality. 

The US Fed released its September Beige Book review this morning, showing a US economy that "downshifted" in July and August, mainly due to sharp cutbacks in the hospitality sector as the delta virus raised the risks of going out. The noted that growth also slowed because of supply disruptions and labour shortages in manufacturing. Car manufacturing and house construction were noted as suffering. "Inflation was reported to be steady at an elevated pace, as half of the Districts characterized the pace of price increases as strong, while half described it as moderate."

US vehicle sales fell to just a 13 mln annual rate in August due to those chip supply shortages, and this is the lowest level since the GFC (ignoring the 2020 pandemic freeze).

US consumer credit growth came in less than expected in July, and much less than for June. But at lease it was 'growth'.

Meanwhile, the risks of a debt default rise in Washington.

On a brighter note, we can report that a new wave of battery technologies are about to come to market, transforming how we power most devices. There are big developments with existing technologies as well.

In Canada, their central bank kept its policy rate unchanged at 0.25% in their latest review, surprising no-one. They also kept their QE program at a target pace of C$2 bln per week, following a -C$1 bln cut in the previous meeting.

In China, high frequency data suggests that economic activity has risen steadily in the past few weeks. This turn up means that new major stimulus is now less likely now.

And that is being reflected in sudden, sharp increases in cement demand and prices.

Japan reported a better Q2 GDP outcome in its latest update, up +1.9% (real) rather than the initial +1.3% originally reported. That was better than analysts had expected. And the Q1 retreat was revised to a worse level however.

In Australia, new inter-state fault-lines are rising over vaccine passports for travel.

The UST 10yr yield opens today at just over 1.33%, so down -4 bps and giving up all of yesterday's rise. 

The price of gold is softer again and down by another -US$4 and now at US$1793/oz.

Oil prices have risen by +US$1/bbl, so in the US they are now just on US$69/bbl, while the international Brent price has dipped to just over US$72/bbl.

The Kiwi dollar opens today at 71.1 USc and little-changed this time yesterday. Against the Australian dollar we firmer at just over 96.4 AUc. Against the euro we are also firmer at 60.1 euro cents. That means our TWI-5 starts today at just under 74.1 and still right at the top of the 72-74 range of the past ten months.

The bitcoin price has stayed down overnight, dipping by a further -1.5% from this time yesterday to US$46,239. Volatility in the past 24 hours has been moderate at +/- 3.3%. 

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 tomorrow.