The recovery glow fades

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 there is a growing sense that the stellar global economic V recovery may be waning.

The US non-farm payroll report for June is due out on Saturday (NZT) and today the precursor ADP Employment Report came in with a +692,000 rise which was better than expected (+600,000). But this June gain actually represents a slowdown from the (downwardly-revised) +886,000 increase in May. Analysts are expecting a non-farm payroll rise of +700,000. So payrolls are only growing modestly at this time.

The Chicago PMI slipped from its unusually high level in May, but the June level is still very high. However, prices paid at the factory gate surged by their biggest jump in 42 years

US grain stocks for corn, soy and wheat fell by almost -50% in June from their March levels, a decline that was more than the one expected. When they are released in a few days, world food prices are expected to have risen sharply again.

It’s a public holiday in Hong Kong today, Establishment Day, celebrating the transition from British to Chinese ownership when it was agreed to be as a Special Administrative Region (SAR).

In China, their official PMIs weren't so flash. The latest surveys suggest that growth softened in June. A slower improvement in services activity was mostly to blame. But supply shortages also continued to hold back output in the manufacturing sector. On a more positive note, the surveys point to an abrupt easing in price pressures recently.

Concerns about the quality of Chinese bonds just aren't going away. Rising investor worries over shaky finances in at least six "fragile" provinces have prompted a sell-off in state-run group bonds. Analysts warn of a surge in defaults in the country’s US$17 tln credit markets.

In Japan, consumer confidence rose in June quite noticeably. It is not quite back to its pre-pandemic level but close. But it is well above mid 2019 levels.

However Japanese industrial production was reported for May as well overnight, and that data sagged, falling almost -6% from April when only a -2.4% fall was expected. The May 2021 level is -11% lower than for May 2019, a huge decline.

South Korean industrial production also fell in May, compounding an April fall. This is just another set of soft data for them.

In Australia, home loan balances grew by the fastest monthly pace in four years, largely by topped-up borrowing by owner-occupiers.

The UST 10yr yield starts today at 1.45% and down -3 bps.

The price of gold ended June at US$1769/oz which is up +US$7/oz from this time yesterday. For the month, gold sank -6.9% after starting at just on US$1900/oz. Silver sank -5.8% in the month.

Oil prices are up nearly +US$1 today. In the US they are now at just under US$73.50/bbl, while the international Brent price is still just over US$74.50/bbl.

The Kiwi dollar opens today just under 70 USc and that is a -4.1% devaluation in a month. Against the Australian dollar we are unchanged from yesterday at 93.1 AUc. Against the euro we are little-changed too at 58.9 euro cents. That means our TWI-5 starts today at 72.6 and a net -2.3% devaluation in a month.

The bitcoin price is now at US$34,730 and down -4.4% from this time yesterday. Over the past month the bitcoin price has fallen a net -6%. Volatility in the past 24 hours has remained high at +/- 3.6%.

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.