More competitive?

Kia ora,

Welcome to Friday'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 New Zealand seems to be making relative progress as an economy.

New Zealand has risen two places in the latest ranking of economic competitiveness and now sits at the #20 spot. That is two places higher than Australia which fell four positions from the #18 spot it was at in 2020. The top four spots are all European and headed by Switzerland. Singapore is #5, the US #10. China is #16.

Yesterday's Fed assessment of its policy position, and the more 'optimistic' dot-plot has powered the US dollar sharply higher overnight. But the benchmark UST 10yr yield has reverted back to its pre-meeting level.

US jobless claims unexpectedly rose last week, although the actual rise was quite small (+37,200). There are now still 3.3 mln people on these benefits and until it dips below 2 mln they will not be able to claim this metric is back to pre-pandemic levels.

The latest Philly Fed survey maintains it good expansionary recordings, but they are essentially unchanged from a month ago. Firms in the region grew more optimistic however. And this is despite input costs rising much faster than output prices.

In China, that port congestion isn't clearing and the latest estimates are that the earliest things will clear is two months from now. The global ripple effects are mounting and it is adding new pressures on the resilience of integrated and globalised supply chains. Container shipping prices are as much as seven times higher than a year ago. The Baltic Dry Index rose +2.9% to 3,267 yesterday, its highest since June 2010. Rising costs affect not only containerised cargoes, but bulk cargoes as well.

Although China is claiming success in taking the top off the commodity price surge, and some commodities like copper have fallen in price over the past week, there is still no sign that iron ore prices are retreating yet.

House prices in China rose an average of +4.9% in May from one year ago, a slightly faster pace of increase (but tame by New Zealand standards). Of the 70 cities surveyed, 8 had price falls. Just three had increases exceeding +10%. As assessed by price movements, the housing market seems stable in China at this time.

The central bank of Taiwan kept its policy rate unchanged at 1.125% but it did upgrade its forecasts for economic growth in the island nation to +5.1% (from 4.5%) for 2021. This is actually more cautious than their official Government forecast. And it does see rising inflation but at +1.6% that is now benchmarked as a tame level.

In the UK, the pandemic is rising "exponentially" again with much of it being driven by younger people who are not yet vaccinated. And this comes at a time the UK is trying to renege on its Brexit agreement.

The Australian unemployment rate has fallen -0.4% to 5.1% in May and back to the level it was at pre-pandemic. 

Australia's population growth sank to just +0.5% in the year to December 2020, the smallest expansion in at least 40 years, probably longer. 

Yesterday, a number of key Australian banks suffered website crashes following an issue with the web services company Akamai. Customers reported problems with banks including ANZ, Westpac, St George, ME bank, Macquarie Bank, Allianz, and the CBA. 

The UST 10yr yield starts today down -5 bps at 1.51% and giving up most of yesterday's sharp run-up. 

The price of gold starts today at US$1779 which is down a massive -US$60 from this time yesterday. And that makes it down -US$102 or -5.2% in a week. Silver is down even more.

Oil prices are down -US$1.50 today at just under US$70.50/bbl in the US, while the international Brent price is over US$72/bbl.

The Kiwi dollar opens today at 70 USc and down another -¾c since this time yesterday. That makes it a -1¼c fall in a week. Against the Australian dollar we are unchanged at 92.7 AUc. Against the euro we are also little-changed at 58.8 euro cents. That means our TWI-5 starts today at 72.5 and a new two month low.

The bitcoin price is now at US$37,825 and down another -2.9% from this time yesterday. At this level however it is actually +3% higher than this time last week. Volatility in the past 24 hours has been moderate at +/- 2.8%.

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 on Monday