Episode Details

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 markets see a cooling US labour market in signals ahead of this weekend's August non-farm payrolls report.

But first, US mortgage applications rose by an insignificant +1.6% from the previous week in the last week of August, a low and stable situation. They are now -4% lower than the soft year-ago levels. Their benchmark 30 year fixed home loan interest rate slipped slightly to 6.35% and its lowest since May 2023.

(Yesterday, we mistakenly reported US retail sales from two weeks ago, up +5.0% at physical stores from a year ago. The actual result from this metric for last week was very much more positive, up +6.3% from the same week a year ago, its best rise since the end of 2022 when the very low year-ago base boosted results. This current result is actually quite impressive.)

US exports hit their highest level ever in July at US$267 bln. Imports rose too, but not to a record high. Their full trade deficit rose to -US$79 bln but that was well short of records set during the pandemic. This deficit continues to quite small in relation to US GDP.

US factory orders were solid in July. New orders rose by +5% from the previous month, above market expectations of a 4.7% increase. Year-on-year they are up +3.8%. Better, new orders rose by +9.8% for durable goods, lifted by transportation equipment which was up more than a third.

But there was a sharper-than-expected drop in July job openings in the US. The number of job openings fell by -237,000 to just under 7.7 mln in July from a downwardly revised 7.9 mln in June. That is the lowest level since January 2021 and below market forecasts of 8.1 mln. This is a first real sign of a cooling labour market there, although the new order data may make that a temporary dip. This is the data that has the financial market's attention today.

Meanwhile, the US Fed's Beige Book survey for August painted a modest picture of the American economy but with the balance of opinion that things are picking up from the current stable positions. This survey found little evidence of labour market stress.

Canadian exports came in little-changed in July, holding the higher levels first achieved in mid 2022.

And as expected, the Bank of Canada cut its policy rate by -25 bps earlier today to 4.25%, its third consecutive cut, saying excess supply in the Canadian economy continued to put downward pressure on inflation there which is now running at 2.5%, its lowest level in more than three years.

In China, the Caixin services PMI eased a bit but is still expanding. Incoming new business and activity remained in growth, with export business rising at a faster rate in A