Episode Details

Kia ora,

Welcome to Friday’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 global economic attention should have shifted to tomorrow's labour market report for September, but the US waterfront strike, and the Middle East tensions has sidelined it.

However first in the US, there was a minor dip in the actual number of initial jobless claims last week, but a lesser dip than expected. There are now 1.62 mln people on these benefits, the lowest level since November 2023.

And as you would expect, the level of job cuts in the US has remained very low.

Tomorrow's non-farm payrolls labour market reports is expected to show a rise in payroll jobs of +130,000.

Perhaps in something of surprise after the wavering factory PMI, the ISM services PMI came in much better than expected. It revealed the strongest growth in this sector since February 2023, amid faster increases in business activity and new orders. And that was mirrored by the internationally benchmarked version.

US factory orders in August weren't as strong, little changed from the prior month to be -0.6% lower than the same month a year ago.

The US East Coast & Gulf port strike is entering its third day, unresolved. But there are signs of progress in negotiations. The Canadian port strike has ended now.

With China closed for holidays, all the equity market signals are being squeezed into Hong Kong which remains open. And that is not good for their property stocks which have had a heady run-up based on the stimulus signals. Now those property stocks are falling just as sharply as investors realise the fundamentals are just not there. And the expected ¥10 tln fiscal 'bazooka' has still be be launched. It is still being talked about and is still expected, but it won't happen till after the holiday week at the earliest.

In the EU, there are signs that producer prices are rising again, up +0.4% in the bloc in August from July, but down -2.3% for the year to August which was a lesser rate of decline from the prior month.

And later today, the EU is expected to approve an increase in tariffs to as much as 45% on electric cars imported from China, a move that officials said would help protect European carmakers from a glut of cheaper vehicles directly subsidised by Beijing.

Those same subsidies have caused Toyota to pull back on developing EVs, because they are no longer commercial to produce.

In China, price cuts along with those government subsidies helped the likes of BYD to boost monthly deliveries to all-time highs in September.

Australian exports retreated slightly in August, but their imports retreated more, so their monthly merchandise trade surplus stayed at about AU$5.6 bln. But that was only because gold exports stayed strong boosted by sharply rising gold prices. Without those, their surplus would have hal