US non-farm payrolls rise in moderating trend; other US data weak; Canadian jobs data strong; China orders Aussie coal again; EU inflation reverses; UST 10yr 3.57%; gold up and oil unchanged; NZ$1 = 63.4 USc; TWI-5 = 71.1

Here's our summary of key economic events over the holiday that affect New Zealand, with news markets are cheering signs the growth momentum is easing in the giant American economy.

Firstly, there were no surprises in the American non-farm payrolls data for December. Those payrolls grew +233,000 in December to 153.7 mln in the headline series. Markets had expected a +200,000 gain. But as regular readers know, there are two related surveys, the widely-reported Establishment (employer) survey, and the parallel Household survey. This second survey shows there is a 159.2 mln employed workforce, more than +15 mln higher than the employer survey. It has recorded that larger level before the pandemic, the difference fell away during the pandemic, and in 2022 is back to the same +15 mln additional. That extra is almost certainly the unincorporated self employed.

(In December the Household data rose an impressive +717,000 from November on the same seasonally-adjusted basis as the Establishment data. It tends to be much more volatile survey, and gives rise to some low-level conspiracy theories touted about the quality of positive American employment stats.)

Average hourly earnings rose +0.3% from the prior month, to US$32.82 in December (NZ$51.80/hr or NZ$108,000 pa) following a downwardly revised +0.4% gain in the prior month and below market forecasts. This was the smallest growth in average hourly earnings in four months.

This reinforces the fact that the momentum in the American labour market is slowing, and the Fed will take heart from that. Financial markets did too.

Employment data tends to lag economic activity however, and this may be a high-water mark to start 2023. A leading indicator wasn't so positive, factory orders. In November they dipped -1.8% from October to take them back to just +6.8% higher than year-ago levels and struggling to account for inflation. A -0.8% fall was anticipated, so this is a worse result. And that was largely due to low orders in the month for civilian aircraft.

Perhaps we should also note that 5.8% of all American cars sold in 2022 were EVs. That is up from 3.2% in 2021. For perspective, total car sales fell -8% in 2022.

Also falling away much sharper than expected is the widely-watched ISM services PMI. It was expected to come in slightly less positive (55 index level from the November 56.5 level), but in fact it dived into a minor contraction in December (49.6) in a sharp shift no-one saw coming.

At the same time, American inflation is biting households. Even though petrol prices are no longer adding to inflation, rents are. In a December survey, more than half the respondents said their rents rose by +$US100/month. Four percent said their increase was more than +US$500/month.

The same survey showed more than 35% of households used credit cards or loans in December to cover spending needs in the prior week. That’s up from around 32% in November and just 21% in April 2021, when they first started collecting this data.

In Canada, they also reported labour force data for December. Their employed labour force grew +104,000 in the month and far more than the +8,000 expected. Most of it (+84,500) was for full-time jobs. It is also a good result for them, and like the Americans, both their participation rate rose and their jobless rate fell. It probably means that more big rate hikes are coming from the Bank of Canada. For perspective, their employed labour force is 19.8 mln, so only 12% as large as their giant southern neighbour.

In Japan, the yield on 10-year Japanese government bonds rose to a seven-year high of 0.5% yesterday, hitting the Bank of Japan's new upper limit in just weeks as other buyers shy away from the asset. The BOJ surprised the market on December 20 by widening its target band for 10-year yields to 0.5%. Investors lose on rising yields and are no longer buying.

In China, an importer has placed an order for Australian coal, providing clear evidence of the lifting of an unofficial ban imposed more than two years ago.

The EU released its December inflation report, and for the Euro area it came in at +9.2%. This was far less than the expected 9.7% and much lower than the November 10.1%. From the prior month, inflation is slowing fast, running at an annualised -4.2% deflation rate now. Much of this can be attributed to the success of their efforts to insulate themselves from the Russian energy stand-over tactics.

EU retail sales however showed some surprise strength, rising at a +10% annualised rate in November from October.

Germany reported its December retail sales data and said it will have grown +8.2% in 2022, but that will be less than inflation. They also reported some rather grim November factory order data.

The UST 10yr yield started today at 3.57%, and and down a sharp -15 bps from yesterday. The UST 2-10 rate curve is less inverted at -70 bps. But their 1-5 curve is much more inverted at -99 bps. Their 30 day-10yr curve is also much more inverted, now at -62 bps. The Australian ten year bond is -12 bps lower at 3.71%. The China Govt ten year bond is up +2 bps at 2.90%. And the New Zealand Govt ten year is starting at 4.40% and up +3 bps.

On Wall Street, the S&P500 is up +1.9% so far in its Friday trade and heading for a weekly rise of +1.3%. European markets all closed about +1.3% higher, although London was the laggard. Yesterday, Tokyo rose another +0.3%. Hong Kong fell -0.3% and Shanghai was up a mere +0.1%. The ASX ended up +0.7% for a weekly gain of +1.2%. The NZX50 closed down -0.2% for a weekly gain of +0.8%.

The price of gold will open today at US$1865/oz and up +US$32 from yesterday in a continuing yo-yo pattern, dancing to the USD tune.

And oil prices start today little-changed from yesterday's levels at just over US$74/bbl in the US while the international Brent price is just under US$79/bbl and still near its 12-month lows.

The Kiwi dollar has risen back more than a full +1c to 63.4 USc. Basically, we are back to week-ago levels. Against the Australian dollar however we are unchanged at 92.3 AUc. Against the euro we are firmish at 59.4 euro cents with a +¼c up-blip. That all means our TWI-5 starts today at 71.1, up a net +50 bps from yesterday.

The bitcoin price is now at US$16,846 and virtually unchanged from this time yesterday. Volatility over the past 24 hours has remained low at just +/- 0.5%.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».