Kia ora,

Welcome to Wednesday’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.

And today we lead with news the world's services sector seems to be holding its own

Ahead of this weekend's November non-farm payrolls report, the private ADP Employment report out today reveals American private businesses added +146,000 workers to their payrolls in the month, slightly below forecasts of 150,000. This is a reversion to the mean for 2024. Currently analysts are expecting the non-farm payrolls to rise +200,000 when they are reported in Saturday (NZT).

New factory orders inched up in October to be +3.4% higher than year ago levels.

US mortgage applications rose again and for the fourth consecutive week. This was driven by new purchase activity, helped by a fall in benchmark mortgage interest rates (to 6.69%), but undercut by a fall in refi activity.

The giant US service sector expanded at a good solid rate in November, but not as fast as in October, according to the widely-watched ISM survey. The November expansion was also a reversion to the 2024 mean. But the internationally-benchmarked S&PGlobal/Markit version reported a rising expansion in the sector, and to its fastest clip since March 2022. They say it was based on a rise and rise in new orders.

The bullish of those two reports is likely to be the more realistic because American vehicle sales rose to an annualised rate of 16.5 mln in November, its strongest pace since May 2021

There were services sector reports out for a number of economies overnight and they were mixed.

In Canada, their small expansion grew again in the month. In Japan, that sector shifted from contraction to expansion. The Caixin version for China stayed at a modest expansion. But it will be disappointing that all their stimulus efforts so far haven't really moved the needle, and deflationary pressure grow. In India, theri expansion stayed strong, but is being marred by fast-rising inflation. It is inflation fuelled by food and wages and is now running at a twelve year high.

In South Korea, the president's martial law move has backfired spectacularly. The stage is now set for an historic vote to impeach him. Democratic forces have prevailed over authoritarian ambition.

As we publish, it seems that the French government will fall to a no-confidence vote supported by both far-right and far-left political opposition parties. (But a little history might be helpful for some French parliamentarians. Only one motion of no confidence has ever been passed in France since 1958. It was in 1962 and it was aimed at PM Georges Pompidou, and through him President Charles de Gaulle. A month and a half later, the two men found themselves more secure than ever.)

In Australia, their services PMI slipped from a very minor expansion to no expansion in November. But the same survey recorded business confidence rising to its highest level since May 2022, which in the circumstances seems odd. However other Australian confidence surveys report a similar disconnect.

The Aussies also released their Q3-2024 GDP result yesterday and it came in with a somewhat surprising miss. Some analysts had expected a surprise, but to the high side given recent data (based largely on the spending surge by their Federal government). But few saw this downside miss coming. The Australian economy grew by +0.3% in Q3-2024, following a +0.2% increase in the prior three quarters. This marked the 12th straight period of quarterly growth but fell short of market expectations of +0.4%. And year-on-year the rise was +0.8% instead of the expected +1.0%. These are still minor moves and given the stimulus in effect, it does lead to a view the Aussie economy is stagnating. But at least it isn't contracting.

The UST 10yr yield is now at just on 4.19%, down -1 bp from yesterday. 

The price of gold will start today at US$2652/oz and up +US$2 from this time yesterday.

Oil prices are -50 USc softer at US$69.50/bbl in the US while the international Brent price is little-changed at just under US$73.50/bbl.

The Kiwi dollar starts today at 58.7 USc and down -15 bps from this time yesterday. Against the Aussie we up +30 bps at 91.1 AUc. Against the euro we have dipped -20 bps to 55.7 euro cents. That all means our TWI-5 starts today at just on 68.3, and unchanged from yesterday.

The bitcoin price starts today at US$95,114 and virtually unchanged from this time yesterday. Volatility over the past 24 hours has remained modest at +/- 1.1%.

You can find links to the articles mentioned today in our show notes.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston. And we will do this again tomorrow.