'Big, beautiful' deficits locked in

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.And today we lead with news the US budget bill has now been approved by Congress setting up a big shift in fortunes for big business at the expense of those on low incomes - and handing their future generations a substantially larger deficit headache. In fact, one so large, it will impact the global economy.In the US, they are about to have another national public holiday, Independence Day, so there has been an early data dump there in advance.US non-farm payrolls expanded +147,000 in June, very similar to the May expansion and better than the expected +110,000. The variance from yesterday's ADP Employment Report will raise a few questions. Average weekly earnings went down in June from May, but were up +3.4% from a year ago. In May that annual gain was +3.8% so this metric is tightening. Month on month decreases have happened before but they are relatively infrequent and usually indicate overtime earnings are drying up.US initial jobless claims came in a 231,500 has week and similar to what was expected, taking the continuing claims level to 1.91 mln, +90,000 higher than year ago levels.These two labour market reports probably take pressure off the Fed to cut their policy rate at their next review at the very end of this month.US exports fell -4.0% in May whereas imports dipped a minor -0.1%. That saw their trade deficit rise from the prior month but stay considerably lower than the same month a year ago.US services exports dipped in the month. But locally the June ISM service sector PMI improved from its tiny May decline to a small June expansion. The S&P Global/Markit services PMI told a similar story. But both noted the rising cost worries.May American factory order levels were up sharply in May from April, to be +3.2% higher than year-ago levels. But aircraft orders drove the rise and without that the year-on-year gain was just +0.2% and far less than can be accounted for by inflation. Even the month-on-month gain without aircraft wasn't significant, but at least it was a gain.And Trump's boast he will do "90 deals in 90 days" resulting from his tariff pressure looks like it will fall completely flat. The US has announced one, with Vietnam, but the Vietnamese will only say they are still working through the details. The talks on all the others are dragging on inconclusively.In Canada, their export and import data for May was little-changed overall. But in fact that hides some pretty significant shifts. Their trade with the US fell a lot, and they how have the smallest share going to the US since 1997, twenty eight years ago. In short order, Canadians have managed to reorient their trade to others successfully.Across the Pacific, analysts had expected the Caixin services PMI for China to maintain its small but steady expansion. But it weakened. Not a lot, and it is still expanding, but it will be disconcerting all the same. And it is now at a nine month low.Surprising analysts who expected a +AU$5 bln monthly trade surplus, the actual Australian trade surplus for May came in at half that level, to its lowest level in five years. May exports fell faster, down -2.7% from April while May imports rose faster, up +3.8% from April. Interestingly, exports of gold are down -3.4% in May from a year ago - and that is in AU$ terms, not volume.Container freight rates fell -5.7% last week from the prior week to be -45% lower than year ago levels. Trans-Pacific rates fell -15% as the trade war crimps these supply chains. Bulk freight rates fell -13% in the past week and are now -33% lower than year-ago levels.The UST 10yr yield is now at 4.34%, and up +5 bps from yesterday at this time.The price of gold will start today at US$3,326/oz, and down -US$20 from yesterday.American oil prices are little-changed at just under US$67/bbl while the international Brent price is down -50 USc at just over US$68.50/bbl. Last week's North American rig counts took an unusually sharp dip. There is certainly no evidence yet that investors are piling in to drill more aggressively.The Kiwi dollar is now just under 60.7 USc, down -10 bps from yesterday. Against the Aussie we are down -20 bps at 92.3 AUc. Against the euro we are unchanged at 51.6 euro cents. That all means our TWI-5 starts today at just over 68 and down -10 bps from yesterday.The bitcoin price starts today at US$109,173 and up +0.5% from this time yesterday. Volatility over the past 24 hours has been low at just over +/-0.8%.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 on Monday. Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI