Supply-chain pressures are getting worse

<p>Kia ora,</p><p>Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news the Omicron surge in Australia is decapitating their workforce. It is about to do the same in China.</p><p>But first, <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20220062.pdf" target="_blank"><strong>US jobless claims rose</strong></a> last week and by more than was expected seasonally. There are now more than 2 mln people on these benefits - although on a seasonal and population adjusted basis this is the lowest level in almost 50 years (1973). And below pre-pandemic levels.</p><p><a href="https://www.bls.gov/news.release/ppi.nr0.htm" target="_blank"><strong>US producer prices</strong></a> didn't rise in December quite as much as feared, and the big +9.7% year-on-year was lower than the November level. Both results suggest that there is some topping out in the wholesale price pressure.</p><p>Meanwhile, a top Fed official <a href="https://www.federalreserve.gov/newsevents/testimony/brainard20220113a.htm" target="_blank"><strong>confirmed</strong></a> they are fully engaged in fighting the inflation threat, confirming they have abandoned the 'transitory' view. And that may mean three rather than two rate hikes in 2022, with the first in March when their bond buying will probably end. One Fed member sees four increases in 2022.</p><p>China's <a href="http://finance.people.com.cn/n1/2022/0113/c1004-32330845.html" target="_blank"><strong>foreign direct investment inflows</strong></a> are starting to slip, according to the December data released late yesterday. </p><p>Meanwhile, Omicron is spreading in China and another port city is now in lockdown. The global impacts on supply-chains won't be helped by this as congestion is growing at the world's biggest port as shippers try to re-route goods. The threat to global trade from this is actually eno