US inflation cools but their labour market stays tight

<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 financial markets are hoping today's data heralds a downshift in central bank rate hike pressures.</p><p>The closely anticipated <a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank"><strong>American inflation rate</strong></a> eased to 6.5% in December, confirming analysts’ expectations. That was a pull back from the 7.1% rate in November. The shift from November to December was actually a tiny decline, mainly as a result of lower petrol prices. The latest 6.5% rate is their lowest since September 2021 and the negative month-on-month shift the lowest since April 2020, and prior to that pandemic bump, August 2015.</p><p>Bond yields sank and the USD slipped. Equity markets rose. Market bets that the Fed will dial back the pace of its rate rises rose on this conviction.</p><p>Meanwhile, <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20230043.pdf" target="_blank"><strong>US jobless claims</strong></a> stayed low yet again, suggesting their labour market remains quite resilient. Obviously they rose in actual number after the holiday period but less than seasonal factors would have suggested. There are now 1.87 mln people currently on this support, an insured unemployment rate of just 1.3%.</p><p>Meanwhile, <a href="https://www.usda.gov/oce/commodity/wasde/wasde0123.pdf" target="_blank"><strong>American estimates</strong></a> for grain supplies are little-changed. But they expect to import more beef from Brazil, produce less milk, and are also seeing egg production fall. Egg prices are rising very fast there.</p><p>There were also no surprises in the <a href="http://www.stats.gov.cn/tjsj/zxfb/202301/t20230112_1891591.html" target="_blank"><strong>December inflation data</strong></a> from China, coming in as expected at 1.8% which wa