The US and China continue to diverge

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 of more of the same - continuing American economic strength, worries about China's prospects.The number of American filing for new jobless claims fell to +190,000 last week which is their lowest since February. A rise to +234,000 was expected so this is a much better-than-anticipated result. There are now 1.75 mln people on these benefits, also much lower than expected. The US labour market is remaining much stronger than almost anyone thought by the end of Q3. With this sort of continuing run, it is hard to see their September non-farm payrolls showing the weakening that has long been foreshadowed - and hoped-for by the Fed.American labour costs are rising (+2.2%) and with the extended labour market pressures this isn't really a surprise. But it is a surprise that pay rates are rising faster (+5.7%) than inflation (+3.0%), and they are getting good labour productivity at the same time (+3.5%). Rarely do you get a 'virtuous combination like this in tight labour markets. It is actually quite remarkable.On the labour front, the GM workers union rejected the carmaker's +16% wage offer as far below their asking +46% demand. Such are levels in a hot labour market.In Canada, they have their own positive surprises. Their widely-followed Ivey PMI came in in August with their strongest expansion since April, reversing a downtrend and a contracting July.Also 'positive' in a back-handed sort of way, Canada's July building consents fell -1.5% which was a much smaller correction than anticipated after the strong +7.5% june rise, meaning most of the June momentum was maintained. In fact their residential consent level rose another +5.4%, so the housebuilding sector maintained it's push up.China's August exports inched higher than in July, but were still -8.8% lower than year-ago levels and this was the fourth straight month of year-on-year declines - and comes despite a weakening yuan. They ran a +US$33 bln surplus with the US which accounted for about half their total trade surplus. They remain very dependent on their trade with the US. Versus Australia, they had an August deficit of -US$6.2 bln in the month, and with New Zealand a deficit if -US$220 mln.China's FX reserves slipped -1.4% to US$3.16 tln, a fall of US$44 bln in the month and to their lowest level since February. But they are well up from just over US$3 tln in July 2022.  The yuan weakened to a 16 year low today.The EU's third estimate of its Q2 economic activity was