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.

Today we lead with news the global economy is slowing amid 'a gloomy and uncertain outlook'.

The IMF lowered its growth forecasts for the global economy to +3.2% in 2022 from +3.6% in its April review, while the outlook for inflation was revised higher due to a surge in food and energy prices as well as lingering supply-demand imbalances. The American economy is seen growing +2.3% this year (down from -3.7% seen in April) and China's GDP is now expected to expand +3.3%, compared to +4.4% early.

Even though they say "the outlook has darkened significantly" they are still forecasting 2022 growth and that might surprise some bears, but the fact remains that global economic activity is still expanding in the major economies, and that is expected to continue even into 2023.

American retail sales rose at as fast a clip last week as we have seen for the past four weeks, and certainly far more than can be accounted for by inflation.

But new home sales in the US tailed off rather sharply in June and slipping below the 600,000 annualised rate for the first time since the March 2020 pandemic pullback.

And American consumer sentiment dipped again in July, according to the Conference Board survey. The decrease was driven primarily by a decline in the Present Situation Index—a sign growth has slowed at the start of Q3. The Expectations Index held relatively steady.

But it is not all gloom. The Richmond Fed's regional July surveys were both indicating improvements in their mid-Atlantic states region. The factory survey rose from its June negative mainly because of the heady rises in new investment in both production equipment and software. And those are expected to rise from here as are shipments of goods. Things weren't quite as positive for their services sector.

Across the Pacific, South Korea reported its Q2 GDP. That showed a pick-up in economic growth to 2.9% from the year-ago period and well above analyst estimates. A rebound in private consumption and government spending offset the decline in exports and private investment.

Economic news out of China has been eerily and unusually absent today. Their usual sources are all focusing on political news, what President Xi is doing or saying. But to be fair, they are winding down for their summer holiday break, even if the weather there is unusually hot at present. But the sudden disappearance of news about their property sector crisis is notable.

In Singapore, even though industrial production was still slightly ahead of year-ago levels in June that masked a sharpish fall away between May and June that is worth keeping an eye on.

The EU countries, bracing for further cuts in Russian gas supply, approved an emergency plan to curb demand after striking compromise deals to limit the reductions for some small countries.

In Australia, punishing Chinese tariffs have decimated what was Australia’s most lucrative export market for wine. Sales slumped from AU$1.1 bln two years ago to just AU$25 mln now. That has forced them to find other markets, and they are with sales to the rest of the world rising quickly, up +AU$400 mln. But the Chinese punishment means that their yields fell -14% from 2020 to 2022.

The UST 10yr yield starts today at 2.79% and down -2 bps from this time yesterday. 

The price of gold will open today at US$1718/oz in New York which is down -US$2 from this time yesterday.

And oil prices are little-changed at just over US$95/bbl in the US, while the international Brent price is now at just over US$100/bbl.

The Kiwi dollar will open today almost -½c weaker than this time yesterday at 62.3 USc. Against the Australian dollar we are also softer at 89.8 AUc. Against the euro we are firmer at 61.6 euro cents. That all means our TWI-5 starts today at 71 and a -20 bps below this time yesterday.

The bitcoin price is again lower than this time yesterday, down by another -4.3% to US$20,925. Volatility over the past 24 hours has been high at just over +/-3.7%.

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

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

Kia ora. I'm David Chaston and we’ll do this again tomorrow.