Kia ora,

Welcome to Thursday’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 that mixed US data that doesn't show their labour market retreating, along with weak Chinese data, has the greenback rising but bond yields falling. Commodities are out of favour.

US mortgage applications fell last week to a three month low (and approaching only half the level of a year ago), held back by both a lack of inventory for sale in their residential market as sellers are reluctant to chase prices lower, and higher interest rates. The benchmark 30 year fixed rate is now 6.91% plus points, a +22 bps rise in a week (thanks to the debt-limit debate).

Meanwhile their labour market just keep surprising with its strength. We get the May non-farm payroll data on Saturday NZT. Today the April job openings data surprised with an unexpected rise when a modest fall was anticipated. That pressure will keep the Fed on edge.

And this is despite last week's retail data coming in only +1.2% higher than a year ago on a same-store basis, far less than inflation.

And despite the Dallas Fed's services sector weakening. And despite the Chicago PMI coming in sharply lower too.

However the Fed's latest Beige Book reported economic activity was little changed overall in April and early May. Four Districts reported small increases in activity, six no change, and two slight to moderate declines. Expectations for future growth deteriorated a little, though most in this survey still largely expected a further expansion in activity. The labour market is still tight, they report. Price pressures are easing.

In Canada, they also report a reasonable expansion. Their Q1-2023 economic activity expanded +3.1% from the same quarter a year ago. This was more than was expected and is sure to raise the pressure on the next Bank of Canada rate review.

They weren't the only one to report a better than expected economic expansion in Q1-2023 overnight. India did too. The Indian economy expanded +6.1% year-on-year in the quarter, higher than an upwardly revised +4.5% in Q4-2022 and well above market forecasts of +5%.

But it isn't so upbeat in China, Their official factory PMI contracted more in May than April and more than expected, reinforcing the lackluster - even failing - recovery there. The yuan is still under pressure. But their services PMI shows that side of their economy still expanding at a good rate, but a little less than expected and near the least of 2023.

Japan also reported a stuttering, with retail sales slipping in April, and industrial production falling when a rise was expected. But they are expecting both May and June to expand. They see their strongest consumer sentiment of the year. This is all reflected in a booking stock market.

Both France and Germany reported CPI inflation rates for May overnight (+5.1% and +6.1% respectively) and both say the pressure is easing - not as fast as they would like however. But they are both far lower than year-ago levels. And hope rise that ECB rate rises may now pause.

Australia' monthly inflation rate rose to 6.8% in the twelve months to April, which is a rise from the monthly indication of 6.3% in the March month.

And AUSTRAC says Bank of Queensland has breached prudential standards and fallen short in its compliance with anti-money laundering laws. For most customers, these requirements seem an unnecessary overreach. But they seem here to stay.

In international trade, air cargo demand in April continued its year-on-year decline but at a slower rate than the first three months of 2023, with volumes falling by -6.6% compared to April a year ago. The fall was about half that in the Asia/Pacific region however.

The UST 10yr yield will start today at 3.63% and down another -7 bps. 

The price of gold will start today at US$1967/oz and up +US$8 from yesterday.

But oil prices are -50 USc lower today from yesterday at just under US$68.50/bbl in the US. The international Brent price is now just under US$73/bbl.

The Kiwi dollar starts today -¼c softer at 60.1 USc. Against the Aussie we are marginally softer 92.6 AUc. Against the euro we are little-changed at 56.4 euro cents. That means the TWI-5 is down -20 bps at 69.1.

The bitcoin price is lower today at US$27,043 which is down -2.5% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.9%.

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

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 tomorrow.