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.

Today we lead with news Wall Street is rising again, partly because some large retailers like Macy’s, Dollar General and Dollar Tree all reported good results reflecting their ability to handle margin pressures from inflation's surge.

Meanwhile, initial jobless claims fell again last week in the US, but the number of people on these benefits rose marginally, but they are still below 1.3 mln and still hovering near 50 year lows.

Pending home sales also fell in April, and both by more than expected and by more than in March. This is an embedded trend now, taking the string of falls to six consecutive months. Higher mortgage servicing costs are hampering sales. That average prices are still rising just means those that are selling are at the higher-priced end of the market. More recently we should note that US mortgage interest rates dropped last week, for a second straight week.

Although it did fall slightly, the Kansas City Fed manufacturing survey stayed historically strong in May.

Also falling slightly was the second estimate of Q1 economic activity in the giant American economy. As we have reported with the first estimate, it shrank slightly from the very strong Q4-2021, but is up +3.5% from the same quarter a year ago on an inflation-adjusted basis. On a nominal basis it is up +10.6% year-on-year, boosted of course by heady inflation.

Also showing signs of wear were Canadian retail sales which were unchanged in March from February when a rise was anticipated. Sales volumes fell.

The news out of China is still mostly negative and compounding that more property developers have said it can't make loan repayments in full.

South Korea raised its OCR by +25 bps to 1.75% in a move that was no surprise in response to rising inflation.

Singapore's industrial production bounced back less in April than anticipated, but the year-on-year gain is still a good +6.2%.

Russia cut its policy rate sharply again, slicing it by -300 bps today on top of the prior -600 bps retreat. They say inflation is retreating fast in the middle of "challenging" economic trends. Their policy rate is now 11%. Their inflation target is 4%, but it is running at over +17% currently they say, but falling faster than that anticipated - hence the rate cut.

In Australia, investment in new private capital fell unexpectedly in Q1-2022, when a solid +1.5% rise was anticipated. This was because investment in buildings and structures fell -1.7% while investment in plant and machinery rose by +1.2%.

Staying in Australia, power prices are regulated. Now just days after the election their regulator has announced new higher "default" power prices, up by between +1.7% and +8.2% above inflation in NSW, south-east Queensland and South Australia from July 1. Soaring coal and gas prices are inflating wholesale prices, mostly war-driven.

The cost of containerised shipping freight barely budged last week. The cost of shipping bulk cargoes fell from its recent highs. 

The UST 10yr yield will start today at 2.76% and little-changed. 

The price of gold is lower today, down -US$2 since this time yesterday at US$1849/oz.

And oil prices are up +US$4 from this time yesterday and now just on US$113.50/bbl in the US, while the international Brent price is now just at US$114.50/bbl.

The Kiwi dollar will open today little-changed against the US dollar, now at 64.7 USc. Against the Australian dollar we are softer at 91.2 AUc. Against the euro we are also softer at 60.4 euro cents. That all means our TWI-5 starts today at unchanged 71.5.

The bitcoin price has slipped a minor -0.6% from this time yesterday and is now at US$29,615. Volatility over the past 24 hours has been high however at +/- 3.5%.

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 on Monday.