Economy Watch

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 there are increasing signs the recent US boom is coming to an end, not necessarily with a recession, but with less expansionary conditions. This is flow through to the global economy quite quickly.

First, US factories are expanding less quickly. And their services sector's expansion is slowing too. However, both are still expanding at quite good levels.

That slowdown is also noticeable in the latest Richmond Fed factory survey for May. That same survey showed cost pressures hit a record high.

New home salesin the US actually slumped in April. This was quite a big miss, the level of retreat quite unexpected.

The good year-on-year gains in retail sales also look like they are coming to an end.

Japan's May PMIs are suggesting that their services sector is expanding faster while their factory sector is expanding slower, a net 'win' for their overall economy.

So far, despite war to the east of them, economic activity in the EU is holding up, described as being at 'robust levels', bolstered by their expansion in services. Their factory expansion is tamer. That is also the story for Germany, the largest economy in the EU.

Perhaps we should also note that Hungary has amended its constitution giving Viktor Orban power to rule by decree - and he immediately imposed it. The EU and NATO now have a pro-Russia dictator in their midst.

At Davos, the OECD chief said the work to iron out the details on their BEPS (base erosion and profit shifting) tax deal is slow going and he doesn't see it starting until 2024

The UST 10yr yield will start today at 2.76% and down -12 bps. 

Wall Street has resumed its repricing lower and the S&P500 is down -1.4% in late Tuesday trade today. Tech stocks are taking a battering with the NASDAQ down -2.8%. 

The price of gold is quite a bit firmer today, up +US$13 since this time yesterday at US$1865/oz.

And oil prices are virtually unchanged today and now just under US$109.50/bbl in the US, while the international Brent price is up about +US$1 at just under US$111.50/bbl.

The Kiwi dollar will open today little-changed against the US dollar, now at 64.5 USc. Against the Australian dollar we are also little-changed at 91 AUc. Against the euro we are soft at 60.1 euro cents. That all means our TWI-5 starts today at 71.3 which is down -20 bps from this time yesterday.

The bitcoin price has fallen -2.8% from this time yesterday and is now at US$29,301. Volatility over the past 24 hours has been moderate at +/- 2.6%.

Join us at 2pm today for an update of the RBNZ Monetary Policy positions. Almost certainly the OCR will rise, probably by another +50 bps to 2.0%.

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.

Kia ora,

Welcome to Tuesday’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 that despite lingering recession worries, there are a set of 'comeback' moves on today. Equities are rising, bond yields are firm, currencies are strengthening and some data is expanding. All this gives a comeback vibe, even if none of them are completely convincing on their own.

First in the US, the National Activity Index compiled by the Chicago Fed delivered a rise from sales, orders and jobs, and the gains were from personal consumption and housing. But these April gains were the sixth in the past seven months, so they have now established a rising trend.

And the US Fed has been surveying households and has found most of them are pretty happy with their financial status. Self-reported financial well-being reached its highest level since the series began in 2013. In Q4-2021, almost 80% of adults reported either doing okay or living comfortably financially. Financial well-being also increased among all the racial and ethnic groups measured in the survey, with a particularly large increase among Hispanic adults. Parents were one group who reported large gains in financial well-being with three quarters saying they were doing at least okay financially, up +8 percentage points from 2020. These are results that challenge the accepted narrative that "most people are struggling". It seems that most American are not.

Singapore reported its April inflation data late yesterday and it was highish but not excessive, coming in at 5.4% and unchanged from March.

Hong Kong inflation was even tamer, reporting just +1.3% annualised inflation when 1.9% was expected.

And Taiwanese April inflation came in at 3.4% with a small rise from March. Taiwan also said its April industrial production was up 7.3% and a gain that well exceeded its March result. Retail sales were up +4.7% and a growth rate slightly lower than for March.

In China, more analysts are accepting that their Q2-2022 economic activity will be lower than in Q1. And that seems to include officials in Beijing who have announced new tax cuts and increased rebates, postponed social security payments and loan repayments, and they have rolled out new "investment projects" to support their economy. They say "the downward pressure on the economy continues to increase and it’s very difficult for many market entities". These measures are said to be worth more than NZ$32 bln in this round of stimulus. Recall, they have also recently cut their loan prime rate that underpins mortgages.

And this latest set of economic rescue measures seems to be being driven by Premier Li rather than President Xi.

Meanwhile, the US has assembled 13 countries to be part of its Indo-Pacific Economic Framework (IPEF) free-trade group, its follow-up to the Trump-rejected CPTPP (which includes neither China nor the US nor India), and its answer to the China-sponsored RCEP. New Zealand is 'in' the IPEF, as it is with the other two trade sets as well. India is part of the IPEF, but not the other two. The IPEF will encompass 40% of global GDP. The RCEP encompasses 30%, and the CPTPP covers about 14% - at least until China and Taiwan are accepted.

And there was positive news out of Germany. Their Ifo Business Climate indicator rose unexpectedly to a 3-month high in May and April's reading was revised up. Views of both current conditions and future expectations improved. There are no signs of a recession at the moment in Germany, Europe's largest economy, though demand for industrial products has waned significantly and supply issues persist in industry and retail, according to the surveyers.

And the head of the ECB confirmed it is likely to increase its key interest rate, currently negative, to zero by September and could continue raising rates after that. It is doing this because underlying economic conditions are improving.

The UST 10yr yield will start today at 2.85% and up +6 bps. 

The price of gold is a little firmer today, up +US$5 since this time yesterday at US$1852/oz.

And oil prices are marginally softer today and now just under US$109.50/bbl in the US, while the international Brent price is still just over US$110.50/bbl.

The Kiwi dollar will open today back up another +½c against the US dollar, now at 64.6 USc. Against the Australian dollar we are little-changed at 91 AUc. Against the euro we are softish at 60.5 euro cents. That all means our TWI-5 starts today at 71.5 which is up +20 bps from this time yesterday.

The bitcoin price has risen a mere 0.7% from this time yesterday and is now at US$30,131. Volatility over the past 24 hours has been moderate at +/- 2.7%.

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.

Kia ora,

Welcome to Monday’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 move towards bear market conditions seems relentless, even if Wall Street pulled back slightly on Friday.

But first, the Australian election seems to have not only delivered a change of governing party - the traditional switch between the Coalition LNP and the Australian Labor Party - but voters behaved in an unusual way, cutting their support for both. The LNP suffered a huge loss of support, but the ALP also suffered a loss, even if quite small.

The gainers were the blue/green independents (the 'teals'), and to a much lesser extent the red/green Greens (the 'purples'). Teal independents have won seven more seats so far, as many extra as the ALP. The Greens won two more. Some seats are still to be decided. The swing to the ALP was less than +4%, the swing away from the LNP was almost -6%. Almost all the difference was the 'teal' independents. They were motivated by climate-change and anti-corruption policies.

In hindsight, it seems clear that the LNP was perceived as driving fringe agendas and culture-war policies out of step with a modern mainstream society, and it was tainted with indications it was untrustworthy. Poor pandemic policies and denials didn't seem to help. Those attributes were punished by voters.

The changes to their Senate are still quite unclear, and the results there are delivered by a very opaque system that can see minor forces (like the Greens) elevated.

The implications for New Zealand are still murky, but they are probably better than if the LNP had retained power.

In other news, the Chinese central bank held steady its key rates for corporate and household loans at its May fixing, but cut the mortgage reference rate for the second time this year, amid a slowdown in the Chinese economy due to the resurgent pandemic outbreak, a property crisis, and weak loan demand. The one-year LPR was kept unchanged at 3.70% after cuts of 5 and 10 bps in December and January, while the five-year LPR was trimmed by -15 bps, the most since a revamp of the rate in 2019, to 4.45%.

The sharply rising risk of default by many Chinese companies has forced their authorities to offer 'default insurance' to investors to induce them to supply funding. Bond investors have become increasingly wary of buying corporate debt amid slowing economic growth, disruption caused by Covid-19 lockdowns, and those rising default risks. Even in China, they privatise the benefits, and socialise the risks.

Taiwanese export orders have taken a very sudden and unexpected dive. After being hugely positive for more than two years, these export orders slumped by -5.5% from a year earlier to just US$52 bln in April. That follows a +17% jump in March and smashes market forecasts of an +8.3% rise. Particularly hard hit were ICT product orders. 

Japan is in the news again with another rare data item - they got inflation in April of +2.5%. It wasn't unexpected and the actual level came in at about the forecasted level. They haven't had price inflation at this level in more than seven years. In the prior seven months they have also recorded CPI inflation, but usually at tiny year-on-year levels. Now is its significant from a policy perspective. Food prices rose +4.0%. It could be worth watching how the Bank of Japan reacts now.

In their Friday session, Wall Street started with sharp losses, pushing towards the start of a bear market. But in late trading those losses were pared back and they ended the day virtually unchanged. But the fear of bear market conditions hasn't really receded.

The early report of the May sentiment readings for EU consumers shows they remain very weak, but little-changed from April.

German factories are being hit very hard with cost increases as a consequence of Russia's invasion of Ukraine. Producer prices are up more than +33% in the year to April, most of it energy related. But non-energy prices are up more than +16% so the downstream impacts are huge for them.

The UST 10yr yield will start today unchanged at 2.79%. 

The price of gold is a little firmer today, up +US$4 since this time Saturday at US$1847/oz. A week ago it was at US$1810/oz.

And oil prices are little-changed today and now just on US$110/bbl in the US, while the international Brent price is still just under US$111/bbl. The convergence of the two benchmarks is quite unusual.

The Kiwi dollar will open today back up more than +¼c against the US dollar, now at 64.1 USc. Against the Australian dollar we are firmish at 91 AUc. Against the euro we are also firmsih at 60.7 euro cents. That all means our TWI-5 starts today  at 71.3 which is up +30 bps from this time Saturday.

The bitcoin price has risen 3.7% from this time Saturday and is now at US$29,907. Volatility over the past 24 hours has been modest at +/- 1.8%.

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.

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 a pall of uncertainty is still hanging over investment and financial markets, uncertainty about how the drive to quell inflation will turn out for asset prices.

US jobless claims rose slightly last week but remained below the 200,000 level in 'actual' terms, and the total number of people on these claims dipped below 1.3 mln and another new record low.

American existing home sales fell in April, and fell more than expected and the third retreat in a row. They are now down almost -6% from the same month a year ago, and the inventory of unsold houses is rising even if it is at historically low levels. 

US mortgage rates dipped unexpectedly last week.

The Philly Fed factory survey is still expanding, but at a sharply reduced rate. However new orders and shipments rose. But employment decreased, and the price indexes remained elevated although edged down. Their looking-ahead indexes remained positive but reflect more muted optimism for growth over the next six months.

Japan's exports rose strongly again in April, the second highest level ever after the record-breaking March result. But the rise actually disappointed analysts. And it came as imports surged, so it was overshadowed by the rising cost of oil and other raw materials which meant it has largely been overlooked.

Japanese machinery orders bounced back in April, building on a good March result. The latest data was higher than analysts were expecting, and builds on the more specialised machine tool order data we noted a few days ago.

In China, some observers are suspecting that President Xi has been forced to share power with Premier Li as a result of a string of policy mistakes. If so, it could mark a turning point in the hardline approach Xi has been pursuing. Or it might be just wishful thinking. In any event, China seems caught out by its hubris over the past few years.

Sri Lanka says it can't pay its debts, and is in "pre-emptive default". The G7 is moving to help, but China seems reluctant to give up the huge debts that it is owed.

In South Africa their central bank raised its benchmark rate by +50 bps to 4.75% at its overnight meeting, as widely expected. This is the 4th consecutive hike and the biggest in over six years. They too are responding to elevated inflation risks stemming from geopolitical tensions.

Although the Australian jobless rate held steady at 3.9% in April from March (NZ = 3.2%), their participation rate slipped to 66.3% (NZ = 70.1%). The total number of jobs rose by only +4000 when a +20,000 rise was expected. But more than +92,000 of that rise was full-time jobs, whereas part-time roles fell -88,000.

Over the past week there has been little change to the cost of shipping containerised freight by sea, but the cost of shipping bulk cargoes has risen.

The UST 10yr yield will start today another -5 bps lower at 2.84%. 

The price of gold is on the move today, up +US$25 since this time yesterday at US$1841/oz.

And oil prices are +US$3 higher today and now just under US$109.50/bbl in the US, while the international Brent price is now just over US$110/bbl.

The Kiwi dollar will open today nearly +1c stronger against the US dollar, now at 64 USc. Against the Australian dollar we are firmish at 90.6 AUc. Against the euro we are almost unchanged at 60.4 euro cents. That all means our TWI-5 starts today at 71 which is up +40 bps from this time yesterday.

The bitcoin price has risen +3.3% from this time yesterday and is now at US$29,946. Volatility over the past 24 hours has been high at +/- 3.3%.

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.

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.

Today we lead with news yesterday's optimism seems to have turned to custard today.

Earnings reports from Walmart and Target show that retailers can't raise prices fast enough to maintain margins and earnings are taking a hit. Investors have quickly forgotten the prior day's upbeat mood.

US mortgage applications were down a sharpish -11% last week but at least their mortgage interest rates did not rise further.

American housing starts remain high but in a rut principally due to supply chain inhibitions because completion levels aren't rising. Building permit approvals remain at historically high levels.

Canada's CPI inflation rate came in at 6.8% in April, marginally above the 6.7% in March but making it a 30 year high. But more recently, prices seem to be running at an annualised 8.5% rate, so they are in a nervous position. Food and housing costs are driving their increases, rather than energy costs.

Japan's economy shrank in the first quarter of 2022 at an annualised rate of -1.0%, continuing a recent trend of oscillating between growth and contraction. Accelerating inflation and a surge in pandemic cases contributed to gross domestic product, adjusted for inflation, dropping -0.2% from the previous quarter. A decline was expected, in fact a decline of -0.4%, so in the circumstances they might take this as a 'win'.

Average new home prices in China's 70 major cities rose by just +0.7% in the year to April, slipping from a timid +1.5% gain a month earlier. But 50 of those 70 cities recorded house price falls from the prior month, 4 recorded no change, and of the 16 that recorded a gain, none exceeded +1%. Shanghai recorded no change, presumably because it was locked down. This was the weakest rise in new home prices since October 2015, as Beijing's deleveraging campaign triggered a liquidity crisis in some major property developers.

In all of Shanghai, population 25 mln (in a greater metro region of 41 mln people), their car dealers sold zero new cars in April. Not even one. But because they order in advance, they still had to buy inventory. It must be tough.

A senior Chinese central banker is "being investigated" for suspected leaking of official economic statistics, after Beijing criticised the central bank for not adequately aligning itself with the party. There is no comeback for him now. The Central Commission for Discipline Inspection said that Sun Guofeng, who was until earlier this month head of the monetary-policy department, is being investigated for “suspected serious violation of laws and discipline.” It didn’t disclose any specifics but it earlier issued a report saying "the building of financial regulations is relatively sluggish" and blames the bank for not meeting President Xi's targets for "promoting deepening financial reform".

The EU settled on its final inflation data for April at 8.1%, up from 7.8% March, and marginally lower than their initial estimate. 

Australian wages rose +2.4% in the year to March, marginally better than the +2.3% in the year to December, but not as strong as expected (+2.5%). Even the q-on-q was a tad disappointing (annualised +2.8%), and this won't really bolster the RBA's case for a quicker return to 'normal' for monetary policy. But the weakish data will accentuate the political points at the end of their election campaign that wage earners are losers in the cost of living pressure. Also, this weak data probably rules out any outsized interest rate hike at their next review on June 7.

The UST 10yr yield will start today -8 bps lower at 2.89%. 

On Wall Street, the S&P500 could not hold yesterday's gain and is down a very sharp -4% in Wednesday afternoon trade. 

The price of gold starts today down -US$2 since this time yesterday at US$1816/oz.

And oil prices are -US$3.50 lower today and now just over US$106.50/bbl in the US, while the international Brent price is now just over US$107.50/bbl.

The Kiwi dollar will open today almost -½c weaker against the US dollar, now at 63.2 USc. Against the Australian dollar we are little-changed at 90.5 AUc. Against the euro we are almost unchanged at 60.3 euro cents. That all means our TWI-5 starts today at 70.6 which is down -30 bps from this time yesterday.

The bitcoin price has fallen -3.5% from this time yesterday and is now at US$28,989. Volatility over the past 24 hours has been high at +/- 3.4%.

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.

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 US expansion rolls on, the core engine again of the global economy as China stumbles.

But first, there was another dairy auction today, and another fall in overall prices. This time they fell -2.9% in USD terms and -1.6% in NZD terms. That means from the mid-March peak they are down -15%. The main fall today was for the core WMP price, down -4.9% on top of the -6.5% fall at the prior event two weeks ago. Yes, pencils will be out checking whether another cut to the farmgate payout price is required.

US retail sales came in strong for April, up +8.2% above year-ago levels but perhaps just as expected. That caps a fourth good consecutive monthly rise. The more recent Redbook survey suggests that strength has continued into May. But Walmart isn't a retailer that is benefiting from this strength. Its sales are up, but its costs are up more. So far that effect is insulating consumers from higher costs.

US industrial production also came in well above year-ago levels, up +5.8%. Recent gains have been running higher.

Better still, all these strong business activity gains have not been because businesses are building inventories. In fact, these are holding at levels that are low historically on an inventory-to-sales ratio basis.

US Fed officials were out talking up their policy positions. Chairman Powell said they will not hesitate to keep raising interest rates until inflation falls in a clear and convincing way. He added that “if that involves moving past broadly understood levels of neutral we won’t hesitate at all to do that” and noticed that the American economy is strong and well positioned to withstand less accommodative, tighter monetary policy.

In China, their main bond trading platform for foreign investors has quietly stopped providing data on their transactions, a move that will heighten concerns about transparency in the nation’s US$20 tln debt market after record outflows. The suspicion is that they are now hiding even faster outflows that they have previously reported.

The crisis in Sri Lanka seems to be getting worse.

In India, their wholesale prices surged at a rate exceeding +15 year-on-year in April, well above what was expected. Food and fuel combined to drive this rise.

In Australia, polls show the election race is tightening, but only slightly. There are just three campaigning days to go there.

The UST 10yr yield will start today +9 bps higher at 2.97%. 

The price of gold starts today up +US$2 since this time yesterday at US$1818/oz.

And oil prices are -US$2.50 lower today and now just under US$110/bbl in the US, while the international Brent price is now just over US$110.50/bbl.

The Kiwi dollar will open today firmer against the US dollar, now at 63.6 USc and a +70 bps rise. Against the Australian dollar we are little-changed at 90.6 AUc. Against the euro we have dipped slightly 60.3 euro cents. That all means our TWI-5 starts today at 70.9 which is up +30 bps from this time yesterday.

The bitcoin price has risen back +0.9% from this time yesterday and is now at US$30,028. Volatility over the past 24 hours has been moderate at +/- 2.1%.

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.

Kia ora,

Welcome to Tuesday’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 that China's economic stumble is the real elephant in the room for the global economy, and not the Russian invasion of Ukraine.

But first in the US, there was a surprisingly negative regional survey of manufacturers in New York. The Empire State Manufacturing Index shrank to -11.6 in May from +24.6 in April, missing market forecasts of +17. This big miss comes after an unusually strong April result, as new orders decreased, and shipments fell at the fastest pace since early in the pandemic. Also, delivery times continued to lengthen, and inventories rose. Averaging out the past three months, this indicator is flat.

Going the other way, Canada posted a better-than-expected result for April housing starts, beating both the March level and analysts forecasts.

But house prices across Canada continue to slip under the weight of rising interest rates, with the nationwide average price of homes falling to C$746,000 in April, down -6.3% from March’s average of C$796,000, a dramatic -C$50,000 retreat in just one month.

Japanese machine tool orders for April came in very strongly again, up +25% year-on-year and a second stellar month in a row, suggesting the world's boardrooms are still investing in capital equipment. It was the second highest order level since 2018, only beaten by the March 2022 result.

Japanese producer prices surged +10%in April from a year ago, rising at a record rate as the Ukraine crisis and a weak yen pushed up the cost of energy and raw materials. "Worse" (but remembering, they are looking for inflation), the March to April rise was at an annualised +14.4% rate, so this shift up is accelerating.

Japan is expecting CPI inflation to hit 2% this year which is very unusual and is having an interesting debate about whether this will be 'transitory' or not. That assessment greatly affects how the Bank of Japan approaches its response to the current inflationary burst.

In China, retail sales in April were very grim. In February 2022 they were up +6.7% year-on-year. In March they fell -3.5% on the same basis, and that was bad. Analysts knew April would be worse thinking they would fall a massive -6.1% which itself would be a shocking retreat. But in the end they dived -11.1%. (And these are the official data.) You can almost hear the gasps in Beijing. This makes the recent warnings from Premier Li look inadequate. It will be no surprise to learn that their official jobless rate has risen from 5.8% to 6.1% with anyone's guess at under-employment.

The fall in China's industrial production in April was massive too. Take a look at this official chart. This is confirmed by looking at their electricity production data. In April, China produced 608.6 bln kWh of electricity, taking it back to 2019 levels, and the lowest since the pandemic-affected early 2020 levels. Given the expansion of their overall economic industrial base since then, a level of just 609 bln kWh is very low given it was almost 760 bln kWh in July 2021, a -20% fall from that peak.

China’s real estate investment also declined in April, as home sales, land purchases and housing prices all set new lows.

Analysts are now downgrading their expectations for calendar 2022 Chinese economic 'growth'.

The UST 10yr yield will start today -5 bps lower at 2.88%. 

The price of gold starts today up +US$4 since this time yesterday at US$1816/oz.

And oil prices are +US$3.50 higher today and now just under US$112.50/bbl in the US, while the international Brent price is now just under US$113.50/bbl.

The Kiwi dollar will open today unchanged against the US dollar, still at 62.9 USc. Against the Australian dollar we are softer at 90.5 AUc. Against the euro we still at 60.4 euro cents. That all means our TWI-5 starts today at 70.6 which is unchanged from this time yesterday.

The bitcoin price has fallen -0.9% from this time yesterday and is now at US$29,772. Volatility over the past 24 hours has been very high at +/- 4.0%.

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.

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 the equity markets are still falling as investors worry that more Fed rate hikes will stunt economic activity everywhere.

But first, last week US jobless claims actually fell slightly to 191,000 (although most reports will focus on a seasonally adjusted rise). There are now 1.44 mln people on these benefits, a new modern low. As a proportion of their labour force, this is easily a new record low.

Meanwhile American producer prices came in +11% higher in April than a year ago, showing how embedded inflation is in their costs now. However, the month-on-month rise indicates a small tailing off of the pressure.

The May USDA World Agricultural Supply and Demand Estimates (WASDE) paint a picture of relentless food stress with lower production, holding demand, and higher prices. Wheat and corn stocks are falling. US beef production is expected to fall and prices rise. US dairy production is expected to be stable.

South of their border, Mexico's central bank raised its benchmark policy rate by another +50 bps to 7% overnight as expected. It was their eighth consecutive hike, bringing borrowing costs to the highest since February 2020.

China has said that it is about to close it borders and strictly limit the ability of its citizens to travel overseas. And there are rumours that Beijing may go into a Shanghai-style lockdown. It is all a consequence of its zero-Covid policies.

And China is also battling distorted harvest practices as grain prices shoot higher on supply concerns.

Meanwhile, the property industry's bond payment woes just go on and on.

In India, they reported consumer inflation up +7.8% in April from a year ago, higher than expected and certainly higher than the March 6.95% level. But the rate seems to be increasing fast recently, with the April month-on-month rate rising at an annualised +17% rate, a level they will need to peg back quickly to prevent major social unrest.

Indian industrial production rose too, but at a only modest rate. This data is for March, and extends a very lackluster run since September 2021. India's inability to pick up the pace of economic activity is consigning it to laggard status in Asia.

In Europe, Finland said it would apply to join NATO "without delay", with Sweden expected to follow. That drew immediate Russian threats, but of course Russia is bogged down elsewhere.

Global container shipping freight rates fell again last week, another modest retreat but extending it to eleven straight weeks of declines and taking them down -26% since the September 2021 peak. Going the other way, freight rates for bulk cargoes rose again, and to their highest level of the year.

The UST 10yr yield starts today down another -8 bps since this time yesterday at 2.84

The price of gold starts today down -US$28 since this time yesterday at US$1824/oz. Silver fell harder.

And oil prices have changed little and are still just over US$104/bbl in the US, while the international Brent price is still just on US$106.50/bbl.

The Kiwi dollar will open today sharply lower on a surging US dollar, now at 62.3 USc and down more than -¾c. That is its lowest since early June 2020 and represents a -10.8% devaluation since the start of April. But against the Australian dollar we are slightly firmer at just over 91 AUc. And against the euro we are also slightly higher at 60.1 euro cents. That all means our TWI-5 starts today at 70.1 and a -6.2% devaluation since the start of April.

The bitcoin price has fallen another -3.8% from this time yesterday and is now at US$28,656. At one point it got down to US$25,402. Volatility over the past 24 hours has been a massive +/- 9.4%.

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.

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.

Today we lead with news the US budget repair is having impressive results.

But first, their April CPI data was released earlier this morning and it came in at 8.3%, fractionally lower than March's 8.5% but slightly higher than the expected 8.1%. The core readings were lower at 6.2% year-on-year. But the monthly change from March actually rose at a faster pace than was expected, and this has grabbed market attention.

Separately, American mortgage applications rose marginally last week, a second consecutive increase, and despite a rise in borrowing costs as their Spring housing market enters its historically busiest time. Applications to purchase a home surged 4.5% while those to refinance a mortgage loan fell 2%. The average contract rate on a 30-year fixed-rate mortgage jumped by 17bps to 5.53%, the highest since 2009.

The better management of the US Federal Government is starting to show up in reduced deficits. In fact, their April result reported a spectacular surplus. That surplus was a remarkable +US$308 bln in the month, reducing the annual deficit to "just" -US$1.2 tln (5% of GDP) from -$2.8 tln (11.6% of GDP) on the prior full fiscal year. The April surplus was the largest ever recorded, built on fiscal restraint (spending was down -16% on the same month a year earlier), and fast rising tax revenues from the booming economy.

We should also note that American farmers are running out of time to plant crops in their spring season. Wet and cool weather in key parts of the Midwest has left farmers with just days to get their crops in the ground at a time when global grain supplies are already under pressure.

In Japan, they now seem to be getting some real economic expansion.

In China, they are starting to get some modest consumer price inflation. April CPI ran at an annual rate of 2.1%, up from an annualised 1.5% rate in March, above market forecasts of 1.8%. This was the highest since November, amid logistic disruptions caused by their strict pandemic measures. Food prices rose for the first time in five months, and its highest since October 2020. 

The reverse is occurring in their factory sector where high producer price inflation is easing, even if only marginally.

Separately, China is lashing out at the recent WHO comments that its zero-COVID policy is unsustainable. Further, it is more aggressively censoring local views that say similar things. China seems to have backed itself into a tough corner.

In Malaysia, their central bank pushed through an unexpected rate hike overnight, taking their policy rate up +25 bps to 2.0%. Their authorities said a better growth outlook, higher inflation expectations, the global rate hiking cycle, and a need to normalise, all played a part in this rise. More are expected in coming months now. Other Asian central banks are also expected to join the rate hiking bandwagon, the next being South Korea.

In Europe, the ECB has signaled that it will be raising its policy rates in July.

In Australia, the Westpac-Melbourne Institute Index of Consumer Sentiment fell -5.6% month-over-month in May 2022, the most since June 2015 and down for the sixth month in a row, amid a combination of surging prices and the prospect of faster interest rate hikes.

The UST 10yr yield starts today down another -7 bps since this time yesterday at 2.92%. 

The price of gold starts today up +US$7 since this time yesterday at US$1852/oz.

And oil prices have moved higher today by +US$4.50 at just under US$104/bbl in the US, while the international Brent price is now just over US$106.50/bbl.

The Kiwi dollar will open today marginally firmer at 63.1 USc and off its two-year low. Against the Australian dollar we are also slightly firmer at 90.8 AUc. And against the euro we are also marginally higher at 59.9 euro cents. That all means our TWI-5 starts today at 70.6.

The bitcoin price has fallen -6.0% from this time yesterday and is now at US$29,789. Volatility over the past 24 hours has been extreme again at just over +/- 5.2%.

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.