Economy Watch

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 of little global fallout from the weekend election results.

First up today, we should note that American consumer inflation expectations for the year ahead slipped for a second consecutive month to now be +3%. That is 'progress' from 3.2% in May. The decline was broad-based over food, petrol, medical care, and rent. One year ahead earnings growth is expected to match that at +3%. Three year ahead inflation is expected to come in at 2.9% and five year ahead the expectation is now 2.8%. Both these are improvements.

Although minor, the Fed will be pleased with the shift because that means the higher rises in April and May were aberrations.

The expected rise in American consumer credit in May came through, although to be fair, even if it was more than expected its was a pretty modest +$11.4 bln rise, up at an annual rate of +2.7%.

In coastal Texas, overbuilding and climate denial is catching up with them. More than 2 mln people are without power as tropical storm Beryl lashes the region. Note it is not even classified as a hurricane anymore. Beryl has been the earliest-ever named hurricane in a season that is upcoming.

China isn't immune to climate stress either. To give perspective to their response to recent severe droughts in the north, and floods in the south, that have just added another ¥3.3 bln (NZ$750 mln) for disaster relief in the past three weeks.

A little air seems to be going out of the rising Australian housing markets - as an indication from their lending data shows. Owner-occupier loan demand fell -2.0% in May from April to now be up +12% year-on-year. This wasn't expected - a +2% rise was expected.

Overall we should note a broad-based retreat by many commodity prices today. Mineral commodities are being led by rebar steel which is down -2.8% today to be down -5.2% for the month and down -10.7% in a year. Copper and iron ore are off too today although not a sharply as construction steel. Nickel is down too, but not zinc. Aluminium is holding.

On the food side, we are seeing a sharp fall in wheat prices, and soybean prices are staying down. We get another look at dairy prices tomorrow morning at the next GDT Pulse event. The futures markets indicate WMP will hold but there is downside risk to SMP.

The UST 10yr yield is now at 4.27% and little-changed from yesterday.

The price of gold will start today down -US$33 from yesterday at US$2356/oz.

Oil prices are -US$1 lower at just under US$82/bbl in the US while the international Brent price is down a bit more at just on US$85.50/bbl.

The Kiwi dollar starts today -20 bps softer from yesterday and now at 61.3 USc. Against the Aussie we are slipped to 91 AUc. Against the euro we are holding at 56.6 euro cents. That all means our TWI-5 starts today at 70.5 and down a mere -10 bps.

The bitcoin price starts today at US$56,063 and down -1.6% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.5%.

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.

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that in the three elections held over the weekend, 'democracy' seems to be signaling a rejection of the hard-line and hard-right.

But first in the week ahead the main event will be Wednesday's RBNZ OCR review. But there will be other important global data released as well, including the American CPI and PPI results for June. China will release its versions of inflation monitoring as well, and the data on new yuan loans. India will release its June CPI data too, plus industrial production data for May. And from Australia we will get the NAB business sentiment results for June, and the Westpac consumer sentiment survey results.

First up however we should note that China's foreign exchange reserves in USD were little-changed in June from May, holding the level they have been since late 2023. But they are rising in yuan, mainly because the yuan is depreciating. Their gold reserves remained unchanged for the second straight month at 72.8 million troy ounces (2264 tonnes) and that ends a gain for 18 consecutive months,

Those reserves have been put to political use. First it was Sri Lanka, now Laos has succumbed to China's 'debt trap' diplomacy. China's 'encouragement' to develop their countries - with official Chinese loans - has plunged Laos into a financially unsustainable situation, and Beijing is now promising to 'help' them out of the mess. Easy money and a drive to 'catch up' is too much of an enticement for local leaders. In the end the price is subservience. Essentially, China now owns Laos.

In Japan, their huge Government Pension Investment Fund, one of the world's biggest institutional investors, booked a +NZ$462 bln gain in the past year (more than New Zealand's entire economic activity as measured by GDP). They need it however. As wages rise there and their workforce ages further, the claims on that will rise. That fund alone has reserves of almost NZ$2.5 tln.

On Saturday (NZT) the closely watched non-farm payrolls report for the US was released with a headline result of +206,000 larger employment in June, slightly more than the +190,000 expected. Their unemployment rate changed little at 4.1%.

But this seasonally-adjusted data masks an actual rise of +547,000 people on company payrolls, although that was lower than the +844,000 increase the prior month. It also masks some downward revisions to the prior month.

There are now 161.8 mil people employed in June in the US, including the unincorporated self employed, up +433,000 from May. So all the growth is in company payrolls and people are shifting out of self-employment to the more formal workforce.

And that is conformed by pay rates. Average hourly pay hit US$30 for the first time ever in June, up +4.0% from a year ago (and rising faster than inflation). Average weekly earnings (which accounts for working hours), rose +3.7% (also more than inflation which is running at 3.3%). But these gains are now easing from earlier months.

Basically, this data changed their economic situation little but is has a sense of a slowing trend. US Treasury yields fell on the news, but Wall Street equities took it in its stride. The USD eased very slightly.

The Fed probably liked what it saw. New York Fed boss said the US economy was doing remarkably well and there had been significant progress towards inflation goals. Fed boss Powell will be testifying in Congress this coming week.

The next US Fed rate review is on August 1, 2024 NZT.

In Canada, their labour market report for June wasn't as positive. In fact their employed jobs fell a trivial -1,400 when a +22,500 rise was expected. They will be disappointed in that. This data probably advanced the case for a July rate cut when their central bank meets next on July 25, NZT. Their policy rate is currently 4.75%.

And staying in Canada, there was some more positive news. Their widely-watched local June PMI rebounded sharply back to April growth levels, consigning the lowish May result to outlier status. They have now had eleven consecutive month of economic growth, the second highest string since 2016 (the pandemic aftermath excepted).

France is voting in the second round of its most crucial legislative elections in recent years, with the early results suggest a sharp rejection of the far-right.. Voter turnout however is being described as being unusually high - as are the stakes. In Iran, the more moderate of the two options for 'President' (a position subservient to the top cleric) won handily in a signal their population wants a less confrontational government and more focus on economic improvement. And the British election delivered an unusually large 'landslide' for its center-left Labour Party, with strong gains for its third-force LibDems as well. The hard-right Reform Party won only 5 seats, despite getting 14% of the votes. Such is FPP. In Tokyo, their first female governor secured a third term on Sunday in the capital's election. It was also a clear rejection of hard-right nationalist opponents.

The UST 10yr yield is now at 4.28% and unchanged from Saturday and down -12 bps from a week ago. The key 2-10 yield curve inversion is little-changed at -33 bps. Their 1-5 curve is now at -78 bps. And their 3 mth-10yr curve inversion is still at -109 bps. The Australian 10 year bond yield starts today at 4.41% and unchanged. The China 10 year bond rate is now at 2.27% and also unchanged. The NZ Government 10 year bond rate is now at 4.77% and up +4 bps from a week ago, but unchanged from Saturday,

On Wall Street this week we will get the early corporate results for Q2, led as usual by some big banks. These upcoming Q2 reports will be following an unusually strong Q1 set, one that generally gave upbeat forward guidance. There will be interest over whether those bullish views have continued.

The price of gold will start today down -US$1 from Saturday at US$2389/oz. A week ago this price was US$2326/oz

Oil prices are marginally firmer at just on US$83/bbl in the US while the international Brent price is just under US$87/bbl.

The Kiwi dollar starts today +10 bps firmer from Saturday and now at 61.5 USc. A week ago it was under 61 USc so a +½c rise since. Against the Aussie we are at 91.1 AUc. Against the euro we are holding at 56.7 euro cents. That all means our TWI-5 starts today at 70.6 and little-changed.

The bitcoin price starts today at US$56,949 and up +0.7% from this time Saturday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.

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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 global container freight rates are rising to ridiculous levels now, just another element that is stifling world trade.

But first up, we should note that it is a public holiday in the US; Independence Day. And it is likely that many will take tomorrow off as well to make a four-day weekend. To data from the world's largest economy is absent today.

But there will be the non-farm payrolls results for June released tomorrow.

In the US, car buyers are back despite elevated interest rates, but the June vehicles sales level probably fell to a 15.8 mln annualised rate. That is because of an industry-wide cyberattack in June that hobbled many major dealerships. The May sales level was 15.9 mln, and a year ago it was 16.1 mln. But the effect of the cyberattack is over now and there could well be a sharp catch-up in July.

We are also awaiting China vehicle sales data for June, and there are no early indications in that market - which is almost twice as large as the US one. They expect to sell more than 30 mln vehicles in the year to June, with nearly half as NEVs. But given their rush to invest in manufacturing, they still have a serious over-capacity problem even at that sales level.

And the EU says it will impose tariffs of up to 37.6% from today on their imports of electric vehicles made in China. That is expected to cost NZ$6.5 bln in lower trade between the two blocs.

In Germany, factory orders eased by -1.6% in May from April, missing market estimates of a +0.5% expansion. That puts them -8.6% lower than the same month a year ago. And that is not insignificant in an economy as large as Germany.

Of course there are elections in two European countries over the next few days. The British have voted and results are awaited. It will be a huge surprise if the opposition left-wing party doesn't win in a landslide. In France however, the expected far-right triumph looks like it isn't going to happen.

In Australia, drought in the heart of Victoria's dairy country is putting a sharp squeeze on output there. Production is down sharply, and this could not come at a worse time. Dairy farmers are facing a -15% drop in the price they get from processors too that went into effect at the start of July.

In Canada, they are suffering sharply lower real estate sales as well. In Toronto, volumes were down more than -15% in June from the same month a year ago. In Vancouver, the drop is -19%.

The rise in global container freight rates isn't easing, according to the latest data for this week. These rates were up another +10% from last week to be three times higher than year-ago levels. The same causes are still there, with the highest increases for freight from China to Atlantic ports. Bulk cargo rates are up a net +5% for the week although they have eased slightly in the past few days. These are rates are +90% higher than year-ago levels.

The UST 10yr yield is now at 4.37% and up +1 bp. 

The price of gold will start today virtually unchanged from yesterday at US$2357/oz and holding its higher level.

Oil prices are +50 USc firmer from this time yesterday at just over US$83.50/bbl in the US while the international Brent price is up +US$1 at US$87.50/bbl.

The Kiwi dollar starts today +¼c firmer from yesterday and back up at 61.2 USc. Against the Aussie we are still softer at 91 AUc. Against the euro we are also holding at 56.6 euro cents. That all means our TWI-5 starts today at 70.4 and unchanged from yesterday.

The bitcoin price starts today at US$58,246 and down -3.2% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.2%.

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 on Monday.  Go the ABs !

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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 that while the world's politics is getting messier and more partisan, the world's big economies are basically doing ok.

First up today, the US Fed released the minutes of its June 13 (NZT) meeting and those show it is in no hurry to cut its policy rate. But they do seem to be on alert for signs of labour-market deterioration.

US mortgage applications fell -2.5% last week from the week before to be -12% lower than last year's weak level. The benchmark 30yr fixed mortgage rate blipped up over 7% again which won't have helped. So, no signs the hibernating American housing market is waking up yet.

Reports of job layoffs among major companies remained very low in June, and noted strong hiring in the month.

But the pre-cursor ADP Employment Report for June said American the private sector added 'only' +150,000 new jobs in the month, less than +160,000 expected. Analysts now expect the June non-farm payrolls to have expanded by +190,000 and we get that data on Saturday (NZT).

There was a minor uptick in the weekly initial jobless claims last week taking them to 238,000 and lifting the number of people on these benefits to 1.8 mln but still well below where they started the year.

US exports of goods and services dipped slightly in May from April but remain +4.3% higher than for the same month a year ago. The overall trade deficit was about US$9 bln more on that basis, insignificant for an economy as large as theirs.

In something of a surprise, the widely-watched local ISM services PMI reported a contraction in June when a similar expansion to May was expected. This was suddenly its worst result since 2020. This garnered headlines. But the internationally benchmarked S&P Global/Markit version did report a rising expansion and at the fastest pace in a year. Again, take your pick depending on your inbuilt bias.

Their May report for new factory orders revealed a small retreat from the prior month after a similar rise in April. Year-on-year they remain almost +1% higher however.

In India, their service sector is on a real spurt higher. Sharp rises in sales and business activity were the main feature in June. International orders increased at a record pace, and they had their fastest upturn in employment for 22 months.

But that is in sharp contrast to China. Although its June factory PMI was stronger than the official NBS version, the Caixin services PMI was weaker, and by quite a bit. But at least it is still expanding, although the rate is at its slowest pace since October 2023.

And it wasn't too different in Japan. Their service sector stalled in June, according to the latest PMI data. The volume of new business was broadly unchanged from May.

In Europe, perhaps we should note that Greece is introducing a six day/48 hour working week for some industries. But it only applies to businesses which operate on a 24-hour basis and is optional for workers.

Meanwhile, Australian retail sales in May rose far less than inflation, a situation they have had for a long time now - since the beginning of 2023. What improvements there are coming from 'chasing bargains'.

There was a small rise in May for dwelling building permits in Australia, and a helicopter view of these trends suggests they may have passed their tough.

There were two PMIs out for Australia yesterday. The internationally-benchmarked Markit version shows their service sector growth was sustained in June. New business and activity both continued to rise, albeit at slower rates. But the AiG version for their factory sector isn't flash at all, even if it 'improved' from May.

The UST 10yr yield is now at 4.36% and down -7 bps. 

The price of gold will start today up +US$32 from yesterday at US$2356/oz, up +1.4% in a day.

Oil prices are little-changed from this time yesterday at just under US$83/bbl in the US while the international Brent price is still at US$86.50/bbl. And perhaps we should note that ahead of the American summer 'driving season' petrol prices there are marginally less than a year ago at this time.

The Kiwi dollar starts today +¼c firmer from yesterday and back up at 61 USc. Against the Aussie we are -20 bps softer at 91 AUc. Against the euro we are also holding at 56.6 euro cents. That all means our TWI-5 starts today at 70.4 with a +10 bps gain.

The bitcoin price starts today at US$60,198 and down -2.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.2%.

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.

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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 the final round of Australian tax cuts have come into effect.

But first, the updated factory PMIs for the giant US economy have brought another diverging set. The S&P Global/Markit one, the internationally-benchmarked version, reported a rise based on a new order expansion to describe a moderately expanding sector. But the widely-watched local version from the ISM reported the opposite - easing new order levels and a small contraction in the sector. Take your pick. The recent trends in both are opposite too. It is hard to know what to make of these competing views, and markets seem to have ignored them.

In China, the private PMI survey by Caixin was much more upbeat than the official government version. This internationally-benchmarked Caixin factory PMI reported that in June business conditions improved the most in over three years. But it turns out that is not saying a lot - the improvement from May was marginal. But at least it is positive, and underpinned by rising new orders.

Staying in China, regular readers will know that we have been watching the Chinese Government bond yields falling into record-low territory as investors continued to snap up these bonds amid pessimism about the domestic economy. Now their central bank has moved to halt the slide.

In Japan, consumer sentiment, which has been quite low for years, improved in June but not by much and not a meaningful or trend-changing amount.

The German consumer inflation rate eased in June to just 2.2%, down from 2.4% in May. On an EU harmonised basis it fell to 2.5% from 2.8%. Their core inflation rate is a bit higher at 2.9% because the rise in food prices is now very low, and energy prices continue to retreat. They will be pleased with this progress and will be hoping it will be maintained.

The full EU CPI rate will be released tomorrow and that is expected to come in at 2.5% and a slight reduction from May.

In Australia, CoreLogic is reporting that dwelling values rose +0.7% nationally in June from May to be up +8.0% for the year. This rise is being led by a booming Perth market (+24% annually), although Brisbane (+16%) and Adelaide (+15%) are also strong contributors. Sydney's rises are about the average, but it is Melbourne's falls that offset the big gainers.

And staying in Australia, their 'Stage Three' tax cuts have come in to operation. They will benefit about 11 mln earners. The plan that has gone into effect was originally proposed by the Morrison Government, but the Albanese Government modified it so that those earning under AU$147,000 per year got more, those earning for than that level had their gains trimmed by half.

The UST 10yr yield is now at 4.48% and up +9 bps to start the Wall Street week. 

The price of gold will start today up +US$3 from yesterday at US$2329/oz.

Oil prices are up +US$2 from this time yesterday at just on US$83/bbl in the US while the international Brent price is now US$86.50/bbl.

The Kiwi dollar starts today slightly softer from yesterday at just on 60.8 USc. Against the Aussie we are slightly softer too at 91.2 AUc. Against the euro we are down -30 bps at 56.6 euro cents. That all means our TWI-5 starts today -20 bps lower at 70.3.

The bitcoin price starts today at US$63,241 and up +2.6% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%

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.

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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 July starts on shaky ground everywhere although the ground is firmer in the US than China.

As this is the first week of July, it will be heavy with PMI survey results everywhere (except New Zealand). But the most important release this week will be the American labour market report (their non-farms payrolls) for June on Saturday. Analysts currently expect another +180,000 gain. And before that we get their JOLTs report.

In Europe, election results in France and England will shape the week. But so will CPI inflation rates. Not only do we get them for the EU and the other big EU economies, they also come for South Korea, Turkey, Indonesia, and the Philippines too.

Over the weekend, Japanese industrial production data was released showing it rose +2.8% in May from April, beating market forecasts. It also recorded an unusual year-on-year gain too. This was the second increase so far this year, mainly due to strong motor vehicles output. They think June will slip back but July will be another gainer.

But it was all backwards in China.

The official factory PMI was steady for the second straight month as expected. The latest result marked the fourth contraction in factory activity so far this year, as Beijing was struggles to spur an economic revival amid weak demand, deflation risks, and a protracted property weakness. New orders, foreign sales, and buying levels all declined for the second month in a row

And their official services PMI slipped as well, now barely expanding. While it was the 18th consecutive month of expansion in June, the latest result was the softest since last December, as new orders and new export orders continues to contract.

On Wednesday we may get the Caixin versions of these two PMIs. Recently they have delivered better results, although not significantly different.

In the US, the inflation measure the Fed prefers, the personal consumption expenditure price index (PCE) was unchanged in May from April following a +0.3% rise in April. This was what markets were expecting. That means the annual PCE rate slipped to 2.6%, its lowest since March 2021. (The May CPI was 3.3% and we get the June CPI on June 13 (NZT).

Personal spending was up +2.4% from May a year ago, personal income a bit less.

US durable goods orders were unchanged in May from April but were -1.2% lower than the same month a year ago. Of more concern however will be that capital goods orders fell -10% on the same basis.

Eventually that may weigh on employment, but so far it hasn't. Last week initial claims for jobless benefits fell from the prior week. Compared to the same week a year ago the number of people on these benefits was higher, but in relation to their workforce, that gain was insignificant.

US pending home sales for May fell when a bounce-back was expected, reinforcing the funk the American housing market is in. In fact local sawmills have been closing on low new home demand and even that hasn't stopped wood prices from falling to post-pandemic lows. Their residential construction and home-improvement markets are buckling.

The widely-watched University of Michigan consumer sentiment survey was little-changed in June, but it is up more than +6% from a year ago.

The ECB said that its survey of consumer inflation expectations over the year ahead are now back to 2.8%, the same level they were at when they started this survey in early 2020. They peaked at 5.8% in October 2022. Those survey said they felt inflation ran at 5.8% over the prior 12 months. (It actually ran at 2.7% in the year to May but averaged 3.9% over the past twelve months. The June results comes later this week and is expected to be 2.5%.)

In France, exit polls show that far-right candidates probably made gains in their weekend first-round elections, garnering about a third of the votes. Turnout was a 'high' 60%. But the final outcome is still uncertain. The second round will take place on July 7, 2024.

The rise and rise of container freight rates continued last week, up +4% from the prior week to now be a massive 256% higher than the same week a year ago. Again the main culprit was outbound rates from China to Europe, hostage to the Yemeni Houthis and their piracy. Bulk cargo rates were up +2% for the week and are again in an uptrend. They are up +72% for the year.

The UST 10yr yield is now at 4.39% and unchanged from Saturday. 

The price of gold will start today up +US$6 from Saturday at US$2326/oz.

Oil prices are little-changed from Saturday at just on US$81/bbl in the US while the international Brent price is still under US$85/bbl.

The Kiwi dollar starts today slightly softer from Saturday at just on 60.9 USc. Against the Aussie we are little-changed at 91.3 AUc. Against the euro we are also unchanged at 56.9 euro cents. That all means our TWI-5 starts today still lower at 70.5.

The bitcoin price starts today at US$61,628 back up +1.6% from this time Saturday. Volatility over the past 24 hours has been low at just on +/- 0.9%.

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.

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The first New Zealand and international wave of electric vehicle (EV) uptake is probably over, with cheaper cars and better public charging infrastructure required for further major growth in the uptake of these "batteries on wheels," says James Foster.

 In a new episode of interest.co.nz's Of Interest podcast, Foster, who runs the EVDB website, says EVs reaching price parity with internal combustion engine (petrol) vehicles, will be a very significant development. The rise of Chinese EVs should help with this.

"At the beginning of 2022 we didn't really have any Chinese brand vehicles [in NZ] and now 20% of those on the road are [Chinese]. It's happened in two years. And that kind of shows you, I guess, why maybe the US have freaked out and implemented protectionist policies to try and protect their own car market. The amount of momentum coming out of China is extraordinary. And the build quality, I wouldn't say is taking people by surprise. But I know historically in New Zealand when we have new brands come to market...way back with the Japanese brands or Korean brands, at first you're kind of like, 'I don't know about this.' And then eventually they become normalised. They just become another brand that's part of the story," Foster says.

"I keep a running tally all the time of the 10 cheapest EVs in New Zealand, and then I get an average from that and that gives me an indication of where we're at. Those are all Chinese vehicles."

From a personal perspective Foster enjoys his EV being a part of energy self sufficiency, or sovereignty.

"That's something that I find quite profound. Since I got the solar panels on the roof I feel like I'm in science fiction...I've actually got the sun's rays going into my house's power and then into a battery in my car and I drive it. Compared to drilling oil, refining it, putting it on a ship, sending it over, driving it down..."

In the podcast Foster also talks about the reasons for the dramatic drop in EV uptake in NZ this year, the popular models and brands, prices including in the secondhand market, battery range, home and public charging, insurance and repairs, other EVs beyond cars such as utes, vans and heavy transport, hybrids and hydrogen vehicles, his expectations for NZ's future vehicle fleet and how electricity supply will cope.

*You can find all episodes of the Of Interest podcast here.

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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 food price signals belie talk of impending trouble.

But first, US mortgage applications were virtually unchanged last week (+0.8%) from the week before, taking them to -13% lower than the same week a year ago. But at least it was a third week of rises, even if small. Mortgage interest rates edged lower last week.

But new home sales in the US sank -11.3% in May from April, to be -16% lower than the same month a year ago as high prices and those still-high mortgage rates continued to weigh on buyers' decisions. It is the lowest reading in six months and well below what was expected. Still the April data was revised sharply higher.

Slightly elevated bidding (+2.5%) for the US Treasury 5 year Note pushed the median yield down to 4.27%, compared to the 4.48% at the equivalent event a month ago.

In Japan, the current focus is on the yen's falling exchange rate, especially to the USD. But while policymakers there say they are watching with concern, interventions so far have been modest and ineffective.

In India, their currency is unusually stable and not something we have seen for more than 15 years.

In China, the Beijing officials controlling the yuan have allowed it to sink a bit faster recently and it is almost back to its modern 'most weakest' levels of mid-2023.

In Australia, their monthly inflation indicator for May edged up to 4% from 3.6% in April, boosting the chance of another RBA rate rise as underlying price pressures clearly remain entrenched. Australian government bond yields leapt almost +20 bps on the news, and to their highest in 2024. The AUD rose +50 bps. The ASX200 tumbled sharply. Markets may have reacted sharply and pulled back somewhat later but economists had a much more measured view preferring to see the relatively small month-on-month change as 'not much'. Meanwhile, an RBA boss said their policy positions are on the right track and will get inflation under control.

We should perhaps note that prices for some of the world's key agricultural commodities are struggling, mainly because good growing conditions are delivering strong supply. The corn price is down to where it first was in 1996 and the bubble that started in 2020 is now all erased. Similarly for oats which are now below 1988 levels. The rice price is still highish, but below 2008 levels still. And canola is also a major-traded food export that has extinguished its recent bubble. Wheat is in the same boat, back to price levels it first hit in 1996. The world's food supply and price is currently no threat of availability or affordability issues. However, despite all this some still see "food wars" as a future risk, but that may just be a Singaporean trader talking his own book.

The UST 10yr yield is now at 4.32% and up +9 bps from this time yesterday. 

The price of gold will start today down -US$18 from yesterday at US$2301/oz.

Oil prices are little-changed from yesterday at just over US$81/bbl in the US while the international Brent price is now just under US$85/bbl.

The Kiwi dollar starts today down nearly -½c from yesterday at just under 60.8 USc. Against the Aussie we are down even more at 91.4 AUc. Against the euro we are down -¼c at 56.9 euro cents. That all means our TWI-5 starts today down -30 bps at 70.5.

The bitcoin price starts today at US$60,974 and down -1.0% from this time yesterday. Volatility over the past 24 hours has modest at just on +/- 1.3%.

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.

Tomorrow is a public holiday in New Zealand (Matariki). We will be publishing on our normal weekend schedule on Saturday and Sunday.

Kia ora. I'm David Chaston. And we will do this again on Monday.

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

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 questions remain about whether inflation's fall can be maintained.

Today is another shadow day with mostly second-tier data released, but some of it is interesting all the same.

First in the US, retail sales at physical stores were up +5.3% last week from the same week a year earlier, a good 'real' rise above inflation. But it was a slowing from earlier weeks and is the least rise since mid April.

But things don't seem to be expanding anymore in their factory sector. More Fed district surveys are being released, the latest one from the mid-Atlantic states and that brought a slowing in June largely based on retreating new order levels.

However the Chicago Fed's National Activity Index for May was less negative, turning up after two prior down months. This was on the back of expanding production levels and new order levels held their own.

The Dallas Fed's services PMI for June retreated again in June, but by far less than the sharpish May level. This is a key 'red state' that is struggling.

Nationally, the widely-watched Conference Board survey of consumer sentiment dipped in June from May, but not as much as expected. The 'present conditions' aspect remains buoyant, but it is the 'future expectations' component that eased a bit.

Separately there was a US Treasury 2 year bond auction earlier today and it was strongly supported, delivering a median yield of 4.66%. A month ago at the equivalent event the median yield was 4.85%, so a -19 bps easing since then. More than US$192 bln was offered for the US$71 bln available.

Is inflation under control in the US? A key Fed official doesn't think so yet, and said she is prepared to vote to raise rates again if the disinflation trend doesn't continue.

In Canada, they got a small surprise from their May CPI data. It rose to 2.9% from its three-year low of 2.7% in April. Analysts had expected it to retreat to 2.6%. While this move is still in the Bank of Canada's expectation range of "about 3%", the halt to the disinflation trend challenged earlier bets that the central bank would continue loosening monetary policy. Bond yields fell there.

In Japan, researchers have found more than 200 million tonnes of manganese nodules, rich in battery metals, in the Pacific Ocean and inside the country’s exclusive economic zone. They say that is the deposit contains 610,000 tonnes of cobalt (equivalent to 75 years of Japan’s consumption) and 740,000 tonnes of nickel (11 years).

The latest South Korean consumer sentiment survey rose in June to its highest level since March. Sentiment regarding current living standards increased, while future outlook improved by the same margin. Expectations for future household income also rose.

Australian consumer sentiment is mired in low territory, according the the June update of the Westpac-Melbourne Institute survey. Despite the improvement, consumer sentiment remains below its March level and still firmly in deeply pessimistic territory. The survey detail suggests positives from fiscal support measures are being negated by increased concerns about inflation and the outlook for interest rates.

In Europe, Denmark is set to become the first nation to impose climate taxes on their agriculture sector. They say they are doing it in part to encourage other countries to follow. Less than 2% of Denmark's GDP comes from their rural sector, but it delivers 22% of their exports.

In the UK, the sheer size of their housing crisis has been explained in a dramatic way. Since 1977, they have fallen behind other northern EU countries in building new homes, driving a severe shortage that has sent housing prices soaring and kept young Britons out of the market. A Bloomberg analysis found that the failure to keep housing production on pace has led to a massive 4.3 million missing homes - greater than the number of existing dwellings in all of London!

The UST 10yr yield is now at 4.23% and down -2 bps from this time yesterday. 

The price of gold will start today down -US$13 from yesterday at US$2319/oz.

Oil prices are down -50 USc from yesterday at US$81/bbl in the US while the international Brent price is down -US$1 at just under US$84.50/bbl.

The Kiwi dollar starts today little-changed from yesterday at just under 61.2 USc. Against the Aussie we are still at 92 AUc. Against the euro we are also still at 57.1 euro cents. That all means our TWI-5 starts today little-changed at 70.8.

The bitcoin price starts today at US$61,577and bouncing back a partial +2.5% from this time yesterday. Volatility over the past 24 hours has high at just on +/- 3.0%.

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.

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI