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.