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.

And today we lead with news financial markets are on tenterhooks for the Thursday US Fed rate decision.

In the meantime, US consumer inflation expectations over the next year eased in May, down to 4.1% and the lowest since March 2021 more than two years ago. Expectations for inflation for longer term periods however rose slightly. The rises were minor, but represent an upturn from previous surveys. Labour market expectations were mixed with expected earnings growth declining, but unemployment expectations and perceived job loss risk improving.

This expectation data comes ahead of tonight's May CPI data for the US, and analysts also see it coming in at 4.1% which would be a good drop from 4.9% in April.

And markets are expecting the Fed to pause its rate hike track when they deliver their latest decisions on Thursday, thinking they have inflation coming down quickly now and have done enough to keep that retreat locked in.

The US Government released its monthly Budget statement for May, and this came in almost exactly as expected. But it is on track for a slightly larger deficit this year than last, this year about -8% of GDP.

In China, there are more indications of their demographic malaise. The number of marriages registered last year fell for the ninth consecutive year to the lowest since 1986, when the figure started to be recorded. Only 6.8 million couples registered marriages in 2022, down -10.5% from the previous year and more than -49% lower than the peak of 13.5 million in 2013.

Japan's producer prices fell in May from April, only the third such drop in the past two years, and the steepest monthly drop (-0.7%) since 2016 (pandemic excluded).

Japanese machine tool orders weren't flash in May, unfortunately, down -22% from the same month a year ago. Orders from both local and export sources were equally weak.

The Bank of Japan also updates its monetary policy this week, on Friday.

India's CPI inflation rate rose slower, and by 4.25% in May from 4.7% in the previous month, the lowest in two years and lower than market forecasts of 4.4%. Food prices eased the most, with most key categories falling rather sharply.

April industrial production in India came in +4.2% above year-ago levels but it was quite a fall-off from the strong March levels.

The UST 10yr yield will start today at 3.75%, up +3 bps from yesterday. 

The price of gold will start today down -US$5 at US$1956/oz.

And oil prices have fallen -US$3 from yesterday to now be just under US$67.50/bbl in the US. The international Brent price is now just under US$72/bbl.

The Kiwi dollar starts today still little-changed at 61.2 USc. Against the Aussie we are almost -½c lower from yesterday at 90.6 AUc. Against the euro we are softer but less so at 56.9 euro cents. That means the TWI-5 is now at 69.3 and little-changed.

The bitcoin price is again a little lower since this time yesterday at US$25,807, down -0.7%. Volatility over the past 24 hours has remained modest at just on +/- 1.1%.

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.