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.

And today we lead with news that tomorrow's Australian Budget may bring some important positive surprises.

But first up today, global food prices are rising again, up in April for the first time in more than a year. But the driver was a sharp rise in the sugar price due to global supply issues. Meat prices rose marginally, but dairy prices fell in this UN-FAO tracking.

Meanwhile, China's foreign exchange reserves have crept up, now just above US$3.2 tln. But theiy remain well below their 2021 levels.

The Caixin services PMI came in at the same level as the official services PMI, both measures recording a healthy expansion.

And after nine years of fitful trials, the PBoC is finally getting its digital yuan off the ground. Some provincial governments allow trade in the e-yuan. And now public employees are being paid in e-yuan, direct to their phone wallets. 

Singapore's retail activity rose +2.2% in March and a sharp deceleration of the February rate. They will be concerned about that fall away. Given they have inflation running at +5.5% and the retail data is nominal, that suggests real retail activity is down -3.3%.

In the US, their economy unexpectedly added +253,000 jobs in April, beating forecasts of +180,000 and following a downwardly revised +165,000 in March. But these are the headline, seasonally-adjusted numbers. On an actual basis, the month-on-month rise was +892,000. There are now 161 mln people employed in their workforce, a new record high and up +3.1 mln from year-ago levels. 155.3 mln are on employer payrolls and 5.7 mln self-employed in unincorporated businesses. The 'self-employed' level is near a record low over the past decade if you exclude the March-July 2020 pandemic emergency period.

Average weekly earnings rose at a +5.8% annualised rate in April from March. It was an unexpected improvement and is a faster rise than in any month in the past year. The jobless rate dipped to 3.4% and their participation rate is unchanged at 62.6% so there remains plenty of capacity for more improvement.

By any measure this is a strong labour market, confounding the doomsters yet again.

This strong labour market is supporting non-housing consumer credit growth which came in higher in March than expected. Total consumer debt rose +US$26.5 bln from the prior month after an upwardly revised +US$15 bln increase in the previous month and the March levels were well above market expectations of a +US$16.5 bln rise. This data is also not supporting bear scenarios.

None of this data will be welcomed by the Fed. It does not indicate that inflationary pressures will be easing soon from a slowing economy. But a more immediate problem is looming - the inability to get their debt limit fiasco sorted.

Across the border, Canada's labour market delivered a stronger-than-expected result too, adding +41,400 jobs when +20,000 additional were expected. But there was a downside - all those additional jobs were part-time roles. Their jobless rate is hovering near a record low for them.

Like Singapore, the EU is suffering declines in retail activity too, down -1.2% in March from February, down -3.8% from year ago levels. This data is inflation adjusted.

In Germany there has been a very sharp drop in factory orders, led by orders for large engineering products. This has been the biggest drop in industrial orders since the height of the pandemic in April 2020.

In Australia, the RBA's Monetary Policy Review doesn't see inflation returning to its policy range until ... mid-2025. They acknowledge the current 7% inflation is too high but they are in no rush to rock the boat to fix that problem. They seem more worried about weak housing markets than inflation stealing savings. Perhaps they are trying to inflate their household debt away? They seem to have little tolerance for meaningful action on inflation.

Lending for owner-occupied homes in Australia rose +5.5% to A$16 bln in March from February, logging a positive month-on-month gain for the first time in ten months and defying expectations for a -1% decline. Still, March’s figure was -25% lower than for March a year ago.

This past weekend, auction clearance rates were high - above 75% - and listings available for sale low, as their housing markets turn higher. A fast-recovering housing market seriously complicates the RBA's efforts to tackle inflation, but signs of an imminent recession there are not on the horizon.

All eyes in Australia are now on the May 9 (Tuesday) Federal Budget. An earlier return to surplus seems likely as taxes rise sharply from their strong jobs and wages growth. Expectations are high for new initiatives aimed at helping households deal with inflation - while themselves not causing more inflation. Income-targeted subsidies for basic household expenses seem to be how they will do that.

The UST 10yr yield starts today at 3.44%, and unchanged from Saturday and a week ago. 

The price of gold will start today at US$2018/oz and up +US$4 from this time Saturday. A week ago it was at US$1991/oz.

And oil prices have slipped slightly from Saturday to be just over US$71/bbl in the US. The international Brent price is just over US$75/bbl. These are -US$5 lower than week-ago levels.

The Kiwi dollar is holding little-changed against the USD and now at 62.9 USc. Against the Aussie we are marginally softer at 93.3 AUc. Against the euro we are marginally firmer at 57.2 euro cents. That means the TWI-5 is now at 70.6 and unchanged from Saturday but up +70 bps in a week.

The bitcoin price is lower today, now at US$28,949 and down -2.1% from Saturday. Volatility over the past 24 hours has been very low at +/- 0.8%.

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.