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 the realities of the post-pandemic bounce are showing it isn't being sustained on a global basis.

This week won't be as busy on the economic data front as last week. It will be mainly Fed-watching in the US, plus PMIs and some key housing sector data there.

China will review its monetary policy positions tomorrow and that will come with eyes keenly watching for more economic stimulus measures. It is seen trimming its 1-year and 5-year loan rates by -10 bps to align with last week's surprise cuts for shorter-term rates that were trimmed to support their property development sector.

But it is more than their property development sector that needs shoring up. China was expected to recover and give the global economy a boost after it abandoned its tough zero-Covid policies and reopened its borders late last year. Yet, domestic consumer spending has tanked and trade has fallen. This weekend's retail event has always been an important retail shopping day, "618" and there are signs that is will also really drag this year. Not only are consumers tiring over the endless 'big' promotions, households are back prioritising savings.

Other country central banks will also be reviewing their positions this coming week, including Norway, Turkey and the UK. In our region Indonesia and the Philippines will do so too. May Inflation data will be released in Japan, Malaysia and South Africa. PMI survey results will also come in Australia, Japan, the UK, and the EU. The Japanese one might reveal a rising expansion, but it is unlikely any of the others will.

Despite getting a new Governor who was thought to be ready to declare victory over deflation, the Bank of Japan under its new leader late Friday kept its key short-term interest rate unchanged at -0.1% and that of 10-year bond yields at around 0% by a unanimous vote. It said it didn't move because of the high risks it sees in international economies.

Singapore's exports slumped in May, and crashing very much more than expected. They have had a good run over the past two years but from July 2022 there has been a steady and now increasing retreat. This data is kind of a regional canary.

The latest update of consumer sentiment in the US, this one from the University of Michigan survey, delivered a bounce that wasn't expected. June sentiment rose to its highest in four months reflecting greater optimism as inflation eased and policymakers resolved the immediate debt ceiling crisis. In fact that caps a year of rising sentiment, with this index up +27% from a year ago. 

In Australia, the pressure is coming in retail sales. At its monthly review, the RBA noted a "substantial slowing in household spending" and this past week many key retailers have been reporting retreating sales levels, some quite sharp. New data from BNPL operator Zip shows a -7.4% slide in spending in fashion and clothing in the first two weeks of June compared to the first two weeks in May. Some major retailers are signaling sales are down -20% recently. Discounting is being turbocharged and the retailing industry is worried.

The UST 10yr yield will start today at 3.77% and up +3 bps from Saturday. 

The price of gold will start today up +US$1 at US$1958/oz.

Oil prices are slightly softish from Saturday to now be just over US$71.50/bbl in the US. The international Brent price is now up at just under US$76.50/bbl.

The Kiwi dollar starts today up at 62.4 USc and little-changed from Saturday. But it is up more than +1c in a week. Against the Aussie we are firm at 90.8 AUc. Against the euro we are little-changed at 57 euro cents. That means the TWI-5 is just on 70 and little-changed but up +50 bps in a week.

The bitcoin price is firmer than time Saturday at US$26,632, up +1.3%. Volatility over the past 24 hours has been low at just under +/- 1%. We should note that Binance.US and the US Securities and Exchange Commission reached an agreement that avoids a total asset freeze at the cryptocurrency trading platform while the regulator’s suit against it proceeds. Meanwhile Binance is quitting the Netherlands, and is facing a regulators probe in France.

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.