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 the US expansion rolls on, the core engine again of the global economy as China stumbles.

But first, there was another dairy auction today, and another fall in overall prices. This time they fell -2.9% in USD terms and -1.6% in NZD terms. That means from the mid-March peak they are down -15%. The main fall today was for the core WMP price, down -4.9% on top of the -6.5% fall at the prior event two weeks ago. Yes, pencils will be out checking whether another cut to the farmgate payout price is required.

US retail sales came in strong for April, up +8.2% above year-ago levels but perhaps just as expected. That caps a fourth good consecutive monthly rise. The more recent Redbook survey suggests that strength has continued into May. But Walmart isn't a retailer that is benefiting from this strength. Its sales are up, but its costs are up more. So far that effect is insulating consumers from higher costs.

US industrial production also came in well above year-ago levels, up +5.8%. Recent gains have been running higher.

Better still, all these strong business activity gains have not been because businesses are building inventories. In fact, these are holding at levels that are low historically on an inventory-to-sales ratio basis.

US Fed officials were out talking up their policy positions. Chairman Powell said they will not hesitate to keep raising interest rates until inflation falls in a clear and convincing way. He added that “if that involves moving past broadly understood levels of neutral we won’t hesitate at all to do that” and noticed that the American economy is strong and well positioned to withstand less accommodative, tighter monetary policy.

In China, their main bond trading platform for foreign investors has quietly stopped providing data on their transactions, a move that will heighten concerns about transparency in the nation’s US$20 tln debt market after record outflows. The suspicion is that they are now hiding even faster outflows that they have previously reported.

The crisis in Sri Lanka seems to be getting worse.

In India, their wholesale prices surged at a rate exceeding +15 year-on-year in April, well above what was expected. Food and fuel combined to drive this rise.

In Australia, polls show the election race is tightening, but only slightly. There are just three campaigning days to go there.

The UST 10yr yield will start today +9 bps higher at 2.97%. 

The price of gold starts today up +US$2 since this time yesterday at US$1818/oz.

And oil prices are -US$2.50 lower today and now just under US$110/bbl in the US, while the international Brent price is now just over US$110.50/bbl.

The Kiwi dollar will open today firmer against the US dollar, now at 63.6 USc and a +70 bps rise. Against the Australian dollar we are little-changed at 90.6 AUc. Against the euro we have dipped slightly 60.3 euro cents. That all means our TWI-5 starts today at 70.9 which is up +30 bps from this time yesterday.

The bitcoin price has risen back +0.9% from this time yesterday and is now at US$30,028. Volatility over the past 24 hours has been moderate at +/- 2.1%.

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 tomorrow.