Kia ora,

Welcome to Thursday’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 inflation seems to be cooling in the world's largest economies.

On Tuesday we noted the retreat of Chinese inflation, today the US is signaling a retreat as well.

The closely-watched US CPI inflation rate slowed for a ninth consecutive period to 5.0% in March from the same month a year ago, its lowest since May 2021. It was a sharpish drop from 6.0% in February on the same basis, and also came in below market forecasts of 5.2%. It was energy costs that drove the drop (-6.4%), with food prices up +8.5% from year ago levels. The core rate ran at 5.6% and little-changed from February. However if we look at the annualised rates in the recent shift from February to March, that ran at just over a +1% annualised rate overall with food showing no change. Energy costs still fell on that more recent basis and it was rent and medical care that kept the February-to-March rate from falling.

However, the minutes from the last Fed (FOMC) meeting were out saying inflation is still too high and the pressure must be kept on. They are stressing vigilence in the inflation fight. But to be fair there were some voices for a pause.

Markets liked the inflation result however, and stocks initially rose, bond yields didn't react, and the USD firmed. Perhaps they sense the transitioning to lower inflation is in place and without a hard landing? However, the S&P500 has since slipped into a small negative result with markets subsequently sensing that perhaps more rate rises are possible from the Fed.

Meanwhile, American mortgage applications rose at a good rate last week, up more than +5% from the prior week to be -31% lower than year-ago levels. The benchmark 30 year fixed rate was marginally lower at 6.26% plus points.

In Canada, they reviewed their benchmark interest rates, and as widely expected kept them at 4.5%.

In Japan, machinery orders rose +9.8% in February from a year ago in the latest data released there. That was well above the +3% expected and well above the good +4.5% rise the prior month.

Japanese producer prices were unchanged in March from February, with a fast-cooling year-on-year rise.

Indian industrial production rose at a little-changed rate in February (+5.6% from a year ago), and their consumer inflation rate slipped to 5.7% in March from +6.4% in February, and close to the top of their wide inflation target range.

The UST 10yr yield starts today at 3.41%, and down -2 bps. 

The price of gold is at US$2013/oz and up +US$8 from this time yesterday.

And oil prices are up another +US$1.50 USc at just on US$83/bbl in the US. The international Brent price is up to just over US$87/bbl.

The Kiwi dollar is firmer against the USD and now at 62.2 USc and up +¼c from this time yesterday. Against the Aussie we are have slipped to 92.8 AUc. Against the euro we have slipped -¼c, now at 56.5 euro cents. That means the TWI-5 is at 69.9 and unchanged from this time yesterday and still a one month low.

The bitcoin price is little-changed today, still at US$30,232. Volatility over the past 24 hours has been low at +/- 1.4%.

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’ll do this again tomorrow.