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 today is Budget Day in New Zealand and we will have full coverage this afternoon.

But first in the US, the good rise in mortgage applications we noted last week have been reversed in the latest report and they were down a sharpish -5.7% to be -26% lower than year-ago levels. The benchmark 30 year fixed mortgage rate was little-changed.

American housing starts unexpectedly rose in April from March, advancing +2.2% to an annualised rate to above 1.4 mln. But data for March was revised lower. And building permits fell although they are still sitting at a higher level than completions.

This American data may not be stellar, but fears of a debt default seem to be easing with both sides saying a deal can be done. And we should note that stresses in the US regional banking markets seem to be easing - and you can see that as share prices for those thought most at risk, recovering.

In China, house prices were little-changed in April - for new builds at least. But the declines for existing resales continue with 34 of 70 housing markets recording falling 'second-hand' house prices in the month and 61 or the 70 recorded falling house prices year-on-year.

Foreign direct investment into China was also weak in April, continuing the 2023 trend. It rose just +2.2% from a year ago and far below what they are used to.

In China, official April data put their jobless rate at 5.2% and for those 16-24 their unemployment rate was 20.4%. (For perspective, the March New Zealand jobless rate was 3.4% and the 16-24 jobless rate here was 10.4%.) That youth unemployment rate in China is a massive problem for them. And some in Beijing are suggesting graduates that can't find work should be sent to the countryside to work as farm labourers.

Japan's economy expanded more than expected in Q1-2023. However, it only grew by +0.4% over Q4-2022. That is a +1.6% expansion (real) over the past year and was the fastest pace since Q2-2022.

In Australia, wages rose +3.7% over the 12 months to March, and growth at this rate is approaching levels the RBA will find uncomfortable without higher productivity. But growth at this rate is much more modest than expected and far lower than their 7.0% inflation rate in the same period. (For perspective, New Zealand total hourly earnings rose +7.6% in the year to March while inflation ran at +6.7% in the same period.)

The UST 10yr yield starts today at 3.58%, and up another +3 bps from this time yesterday. 

Wall Street has opened its Wednesday session with a solid +1.2% gain on the S&P500. 

The price of gold will start today at US$1981/oz and down -US$8 in a day.

And oil prices are up +US$2 from yesterday to be just under US$73/bbl in the US. The international Brent price is now under US$77/bbl.

The Kiwi dollar is a +¼c firmer against the USD from yesterday and now just over 62.6 USc. Against the Aussie we are up +¼c at 93.9 AUc. Against the euro we are up +½c at 57.8 euro cents. That means the TWI-5 is now under 71 and up +50 bps from this time yesterday. We should also note that the Chinese yuan keeps sliding now past 7 to the USD, a point it hasn't been at in 18 months.

The bitcoin price is very little-changed today, now at US$27,084 and up a mere +0.1% from this time yesterday. Volatility over the past 24 hours has remained modest at just on +/- 1.2%. In Britain, a parliamentary select committee has urged their government to treat retail investment in cryptocurrencies such as Bitcoin as a form of gambling and be regulated as such.

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.