Kia ora,Welcome to Tuesday’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 global service sector is expanding faster and keeping the long-awaited economic retreat at bay.First in the US, there were two PMIs out for their services sector. The widely-watched ISM one retreated from a modest expansion to a minor expansion in May. This wasn't expected because a faster expansion was anticipated. (However new order growth was notably strong.) The internationally benchmarked Markit one rose to a moderate expansion, but not by as much as was anticipated. (New order growth as a feature of this one too.) Markets took their cues from the ISM one.But there was little growth in US factory orders in April. They did grow from March but it was modest, but from a year ago, they fell -1.1%. Given inflation in that period, that is a substantial retreat.And this is reflected in American May vehicle sales which were a bit of a disappointment. They ran at about a +15.0 mln annual rate and well down on the +16.1 mln annual rate in April. Over the weekend, not only did the US Congress approve the debt-limit compromise and their President sign it, their labour market showed much more strength than expected in May. At a headline level, the US economy created +339,000 jobs in May, compared to market expectations of +190,000 and following an upwardly revised +294,000 in April. Job gains occurred across the board in professional and business services, government, health care, construction, transportation and warehousing, and social assistance.Across the Pacific, China's services PMI expanded at a good pace in May, according to the Caixin survey, and faster than the official version.Japan's service sector is expanding even faster now and at a record pace since this survey began in 2008India's service sector is expanding faster as well. There has been a slower, but historically strong, expansion in new business in May. But this survey reveals inflation is now at its joint-highest since July 2017.In Australia, consumer inflation expectations rose to 5.0% in May from 4.6% in April, reinforcing the view that inflation is far from beaten there.And staying in Australia, home loan approvals fell a surprise -2.9% in April, when a solid +2% rise was expected. This follows a strong +5.3% gain in March. Some analysts blamed the timing of Easter, but that was hardly unexpected. More likely it is an overall reflection of the state of the new house building market. The supply of new homes is set to continue to decline under the weight of rising interest rates designed to rein in inflation. They have a lot of work to do on that front.Meanwhile, their official pay review body raised pay rates for their lowest paid workers by +8.65% and workers under their Award system will get +5.75% effective July 1, 2023. It will apply to about a fifth of the Australian workforce. Data out Monday shows wages and salaries rose at a fast +11.4% year-on-year. That probably means the RBA will raise rates again soon. Inflation was running at 6.8% in April.And the record-breaking grain production in Australia is now expected to come to an end as favourable weather conditions fade. In fact, the volume reductions will be quite sharp and may affect global food prices.The UST 10yr yield will start today at 3.69% and little-changed from Saturday. The price of gold will start today at US$1961/oz and up +US$10 from Saturday.And oil prices are up +US$1 today from Saturday at just on US$72.50/bbl in the US. The international Brent price is now just on US$77/bbl. The Saudi announcement that they will be cutting supply for longer to try and raise the price has had only minimal impact. Cheap Russian oil flooding many markets undermines them.The Kiwi dollar starts today little-changed at 60.8 USc. Against the Aussie we are still at 91.8 AUc. Against the euro we are little-changed at 56.7 euro cents. That means the TWI-5 is down -20 bps at 69.3 from where we left it Saturday.The bitcoin price is sharply lower today at US$25,759 which is a full -5.0% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.8%. The US Securities & Exchange Commission has filed charges against Binance, accusing it of a 'giant web of deception'.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.

Kia ora,Welcome to Friday’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 markets want to move on from the US debt-ceiling debate but there are details to deal with.In Washington DC, the House of Representative has approved the Biden-McCarthy debt deal compromise. It is unlikely to fail in a Senate vote soon. The Biden Budget is largely intact in the end. All eyes will now turn to the bond markets as the US Treasury races to raise the necessary funds to avoid default. They will come at a higher cost than it these theatrics hadn't played out.US-based employers announced 80,089 cuts in May, a +20% increase from the 66,995 cuts announced one month prior. This tally is rising; so far this year, companies have announced plans to cut 417,500 jobs, a 315% increase from the 100,694 cuts announced in the same period last year. But these layoffs are tiny compared to both their overall labour force, and even the expansion of those employed.The pre-cursor ADP jobs report came in way stronger than expected, reporting private payrolls expanded +278,000 in May when +170,000 was expected. But they did report pay growth was slowing. Markets are still expecting tomorrow's non-farm payrolls report to deliver +190,000 extra jobs for May.American initial jobless claims totaled 208,000 last week, little-changed from the prior week and really no evidence their labour market is tightening. There are still just 1.6 mln people on these benefits.However on the factory floor, things are tightening. There were two factory PMIs out overnight and both reported a contraction in activity. New orders are slowing and this weaker demand is dragging on performance. The widely-watched ISM Manufacturing PMI retreated further as expected to a seventh consecutive month of contraction. However, production rose, employment rose and at a faster pace, and price pressures eased. The internationally benchmarked Markit PMI for the US reported similar conditions.In China and in a bit of a surprise, the private Caixin factory PMI actually expanded in May, in contrast to the official version which said the sector contracted further. No analyst picked the Caixin PMI reversal. Certainly, the Beijing stats masters aren't gilding anything this month.Belt & Road project bad debts are piling up. New analysis shows Chinese overseas loans went sour at a far worse rate in recent years as the pandemic and inflation took a toll on the economies involved in Beijing's signature infrastructure initiative. Almost US$77 bln in debt was renegotiated or written off from 2020 to 2022. This figure is more than four times the US$17 bln in problem debt for the preceding three years. These write-offs and write-downs however tie these countries even tighter to China.Debt levels are a key focus at home too, especially those owed by local governments. A leading Chinese economist says China could be courting disaster if it permits local governments to default on their debts as part of a strategy to encourage greater fiscal discipline.In Europe, consumer inflation retreated somewhat although it remains high. It fell to 6.1% in May, down from 7.0% in the previous month and below market expectations of 6.3%. A year ago, it was 8.1%. Core inflation is now significantly lower, only 5.3% in May.In Australia, house price rises are gaining momentum. They rose +1.2% in May from April, and annualised rise exceeding +14%. In Sydney that annualised rate is nearer +20%, the city’s highest monthly gain since September 2021.Global container freight rates slipped yet again last week. Bulk cargo rates fell too.However, global air passenger travel is in a strong recovery mode, now back to 90% of pre-pandemic levels. But international travel is lagging that.The UST 10yr yield will start today at 3.61% and down another -2 bps. The price of gold will start today at US$1977/oz and up +US$10 from yesterday.And oil prices are up +US$2 today from yesterday at just under US$70.50/bbl in the US. The international Brent price is now just over US$74.50/bbl.The Kiwi dollar starts today +½c firmer at 60.7 USc. Against the Aussie we are -½c softer 92.2 AUc. Against the euro we are unchanged at 56.4 euro cents. That means the TWI-5 is up +10 bps at 69.2.The bitcoin price is marginally lower today at US$26,971 which is down a mere -0.3% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.3%.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.Remember, Monday is a public holiday in New Zealand.Kia ora. I'm David Chaston. And we will do this again on Tuesday.

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 that mixed US data that doesn't show their labour market retreating, along with weak Chinese data, has the greenback rising but bond yields falling. Commodities are out of favour.US mortgage applications fell last week to a three month low (and approaching only half the level of a year ago), held back by both a lack of inventory for sale in their residential market as sellers are reluctant to chase prices lower, and higher interest rates. The benchmark 30 year fixed rate is now 6.91% plus points, a +22 bps rise in a week (thanks to the debt-limit debate).Meanwhile their labour market just keep surprising with its strength. We get the May non-farm payroll data on Saturday NZT. Today the April job openings data surprised with an unexpected rise when a modest fall was anticipated. That pressure will keep the Fed on edge.And this is despite last week's retail data coming in only +1.2% higher than a year ago on a same-store basis, far less than inflation.And despite the Dallas Fed's services sector weakening. And despite the Chicago PMI coming in sharply lower too.However the Fed's latest Beige Book reported economic activity was little changed overall in April and early May. Four Districts reported small increases in activity, six no change, and two slight to moderate declines. Expectations for future growth deteriorated a little, though most in this survey still largely expected a further expansion in activity. The labour market is still tight, they report. Price pressures are easing.In Canada, they also report a reasonable expansion. Their Q1-2023 economic activity expanded +3.1% from the same quarter a year ago. This was more than was expected and is sure to raise the pressure on the next Bank of Canada rate review.They weren't the only one to report a better than expected economic expansion in Q1-2023 overnight. India did too. The Indian economy expanded +6.1% year-on-year in the quarter, higher than an upwardly revised +4.5% in Q4-2022 and well above market forecasts of +5%.But it isn't so upbeat in China, Their official factory PMI contracted more in May than April and more than expected, reinforcing the lackluster - even failing - recovery there. The yuan is still under pressure. But their services PMI shows that side of their economy still expanding at a good rate, but a little less than expected and near the least of 2023.Japan also reported a stuttering, with retail sales slipping in April, and industrial production falling when a rise was expected. But they are expecting both May and June to expand. They see their strongest consumer sentiment of the year. This is all reflected in a booking stock market.Both France and Germany reported CPI inflation rates for May overnight (+5.1% and +6.1% respectively) and both say the pressure is easing - not as fast as they would like however. But they are both far lower than year-ago levels. And hope rise that ECB rate rises may now pause.Australia' monthly inflation rate rose to 6.8% in the twelve months to April, which is a rise from the monthly indication of 6.3% in the March month.And AUSTRAC says Bank of Queensland has breached prudential standards and fallen short in its compliance with anti-money laundering laws. For most customers, these requirements seem an unnecessary overreach. But they seem here to stay.In international trade, air cargo demand in April continued its year-on-year decline but at a slower rate than the first three months of 2023, with volumes falling by -6.6% compared to April a year ago. The fall was about half that in the Asia/Pacific region however.The UST 10yr yield will start today at 3.63% and down another -7 bps. The price of gold will start today at US$1967/oz and up +US$8 from yesterday.But oil prices are -50 USc lower today from yesterday at just under US$68.50/bbl in the US. The international Brent price is now just under US$73/bbl.The Kiwi dollar starts today -¼c softer at 60.1 USc. Against the Aussie we are marginally softer 92.6 AUc. Against the euro we are little-changed at 56.4 euro cents. That means the TWI-5 is down -20 bps at 69.1.The bitcoin price is lower today at US$27,043 which is down -2.5% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.9%.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.

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.And today we lead with news we are in the shadow period until the US House votes on the debt deal. The chatter accentuates the risks of failure, so markets are holding their breath. But they also assume it will get passed.Meanwhile, the data being released is all quite bland, and will be until the May non-farm payrolls report is available. American consumer sentiment as monitored in the Conference Board survey held in May when a small dip was anticipated. This is consistent with the good personal income data we had recently, and a declining inflation rate. But overall levels are still low; the Expectations Index has now remained below 80, a level associated with a recession within the next year, for every month since February 2022, with the exception of a brief uptick in December 2022. But the endless signals of recession just don't seem to materialise, probably because of the strong labour markets.We get the May US non-farm payrolls report on Saturday NZT and it is expected to show a modest +190,000 gain - although don't be surprised if it beats that estimate yet again.The Dallas Fed survey of factories in their oil patch is quite subdued in May which is probably no surprise given the languishing oil price. And with today's oil price retreat it will probably be even lower in June.According to the US Federal Housing Finance Agency, American house prices rose in the year to March at about their long-run average of ~4%, ending the pandemic turmoil period when for a few years they were up almost +20%. Separately, the Case-Shiller index on house prices in major urban areas fell in the year to March and below their long-run average. Analysts tend to watch the Case-Shiller Index more.In China, they have been getting a lot of late-season rain and that is causing havoc with crop harvesting. They have lost millions of tonnes of wheat right before harvest, with global price implications. The unseasonal rains have infected crops with blight and caused pre-harvest sprouting. That sets China up for some massive imports, disrupting global prices - and their own plans at a time when local food security is a high-level concern.And staying in China, a strong echo from their brutal pandemic lockdown is starting to play out in their economy. Memories of that has reinforced the urge by households to save, and at such a level that it seems to be inhibiting their economy from recovering. They have a liquidity trap which is frustrating efforts by Beijing to expand domestic demand and increase consumption’s share of national GDP. And this is putting severe pressures on local governments.These two big trends in the Chinese economy has seen their yuan devalue further.In Japan, their jobless rate fell back to the 2.6% level it was a few months ago, which was a better result than expected. An expanding economy is having a positive effect on employment and wages now.EU sentiment is still in the doldrums and fell in May to a six month low. There was little change in consumer sentiment, but manufacturer sentiment eased lower.In Australia, they are about to hand down a NZ$485 mln financial penalty on the Crown casino business for breaches of its AML-CFT laws. As such it will be one of the largest money-laundering penalties imposed on a casina anywhere in the world. But no-one went to jail. Despite its size, Crown casinos won't be crippled financially - it just seems like a cost of doing business in the world of gambling.The UST 10yr yield will start today at 3.70% and down -7 bps as Wall Street trades again after their holiday weekend. The price of gold will start today at US$1959/oz and up +US$3 from yesterday.And oil prices are a lot lower today from yesterday at just over US$69/bbl in the US and that is down -US$4/bbl. The international Brent price is now just on US$73.50/bbl.The Kiwi dollar starts today marginally softer at 60.4 USc. Against the Aussie we are marginally firmer 92.8 AUc. Against the euro we are softer at 56.3 euro cents. That means the TWI-5 is down -10 bps at 69.3.The bitcoin price is almost unchanged today at US$27,739. Volatility over the past 24 hours has been low at just on +/- 0.9%.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.

Kia ora,Welcome to Tuesday’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 we may be having a bear market rally in financial markets, always a very risky time even if the data doesn't shout risk warnings. (In the past, such events have ended with a panic selling period.) But of course every new event isn't the same as prior ones and this time we have strong labour markets and resilient households which were never present in similar prior periods.But first, today is a holiday in the US, their Memorial Day. That will be a key reason financial markets will remain quiet today.The Biden-McCarthy debt limit deal is heading for votes in Congress. The Senate is likely to approve. But the House vote will be more contentious, and that will likely take place on Thursday NZT. After that, attention will turn to financial markets as the US Treasury races to sell bonds to replenish their reserves. That amount will be huge but needs to be completed by June 5 (Saturday NZT) to avoid default. This rush will likely be destabilising in bond markets, although the Fed may have to step in with its balance sheet support to ease the strains on financial stability.Yellen has told McCarthy that "We will make more than US$130 bln of scheduled payments in the first two days of June, including payments to veterans and Social Security and Medicare recipients. These payments will leave Treasury with an extremely low level of resources. During the week of June 5, Treasury is scheduled to make an estimated US$92 bln of payments and transfers, including a regularly scheduled quarterly adjustment that would result in an investment in the Social Security and Medicare trust funds of roughly US$36 bln. Therefore, our projected resources would be inadequate to satisfy all of these obligations." Essentially default is imminent. It is up to McCarthy to get his deal through the House. No wonder markets are nervous.Across the Pacific, a gauge of Chinese shares traded in Hong Kong inched closer to a bear market as a wobbling economic recovery, intensifying geopolitical tensions and a weaker yuan kept investors away. The Hang Seng China Enterprises Index slumped -1.3% on Monday, taking its losses from a January 27 peak to a whisker away from reaching -20%. The Chinese carmakers' industry association said car demand remained weak and shares of many of these companies slid.Also falling sharply have been Hong Kong exports in April, down -13% from year-ago levels but that too was less than was feared.Singapore's producer prices are now more than -11% lower than year ago levels and at a three year low. This reflects the tough times that have fallen on their economy recently, but at least the pace of the fall eased considerably in AprilIn Australia, the turmoil at PwC is getting ugly. There are about 900 partners and many of them will be very angry at what a few of their tax partner colleagues have wrought for the firm. And partners are jointly and severally liable for the huge costs which are inevitably coming. Many good people are about to be hurt significantly. The firm has stood down the nine partners at the center of their troubles and the Chairman has been jettisoned. But none of this is going to save them. Now the Australian Prime Minister wants those partners at the center of all this named. And the MNCs who took the PwC tax advice will be sweating their situation.Meanwhile in Western Australia, their very popular Premier, Mark McGowan has unexpectedly quit politics. He led the Labor Party there to an extraordinarily dominant win in the 2021 election. He is certainly going out on top.The UST 10yr yield will start today at 3.77% and down -3 bps in off-Wall Street trading. The price of gold will start today at US$1943/oz and down -US$3 from yesterday.And oil prices are unchanged from yesterday at just on US$73/bbl in the US. The international Brent price is still just on US$77/bbl.The Kiwi dollar starts today marginally firmer at 60.6 USc. Against the Aussie we are marginally softer 92.6 AUc. Against the euro we are at 56.5 euro cents and little-changed. That means the TWI-5 is still at 69.4.The bitcoin price is a higher again today, now at US$27,729 and up another +1.4% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.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.