Even dour opinions can't knock blossoming data

Economy Watch

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 the positive global economic news rolls on, despite the best efforts of some regional forces to risk everything with crazy adventures.

First, today's dairy auction brought a welcome, if small, rise. And it is maybe more than it looks given the signals from the derivatives market and the recent GDT Pulse events all pointed to softness. Recent global tensions may have played a part. Turkey suspended all trade with Israel and that included their regionally important dairy trade. Middle East buyers were prominent overnight. Overall prices rose +1.8% from the prior event in USD terms but were little-changed in NZD terms. The important WMP price rose +2.4%, butter was up +2.1% and cheddar cheese impressed with a big +8.0% gain. Perhaps we need to see these shifts as part of the global rise in overall commodity prices recently as the world's major economies build some upward momentum.

In the US, one measure of American economic optimism among investors declined sharply in May, but there seems to be big disconnect between 'opinions' (everyone has one), and behaviour. For example, retail spending at bricks & mortar stores was up +6.0% last week from the same week a year ago, a trend that has built to its highest level since the end of 2022. Equity prices are rising still.

And the US logistics industry is on the rise with a solid April expansion.

Meanwhile the latest UST 3 year bond tender was very well supported, and a feature today was that yields rose much less from the prior even that we have seen in a while. Today's event brought a 4.55% median yield, not too different to the 4.49% we saw in the prior equivalent event a month ago. This is only one tender, but perhaps the rising demand is finally suppressing the upward yield trend. They have a lot of funds to raise but investors are showing they have an even faster-growing appetite for this paper.

Across the border there was also a positive surprise. Their closely-watched Ivey PMI jumped to its highest level in two year, recording an expansion only currently matched by India.

Japan is on a roll. Their services PMI for April has come in at a strong level (54.3), outpacing the US (51.3), China (52.5), and the EU (53.3). Only India (60) tops them among the world's largest economies.

In Europe they also surprised on the upside. Retail sales surged (for them) in March to be up +2.0% in volume (real) terms from the same month a year ago, and far better than what was anticipated.

In Australia, or more importantly Western Australia, their state government has launched a AU$5,000 incentive to vacant property owners to bring them onto the long-term rental market for Western Australians to lease.

Overall in Australia, retail sales are disappointing. In the March quarter they fell, making this the fifth of the past six quarters of retreat in retail volumes.

Yesterday, the Reserve Bank of Australia held its monetary policy positions and rate, and issued guidance that you could take any way. The most you can say is that they remain vigilant to the risks of higher inflation. Pretty lame really. More here.

For those of you anxious about coffee prices (the main media is just picking up on the April rise), be assured current prices are retreating as fast as they rose with good supplies re-entering markets from Brazil and Vietnam.

The UST 10yr yield is now at 4.46% and down -3 bps from yesterday.

The price of gold will start today down -US$9 from yesterday at US$2316/oz.

Oil prices have risen a minor +50 USc to just under US$78.50/bbl in the US while the international Brent price is now just under US$83.50/bbl.

The Kiwi dollar starts today little-changed from yesterday at just under 60.1 USc. Against the Aussie we are firmer at 91 AUc. Against the euro we are unchanged at 55.8 euro cents. That all means our TWI-5 starts today just under 69.4 and marginally firmer from yesterday.

The bitcoin price starts today at US63,355 and up +0.4% 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.

Kia ora. I'm David Chaston. And we will do this again tomorrow.