Congestion at China's ports spreads. China's car sales slip. US sentiment positive. Eyes on Fed. Germany and Russia battle inflation.
Kia ora,
Welcome to Monday's Economy Watch where we follow the economic events and trends that affect New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with news supply-chain stresses are not going away.
We recently noted that the USDA sees falling corn inventories worldwide. A key reason is that China is buying up big - and that is causing infrastructure clogging in their ports. China's corn imports quadrupled in the first four months from a year earlier, while millet imports jumped five times in April from a year ago. Barley shipments are up too despite none now arriving from Australia. These port unloading delays add to rising raw material costs that Beijing is struggling to control.
They aren't managing to take the top off high prices for iron ore or coal either. Both rose again last week. And shipping costs turned up as well over the past week. Congestion at China's ports is having a ripple impact globally, but especially in the region. This backup is worse than the March 2021 Suez Canal blockage, and will take longer to clear, some say.
Not rising however were vehicle sales in China in May. They sold 2.1 mln units in the month, down slightly from in April and -3% lower than for May 2020. This outcome ended a 13 month run of rising sales. But China is still far and away the largest market for vehicles, a quarter larger than the US. Meanwhile, the Chinese government has ordered car manufacturers to make sure 95% of every vehicle is recyclable by 2023.
In the US, the latest consumer sentiment survey for early June is generally positive, especially among middle and upper income households. And especially for future economic prospects rather than current conditions. Rising inflation remained a top concern of consumers.
But not all prices are still rising.
This coming week, all eyes will be on the Federal Reserve as it meets and reports on Thursday (NZT). Their attitude to inflation will be the big talking point.
In Germany, wholesale prices were up almost +10% in May from the same month a year ago. This is unusually high for German industry and they are hoping that, because the key driver is the cost of fuel (+47%), it will pass soon.
The Russian central bank raised its key interest rate by +50 bps to 5.5% on Friday. It said more hikes would be needed to rein in high inflation, which is now running at 6.2% pa and is expected to shift higher. The rouble, which has lost two thirds of its value in the past ten years, fell another -1% in the past week but bounced marginally on the central bank move.
In Australia, we should note that today is a public holiday in most of the country (but not Queensland or Western Australia).
The UST 10yr yield starts the week with its yield fall arrested, unchanged at 1.45%. But there are heavy-hitters surprised at the recent fall in bond yields even as inflation is rising.
The price of gold starts today at US$1878/oz, after a week of relative volatility for the yellow metal.
Oil prices are still at their higher level US$70.50/bbl in the US, while the international Brent price is still just under US$72.50/bbl. These are two year highs.
The Kiwi dollar opens today at 71.3 USc and staying at the lower level it reached on Friday night. Against the Australian dollar we are still at 92.5 AUc. Against the euro we are still at 58.9 euro cents. That means our TWI-5 starts today at 73.1 and a two month low.
The bitcoin price is now at US$37,372 and up +1.6% from this time Saturday. Volatility in the past 24 hours is still high at +/- 3.8%.
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.