US moving to a slower growth mode; Japan's expansion extends; EU holding up but Hungary goes rogue; BEPS deal slow to get going
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.
Today we lead with news there are increasing signs the recent US boom is coming to an end, not necessarily with a recession, but with less expansionary conditions. This is flow through to the global economy quite quickly.
First, US factories are expanding less quickly. And their services sector's expansion is slowing too. However, both are still expanding at quite good levels.
That slowdown is also noticeable in the latest Richmond Fed factory survey for May. That same survey showed cost pressures hit a record high.
New home salesin the US actually slumped in April. This was quite a big miss, the level of retreat quite unexpected.
The good year-on-year gains in retail sales also look like they are coming to an end.
Japan's May PMIs are suggesting that their services sector is expanding faster while their factory sector is expanding slower, a net 'win' for their overall economy.
So far, despite war to the east of them, economic activity in the EU is holding up, described as being at 'robust levels', bolstered by their expansion in services. Their factory expansion is tamer. That is also the story for Germany, the largest economy in the EU.
Perhaps we should also note that Hungary has amended its constitution giving Viktor Orban power to rule by decree - and he immediately imposed it. The EU and NATO now have a pro-Russia dictator in their midst.
At Davos, the OECD chief said the work to iron out the details on their BEPS (base erosion and profit shifting) tax deal is slow going and he doesn't see it starting until 2024
The UST 10yr yield will start today at 2.76% and down -12 bps.
Wall Street has resumed its repricing lower and the S&P500 is down -1.4% in late Tuesday trade today. Tech stocks are taking a battering with the NASDAQ down -2.8%.
The price of gold is quite a bit firmer today, up +US$13 since this time yesterday at US$1865/oz.
And oil prices are virtually unchanged today and now just under US$109.50/bbl in the US, while the international Brent price is up about +US$1 at just under US$111.50/bbl.
The Kiwi dollar will open today little-changed against the US dollar, now at 64.5 USc. Against the Australian dollar we are also little-changed at 91 AUc. Against the euro we are soft at 60.1 euro cents. That all means our TWI-5 starts today at 71.3 which is down -20 bps from this time yesterday.
The bitcoin price has fallen -2.8% from this time yesterday and is now at US$29,301. Volatility over the past 24 hours has been moderate at +/- 2.6%.
Join us at 2pm today for an update of the RBNZ Monetary Policy positions. Almost certainly the OCR will rise, probably by another +50 bps to 2.0%.
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.