China sues Australia at the WTO

Kia ora,

Welcome to Friday'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 China sues Australia at the WTO.

But first, US durable goods order levels for May were slightly disappointing, rising +2.3% from April when a +2.8% bounce back was expected. Still this was the largest month-on-month increase since July 2020. But it is only +0.9% higher than the May 2019 level. Non-defence capital goods orders were actually down -2.3% month-on-month and only up +0.8% from May 2019

American new jobless claims came in at a relatively high +393,000 last week and more than expected. There are now 3.2 mln people on these benefits and while this is now far below the pandemic peak it is also far above the 2 mln level it needs to reach before they can say they are back to pre-pandemic levels.

The US merchandise trade deficit rose to -US$86 bln in May with imports up and exports slipping. This result means the annual total has now hit -$1 bln in the prior twelve months or -4.5% of GDP.

The Kansas City Fed factory survey is still reporting a strong expansion in that region and expectations for future activity increased to a survey record high. They also report that firms are successfully passing on the much higher input costs they are facing.

We should also note that the results of the Fed's annual stress tests for US banks is released at about 8:30am this morning (NZT).

And we should note that a bipartisan but slimmed-down US$1 tln infrastructure plan has been agreed and the White House will now attempt to shepherd through a closely divided Congress.

In Mexico, there was something of a surprise rate hike their overnight. They unexpectedly raised their benchmark rate for the first time in three years by +0.25% to 4.25%. It was a split decision. Concerns are mounting that persistently high inflation may threaten the economy’s rebound - and they took action despite previously describing current inflation as transitory.

The English central bank also reviewed its rates overnight, but it was a non-event.

German business sentiment rose markedly in June for both manufacturing firms and service providers.

The tit-for-tat between Australia and China continues. China said it filed a claim at the WTO over Australian anti-dumping and anti-subsidy measures on Chinese exports of railway wheels, wind towers and stainless steel sinks. This would be the third recent WTO case between the two countries, after Australia sued over Chinese tariffs on wine and barley.

Meanwhile, China is making top-level efforts to extend its influence into the South Pacific, with President Xi making a personal phone call to Fiji's prime minister Bainimarama. The Fijian leader apparently thanked China for its help in their current Pandemic situation.

In Australia, the latest data shows that their full-year budget deficit is on track to be almost half the -AU$$214 bln originally forecast. Surging income tax receipts from companies and individuals is driving the improvement.

The Aussie stats bureau released household wealth data as at Q1-2021 and that had their "Wealth per capita" up at a record high of AU$492,055 and up a remarkable +15.3% in a year, its fastest growth in more than a decade. Rising house prices drove the gains with property prices contributing +8.5 percentage points to the growth and superannuation balances +4.1 percentage points. Household wealth grew more in the last year than it did during the preceding three years combined. 

The UST 10yr yield starts today unchanged at 1.49%. 

The price of gold starts at US$1775/oz which is down -US$8/oz from this time yesterday.

Oil prices are little-changed from this time yesterday. In the US they are now at just over US$73/bbl, while the international Brent price is just on US$74.50/bbl.

The Kiwi dollar opens today firm at 70.6 USc. Against the Australian dollar we are also firm at 93.2 AUc. Against the euro we are a little firmer too at 59.2 euro cents. That means our TWI-5 starts today at 73.1.

The bitcoin price is now at US$34,832 and up +3.6% from this time yesterday. Volatility in the past 24 hours has been very high again at +/- 4.1%.

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 on Monday.