Expanding at a fast clip

Kia ora,

Welcome to Thursday'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 the first world economies seem to be expanding at a very good clip.

In the US, the preliminary June factory PMI expanded faster than in May at a roaring level. But the services PMI slipped back from its record fast expansion but it is still expanding faster than the factory sector.

May sales of new homes were reported overnight too, but they were a surprise disappointment. But they are still running +9% higher than the year ago level, and a similar gain against May 2019. Given the shortage of houses for sale, it was expected this new home activity would have been very much higher. But there may be resistance to the much higher prices in this market.

Also disappointing was Canadian April retail sales data which was quite weak, even though this data is now quite dated.

China is now battling a damaging reputation risk as its COVID vaccines are not working well in the developing countries it supplied. It's vaccine diplomacy seems to be backfiring badly. It seems to be another massive own-goal, just like its trade actions against Australia.

Taiwanese industrial production continued on it fast expansion in May, but their retail sales expansion fell away noticeably in that month.

In Europe, their economies are cranking up, expanding at a level they haven't seen in 15 years. Their factories are being driven by very strong new order levels, their services by strong current activity. Employment is rising. And all this is happening while costs and prices are rising at rates not seen since this series began in the late 1990s. Germany is the key engine here, although both France and the UK are expanding well too.

Australia is reporting a huge AU$13.3 bln merchandise trade surplus in May, easily a new record. It is based on very strong exports of iron ore, coal and meat. Their exports rose to a massive AU$39.2 bln in the month, with a +16% rise to China. Their political dispute isn't hurting Australia yet, and that will be annoying Beijing a lot. And China has so far been unsuccessful in getting the iron ore price to fall as it stays at very high levels.

And Australian states are erecting hard borders with NSW after Sydney’s outbreak grew to 38. The NSW Premier Gladys Berejiklian only wants to minimal ‘common sense’ restrictions in her state. She has support for that from the Federal prime minister, but few others. Now four of her coalition MPs are self-isolating after exposure.

And the ATO has signaled it will be targeting investors in crypto currencies, along with about 2.6 million investment properties in this years audits. The expenses claimed by working from home will also be among those prime targets.

The UST 10yr yield starts today up +2 bps at 1.49%. Rates also rose at today's well supported US 5yr bond auction. 

The price of gold starts at US$1783/oz which is up +US$4/oz from this time yesterday.

Oil prices have risen slightly in the US overnight and are now at just over US$73/bb, while the international Brent price is firm too at just on US$74.50/bbl.

The Kiwi dollar opens today rising at 70.5 USc. Against the Australian dollar we are holding at 93 AUc. Against the euro we are a little firmer at 59 euro cents. That means our TWI-5 starts today at 72.9.

The bitcoin price is now at US$33,613 and up +1.8% from this time yesterday. Volatility in the past 24 hours has been very high at +/- 4.8%.

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.