Global economic recovery very mixed

Kia ora,

Welcome to Tuesday'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 of a very mixed state of affairs across the global economy.

The US is on holiday today, and some of Europe and all of China is too. That obviously means regular economic activity is taking a pause in large parts of the global economy. And that gives us an opportunity to look at activity in a wider set of second tier economies.

In South Korea they reported April industrial production data but it didn't expand anywhere as much as expected. In fact it fell from March. At least they saw gains in retail sales.

In Japan, their April industrial production data was positive although not quite as positive as expected.

China released its official May PMI survey results and those were unimpressive for manufacturing, although expanding at a moderate rate for services which indicates retail spending is holding up. However for quite some time now we have seen these official releases being more conservative than the parallel private sector PMI surveys which will come later today.

But a new pandemic outbreak in Guangdong, the province next to Hong Kong, is recording a sharp rise in pandemic infections and authorities have locked the border around the province. To outsiders, China is downplaying the risks.

Malaysia has entered a two week COVID lockdown as a sharp rise in pandemic infections has gotten away in that country.

In Germany, they released CPI data that showed inflation running there at +2.5% in May, and that is high for them - in fact, this is their highest year-on-year rate since 2008.

In Canada, producer price data was released overnight and that revealed very large price increases, in fact the largest increases since the 1980s when inflation was rampant.

Back in China, the central bank has moved to require banks to hold more foreign currencies in reserve for the first time in more than ten years. Authorities are suddenly concerned the appreciation of the yuan is moving too fast for them. The yuan appreciated sharply again overnight.

China also announced overnight that it would allow three-child families, in a new move to address their negative demographic trend.

The OECD has been assessing how this recovery will progress and they see very uneven progress across the various global economies. It sees New Zealand fully recovered on a per capita basis by the end of 2021, Australia by Q1-2022. and much of Europe by much later. It says the USA is already recovered on that basis and China got there late last year.

In Australia, things are on a knife-edge in Melbourne. Victoria has reported more new cases overnight as their aged care outbreak continues to grow. Their government isn't ruling out an extension to their 7-day lockdown.

The UST 10yr yield starts today unchanged at 1.58% while Wall Street is on holiday. 

The price of gold starts today up at US$1907/oz, a gain of +US$3 since this time yesterday.

Oil prices start today marginally firmer at just over US$66.50/bbl in the US, while the international Brent price is just under US$69.50/bbl.

The Kiwi dollar opens today at 72.8 USc and small firming overnight. Against the Australian dollar we are still at 94.1 AUc. Against the euro we are holding at 59.5 euro cents. That means our TWI-5 starts today at 74.4 which is up on day-ago levels.

The bitcoin price is now at US$36,895, and a +2.8% rise from this time yesterday. Volatility in the past 24 hours has still been very high again at +/- 4.8%. And a key US regulator has signaled they are to take a more direct role in regulating crypto markets in the US.

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.