Kia ora,

Welcome to Monday’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 of some slippage in the world's largest economies.

However, in the week ahead we will get central bank rate review decisions from China, Norway, the UK, and Switzerland. Of special interest to us will be Tuesday's one in Australia. No change is expected there at 4.35%, but the signals about how they see progress to their inflation targets will be important. There will be a heavy set of data releases from both the US and China this week as well, many of which could move markets. Elsewhere Japanese inflation data, German sentiment surveys, and PMIs everywhere will feature.

But first in Japan, their central bank held its new slightly positive official policy interest rate at Friday's meeting. But it did confirm it is working on ways to reduce its bond purchase program. They see Japanese inflation embedding from here, rising modestly over the rest of 2024 above 2%.

However Japanese industrial production slipped in April in advance data released Friday, but that was among overall business activity that rose at a modest rate.

Indian exports, which are actually modest on the world scale, rose in May to be more than +9% higher than year ago levels. (Australia's exports fell in the same month, but they are still larger than for India. You have to go back to 2018 for India's export levels to be larger than Australia's. Since, the Aussies have made far more gains than India. India may now be the world's fourth largest economy and Australia the 13th, but India is an also-ran as an exporter.)

Despite a heady push from Beijing, Chinese banks extended only ¥950 bln in new loans in May, up from the low ¥730 bln in April and well short of the 'recovery' analysts expected of ¥1.3 tln.

Also somewhat disappointing were May vehicle sales results in China. They were up only +1.5% from a year earlier to 2.42 million in May, slowing from a +9.3% rise in the previous month. However sales of new energy vehicles surged by a third, accounting for nearly half (47%) of all car sales and a record high share. The modest overall sales result is on the back of surging production (+25%) and the excess is being shipped to export markets, causing trade friction and distortions, and accusations of dumping.

And in a massive part of important north-east China, an emergency drought response has been triggered. This will be a very big test of their food security.

In Russia, as their central bank expected in its last policy review, inflation jumped to 8.3% in May from 7.8% in April, the highest since February 2023. A year ago it was running at 2.5%. War and the resulting labour market distortions are the cause.

In the US, the weekend release of the preliminary University of Michigan consumer sentiment index fell slightly for a third straight month in June, the lowest since November. Overall, consumers perceive few changes in the economy from the May survey. Inflation expectations were broadly stable at just over 3%. (The final results of this survey will come in about two weeks, and these have often come out better than preliminary results.)

The UST 10yr yield is now at 4.22% and unchanged from Saturday.

The price of gold will start today little-changed at US$2334/oz but up +US$30 from a week ago.

Oil prices are unchanged at US$78/bbl in the US while the international Brent price is still just over US$82.50/bbl.

The Kiwi dollar starts today still at just under 61.4 USc. Against the Aussie we are start marginally firmer at 92.9 AUc. Against the euro we are unchanged at 57.4 euro cents. That all means our TWI-5 starts today up +10 bps at just on 71.1.

The bitcoin price starts today at US$66,514 and up +1.5% from this time Saturday. But that is down -3.7% from a week ago. Volatility over the past 24 hours has again been low at just under +/- 0.7%.

You can find links to the articles mentioned today in our show notes.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston. And we will do this again tomorrow.

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