A broad easing of some key commodity prices

Kia ora,

Welcome to Tuesday’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 little global fallout from the weekend election results.

First up today, we should note that American consumer inflation expectations for the year ahead slipped for a second consecutive month to now be +3%. That is 'progress' from 3.2% in May. The decline was broad-based over food, petrol, medical care, and rent. One year ahead earnings growth is expected to match that at +3%. Three year ahead inflation is expected to come in at 2.9% and five year ahead the expectation is now 2.8%. Both these are improvements.

Although minor, the Fed will be pleased with the shift because that means the higher rises in April and May were aberrations.

The expected rise in American consumer credit in May came through, although to be fair, even if it was more than expected its was a pretty modest +$11.4 bln rise, up at an annual rate of +2.7%.

In coastal Texas, overbuilding and climate denial is catching up with them. More than 2 mln people are without power as tropical storm Beryl lashes the region. Note it is not even classified as a hurricane anymore. Beryl has been the earliest-ever named hurricane in a season that is upcoming.

China isn't immune to climate stress either. To give perspective to their response to recent severe droughts in the north, and floods in the south, that have just added another ¥3.3 bln (NZ$750 mln) for disaster relief in the past three weeks.

A little air seems to be going out of the rising Australian housing markets - as an indication from their lending data shows. Owner-occupier loan demand fell -2.0% in May from April to now be up +12% year-on-year. This wasn't expected - a +2% rise was expected.

Overall we should note a broad-based retreat by many commodity prices today. Mineral commodities are being led by rebar steel which is down -2.8% today to be down -5.2% for the month and down -10.7% in a year. Copper and iron ore are off too today although not a sharply as construction steel. Nickel is down too, but not zinc. Aluminium is holding.

On the food side, we are seeing a sharp fall in wheat prices, and soybean prices are staying down. We get another look at dairy prices tomorrow morning at the next GDT Pulse event. The futures markets indicate WMP will hold but there is downside risk to SMP.

The UST 10yr yield is now at 4.27% and little-changed from yesterday.

The price of gold will start today down -US$33 from yesterday at US$2356/oz.

Oil prices are -US$1 lower at just under US$82/bbl in the US while the international Brent price is down a bit more at just on US$85.50/bbl.

The Kiwi dollar starts today -20 bps softer from yesterday and now at 61.3 USc. Against the Aussie we are slipped to 91 AUc. Against the euro we are holding at 56.6 euro cents. That all means our TWI-5 starts today at 70.5 and down a mere -10 bps.

The bitcoin price starts today at US$56,063 and down -1.6% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.5%.

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.