Episode Details

Kia ora.

Welcome to Thursday’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 the US-Iran deal temporarily reopens Strait of Hormuz, and offers major concessions to Tehran. Tehran probably can't quite believe its luck here. Trump is battling widespread claims his Iran deal is worse (much worse) than the Obama deal he tore up.

In economic matters in the US, their central ban kept it policy rate range unchanged at 3.50%-3.75% for a fourth consecutive meeting, in a unanimous decision and as expected. But updated dot plot projections show that 9 officials foresee at least one quarter-point hike this year, with 6 anticipating at least two. Another 9 expected no move or a cut. They see core inflation rising from 2.7% at their prior forecast to 3.3% by the end of the year. and removed their easing bias. And the next move will be up. This uncertainty got the market's attention.

Wall Street retreated, bond yields rose, and the USD rose. Gold fell.

But Kevin Warsh's influence can be seen in the fact that the decision announcement had very little detail or context. He is not a fan of central bank transparency.

Separately, US mortgage applications fell last week and across the board even though the benchmark interest rate was unchanged (at 6.60%).

However American retail sales rose in May from April and by more than expected to be +5.2% higher than year-ago levels. But most of this was due to higher fuel prices. Without fuel, these sales were up +3.6% when inflation was up +4.2%.

US pending home sales rose more than expected too, with sales volumes yp +4.8% from May a year ago. That is two months in a row of good gains although on the back of quite weak results a year ago.

US crude oil stocks fell an outsized -8.3 mln barrels last week, the largest weekly fall in eight weeks and the most concentrated drawdown of the strategic reserve levels since the pandemic. In fact, their strategic reserves are at their lowest level now since March 1985. a 40 year low.

Japan said its exports were up +17.0% in May from a year ago to US$59 bln and its imports were up +12.5% over the same period. Export customers were dominated by China (+17.9% growth ), the US (+12.5%), ASEAN (+20.0%), and the EU (+14.5%).

Meanwhile Japan reported its machinery orders were strong too, up +15.6% in April from a year ago, up +8.7% from March. Japan really has its mojo ba