Housing shortage distortion spreads

<p>Kia ora,</p><p>Welcome to Wednesday's Economy Watch where we follow the economic events and trends that affect New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news the housing shortage distortion is spreading.</p><p>US <a href="https://www.nar.realtor/newsroom/existing-home-sales-experience-slight-skid-of-0-9-in-may" target="_blank"><strong>existing home sales</strong></a> volumes slipped again in May on a lack of inventory for sale, and that demand pushed up median prices very sharply to US$350,300 (NZ$500,000) which is +24% higher than a year ago and driven by fast rising prices for single family homes. The April to May price rises are a faster pace of increase (+32% pa). This is a market that has gone Kiwi-style, one that they see more closely over their norther border in Canada. Expect a renewed surge in house-building.</p><p>The <a href="https://www.richmondfed.org/-/media/richmondfedorg/research/regional_economy/surveys_of_business_conditions/manufacturing/2021/pdf/mfg_06_22_21.pdf" target="_blank"><strong>Richmond Fed factory survey</strong></a> also turned in a rising indicator, driven by shrinking inventories, growing order backlogs, and lengthening vendor lead times. Many firms there are reporting skill shortages. And they are also reporting high growth rates of both prices paid and prices received.</p><p>In <a href="https://www.federalreserve.gov/newsevents/testimony/powell20210622a.htm" target="_blank"><strong>testimony</strong></a> before Congress today, Fed boss Jay Powell said US job growth should pick up in coming months, and temporary inflation pressures should ease, as their economy continues to recover from the effects of the pandemic. This confirms the Fed's view that the inflation we see is temporary. While markets are nervous, they basically are buying this view.</p><p>There was another <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2021/R_20210622_2.pdf" target="_blank"><strong>large US Tre