An Omicron relief rally gathers steam

<p>Kia ora,</p><p>Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with there is a major relief rally going on at present, relief that Omicron won't derail the global economic recovery.</p><p>Firstly and at first sight, the overnight <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>dairy auction</strong></a> was a lackluster affair, not delivering the good increases the derivatives market was counting on. In USD terms, overall prices rose just +1.4% from the prior auction to be +31% higher than a year ago, and +12% higher than the end of August. Today's event however came after a -3% devaluation in the Kiwi dollar, so in local currency terms today's prices are +4.6% higher than the prior event three weeks ago. It is this rise that will underpin the farm gate milk price pay-out forecasts. </p><p>In terms of product, WMP rose only +0.6%, SMP rose +1.3%, while butter is on a foodservice tear, up +4.6% and is up +30% since the beginning of July.</p><p>In the US, their <a href="https://www.the-lmi.com/november-2021-logistics-managers-index.html" target="_blank"><strong>Logistics Managers Index</strong></a> (LMI) is still expanding. Growth is increasing at a decreasing rate for inventory levels, and warehousing utilisation. Growth is increasing at an increasing rate for inventory costs, warehousing prices, transportation utilisation, and transport prices. Warehousing capacity and transport capacity are contracting. The supply chain pressures are not over yet despite the holiday shopping season crush coming to its natural end.</p><p>As expected, the giant American deficit in international trade of goods and services shrank sharply in October, reducing from -US$81 bln in September to -$67 bln in October, and a six month low. Exports rose sharply, imports changed little. Their politically sensitive deficits with bo