Central banks eye more rate hikes

<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>And today we lead with news central banks are not yet done raising rates to quell inflation.</p><p>But first up today we can report a satisfactory <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>dairy auction</strong></a>. <a href="https://www.interest.co.nz/charts/commodities/dairy-prices"><strong>Prices rose +3.2% in USD</strong></a> at this morning’s event on an overall basis with +3.8% rise for the dominant WMP product. Butter rose +6.6% and cheddar cheese was up +2.3%. SMP dragged however, unchanged. In NZD, the gain was magnified by the lower exchange rate, up a full +5.0%. This will be a relief as it comes after four poor or weak results, and is in fact the best result since early September 2022.</p><p>In the US, the slow but steady slide in retail sales gains continues, with <a href="https://www.redbookresearch.com/" target="_blank"><strong>same-store sales up only +4.3%</strong></a> last week from a year ago, and probably not keeping up with inflation.</p><p>You can see the trade consequences in the Logistics Managers Index (<a href="https://www.the-lmi.com/january-2023-logistics-managers-index.html" target="_blank"><strong>LMI</strong></a>). Growth is increasing at an increasing rate for inventory levels, inventory costs, warehousing utilisation, warehousing prices, transportation capacity, and transportation utilisation. But warehousing capacity and transportation prices are contracting. None of these levels are a special problem yet, but they are going in a tougher direction.</p><p>The American <a href="https://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf" target="_blank"><strong>December trade deficit</strong></a> in both goods and services came in about what was expected, which was slightly worse that the Nove