China reversal larger than expected

<p>Kia ora,</p><p>Welcome to Tuesday’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 news that China's economic stumble is the real elephant in the room for the global economy, and not the Russian invasion of Ukraine.</p><p>But first in the US, there was a surprisingly negative regional survey of manufacturers in New York. The <a href="https://www.newyorkfed.org/medialibrary/media/survey/empire/empire2022/esms_2022_05.pdf?la=en" target="_blank"><strong>Empire State Manufacturing Index</strong></a> shrank to -11.6 in May from +24.6 in April, missing market forecasts of +17. This big miss comes after an unusually strong April result, as new orders decreased, and shipments fell at the fastest pace since early in the pandemic. Also, delivery times continued to lengthen, and inventories rose. Averaging out the past three months, this indicator is flat.</p><p>Going the other way, Canada posted a better-than-expected result for <a href="https://www.cmhc-schl.gc.ca/en/professionals/housing-markets-data-and-research/housing-data/data-tables/housing-market-data/monthly-housing-starts-construction-data-tables" target="_blank"><strong>April housing starts</strong></a>, beating both the March level and analysts forecasts.</p><p>But <a href="https://creastats.crea.ca/en-CA/" target="_blank"><strong>house prices across Canada</strong></a> continue to slip under the weight of rising interest rates, with the nationwide average price of homes falling to C$746,000 in April, down -6.3% from March’s average of C$796,000, a dramatic -C$50,000 retreat in just one month.</p><p>Japanese <a href="https://www.jmtba.or.jp/wp-content/uploads/sokuhou2204wlclf.pdf" target="_blank"><strong>machine tool orders for April</strong></a> came in very strongly again, up +25% year-on-year and a second stellar month in a row, suggesting the world's boardrooms are still investing in capital equipment