China's households prepare for tough times

<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 news the BA.5 Covid risk is rising 'significantly' and threatens how our economy will operate.</p><p>But first up today, we need to report <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>another weak dairy auction</strong></a>. It was down -5% in US dollar terms and down -6.3% in NZ dollar terms. The falls were led by SMP which was down -8.6% followed by WMP which was down -5.1% from the prior event two weeks ago. These reductions are compounding now; in the ten events since the start of March there have been eight with losses and the net fall is now -23%. That is doing to change minds when it comes to pay-out forecasts, and especially as the retreats for SMP and WMP have been at the sharp end. Somewhat unusual has been the recent firming of the NZD, and that can only be a 'bad thing' for pay-out forecast estimates.</p><p>In the US, early data for <a href="https://www.redbookresearch.com/" target="_blank"><strong>last week's retail sales</strong></a> were stronger than the usual positive levels.</p><p>There were also a string of quite positive earnings reports out today, and that has juiced up Wall Street equities.</p><p>American <a href="https://www.census.gov/construction/nrc/pdf/newresconst.pdf" target="_blank"><strong>data on housing starts</strong></a> wasn't so flash. Their housing sector has been cooling amid soaring prices and mortgage rates. New building consents also fell, but they are still high compared to pre-pandemic levels. Housing completions remained high.</p><p>China's holdings of American government debt have <a href="https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt" target="_blank"><strong>fallen below US$$1 tln</strong></a> for the first time since 2010, with concerns about the