Economic rebound tough to sustain

<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 two of the four world's largest economies are back in recession, or are nearly.</p><p>But first up today, there was another <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>dairy auction</strong></a> overnight and prices in US dollars were virtually unchanged (-0.2%). But in New Zealand dollars <a href="https://www.interest.co.nz/charts/commodities/dairy-prices" target="_blank"><strong>they dipped -1.7%</strong></a> as the NZ dollar has appreciated by +1.0% in the past two weeks. This is the fourth consecutive event where prices have stayed virtually unchanged, so in effect it embeds in the big rise we got at the beginning of March. Prices are now up +25% from the start of 2021, and up +42% from this time last year. It seems unlikely today's event will undermine any farmgate milk payout price forecast. Volumes sold were +26% higher than at the equivalent event a year ago. This is the season low for product offerings and they will rise from here. And today's auction offered the most at this low season point than at any time in the past eight years.</p><p>US <a href="https://www.census.gov/construction/nrc/pdf/newresconst.pdf" target="_blank"><strong>housing starts fell</strong></a> quite sharply in April and more than expected, continuing an unusual volatile start to 2021. But building permit levels remained high so the building start miss is unlikely to be a trend. More likely, <a href="https://www.reuters.com/business/us-housing-starts-drop-sharply-april-2021-05-18/" target="_blank"><strong>timber shortages</strong></a> and other supply-chain issues are behind this miss.</p><p>The latest weekly US <a href="http://www.redbookresearch.com/8702.html" target="_blank"><strong>retail sales indicators</strong></a> suggest firm activity. But that