Factories in overdrive

<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 worldwide, factories seem to be in overdrive.</p><p>But first, the latest <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>dairy auction</strong></a> has brought lower prices again, now the fifth fall in the prior six auctions. This one fell by almost -0.9% in US dollar terms and -1.0% in New Zealand dollar terms. Since the large +14% rise three months ago overall prices have fallen -5%. Butter retreated by -5.4% today from the prior auction and was the biggest mover. But most other changes were small with SMP up +0.5% and WMP down -0.5%.</p><p>In the rest of the world, the data is all about factory PMIs.</p><p>In the US, their factory PMIs expanded faster. The locally-watched <a href="https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/may/" target="_blank"><strong>ISM one</strong></a> starred with a strong result, bolstered by very high new order, and order backlog readings. The prices measure is still reflecting high stress although it wasn't quite as extreme as for April. The <a href="https://www.markiteconomics.com/Public/Home/PressRelease/fca84cfcbc154e05a2bd805b264290e5" target="_blank"><strong>Markit one</strong></a> was equally expansionary and reached a new record high. This one reported "soaring cost pressures". (But there was one data item that was soft: employment.)</p><p>Interestingly, in the <a href="https://www.dallasfed.org/research/surveys/tmos/2021/2105.aspx" target="_blank"><strong>Dallas Fed factory survey</strong></a> their fast expansion slowed somewhat in May, but input prices and wage pressures accelerated further in the month. Perhaps this is an early sign those raging cost increases are working to take the top off their factory boom.</p><p>But the US <a href="http://www.