Inflation's rise takes center stage

<p>Kia ora,</p><p>Welcome to Friday'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 American inflation is now at 5% in a new sudden jump.</p><p>But first, last week's <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20211041.pdf" target="_blank"><strong>jobless claims</strong></a> came in very much as expected and very similar to the level of the prior week. There are now 3.3 mln on these programs and a -5% reduction in one week. They still have some way to go to get back to pre-pandemic levels but most of the progress to that goal has been made.</p><p>The American <a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank"><strong>CPI inflation</strong></a> rate touched 5% in May and above the expected +4.7% and well above the April level of 4.2%. That is a 13 year high. This result was essentially driven by the energy sector, but without that, the result "less food and energy" was still a 3.8% rise, and a good part of that was caused by their booming used car market. Because of these odd drivers, it is easy to see why policy makers might still look though these results.</p><p>The Fed is meeting next week and how they view the inflation track will likely be a key discussion topic.</p><p>The US Federal Government <a href="https://fiscal.treasury.gov/files/reports-statements/mts/mts0521.pdf" target="_blank"><strong>reported</strong></a> a May deficit of -US$132 bln and far less than the -US$399 bln recorded in May 2020. For the full twelve months to May, the federal deficit is -US$3.3 tln or -15% of US GDP. External Federal debt is now US$22 tln or about one times as much as the annual US economic output (GDP).</p><p>But away from the public sector, <a href="https://www.federalreserve.gov/releases/z1/default.htm" target="_blank"><strong>American household wealth</strong></a> is surging and their net worth is now +US$137 tln, or