Markets bet on a soft landing

<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 markets seem more convinced of a 'soft landing' ahead, and investors are buying on that basis.</p><p>The latest American <a href="https://www.newyorkfed.org/microeconomics/sce#/hhincexp-2" target="_blank"><strong>survey of consumer expectations</strong></a> shows how embedded these are - not disastrously, but quite sticky. In the short term, inflation expectations continued to decline but are only down to 5% for the next year. They were unchanged over the medium term at 3.0%. But longer-term inflation expectations edged up slightly to 2.4%. All of them remain above the policy goal of 2%. And when polled about household income growth expectations, that rose sharply to +4.6%, a new high since this survey started in 2014. That is probably the more revealing trend than just asking about 'inflation'.</p><p>The total value of <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/230109/dq230109a-eng.htm?HPA=1" target="_blank"><strong>building permits in Canada</strong></a> jumped more than +14% in November from October, rebounding after two consecutive monthly losses. It was an unexpectedly strong jump; no-change was expected, and it comes after their labour market also delivered very strong and unexpected gains.</p><p>An updated look at the impact of <a href="https://libertystreeteconomics.newyorkfed.org/2023/01/global-supply-chain-pressure-index-the-china-factor/" target="_blank"><strong>Chinese factors on global supply-chain pressures</strong></a> shows them worsening in December, against the overall 2022 trend of prior improvement. It is a factor that will speed the separation of many companies from reliance on China as a supplier. The per-unit cost penalties are being judged as less than the costs of disruption. Supply reliability has real-world benefits, as many compa