Risk off and major problems linger

<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 financial markets are showing increasing turbulence as war rages, the pandemic rolls on, and inflation rises. A risk-off mood is developing again.</p><p>But first, the American <a href="https://www.census.gov/econ/indicators/advance_report.pdf" target="_blank"><strong>merchandise trade balance</strong></a> fell in February from January, down from -US$101 bln to -US$84 bln for each month, but given the seasonality of these months the improvement was minor. A year ago in February, the deficit was -US$69.8 bln, but this increase is really just a reflection of strong domestic demand from a booming economy.</p><p>The rise in both <a href="https://www.census.gov/econ/indicators/advance_report.pdf" target="_blank"><strong>retail and wholesale inventories</strong></a> can also be attributed to the same demand strength, but also the growing pressures on supply chains is adding new bulk to these reserves. We are talking +10% to +20% bulking up here and more than just inflationary effects. The latest Shanghai lockdowns will accentuate that.</p><p>The <a href="https://www.dallasfed.org/research/surveys/tmos/2022/2203.aspx" target="_blank"><strong>Dallas Fed's factory survey</strong></a> shows their expansion is extending even if it is at a slightly lower pace. New orders growth softened, but costs and wages rose at their fastest pace ever for this survey.</p><p>Supply chain stress is a common conversation point, and the new Shanghai lockdown is getting most of the attention. But we should also note that a potential US West Coast <a href="https://www.nytimes.com/2022/03/28/business/dockworkers-strike-supply-chain.html" target="_blank"><strong>dockworkers strike is a new immediate upcoming threat</strong></a>, possibly stranding ships until it is resolved and throwing shipping schedul