Softer economic activity brings lower inflation

<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>And today we lead with news financial markets are on tenterhooks for the Thursday US Fed rate decision.</p><p>In the meantime, US <a href="https://www.newyorkfed.org/microeconomics/sce#/" target="_blank"><strong>consumer inflation expectations</strong></a> over the next year eased in May, down to 4.1% and the lowest since March 2021 more than two years ago. Expectations for inflation for longer term periods however rose slightly. The rises were minor, but represent an upturn from previous surveys. Labour market expectations were mixed with expected earnings growth declining, but unemployment expectations and perceived job loss risk improving.</p><p>This expectation data comes ahead of tonight's May CPI data for the US, and analysts also see it coming in at 4.1% which would be a good drop from <a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank"><strong>4.9% in April</strong></a>.</p><p>And markets are expecting the Fed to pause its rate hike track when they deliver their latest decisions on Thursday, thinking they have inflation coming down quickly now and have done enough to keep that retreat locked in.</p><p>The US Government released its <a href="https://www.fiscal.treasury.gov/files/reports-statements/mts/mts0523.pdf" target="_blank"><strong>monthly Budget statement</strong></a> for May, and this came in almost exactly as expected. But it is on track for a slightly larger deficit this year than last, this year about -8% of GDP.</p><p>In China, there are more indications of their demographic malaise. The number of <a href="https://www.mca.gov.cn/mzsj/xzqh/2022/202204tjsj.htm" target="_blank"><strong>marriages registered</strong></a> last year fell for the ninth consecutive year to the lowest since 1986, when the figure started to be recorded. Only 6.8 million couples regist