The worst over?

<p>Kia ora,</p><p>Welcome to Friday’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 that markets are assuming a US debt deal will be done soon to avoid a shutdown and default.</p><p>Well, equity markets seem to be assuming that. Bond markets aren't so sure although yield inversions are either easing back or not getting worse. But long-term rates are rising slightly.</p><p>Last week's <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20231056.pdf" target="_blank"><strong>new American jobless claims fell</strong></a> back unexpectedly to +216,000 and there are now 1.6 mln people on these benefits. Analysts had expected higher levels, not lower levels. The strength of the US labour market is not done yet it seems. Markets noticed, thinking this will give room for another Fed rate hike at their June 15 (NZT) meeting.</p><p>The next regional <a href="https://www.philadelphiafed.org/-/media/frbp/assets/surveys-and-data/mbos/2023/bos0523.pdf" target="_blank"><strong>Fed factory survey</strong></a>, this one from the manufacturing heartland by the Philadelphia Fed was far less negative than the New York one. It improved in May sharply from its April low although to be fair it is still not 'positive'. The indicators for current activity, new orders, and shipments rose, but all three remained in negative territory. The firms surveyed continue to indicate overall increases in prices paid and decreases for prices received. The survey’s future indexes still suggest "tempered expectations" for growth over the next six months.</p><p>Meanwhile, <a href="https://www.nar.realtor/newsroom/existing-home-sales-faded-3-4-in-april" target="_blank"><strong>existing-home sales faded</strong></a> -3.4% in April to an annual rate of 4.28 mln. That is their largest drop in more than a decade. Sales fell more than -23% from one year ago. Unsold inventori