US consumers the central global economic driver

<p>Kia ora,</p><p>Welcome to Wednesday’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 the US expansion rolls on, the core engine again of the global economy as China stumbles.</p><p>But first, there was another <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>dairy auction</strong></a> today, and another fall in overall prices. This time they fell -2.9% in USD terms and -1.6% in NZD terms. That means from the mid-March peak they are down -15%. The main fall today was for the core WMP price, down -4.9% on top of the -6.5% fall at the prior event two weeks ago. Yes, pencils will be out checking whether another cut to the farmgate payout price is required.</p><p>US <a href="https://www.census.gov/retail/marts/www/marts_current.pdf" target="_blank"><strong>retail sales</strong></a> came in strong for April, up +8.2% above year-ago levels but perhaps just as expected. That caps a fourth good consecutive monthly rise. The more recent <a href="http://www.redbookresearch.com/" target="_blank"><strong>Redbook survey</strong></a> suggests that strength has continued into May. But Walmart isn't a retailer that is benefiting from this strength. Its sales are up, but its costs are up more. So far that effect is insulating consumers from higher costs.</p><p>US <a href="https://www.federalreserve.gov/releases/g17/Current/default.htm" target="_blank"><strong>industrial production</strong></a> also came in well above year-ago levels, up +5.8%. Recent gains have been running higher.</p><p>Better still, all these strong business activity gains have <a href="https://www.census.gov/mtis/www/data/pdf/mtis_current.pdf" target="_blank"><strong>not been because businesses are building inventories</strong></a>. In fact, these are holding at levels that are low historically on an inventory-to-sales ratio basis.</p><p>US Fed officials were ou