US has a high inflation problem, China has a low income problem

<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>Today we lead with news that the ECB has turned hawkish and is now focused on fighting inflation rather than propping up some of their large slow growing economies.</p><p>But first, new American <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20221152.pdf" target="_blank"><strong>jobless claims rose</strong></a> to +185,000 last week, a very minor rise. There are now 1.255 mln people on these benefits, still an all-time record low even if little-changed from the prior week.</p><p>Tomorrow, all eyes will be on the American CPI inflation rate. It is expected to come in at +8.3%, for May, the same as for April. But there will be special interest on the food component which could well come in higher than overall prices. Other countries are about to release monthly CPI data too. But New Zealand only releases this data quarterly and we will have to wait until July 18 to get our June data. Our <a href="https://www.interest.co.nz/charts/prices/grocery-prices" target="_blank"><strong>weekly grocery price monitor</strong></a> suggests our prices are now starting to rise very fast, up +13% in a year.</p><p>There was a <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2022/R_20220609_3.pdf" target="_blank"><strong>US Treasury 30yr bond auction</strong></a> a few hours ago, well supported, but the median yield rose to 3.11%, up from 2.91% at the <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2022/R_20220512_3.pdf" target="_blank"><strong>prior equivalent event</strong></a> a month ago. That a +20 bps rise and above today's secondary market level, an unusual outcome.</p><p>In China, exports were expected to recover somewhat in May after a tepid change in April. But in fact they jumped by much more than expected, up almost +17% to US$3