Wall Street turns to custard

<p>Kia ora,</p><p>Welcome to Thursday’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 yesterday's optimism seems to have turned to custard today.</p><p>Earnings reports from Walmart and Target show that retailers can't raise prices fast enough to maintain margins and earnings are taking a hit. Investors have quickly forgotten the prior day's upbeat mood.</p><p>US <a href="https://www.mba.org/news-and-research/newsroom/news/2022/05/18/mortgage-applications-decrease-in-latest-mba-weekly-survey" target="_blank"><strong>mortgage applications were down</strong></a> a sharpish -11% last week but at least their mortgage interest rates did not rise further.</p><p>American <a href="https://www.census.gov/construction/nrc/pdf/newresconst.pdf" target="_blank"><strong>housing starts remain high</strong></a> but in a rut principally due to supply chain inhibitions because completion levels aren't rising. Building permit approvals remain at historically high levels.</p><p>Canada's <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/220518/dq220518a-eng.htm?HPA=1" target="_blank"><strong>CPI inflation rate</strong></a> came in at 6.8% in April, marginally above the 6.7% in March but making it a 30 year high. But more recently, prices seem to be running at an annualised 8.5% rate, so they are in a nervous position. Food and housing costs are driving their increases, rather than energy costs.</p><p><a href="https://www.esri.cao.go.jp/jp/sna/data/data_list/sokuhou/gaiyou/pdf/main_1.pdf" target="_blank"><strong>Japan's economy shrank</strong></a> in the first quarter of 2022 at an annualised rate of -1.0%, continuing a recent trend of oscillating between growth and contraction. Accelerating inflation and a surge in pandemic cases contributed to gross domestic product, adjusted for inflation, dropping -0.2% from the previous quarter. A decline was expected, in fact a d