Yields up as growth forecasts downgraded

<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 of growth downgrades amid bond yields that continue to march higher.</p><p>First and as anticipated, today's <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>dairy auction</strong></a> was a negative one, with prices falling -3.6% on average in USD terms. That is on top of falls at the two prior events, so they are down -4.1% since early March. But today's event wasn't as dire as analysts had feared. WMP fell less than the futures market had indicated. SMP fell marginally more. But more importantly, the currency has come to the rescue, falling -3.2% since the last auction so in NZ dollar terms today's overall result was a decline of only -0.2% in local currency.</p><p>Given the currency effect, today's results are unlikely on their own to alter any farm gate payout forecast, but it will certainly now push downgrade thoughts to front-of-mind if the trend continues. Fortunately, the current season is in the bag. Any softness will all be about the upcoming season.</p><p>In the US, the data released overnight continued its strong run. American <a href="https://www.census.gov/construction/nrc/pdf/newresconst.pdf" target="_blank"><strong>housing starts</strong></a> came in above estimates for March and above the prior month which was revised up. The same is true for residential building permits. Both are at historically high levels.</p><p>American <a href="http://www.redbookresearch.com/" target="_blank"><strong>retail sales for last week</strong></a> were also strong, improving to be +15.2% higher than the same week a year ago, so the strength is much more than 'just inflation'.</p><p><a href="https://www.cmhc-schl.gc.ca/en/"><strong>Canada housing starts</strong></a> also came in high, but although it was not quite as high as expected