Inflation's surge not easing

<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 the US budget repair is having impressive results.</p><p>But first, their <a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank"><strong>April CPI data</strong></a> was released earlier this morning and it came in at 8.3%, fractionally lower than March's 8.5% but slightly higher than the expected 8.1%. The core readings were lower at 6.2% year-on-year. But the monthly change from March actually rose at a faster pace than was expected, and this has grabbed market attention.</p><p>Separately, <a href="https://www.mba.org/news-and-research/newsroom/news/2022/05/11/mortgage-applications-increase-in-latest-mba-weekly-survey" target="_blank"><strong>American mortgage applications</strong></a> rose marginally last week, a second consecutive increase, and despite a rise in borrowing costs as their Spring housing market enters its historically busiest time. Applications to purchase a home surged 4.5% while those to refinance a mortgage loan fell 2%. The average contract rate on a 30-year fixed-rate mortgage jumped by 17bps to 5.53%, the highest since 2009.</p><p>The better management of the US Federal Government is starting to show up in reduced deficits. In fact, their <a href="https://www.fiscal.treasury.gov/files/reports-statements/mts/mts0422.pdf" target="_blank"><strong>April result</strong></a> reported a spectacular surplus. That surplus was a remarkable +US$308 bln in the month, reducing the annual deficit to "just" -US$1.2 tln (5% of GDP) from -$2.8 tln (11.6% of GDP) on the prior full fiscal year. The April surplus was the largest ever recorded, built on fiscal restraint (spending was down -16% on the same month a year earlier), and fast rising tax revenues from the booming economy.</p><p>We should also note that American farmers are running out of time