US consumers save, don't spend; factories expand everywhere except China; Aussie wages fall; Z buys Caltex; UST 10yr yields 2.18% ; NZ$1 = 70.9 US¢, TWI-5 = 75.8

Here's my summary of the key issues from over the long weekend that affect New Zealand, with news of a major move down by the New Zealand dollar.

American consumer spending unexpectedly stalled in April as households put their extra income into savings, cutting back on purchases of cars. Consumers did not come to the rescue early in the second quarter.

But factories may have. There were two factory activity reports out overnight (here and here), both showing expanding conditions. They are both reports for May.

The April Personal Consumption Expenditure (PCE) price index, excluding food and energy, increased +1.2% from April a year ago. The PCE index is the Fed's preferred measure of US inflation, and at that level it may not be enough to trigger policy concerns requiring action.

Factory data out of China overnight was not very encouraging. Orders, output and prices all fell all due to weak export demand. But the Chinese results are out of step with what we are seeing in both Japan and India. Those two countries reported expanding output, employment growth, and higher prices. That is especially impressive for Japan.

It was also surprising to see the Australian factory sector post a rare expansion. Activity was boosted by a lift in exports which have benefited from the lower Australian dollar.

There was other data out in Australia yesterday that helps put our performance in perspective. They are crowing about the 580,000 visitor arrivals they had in January. New Zealand recorded 302,000 in the same month, more than half the Aussie level. Also interesting is that they are now only reporting January data; our Stats agency has already reported for April.

And staying in Australia, the central bank looks unlikely to change their official cash rate which is currently at 2% when they wrap up their monthly meeting later today, and this is despite continued sluggishness in their domestic economy. Accentuating the sluggishness, data out yesterday showed a rare fall in wages and salaries paid in the March quarter.

In fact, Aussie GDP data is due out on Wednesday and if it is weak, that may set the stage for another rate cut in July.

In New York, the UST 10yr benchmark yield is climbing again after its big fall late last week. It is up +5 bps today at 2.18%.

The US oil markets are a little higher again today with the US benchmark price now just over US$60/barrel again, and Brent crude is up $2 to over US$65/barrel. OPEC is huddling later in the week.

Locally, Z Energy is about to buy the Caltex network after taking over the Chevron shareholding in NZ Refining. They are paying about $800 mln for the assets.

The gold price is down $2 to US$1,189/oz and where we left it on Friday.

The New Zealand dollar starts today lower threatening 70 USc but at the moment it is at 70.9 US¢, at 93.2 AU¢, and at 64.9 euro cents. The TWI-5 is at 75.8.

If you want to catch up with all the local changes on Friday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here »