China goes nuclear in credit creation

<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 Russia's invasion of Ukraine deepens, as does the resistance. The IMF is bolstering Ukraine's finances. The US is proving substantial aide too. Talk is surfacing on how Russia will be expected to make reparations when the conflict is over. Damage tops US$100 bln so far. Peace talks are non-starters so far.</p><p>Elsewhere, US <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20220441.pdf" target="_blank"><strong>jobless claims rose</strong></a> last week to 218,000 claiming these benefits. That was marginally above what was expected even if these are back to pre-pandemic levels. There are now just over 1.9 mln people on jobless benefits and still close to 40 year lows.</p><p>Going the other way,<a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank"><strong> American consumer inflation</strong></a> is at a 40 year high. In February, the headline rate rose to 7.9% which was what analysts were anticipating. Core inflation, without food or energy, was up to 6.4%, also as expected, but showing how embedded inflation has become in the US. Rents were up +4.7% in the February year, clothing up +6.6%. Food was up 7.9%. But of course the main driver is fuel costs. Again, it is medical costs that lag, up only 2.5%. Despite all this, the flow-though of the Ukraine war came after this data release. March data will be shocking, no doubt. Equity markets fell on this data, which is a bit surprising given it was what was expected. The ECB announcement might have also contributed. But all this cements in a substantial Fed response next week, which markets assume they won't like.</p><p>Later this morning we will get the US Federal Government budget out-turn for February and a small -$50 bln deficit is expected and at that level one of the smallest po