Higher inflation isn't going to be transitory

<p>Kia ora,</p><p>Welcome to Wednesday's edition of 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 that the bond market is sending 'clear signals' that much higher inflation is here to stay.</p><p>But first in the US, <a href="https://www.census.gov/construction/nrs/pdf/newressales.pdf" target="_blank"><strong>new home sales</strong></a> picked up more than expected in September and are now running at an annual rate of +800,000 which is +17% above the annual rate in August, but miles below the 971,000 rate of sales in September 2020.</p><p>The <a href="https://www.conference-board.org/data/consumerconfidence.cfm" target="_blank"><strong>US Conference Board measure of consumer confidence</strong></a> rose in October when analysts were expecting another lower result. But consumer expectations remain low even if they think the present situation for them is actually quite good.</p><p>The <a href="https://www.richmondfed.org/-/media/RichmondFedOrg/research/regional_economy/surveys_of_business_conditions/manufacturing/2021/pdf/mfg_10_26_21.pdf" target="_blank"><strong>Richmond Fed factory survey</strong></a> in their Mid-Atlantic states came in much better in October than for September. It is yet another survey that features good new order flows, rising backlogs, and prices jumping at near extreme levels (+13%). The surveyed firms do expect the pricing pressure to ease, but to levels that would have sent warning bells at an earlier time (+6%).</p><p>And we should note that there was another big <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2021/R_20211026_2.pdf" target="_blank"><strong>US Treasury bond auction</strong></a> overnight, this one for the two year maturity. US$167 bln was offered for the US$67 available (the Fed took US$6 bln). This was well above the US$144 bln in demand at the prior equivalent auction. But despite the de