Low growth, high inflation settles in

<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>And today we lead with news the world seems to be settling in to a low-growth high-inflation period, not quite stagflation but disarmingly close.</p><p>In the US, <a href="https://www.census.gov/econ/indicators/advance_report.pdf" target="_blank"><strong>retail sales</strong></a> last week on a same store basis were up +5.3% from year-ago levels, unchanged in a week, and hardly accounting for inflation.</p><p><a href="https://www.census.gov/econ/indicators/advance_report.pdf" target="_blank"><strong>American inventories</strong></a> were little-changed in January from December. But that can't hide the fact that retail stocks of goods are +12% from year-ago levels and wholesale stocks are up +16% on the same basis. Still, it is probably good that that expansion seems to have stopped, and that some of it is "just inflation".</p><p>Meanwhile, <a href="https://www.census.gov/econ/indicators/advance_report.pdf" target="_blank"><strong>American exports slipped</strong></a> in January from December to be up less than +12% in a year. But imports rose marginally on the same basis but are only up +2% year-on-year. That means their merchandise trade deficit rose to almost -US$89.3 bln in the month from December, but is actually -US$11 bln less than the same month in 2022.</p><p>The Chicago industrial heartland isn't in its best shape, with declining activity, according to the <a href="https://drive.google.com/file/d/1Ou5u_DMUBrw8GhlEks3O8tyYf1dHc6bm/view" target="_blank"><strong>ISM Chicago PMI</strong></a> for February. It is contracting at a pace that is uncomfortable for them but at least there is light ahead - New Orders, Order Backlogs, and Supplier Deliveries increased.</p><p>The situation is similar in the <a href="https://www.richmondfed.org/-/media/RichmondFedOrg/research/regional_economy/surve