Running out of steam

<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>And today we lead with news that without both the US and China in a healthy economic state, it is hard for the world to prosper. Commodity prices measure that pullback.</p><p>As the US heads into its long Memorial Day holiday weekend, negotiators are still unable to sort out their made-up debt limit problem. Credit rating agencies are getting antsy. Stories about a deal being 'close' continue to circulate but that is probably just political spin. Still, at some point they will reach a deal. But even after they do, the costs will linger - probably with a higher risk premium for US debt meaning higher interest rates.</p><p>Meanwhile, US <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20231119.pdf" target="_blank"><strong>initial jobless claims</strong></a> were little-changed from the low 202,000 of the week before. There are still 1.6 mln people on these benefits. This data does not show the expected easing in their labour market.</p><p>The American released <a href="https://www.bea.gov/news/2023/gross-domestic-product-second-estimate-corporate-profits-preliminary-estimate-first" target="_blank"><strong>a second estimate</strong></a> of their Q1-2023 economic activity and this revised their initial estimate higher. The US economy grew by an annualised +1.3%, slightly higher than +1.1% in the advance estimate. Consumer spending rose more than originally estimated.</p><p>Also improving was the Chicago Fed's <a href="https://www.interest.co.nz/sites/default/files/2023-05/cfnai-may2023.pdf"><strong>National Activity Index</strong></a> which reported a strong improvement, and one that wasn't expected. But it is consistent with the GDP result. The next regional Fed factory survey <a href="https://www.kansascityfed.org/Manufacturing/documents/9571/2023May25.pdf" target="_blank