Sell-offs build on stagflation fears

<p>Kia ora,</p><p>Welcome to Tuesday’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 equity markets are gripped by stagflation fears today, with substantial sell-offs underway worldwide, especially for tech firms.</p><p>An <a href="https://www.minneapolisfed.org/article/2022/policy-has-tightened-a-lot-is-it-enough" target="_blank"><strong>article</strong></a> by the Minneapolis Fed's Kashkari didn't help, suggesting a recession may be necessary to kill off inflation.</p><p>In the US, <a href="https://www.newyorkfed.org/newsevents/news/research/2022/20220509" target="_blank"><strong>inflation expectations</strong></a> have fallen from record highs in data released overnight, but remain very elevated. For the year ahead they fell to 6.3% in April from a record high of 6.6% in March mainly because consumers see the price of fuel falling. They see house prices rising +6% and incomes up +3%. Three-year-ahead inflation expectations rose slightly to 3.9%.</p><p>Meanwhile, <a href="https://www.census.gov/wholesale/pdf/mwts/currentwhl.pdf" target="_blank"><strong>American wholesale inventory levels</strong></a> rose only a marginal +2.3% in price terms in March, confirming they remain very low in volume terms. More crucially, the inventory-to-sales ratio remains at cycle lows, showing there is no buildup usually associated with a looming recession.</p><p>In Canada overall <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/220509/dq220509a-eng.htm?HPA=1" target="_blank"><strong>building permit levels</strong></a> fell in March after a very strong February, mainly due to the non-residential sector and an absence of public projects in the month. But residential permit levels remained strong, rising almost +5%.</p><p><a href="http://www.customs.gov.cn/customs/302249/zfxxgk/2799825/302274/302275/4334846/index.html" target="_blank"><strong>Exports from China rose