The pulling in of horns spreads

<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>Today we lead with news there are some early signs global households may be starting to feel they are owing too much debt. Any pullback from that will induce a 'balance sheet recession', that during stagflation, might be very hard to control.</p><p>But first up today, the latest <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>dairy auction</strong></a> has come in with something of a disappointment. Overall prices rose as expected, but the +1.5% gain in USD terms wasn't as strong as the derivatives market had priced in. Chinese buyers were noticed by their relative absence. On the positive side, it did end a run of five consecutive declines. In NZD terms however, that small rise evaporated. Volumes were low so the direct impact was not great, but the flow-through to wider contract pricing based on these auctions will be noticed. Maybe the impact on farmgate payout prices won't be strong either given where we are in the season, but analysts will be underwhelmed by this result.</p><p>In the US, logistics stress as measured by the <a href="https://www.the-lmi.com/" target="_blank"><strong>LMI index</strong></a> seems to be easing. The rise in freight costs seems to be tailing off, but warehouse capacity is getting tighter and so warehousing costs are rising faster. It's a mixed bag. Higher inventory levels in response to the extended supply-chain uncertainties appear to be embedded now.</p><p>However, at least one very large American retailer has <a href="https://investors.target.com/static-files/5d25e431-34bb-4b0b-b8db-b773d86abb49" target="_blank"><strong>announced</strong></a> plans to shrink their embedded high inventories. If that spreads, suppliers may face a drought of orders.</p><p>American retail activity still appears to be strong, according to l