Stagflation stalks the global economy

<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 that stagflation is stalking the global economy.</p><p>But first, the latest American consumer sentiment survey, this one from the <a href="https://www.conference-board.org/topics/consumer-confidence" target="_blank"><strong>Conference Board</strong></a>, declined marginally in May, but nothing like the University of Michigan one. The dip in this one was less than expected. Those surveyed seem happy with the 'present situation' but concerned about their 'expectations'. This survey seems more in keeping with the economic data we have seen recently.</p><p>And the latest Chicago PMI backs that up. It <a href="https://drive.google.com/file/d/11r9AkpLdr6qJgGXbatNg_C1R7iXN3cXQ/view" target="_blank"><strong>reports</strong></a> a better expansion in this industrial heartland - in fact quite a fast expansion in May. Both production and new orders jumped from April, but the cost pressure isn't waning yet. Inventories are very high as firms 'invest' to add resilience against supply-chain difficulties that aren't going away.</p><p>And the Dallas Fed's survey of Texan manufacturing paints a similar story. <a href="https://www.dallasfed.org/research/surveys/tmos/2022/2205.aspx" target="_blank"><strong>Their May report</strong></a> reveals expansions across the board. But they also report heightened concerns about the future in a more generalised way - even if firms had no evidence yet to support those concerns. It seems more 'politics' than a reading of their actual situation.</p><p>Canada <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/220531/dq220531a-eng.htm?HPA=1" target="_blank"><strong>reported</strong></a> a more modest GDP growth rate for Q1-2022 of +3.1% real. This would be regarded as quite good except in light of the recovery-growth posted in 2021.</p><p>Japan r