Craigs Investment Partners Research Team, 14 June 2019

The local market has climbed higher this week. Milk producers The a2 Milk Company and Synlait, pushed the market forward, rebounding from their respective recent issues. At the time of writing, the index is up 1.6% for the week. 3.7% for the quarter, and 13.7% in the last 52 weeks.

New Zealand net migration remains strong in the year to April. Statistics New Zealand have estimated that there was a net population gain of 55,834 people in the 12 months to the end of April 2019. The result is trending toward the April peak year of 2016, where there were was a net population gain of 62,508 people. The 2019 result was largely driven by a surge of long-term residents. In the 12 months to April there were 150,974 long-term arrivals in comparison to 95,141 long-term departures.

The Labour market in Australia remains tight. The Australian economy added 28,400 jobs in May, outstripping consensus forecasts. Although the increase in jobs was not enough to move the dial on the unemployment rate, which has remained steady in May at 5.2%. The participation rate raised 0.1% in May to a record level of 66%.

Data from the National Bank of Australia’s (NAB) business survey highlighted a further decline in business conditions. The most notable sector decline came from retail, with the NAB survey noting that conditions across the sector were decreasing steadily and were now at the same levels as they were during the financial crisis. On the other hand NAB’s business confidence survey data spiked in May. The bounce in optimism is most likely a result of the surprise Federal election result in which the Coalition party was re-elected as well as the anticipation of interest rate cuts (the RBA cut interest rates from 1.50% to 1.25% on 4 June).

China has a lift in its Consumer Price Index (CPI). China’s consumer inflation rose to its highest point in 15 months, climbing 2.7% in May from a year ago. Pork prices in China have risen 18.2% from a year ago as swine flu effects decreased supply and fresh food prices soared as weather conditions made production difficult.

Japans revised growth figures highlight larger than expected growth. Revised figures show that Japan’s gross domestic product grew at an annualised rate of 2.2% in the first three months of 2019, an acceleration from the 1.8% growth in the last quarter of 2018.

The US Consumer Price Index weakens in May. US consumer prices barely moved in May, rising 0.1% for the month. In the 12 months to May the CPI increased 1.8%, which was slower than April’s year to date gain of 1.9%.

The US drops proposed tariffs on Mexico. Globally, investors were offered some respite from the recent trade tensions. On Sunday, the Trump administration announced that it would not impose tariffs on Mexican goods going to the US. Although, the stoush between the US and China continues to remain at a relative standpoint. The crucial next event will be the G-20 summit later in the month. Currently the US has imposed US$250 billion worth of tariffs on Chinese goods, with a decision on whether to implement tariffs on a further US$300 billion worth of Chinese goods is to be decided after the G-20 meeting.

The UK’s economy shrinks in May. Britain’s overall economy shrank 0.4% in April, after a 0.1% decline in March. The April decline was the biggest monthly drop since March 2016. The fall in economic output was relatively miniscule in comparison to the UK’s manufacturing sector, which fell by 3.9% for the month in April being, the largest decline since July 2002. A key aspect of this fall was car production, which fell 24% in April as major manufacturers such as BMW and Rolls-Royce shut their plants for the entirety of the month amidst the confusion and delayed exit of Britain from the European Union.