French political camps draw election battle lines on economy. France's far-right National Rally (RN) hit back on Thursday at charges from opponents that its spending plans would crash the economy, while President Emmanuel Macron's centrist alliance said it was the only bulwark against financial mismanagement. (Reuters)

US business activity grows as Europe recovery slows. The S&P Global U.S. Composite Purchasing Managers Index reached a 26-month high as S&P Global’s composite PMI for the eurozone fell. (WSJ)

UK inflation drops to 2% target for first time since 2021. British inflation returned to its 2% target for the first time in nearly three years in May, but strong underlying price pressures all but rule out a pre-election interest rate cut. (Reuters)

NATO chief says Russia, North Korea pact shows mutual support by authoritarian powers. Russia's new defensive pact with North Korea shows increasing alignment among authoritarian powers and underscores the importance of democracies presenting a united front, the head of NATO said on Wednesday. (Reuters)

Government borrowing in May is highest since Covid. Government borrowing in May hit the highest since the Covid crisis but was lower than the UK's fiscal watchdog had forecast. (BBC)

Bank of Japan pauses along its policy normalization path. The Bank of Japan (BoJ) did not make any meaningful policy changes at its June 13-14 meeting, reiterating that it would encourage the uncollateralized overnight call rate to remain at around 0.0%-0.1% and would conduct bond purchases in accordance with the decision made at its March monetary policy meeting. (Wells Fargo)

US-Mexico energy cooperation is vital to enable nearshoring. To make the most of those opportunities, the United States and Mexico must work together to enhance Mexico’s grid for a new industrial era. (Atlantic Council)

Investors cautiously optimistic South Africa’s new government can deliver growth-friendly reforms. Investors are optimistic South Africa’s new unity government can deliver stable economic policies to revive growth, but are cautious about how the new coalition’s main partners can reconcile stark ideological differences. (CNBC)

RBI’s timely action reduced vulnerabilities in unsecured loans: Shakanta Das. The Reserve Bank of India (RBI) Governor Shaktikanta Das announced on Thursday that timely actions by the central bank have helped in moderating vulnerabilities related to unsecured loans. This statement was made during the Second Global Conference on Financial Resilience organized by the College of Supervisors. (The Economic Times)

Switzerland leads big central banks in rate cuts as US Fed lags. Switzerland is at the front of the rate-cutting pack among developed economy central banks, lowering borrowing costs again on Thursday, while the all-important Federal Reserve is nowhere near the starting line as the U.S. economy stays strong. (Reuters)

RBA’s hawkish stance spurs traders to boost bets on August hike. Traders are now pricing a 20% chance of a rate hike on Aug. 6. (Bloomberg)

New Zealand exits recession, but economic troubles linger. GDP grows 0.2% in first quarter, buoyed by record immigration. (Al Jazeera)

Home prices hit a record high. Prices for existing homes rose to $419,300 in May, and sales slipped for third month in a row. (WSJ)

 

New Zealand's economic challenges persist

Kendall Payton, editorial associate

 

New Zealand’s government outlined a soft economy with rising unemployment and a weaker balance sheet of modest tax relief but lowered new spending—facing much criticism for neglecting the country’s indigenous population.

As the country just barely emerged from a recession in Q1 of this year, economists predict modest growth. GDP increased 0.1% in the first quarter, according to economists surveyed by Bloomberg News. 3 survey respondents from local banks forecast a contraction and ‘two tip zero’ growth.

“This budget won't fix all of New Zealand's economic challenges on its own and there is much more to do, but it does show what is possible with care and discipline,” said New Zealand Finance Minister Nicola Willis in her inaugural budget statement. “The budget, (which reduced new operating spending and covered large savings in housing, tertiary education, conservation and environment spending along with smaller cuts across many agencies), saw NZ$2.68 billion for roads, rail and public transport, and NZ$2.1 billion for law and order.

Yes, but: Recent data revisions to GDP estimates have seen estimates of labor productivity and potential output growth to turn downwards. This points to the potential GDP forecast to be 2% lower by 2026:

• Weak near-term demand and record high net migration have seen the unemployment rate increase from a record low 3.2% at the start of 2022 to 4.3% in March 2024.
• Unemployment in New Zealand is forecast to peak at 5.3% at the end of 2024.
• With inflation pressure subsiding, interest rates are forecast to begin gradually easing from late 2024 quarter.

By the numbers: Customers in New Zealand have averaged 41 days beyond terms, with 67% of credit professionals saying payment delays have stayed the same, per the FCIB Credit and Collections Survey. The most common causes for payment delays are cash flow issues (33%), cultural norms and customs (33%) and other disputes (33%).

What FCIB Credit and Collections Survey respondents are saying:

• “Use credit insurance if offering net terms.”
• “It is important to know customer’s payment process to avoid misunderstandings or delays due to administrative issues.”
• “Follow up with the customer’s procurement and finance department as many times as necessary.”
• “Obtain financial statements on your customers and backstop sales with credit insurance.” 

Annacaroline Caruso, editor in chief

Jamilex Gotay, editorial associate

Kendall Payton, editorial associate