Slow wage growth props up employment numbers

Share Markets:

Markets were required to weigh up good economic news in the US against disappointing developments in the Greek debt saga. 

The better than expected news on US retail sales won the day with US share markets moving modestly higher.

The Dow and the S&P500 both rose 0.2% while the Nasdaq was up just 0.1%. European markets also ended in positive territory.

The German Dax was up 0.6%, the FTSE100 rose 0.2% while the broader Euro Stoxx index was up 0.7%.

Interest Rates: 

Strong demand for US, UK and German government bonds saw yields decline overnight, despite the strong outcome for US retail sales.

The impasse over Greek debt saw investors seeking safe havens. US 10 year government bond yields fell 11 basis points to 2.38%.

UK long bond yields declined 10 basis points while in Germany they fell 8 basis points to 0.88%. Australian yields (implied by futures) went in the opposite direction following the labour markets results for May.

Ten year Australian government bond yields rose 10 basis points to 3.15% while 3 year yields were up 7 basis points to 2.12%.

Foreign Exchange:

The US dollar index rose ahead of the US retail sales data but then ran out of steam. EUR initially fell but partly recovered after the US data. AUD ranged between 0.7693 and 0.7793.

The NZD continued to decline from the RBNZ's surprise cut, falling as low as $US 0.6968 - the lowest since August 2010 - before steadying. AUD/NZD held its early gains which took it to 1.1080 - an eight-month high.


The price of iron ore has risen to $US65 per tonne from a low of $US 48 in mid-May. There are important figures in the context of government budget estimates.

Overnight, copper prices fell 2.7% as supply rose and inventories piled up. Oil slipped back a touch as did the price of gold.


The World Bank downgraded its global economic growth outlook to 2.8% for this year, after originally being estimated at 3.0% in January.

It came as a result of slower growth in many developing economies due to reduced oil and other commodity prices. Soft growth in the United States also contributed.


Consumer expectations for inflation eased to an annual pace of 3.0% in June, below the previous 3.6% in May. Inflation expectations remain well contained.

Jobs surged 42.0k in May, defying expectations for a much softer rise. The steady growth in jobs saw the unemployment rate fall from 6.1% in April to 6.0% in May, the lowest in a year.

Slow wage growth could explain the solid job gains, and hint at greater labour market flexibility.

This could continue to support job growth and prevent the unemployment rate from climbing sharply. However, the outlook for below trend economic growth for most of this year suggests that job growth will moderate, which indicates a risk that the unemployment rate will edge higher later in the year.


Annual retail sales growth in May was 10.1%, in line with consensus forecasts and up from 10.0% in April. Factory output in May grew at an annual pace of 6.1%, slightly above the median forecast of 6.0% and April's 5.9%.

Fixed asset investment has risen 11.4% so far in the first five months of 2015, compared to the same period last year, which is below the forecast of 11.9% and 12.0% in April. It is also the lowest rate of growth in fixed asset investment since 2000.

The stabilisation in retail spending and industrial production provides some positive signals that recent stimulatory measures are providing support to the Chinese economy.


The heads of the European Union and the IMF have indicated that wide differences remain between Greece and its major creditors.

Negotiators have left Brussels with little apparent progress made. The extent of 'gamesmanship' is frustrating the head of the IMF.

Talks have not broken off but resolution is required before the end of June if Greece is to gain access to financial aid in order to meet loan repayment deadlines.  

New Zealand:

No major data released.

United Kingdom:

No major data released.

United States:

US retail sales jumped 1.2% in May, reflecting a 2% rise in auto sales, a 3.7% lift in gasoline sales (as prices rose again) and a solid 0.7% gain in core retailing ex-autos and gasoline.

This outcome suggests less reticence on the part of American householders to spend, with May's 0.3% rise in hourly earnings and hours worked supportive of incomes growth, even as renewed increases in energy prices have begun to weigh against disposable income.

Initial jobless claims rose 2k to 279k in the week ended 6 June. It is now three months since claims last rose above 300k, a sign that the labour market is continuing to improve.