Economy Watch

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news we are still waiting for indications of the China-US trade talks in London.Meanwhile, the World Bank said global trade expansion is now at its weakest since 2008 as the tariff tit-for-tat undermines it. They say without a swift course correction, "the harm to living standards could be deep". But they still see a global expansion of +2.3%, largely driven by China, Indonesia, Thailand and India. The retreat of growth in the US will be sharp they say halving in 2025 (+1.4%) from 2024 (+2.8%). The EU will be largely unaffected and maintain their low growth. Japan's low growth is expected to rise in the next three years. They don't review Australia or New Zealand.Elsewhere, the overnight dairy Pulse auction brought downbeat results. The key WMP price fell -1.1% in a retreat expected by the derivatives market. But even at this level it remains in the rising trend that started in mid-2024. However, the SMP price fell a hard -4.8% and much more than expected. In fact, SMP prices have now broken through their weak rising trend, and look quite vulnerable.Also showing signs of running out of steam were US retail sales growth as measured by their Redbook survey. They were up +4.6% from the same week a year ago, the weakest rise since March 2024. After inflation, this isn't any better.The the US NFIB small business optimism survey turned up in May, the first time it has done that in 2025.There was a US Treasury 3 year bond auction earlier today and that showed a small fall-off in support, something worth watching. The winning investors got a median yield of 3.92%, up from the 3.77% at the prior equivalent event a month ago.Across the Pacific, Japanese machine tool orders came in at a similar level in May as April, but that is only a +3.4% gain from the same month a year ago. It was kept positive by export orders, although domestic orders, which had been strong earlier in the year, are now cooling.In China, concerns persist about overproduction in their car manufacturing sector even though local new-vehicle sales overall, including exports, rose almost +10% in April. Those concerns are rippling through commodities that supply this juggernaut industry. Rubber prices, for example, are being hit hard as buyers lose confidence the China car industry can avoid a crash like the property sector. There are signs the government there is worried too, with Beijing telling carmakers to make sensible commercial decisions.In Australia, the Westpac-Melbourne Institute consumer sentiment survey wasn't particularly upbeat, coming in little-changed in June from May. But at least it isn't going backwards. Aussie consumers remain relatively averse to real estate as an investment option and to risk in general. Indeed, responses to a question on the ‘wisest place for savings’ suggest that the tariff-related turmoil this year has seen what was already a high level of risk aversion intensify even further.And staying in Australia, the closely-watched NAB business sentiment survey has improved marginally in May, recording its first positive reading in four months. But, business conditions weakened in this survey and it will be hard for sentiment to improve if business conditions get weaker. Those weaker conditions came from ongoing profitability pressures and soft demand, with signs of a further softening in labour demand.The UST 10yr yield is now at 4.47%, and down -2 bps from this time yesterday.The price of gold will start today at US$3,323/oz, and down -US$10 from yesterday.American oil prices are little-changed at just on US$65/bbl while the international Brent price is now just on US$67/bbl.The Kiwi dollar is now at 60.4 USc, and dipping -10 bps from yesterday at this time. Against the Aussie we are also down -10 bps at 92.7 AUc. Against the euro we are down -10 bps at 52.9 euro cents. That all means our TWI-5 starts today at under 68.4 and down a bit less than -10 bps from yesterday.The bitcoin price starts today at US$108,723 and up +0.4% from yesterday. Volatility over the past 24 hours has been low at just on +/-0.9%.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the US and China are meeting in London to discuss China's block on exports of rare earth minerals that the US manufacturing sector needs. The hope is that the settlement will have the US pull back from its tariff-tax war. More likely, it will be a trade of US AI chips for Chinese rare earth minerals.In the background, the dismantling of civil society and the rule of law continues in the US, but you will have to get news of those overnight events elsewhere - even though they will have a corrosive impact on commerce.Our first item in the US is that consumer inflation expectations fell back in June to 3.2% for the year ahead, which wasn't what was expected. But a look at the components explains why. It was driven by the expectation that petrol prices will drop - on a weakening economy. On the other hand those surveyed expected food prices to rise to 5.5% which is a two year high, rents by 8.4%. The expectation that their jobless rate will rise remained high.And we should probably point out that analysts are noting that the UST 10 year yield (4.5%) is now well above the US nominal GDP growth rate (3.8%) for the fits time since 2011, and that is seen as a signal that corporate insolvencies will now rise noticeably after a long period of relative stability.China said its CPI price change held at -0.1% of deflation. That is the third month in a rose it has reported that, the fourth recording deflation. It does seem odd, and a tad unlikely, that Chinese consumer prices are consistently deflating at such a low level. Anecdotal observations talk of 'raging price wars'. According to the official data these are having zero impact. Year-on-year they say beef prices are down -0.1%, lamb prices are down -2.8% and milk prices are -1.5% lower. But beef prices did rise in May from April, according to this data.Meanwhile Chinese producer prices deflated more, down -3.3% from a year ago to their fastest rate of decline since July 2023.And China booked another bumper trade surplus in May. Exports rose +4.8% (about what was expected but historically low), while imports fell -3.4% and far more than expected. They benefited from the TACO trade in May. Their surplus with the US was +US$18 bln for the month although they did export less and import more. To New Zealand, they exported -3% less but imported +11% more, so our surplus rose. To Australia, their exports were little-changed but they imported almost -19% less in May.In Taiwan, they far outshone their neighbour and rival with a huge rise in exports (a new record high) and a large rise in imports from the same month a year ago. That contributed to a trade surplus of +US$12.6 bln in the month, now one eighth that of China even though their economy is only one twentieth as large.The UST 10yr yield is now at 4.49%, and down -2 bps from this time yesterday. The price of gold will start today at US$3,334/oz, and up +US$26 from yesterday.American oil prices are firmish, up +50 USc at just on US$65/bbl while the international Brent price is just under US$67/bbl.The Kiwi dollar is now at 60.5 USc, and up +30 bps from yesterday at this time. Against the Aussie we are up +10 bps at 92.8 AUc. Against the euro we are up +20 bps at 53 euro cents. That all means our TWI-5 starts today at over 68.4 and up +20 bps from yesterday.The bitcoin price starts today at US$108,312 and up +1.9% from yesterday. Volatility over the past 24 hours has been modest at just on +/-1.4%.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news that despite the Trump-generated spectacle of intimidation and violence in Los Angeles against immigrant communities, the economic news has been contained.This coming week is not a big one for local data releases, but in Australia we will get updated surveys of both consumer (Westpac/MI), and business (NAB) sentiment surveys. Not a lot of change is expected in either.There will be a June update of American consumer sentiment from the widely watched University of Michigan. And we will get CPI updates for May from both the US (expect a small rise to 2.5% (and China (expect slightly deeper deflation at -.2%). India will also release May CPI data (expect little change).The Chinese will also release export and import data. Japan will update its machine tool order data. And Germany will release some wholesale price data too.Over the weekend, and in something of a relief, the US May non-farm payrolls growth came in at +139,000, little different to the expected +130,000 and only a minor retreat from the +147,000 growth in April. But that is a bit below the average for 2024 and well below the average for 2023, and the lowest expansion for a May since 2020. In data not seasonally adjusted, it was the lowest since 2016. The US labour market seems to be plateauing after a rather strong recovery in the prior four years.Average US weekly earnings rose +3.9% in May from the same month a year ago, similar to earlier 2025 months and the same as the average for a May over the past ten years. The jobless rate was unchanged at 4.2%.But hiring freezes and production cutbacks seem to be the themes coming out of corporate America. The landscape for reshoring isn't good, apparently.And the data is becoming clearer that foreigners are avoiding the US as a travel destination, and not just Canadians, with anti-American sentiment on the rise in Europe too. Companies like Airbnb, Booking.com and Expedia all said that their financial results will be weaker than expected because of the softening demand.Total US consumer credit rose by +US$18 bln in April or +4.3%, up from a +$10 bln increase in March and better than expected. So this expansion, while modest, is back to a 'normal' pace. Revolving credit (credit cards) increased at an annual rate of +7%, while nonrevolving credit (car loans and similar) rose at a letter 3.3% rate.There was May Canadian labour market data out over the weekend too. Somewhat surprisingly, that delivered an expansion of +8,800 jobs when a -15,000 reduction was anticipated. Even better, +57,700 new full-time jobs were added in May balanced by a reduction of -48,800 part-time jobs. So, overall a rather surprising net gain.However, their jobless rate rose to 7%, the first time it has hit that level since 2016 (apart from the pandemic), so that probably raises the chance of a rate cut at their next review at the end of July.In Japan, the level of central bank bond buying tapering continues to raise concerns and undermine demand by other potential investors. It is also raising questions about the value of the yen. There is elevated debate about the right level from here and the central bank may have to slow its tapering operation. The void their tapering is leaving is not being filled by the private sector. And that could seriously twist Japanese interest rates.Late on Friday, the Indian central bank cut its policy rate again, with an outsized -50 bps cut to 5.5% when a -25 bps trim was expected. That makes it a full -100 bps reduction since February. They say the outsized move was required by the combination of fast- easing inflation and ongoing uncertainty surrounding global trade tensions.The Russian central bank also surprised with a rate cut when one wasn't expected. It cut -100 bps to 20% under Kremlin pressure, and claiming that "inflation is under control".EU retail sales for April came in surprisingly strong. They report these on a volume basis and were +2.8% higher than in April 2024. Only a +1.4% expansion was expected, and the March expansion was +1.9%. So a great result for them. Most other countries are not getting inflation-adjusted retail growth anything like this.Today is a public holiday in Australia, so our markets will be quiet.Meanwhile, both sides seem to be gearing up for trade talks between China and the US - in London.The UST 10yr yield is now at 4.51%, and unchanged from Saturday, up +9 bps for the week. The price of gold will start today at US$3,308/oz, and down -US$10 from Saturday. That is up +US$24 from US$3294/oz a week ago.American oil prices are holding at just on US$64.50/bbl while the international Brent price is still the same at just on US$66.50/bbl.The Kiwi dollar is now at 60.2 USc, and unchanged from Saturday at this time. Against the Aussie we are also unchanged at 92.7 AUc. Against the euro we are still at 52.8 euro cents. That all means our TWI-5 starts today at just on 68.2 and unchanged from Saturday.The bitcoin price starts today at US$106,270 and up +1.5% from Saturday. Volatility over the past 24 hours has been low at just under +/-0.6%.You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news US Republicans are becoming more like the CPC than they probably realise.But first, there were 209,000 initial jobless claims in the US last week, a small decrease from the prior week but less of a decrease seasonal factors would have assumed. That resulted in the widely reported seasonally adjusted level to jump to its highest in eight months. There are now 1.757 mln people on these benefits, almost +100,000 more than at this time last year.That level may grow. The Challenger job cut report came in with another outsized count for May, and were up +47% over the same in 2024. They say layoff activity is now spreading to other sectors than just the Federal government.US exports rose slightly in April, enough to claim an all-time record high. And as expected, actually a bit more than expected, US imports fell sharply after the March pre-tariff splurge. The average of March and April was about the same level they recorded in each of January and February 2025. For April 2025, the US$350 bln in imports were little-different to the April 2024 level of US$340 bln. It only looks like a big drop because of all the front-loading generated by tariff-tax uncertainty.We should note that US data reliability may become more like Chinese data - heavily influenced by politics. In a random note, the BLS said it isn't going to survey prices as deeply anymore, which could mean "inflation" will be what the Administration says it is. They are also shifting that statistics agency to be under Howard Lutnick's control. And the Republicans have gone on the attack at the bipartisan Congressional Budget Office for saying their new Budget will swell their deficit by US$2.4 tln. The employees who released that are being laid off. They will be replaced with more compliant analysts.Meanwhile, there has been a phone call between China president Xi and US President Trump. But is seems to have achieved little other than agreement for more talks. However, mutual visits are a likely result, and the set-piece opportunities may give Xi an opportunity to get Trump to "chicken out".North of the border, Canadian exports fell more than -10% while their imports fell -3.5% in April. Again, the same trade and tariff-war factors are at play here, and that has resulted in a record trade deficit for them.In China, the Caixin China General Services PMI rose in May from April’s seven-month low and in line with market forecasts of only a very modest expansion. This survey shows a small uptick in new business and activity, despite a renewed decline in new export orders. New export orders fell for the first time in 2025, dampened by Trump's tariffs. The official Chinese services PMI also showed a modest expansion, one weaker than this Caixin version.In Taiwan, their inflation rate eased to 1.6% in May from 2.0% in April, and that is its lowest rate since March 2021. They are back to about what it was running in the years prior to the pandemic.Singapore released April retail sales data and that showed virtually no expansion there. Over the past six months, their retail activity has been quite unstable in its ups and downs.As expected, the ECB cut its key interest rates by -25 bps at its overnight meeting, to 2.15%. Updated inflation and economic forecasts show eurozone inflation is near their 2% target, with projections showing 2.0% in 2025 (vs 2.3% previously), 1.6% in 2026 (vs 1.9% previously), and 2.0% in 2027. They say their expansion is being held back by global events but all the same they see their combined economy expanding slightly faster over the next three years.Australia's exports rose +2.1% in April from the same month a year ago. Their imports were up +3.5% on the same basis. The result was a sharp weakening in their merchandise trade surplus, as you might have expected. It would have been worse if their gold exports had not come in +48% higher than year ago levels in April. The longer term view of the year to April 2025 compared to the year to April 2024 saw exports down -5.2% and imports up +2.7% showing the balance is tightening over the longer term too.Household spending in Australia in April was flat. But spending on recreational and cultural activities, health, and dining out contributed to a +1.5% rise in services spending, while spending on goods fell by -1.1%, with households buying less clothing and footwear and new vehicles.Last week, container freight rates jumped an outsized +41% from the prior week, with capacity struggling to cope with the sudden Trump tariff-tax pause and a new rush to beat what might happen in 90 days. It was impossible for shipping lines to adjust capacity for this unexpected shift. The largest rises were trans-Pacific rises, up almost +60%. Despite that, these container freight rates are now -25% lower than year-ago levels, although those year ago levels were in a sharp upswing that ran to mid-July 2024. Bulk cargo rates are also on the move up, gaining +9.5% in the past week.The UST 10yr yield is now at 4.39%, and up +4 bps from yesterday. Wall Street is weaker with the S&P500 down -0.7% in Thursday trade as confidence in public policy fades in a sudden Trump/Musk slanging match. The price of gold will start today at US$3,352/oz, and down -US$28 from yesterday.American oil prices are up +50 USc at just over US$63/bbl while the international Brent price is up the same at just over US$65/bbl.The Kiwi dollar is still at 60.4 USc, essentially unchanged from yesterday at this time. Against the Aussie we are also unchanged at just under 92.8 AUc. Against the euro we are up +10 bps at 52.9 euro cents. That all means our TWI-5 starts today at just on 68.3 and up +10 bps from yesterday.The bitcoin price starts today at US$103,373 and down -1.6% from yesterday. Volatility over the past 24 hours has been modest at just under +/-1.2%.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Monday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news that poor American data has seen risk aversion rise in financial markets with the USD falling, benchmark bond prices rising (yields falling), many key commodity prices either falling or showing weakness, and Wall Street underperforming global markets.The poor data was important and widespread.US mortgage applications fell last week for a third week in a row, this time by a solid -3.9% from the prior week but is +18% higher than year ago levels, even if year ago levels were quite weak. The benchmark 30 year mortgage interest rate dipped last week which makes the application levels look even weaker.Meanwhile there was weakness in the US labour market. We get the non-farm payrolls report on Saturday (NZT) but the pre-cursor ADP Employment Report was out today and it was expected to show a +117,000 jobs gain in May. But in fact it only reported a +37,000 gain - and April data was revised lower. There is no evidence in this data that factories are hiring to meet reshoring demand.And the widely watched ISM services PMI isn't showing much optimism either, slipping into a small contraction, its first since June 2024 with all the post-election hubris now evaporated. A feature of this report is the sharpness of the 'new business' component fall.And staying in the US, vehicle sales tumbled in May, falling to an annual rate of 15.65 million units. That was well short of analyst's cut-down expectations of 16.3 million and the steepest monthly decline in nearly five years. In April, sales ran at a 17.25 million rate and that was itself below the 17.8 mln rate in March when buyers rushed to get ahead of anticipated tariff-tax price hikes. Although sales at a 15.65 mln rate isn't nothing, it does indicate the margins of this market is quite price sensitive.So it will be no surprise to know that the US Fed Beige Book for May paints an uninspiring picture in most regions. Half of the Districts reported slight to moderate declines in activity, three Districts reported no change, and three Districts reported slight growth. All District reports indicated that higher tariff rates were putting upward pressure on costs and prices.Things may not improve for the American. Trump is now whining that XI won't take his call. (But he did call Putin who took his call.) And China seems to be on the verge of signing a massive aircraft deal with Airbus, at the direct expense of Boeing.Finally, the Congressional Budget Office has calculated the fiscal impact of the big Trump Budget Bill - saying it will add US$2.4 tln to US deficits, the largest expansion of these deficits ever through gigantic tax cuts for the wealthy. It may be no surprise that Trump can't do basic math, but that the whole Republican congressional party votes for this type of economic damage is quite astounding.In Canada, their central bank review of monetary policy settings left the policy interest rate unchanged at 2.75%, as was expected. They have inflation at 1.7% and an economic expansion of +2.2% in the March quarter, although that is not expected to last. They are watch for downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.In Japan, the 2024 total number of births was 686,061, down -5.7% from the previous year. This was the first time annual births have fallen below 700,000 since record-keeping began in 1899.Australia released its Q1-2025 GDP growth data yesterday. Their economy grew +0.2% in Q1-2025 from Q4-2024, slowing from +0.6% in Q4 and falling short of the +0.4% expected by analysts. This marked the 14th quarter of expansion but the softest pace in three quarters. On an annual basis, the GDP expanded +1.3%, holding steady for the second straight quarter but missing the expected +1.5% rise.The UST 10yr yield is now at 4.36%, and down -10 bps from yesterday.The price of gold will start today at US$3,379/oz, and up +US$26 from yesterday.Oil prices are down -US$1 in the US at just over US$62.50/bbl while the international Brent price is down -US$1.50 at US$64.50/bbl.The Kiwi dollar is now at 60.4 USc, a +30 bps rise from yesterday at this time. Against the Aussie we are unchanged at just over 92.8 AUc. Against the euro we are up +10 bps at 52.8 euro cents. That all means our TWI-5 starts today at just on 68.2 and up +10 bps from yesterday.The bitcoin price starts today at US$105,010 and down -0.9% from yesterday. Volatility over the past 24 hours has been modest at just under +/-1.0%.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the global economic expansion is losing pace, led by the US.But first up today, the overnight full dairy auction pulled back, and expected, but perhaps not be as much as the derivatives markets suggested. In the end prices were down -1.6% in USD terms and -3.0% in NZD terms on a rising Kiwi dollar. It was a mixed picture across the commodities offered.In the US, the weekly Redbook retail monitor pulled back last week to be 'only' +4.9% higher than the same week a year ago. That is a sharpish dip from the prior week's +6.1% and mid-April's +7.4%. Much of this may be attributable to tariff-tax increases, with sales volumes easing faster now.Meanwhile, April job openings were little-changed but they did come in slightly higher than expected at 7.4 mln. We get the May non-farm payrolls report this Saturday (NZT) and that is expected to show a modest +130,000 rise.Meanwhile April factory orders came in weak, down a sharp -3.7% following the boosted March gain of +3.4%. Between the two months, a slight easing that was setting in since November. From April 2024 these order levels are up +0.6% and that is before accounting for inflation.The US Logistics Managers Index rose, but because inventory costs, warehousing utilisation, and transportation prices all rose at a faster rate, probably not the indicators that help their economy.But the latest RCM/TIPP optimism survey did rise for 'positive' reasons, but only back to levels it was in November after retreating rather sharply from a February high. The tariff-tax staggers may be easing among investors and the surveyors say this indicates US "consumers are closer to optimism".In Canada, Canadians have so heavily altered their travel plans to the US that the duty-free stores at the border seem to be on their knees in what is being called a 'collapse'.In South Korea, the candidate of the more liberal Democratic Party seems to be the winner of Tuesday's snap presidential election. It is a clear break, with voters turning away from the conservative party, who’s previous President triggered their constitutional crisis. It’s a win for the rule of law. The other main candidate has conceded.In China, they have delivered something of a surprise. The May Caixin China factory PMI unexpectedly dropped to 48.3, down from April’s expanding 50.4 and missing market forecasts of a faster expansion (50.6). This was the first contraction in the sector in eight months and the steepest since September 2022. Output shrank alongside a renewed drop in new orders, with foreign sales declining at a faster pace. The official factory PMI came in at 49.5, a small improvement (lesser decline).Eurozone consumer price inflation eased to 1.9% in May, down from 2.2% in April and below market expectations of 2.0%. With inflation under control, that gives the ECB some room to trim interest rates further at their Friday (NZT) review.Globally, the OECD has lowered its economic expansion forecasts as the Trump tariff-taxes bite, and the US an economy they see suffering as much as others from the impact.That is spurring free trade talks among other nations, especially between Australia and the EU.In Australia, their Fair Work Commission’s Expert Panel announced the National Minimum Wage and award wages will increase by +3.5% from 1 July 2025, following the 2024-25 Annual Wage Review. That means their National Minimum Wage will increase by +AU$0.85 to AU$24.95 per hour. (NZ$26.90/hr) The New Zealand adult minimum wage is currently $23.50/hr.The UST 10yr yield is now at 4.46%, and unchanged from yesterday.The price of gold will start today at US$3,353/oz, and down -US$22 from yesterday.Oil prices are up +50 USc in the US at just over US$63.50/bbl and the international Brent price is up +US$1 at US$66/bbl.The Kiwi dollar is now at 60.1 USc, a -10 bps dip from yesterday at this time. Against the Aussie we are down -10 bps at just on 92.8 AUc. Against the euro we are unchanged at 52.7 euro cents. That all means our TWI-5 starts today at just on 68.1 and down -10 bps from yesterday.The bitcoin price starts today at US$105,965 and up +1.6% from yesterday. Volatility over the past 24 hours has been modest at just on +/-1.2%.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the Americans seem to be making a concerted effort to adopt a stagflation policy. The USD is falling toward a three year low, gold is rising again, as are US benchmark interest rates.But first, the week ahead will feature central bank rate decisions from Canada (expect a hold at 2.75%), the ECB (-25 bps to 2.15%) and India (-25 bps to 5.75%). And the week will end with the US non-farm payrolls report (+130,000 and extending the ho-hum trend).But the week will be dominated by factory and service sector PMIs, closely watched for the consequences of trade war activity. More damage came from the US over the weekend with the doubling of steel tariffs, from 25% to 50%. These are certain to make the US steel industry even less competitive globally, embedding higher producer costs for American factories and higher prices for its customers.We can see that from the latest ISM factory PMI for May, where a small contraction is now taking place, and the cost pressures are still very high. The final S&P/Markit May factory PMI recorded the most cost pressure since 2022, but a tiny expansion in this one.China released its official PMIs over the weekend, with the factory version contracting much less, and their services little-changed in a tiny expansion. Inflation pressures aren't evident here. The US trade pressure may be preventing China's economy from growing much but it isn't pushing it into a contraction. And so far, Beijing has resisted Trump's request for a phone call with Xi.And there were May PMIs out for Japan (contracting less), Canada,(holding a sharp contraction) Taiwan (contracting less), Korea (small contraction, but stable) Singapore (stable small contraction) and Australia (stable but expanding a bit less) on Monday. So this set isn't yet showing much change, but the trade war does seem to be embedding stagnation. Inflation doesn't seem to be much of a problem here, it is only the US that is getting them both.Stagnation without inflation does allow central banks to try a rate cut remedy - a remedy not available to the Americans.In China they are applying both monetary (lower rates) and fiscal policies (more spending) to stabilise their situation. Beijing is spending big to counter the downward pressure on its economy. As a result, the country’s broad fiscal deficit expanded at its quickest clip since 2023 in the first four months of 2025, reaching a -¥2.7 tln (-NZ$630 bln) deficit in the period, almost 60% more than in the same period in 2024.They need all of that because it is pretty clear their real estate sector slump isn't anywhere near over yet, despite all the official help for it.We should also note that it is a holiday in China today, for Dragon Boat Festival.India reported Q1-2025 GDP outcomes, claiming a heady expansion of +7.4% from a year earlier, far better than the +6.7% expected and the +6.4% expansion in Q4-2024. This expansion was led by both the construction sector, and consumer spending.And Canada also reported an expanding economy in Q1-2025, gaining +0.5% in the quarter to be +2.2% higher for the year. Both these indicators of economic activity are better than analysts had expected. Of course these are only of historical interest because they pre-date the tariff-war actions of the US that started in April.Back in the US, the final University of Michigan consumer sentiment survey recovered its early month drop in the second half of the month, ending similar to the April level. The pause in the tariff war and the hope this would ease inflation pressures during the survey period was said to be behind the mood change. Still, this level is very pessimistic, -24% lower than year-ago levels.In Australia, job ad growth has turned into a decline, with the number of job ads dropping -1.2% in May from April, when they fell a downwardly revised -0.3%. Year on year they are down -5.7% although they remained +14% higher than pre-pandemic levels.The UST 10yr yield is now at 4.46%, and up +6 bps from Friday. The price of gold will start today at US$3,375/oz, and up +US$86 from yesterday.Oil prices are up +US$2 in the US at just under US$63/bbl and the international Brent price is just under US$65/bbl.The Kiwi dollar is now at 60.2 USc, a +50 bps rise from yesterday at this time. Against the Aussie we are up +20 bps at just on 92.9 AUc. Against the euro we are up +10 bps at 52.7 euro cents. That all means our TWI-5 starts today at just on 68.2 and up +30 bps from yesterday.The bitcoin price starts today at US$104,272 and down -0.9% from yesterday. Volatility over the past 24 hours has been modest at just on +/-1.0%.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the legality of the US tariff taxes is now under court scrutiny.But first, US initial jobless claims rose +10,000 last week from the prior week to 212,000 when seasonal factors suggested it should have fallen -7,000. (The headline number was +240,000.) There are now 1.78 mln people on these benefits, +120,000 more than this time last year or a +7% rise.There was an update to the Q1-2025 US GDP growth rate out overnight, and it was little-changed, still showing a stall. Now they say it contracted at an annualised rate of -0.2% in the quarter, a slight improvement from the initial estimate of a -0.3% decline. However, it is still the first quarterly GDP contraction in three years. The slight improvement was driven by stronger-than-expected investment, which partially offset weaker consumer spending and a larger-than-anticipated drag from trade.The same data showed corporate profits fell sharply in the period and could continue to be squeezed this year by higher costs from tariffs.Pending home sales retreated an outsized -6.3% in April from March, far more than the -0.9% drop anticipated by analysts and fully erasing the revised +5.5% increase in March. The industry blames "high interest rates".The US Treasury 7yr bond auction today was supported a bit better than the prior event, resulting in a median yield of 4.14% compared to the 4.07% at the prior equivalent event a month ago.In a US Federal Court, the Trump Administration lost a key case challenging the imposition of his "Liberation Day" tariffs, where it was claimed the President didn't have the authority to impose them without Congressional approval. The issue will end up in the US Supreme Court soon for 'final' resolution. If it doesn't go Trump's way in his stacked court, things could get 'interesting'.In Japan, consumer sentiment is still trending down after peaking in March 2024. But the May survey recorded a bounce back from the unusual drop in April.In Australia, capex investment is not growing, especially for plant and equipment. And that is a hesitation in the rising trend that started in 2014 and continued until September 2024. The recent Q1-2025 data softness seems to be embedding.Globally, passenger air travel demand was up +8.0% with international travel demand rising almost +11%. In the Asia/Pacific region it was up more than +14%. Wanderlust is back fully after the pandemic period.Air cargo demand was up +5.8% in April, up +10% in the Asia/Pacific region, no doubt boosted by the rush to beat US tariffs.Meanwhile, container freight rates rose +10% last week from the week before to be -41% lower than year-ago levels. Trade uncertainty surrounding 'new' tariff-taxes is causing the current scramble to get goods moved. Bulk cargo rates dipped -2.5% in the past week however.The UST 10yr yield is now at 4.43%, and down -5 bps from yesterday.The price of gold will start today at US$3,322/oz, and up +US$26 from yesterday.Oil prices are down -US$1 at just under US$61/bbl in the US and the international Brent price is now at US$64/bbl.The Kiwi dollar is now at 59.9 USc, a +30 bps rise from yesterday at this time. Against the Aussie we are unchanged at just under 92.8 AUc. Against the euro we are down -20 bps at 52.6 euro cents. That all means our TWI-5 starts today at just under 68 and up +10 bps from yesterday.The bitcoin price starts today at US$106,229 and down -1.1% from yesterday. Volatility over the past 24 hours has been modest at just on +/-1.3%.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again on Tuesday.

Kia ora,Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news the trade chaos and tariff-war skirmishes have markets worldwide watching for inflation signals as much as growth signals.First, in the US their Redbook retail index was up +6.1% last week from the same week a year ago, driven increasingly by tariff-tax price increases, which is why this metric is diverging so much from the formal retail sales volume data.American mortgage applications fell last week from the prior week. That is consistent with the benchmark 30 year mortgage rate rising, now almost touching 7% again.The Richmond Fed's regional factory survey came in negative again in May with activity slowing and new order levels still quite weak. The service sector report for the same mid-Atlantic region was weaker too. In both cases they recorded price pressures over +6%.The Dallas Fed services survey was just as negative, in fact even more so. Input prices are a real issue here too, over 5%..The well-supported US Treasury 5 year bond auction continued the trend of bidders wanting and getting higher risk premiums. This one delivered a median yield of 4.01%, up from 3.93% at the prior equivalent event a month ago.The minutes of the May 8 (NZT) Fed meeting released overnight revealed policymakers are uncertain on how to assess the future risks of inflation and their labour market, and how they can meet their dual mandate when forces are pushing in different directions. They seem to see the inflation risks are the key priority. They are also watching the USD depreciation because that too brings inflation risks. For them, it is a waiting game.India's April industrial production expansion slowed from March, but not by as much as was expected. It seems to be settling in at an under +3% rate which is far more modest than the overall economic expansion there. India's economic rise isn't really being built on manufacturing prowess. Of course the trade and tariff-war backdrop won't be helping.Euro area inflation expectations are rising again, and came in at 3.1% in the latest survey (in April) for the ECB, results they won't have liked. These expectations are back to early 2024 levels, unwinding the progress the ECB policymakers had thought they had won.In Australia, their monthly inflation indicator, also for April, shows it stuck at 2.4%. A small easing was expected but didn't eventuate. But 2.4% isn't a killer level and probably doesn't change expectations that the RBA will keep reducing its cash rate target, currently at 3.85%, by another -25 bps at their next meeting on July 8, 2025. A lot could change in between however, and analysts will be watching for upside risks.The UST 10yr yield is now at 4.48%, and up +4 bps from yesterday.The price of gold will start today at US$3,296/oz, and down -US$6 from yesterday.Oil prices are up +US$1.50 at just on US$62/bbl in the US and the international Brent price is now at US$65/bbl.The Kiwi dollar is down at 59.6 USc, a small +10 bps rise from yesterday at this time. Against the Aussie we are up +50 bps at just under 92.8 AUc. Against the euro we are up +30 bps at 52.8 euro cents. That all means our TWI-5 starts today still just under 67.9 and back up +30 bps from yesterday.The bitcoin price starts today at US$107,462 and down -2.6% from yesterday. Volatility over the past 24 hours has been modest at just on +/-1.4%.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.

Kia ora,Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.I'm David Chaston and this is the international edition from Interest.co.nz.And today we lead with news a relief rally is underway on Wall Street, responding to the delays in tariffs by the US on EU goods.But first, an update of the overnight dairy Pulse auction where prices for both SMP and WMP slipped although less than the futures market had suggested. The WMP was down -2.7% in USD from the prior week's full event, and a bit more in NZD. To be fair both prices had risen sharply since April but this pullback still leaves it in a rising trend despite today's adjustment.Data releases resumed in the US after their weekend holiday with durable goods orders pulling back in April after the unusually strong March gains. The pullback was largely in line with what was expected however, -6.3% lower than the prior month but up +2.7% from a year ago. Perhaps worryingly, excluding aircraft orders, nomn-defence capital goods barely budged in April, a sign that boardrooms remain skittish about future investment.\That was matched by the Dallas Fed's May factory survey where activity was reported flat with a decline in new orders.But consumers seem happier, according to the Conference Board's May survey of consumer sentiment. But it was a survey taken before the latest US threats on the EU, so there is a sense of 'relief rally' here after the China tariff pullback. However, despite the month-on-month gain, this indicator is still tracking lower on the longer term, still lower than year-ago levels.Sentiment will be challenged again soon. There were a couple of housing indicators out overnight, and both recorded falls in American house prices. The FHA one was spun as an improvement, but it wasn't. The S&P/Case-Shiller one was a gain but a tiny one and the least since mid-2023.The bond market isn't feeling any better. The latest US Treasury 2 year auction, although as well supported as usual, brought a median yield of 3.90%, up from 3.74% at the prior equivalent event a month ago.And we can note that pricing for Trump Media shares, a marketplace that basically attracts investors who are supporters, is doing terribly. TMTG is down -11% today, down -33% so far this year, down more than -50% from a year ago. To rescue itself, it says it wants to raise US$2.5 bln to shift into crypto investing. It is an idea not going down well with shareholders.Across the border, core Canadian business activity is struggling a bit too. April wholesale trade was down -0.9% from March. That is kind of a lot for a one-month impact, one that records the initial tariff-war skirmishes.Across the Pacific in China, profits at industrial firms rose +1.4% in the first four months of 2025 compared to the same four months in 2024, picking up from +0.8% growth in the January–March period. For April alone, that was a rise of +5.2% from April 2024. Having noted that, April 2024 was a weak base. Still, given the trade challenges, and that China's factories are still very export oriented and vulnerable to trade war risks, this has to be seen as a good result in the circumstances.And we should start to keep an eye on China's carmakers. It is attracting increasing scrutiny because the economic fundamentals seem to be leaking away and quite fast. It could be another 'property development' industry failure, and could have just as large consequences if it wobbles too. They have no problem making cars, and good ones. But not only are they making more than the world needs, there are serious questions as to whether they can sell them for more than they cost to make.We should probably note that South Korean consumer sentiment jumped in May, rising back to levels that were common in November 2024 and prior. The ugly confusion period when its president went full-Trump and tried a palace coup (which resulted in impeachment, one that was upheld by the courts) is now behind it and Koreans are breathing easier. The rule of law won against a power grab. South Koreans will vote in a snap presidential election on Tuesday, June 3.And still in South Korea, they should join the CPTPP and diversify its trade as part of the bloc in the face of US uncertainties, a senior trade ex-minister is saying. (New Zealand runs a huge trade deficit with Korea.)In the EU, consumer and business sentiment basically held steady in May, according to the latest update. The trade wars are not yet unnerving the Europeans.The UST 10yr yield is now at 4.44%, and down -6 bps from yesterday.The price of gold will start today at US$3,302/oz, and down -US$38 from yesterday.Oil prices are down -US$1 at just over US$60.50/bbl in the US and the international Brent price is still just under US$64/bbl.The Kiwi dollar is down at 59.5 USc, a -½c retreat from yesterday at this time as commodity currencies are out of favour today. Against the Aussie we are down -20 bps at just on 92.3 AUc. Against the euro we are holding at 52.5 euro cents. That all means our TWI-5 starts today still just over 67.6 and down -30 bps from yesterday.The bitcoin price starts today at US$110,309 and up another +1.2% from yesterday. Volatility over the past 24 hours has been modest at just on +/-1.2%.Check back with us at 2pm for the RBNZ's May Monetary Policy Statement and OCR review. As you will knwo by now, 'everyone' expects a -25 bps cut. But the outlook from there is reasonably clouded, so Governor Hawkesby's analysis at 3pm is keenly awaited. We will have full coverage.You can get more news affecting the economy in New Zealand from interest.co.nz.Kia ora. I'm David Chaston. And we will do this again tomorrow.