Economy Watch

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 downgrade is seeing the trend of higher interest rates extend.And in the US, we have more negative signals. The Conference Board's Leading Economic Index (LEI) "plunged" by -1.0% in April, after declining sharply by -0.8% in March. The LEI has declined by -2.0% in the six-month period ending April and is now just shy of signaling 'recession' they say. But it is actually back lower than in the last Trump presidency when there was recession.At an investor day in New York, the boss of the US's largest bank, JPMorgan Chase, said investors are underestimating geopolitical and inflation risks. “Credit today is a bad risk,” he said earlier today. “The people who haven’t been through a major downturn are missing the point about what can happen in credit.”In Canada, their largest province has announced a Budget that prioritises higher spending and larger deficits in the coming year in a direct effort to "protect Ontario". The next federal Canadian budget isn't due until at least September.In China, retail sales rose by +5.1% in April from the same month a year ago, moderating from March's over 1-year high of +5.9% and missing market estimates of +5.5%. But is was one of the still-good data releases from China, one that is in a rising trend and even better because they have virtually no inflation.Another positive data release from China came from their industrial production which grew by a claimed +6.1% in April from a year ago and better than the expected +5.5% gain. However, the latest figure eased from the +7.7% growth recorded in March. Meanwhile, electricity production rose only +0.9% in April, hardly supporting the much stronger industrial production data.China, which regulates the wholesale price of petrol and diesel, announced cuts overnight, to take effect immediately.Meanwhile their national real estate development investment fell sharply yet again, and the residential sector was down -9.6% from April last year. And prices for new, and previously-owned housing are still down sharply on a year-on-year basis even if there are small pockets of regional improvements.Meanwhile, Chinese residents trading foreign stocks or holding offshore accounts are being put on notice as authorities take fuller advantage of cross-border data to trace unreported earnings.In the EU, their economy is projected to grow by +1.1% in 2025 and +1.5% in 2026, and both are downgrades from the levels forecasted last autumn. This is according to the European Commission’s Spring outlook. The downgrade is primarily attributed to the impact of rising tariffs and increased uncertainty stemming from recent abrupt shifts in US trade policy. On the inflation front, disinflation is now expected to proceed more rapidly than previously anticipated. Inflation in the Eurozone is projected to ease to 2.1% by mid-2025, reaching the ECB’s target earlier than previously expected, and to decline further to 1.7% in 2026. And staying in Europe, we should probably note that BNPL giant Klarna, which also operates in New Zealand, is seeing its losses grow. In Q1-2025 they doubled to -US$100 mln as "consumer credit losses" rose sharply, even as revenue grew.Later today (at 4:30pm NZT), the Australian central bank will review its cash rate target, currently at 4.10%. It is widely expected to be cut by -25 bps to 3.85%. That would put it still above the New Zealand OCR at 3.50% and our official rate is also expected to be cut by -25% mid next week to 3.25%, restoring the differential. But although both cuts are expected and priced in, more attention will focus on the next likely shift. Some see the RBA 'done' at one cut with the next move a rise. Background inflation risks are still elevated there, their labour market isn't suffering, and growth prospects are still there even in the current turbulent world.The UST 10yr yield is at 4.47%, up a mere +3 bps from this time yesterday, but curves are steeper.The price of gold will start today at US$3227/oz, and up +US$25 from yesterday.Oil prices are holding again today at just over US$62.50/bbl in the US but the international Brent price is -50 USc lower at US$65/bbl.The Kiwi dollar is now at 58.9 USc, up +10 bps from yesterday at this time. Against the Aussie we are unchanged at 91.8 AUc. Against the euro we are also unchanged at 52.7 euro cents. That all means our TWI-5 starts today still just over 67.5 and up +10 bps from yesterday.The bitcoin price starts today at US$105,393 and essentially unchanged from yesterday. Volatility over the past 24 hours has been moderate however at just under +/-2.2%.You can find links to the articles mentioned today in our show notes.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 analysts and investors are looking at the unfolding trade-war skirmishes through different lenses.The week ahead will be dominated for us by the 2025/26 Government Budget announcements on Thursday and before that the RBA rate decision tomorrow. Important in the background will be the bond vigilantes and their global assessments of risk premiums.While this is going on, the May PMIs will come through for most of the major economies. A number of countries will release their April CPI data too. And we will keep a close eye on Chinese data releases later today including for retail sales, industrial production, house prices and foreign direct investment levels. And Chinese demand will have an influence on the Wednesday full dairy auction as well.But first we should note that equity analysts are changing their tune. But it is not clear yet that investors are following them. Globally, Q1-2025 earnings have been good, with widespread results that beat forecasts. But for an increasing number of analysts, those good recent results are being dismissed because they now want to know how a company will fare in the Q2 and ahead world of trade disruption, sagging sentiment and higher costs. Stagflation offers few places to hide.The separate views between analysts and investors is probably clearest in the world's largest economy.Influential analysts at Moody's credit rating service are worried and have joined S&P and Fitch in a notable downgrade over the weekend of the US sovereign credit rating.That followed news that falling American consumer sentiment is hanging over the global economy. The University of Michigan consumer sentiment index dropped sharply in May from April when analysts expected it to rise. This is the fifth consecutive monthly decline, the lowest reading since June 2022, and the second-lowest on record. Hurting was rising inflation expectations largely around the impact of the tariff taxes. Sentiment is down by a quarter in a year.And retailing giant Walmart is only now starting to roll out tariff price increases, so the pressure on inflation will become even more apparent in the coming monthsCurrent assessments of personal finances sank nearly -10% on the basis of weakening incomes. Tariffs cost fears were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April. Inflation expectations for the year ahead surged to 7.3%, a new all-time high from 6.5% and long-run inflation expectations edged up to 4.6% from 4.4%.US housing starts stayed at a relatively low level and that was lower than expected. Given the impact of the tariff taxes, that won't really be any surprise. This is largely why new building consents fell further.Meanwhile, Bloomberg is reporting that the US Fed will trim 2500 jobs or about 10% of its workforce "over the next several years".And we should probably note that the Trump tax cut bill failed in a key US House of Representatives committee, mainly because conservative Republicans want greater spending cuts, including to Medicaid programs. In Canada, their senior loan officer survey of credit conditions tightened for both home loan lending and other lending. "Price" (the expectations of higher interest rates) was a key factor. But for non-mortgage lending the impact of tariffs was prominent also.In China, later today we get a big data dump for April activity which could be revealing on how they weathered the initial tariff-war impacts.And they may say they are best-buddies with Russia, but Russia can't afford to buy Chinese cars and has moved to block imports. It is hard to imagine China being happy with that because it will kill a trade of over 1 mln vehicles annually.Singapore's non-oil exports surged +12.4% in April from a year ago, far exceeding expectations of a +4.0% increase and accelerating from a +5.4% rise in March. It is the third consecutive month of export growth and the fastest pace since last July. There were sharp rises in exports of both electronics and non-electronic products.Although slightly dated now, we can report the Eurozone's trade surplus surged to a record +€37 bln in March, up from +€23 billion a year earlier, fueled by a sharp rise in exports, particularly to the US as buyers rushed orders ahead of incoming tariffs.The UST 10yr yield is at 4.44%, unchanged from Saturday. The price of gold will start today at US$3201/oz, and up +US$14 from Saturday. But it is down -US$137 from this time last week.Oil prices are holding today at just over US$62.50/bbl in the US and the international Brent price is still just under US$65.50/bbl. But both are up +US$1.50 from a week ago.The Kiwi dollar is now at 58.8 USc, unchanged from Saturday at this time. Against the Aussie we are down -10 bps at 91.8 AUc. Against the euro we are unchanged at 52.7 euro cents. That all means our TWI-5 starts today still just under 67.4 but up +40 bps from a week ago.The bitcoin price starts today at US$105,306 and up +1.3% from Saturday. Volatility over the past 24 hours has been modest at just under +/-1.4%.You can find links to the articles mentioned today in our show notes.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 Trump's back-down on tariffs came as corporate decision-makers concluded reshoring isn't a good idea. There are few moves to bolster US-based production.But first today, Fed boss Powell spoke overnight and he focused on the challenges they face keeping inflation under control. He noted long-term interest rates are now notably higher, driven mainly by risk premiums rather than shifts in inflation expectations, while estimates of the longer-run neutral policy rate have also risen. He noted the US economy has changed a lot since their last review and warned that inflation might become more volatile in future due to more frequent supply shocks, which will make it harder for central banks to achieve price stability. Throughout his remarks, Powell also stressed the critical role of anchored inflation expectations. Meanwhile US initial jobless claims slipped slightly to 205,200 but that was what seasonal factors accounted for and what analysts were expecting. There are now 1.783 mln people on these benefits, a reduction from last week, but it is up almost +100,000 from this time last year.Maybe surprisingly, American producer prices fell by -0.5% in April, following a revised flat reading in March and defying market expectations of a +0.2% increase. This was the first decline in the PPI since October 2023 and the sharpest drop since April 2020, during the early pandemic period. The retreat was largely driven by a -0.7% fall in service costs, the largest since data collection began in December 2009, and that was due to a -1.6% drop in margins for trade services, because businesses are absorbing much of the impact from higher tariffs. PPI is now up +2.4% from a year ago.Industrial production in the US didn't rise as expected in April. In fact factory output fell -0.4%, reversing the increase in March. And the prospects of shifting significant production "back to the US" seem remote in many diverse categories.There were two regional factory surveys released for May overnight, and both declined somewhat. The NY Fed's Empire State survey reported another modest decline. The Philly Fed's survey for their core rust belt region recorded a sharp improvement, better than the improvement expected. But it is still in decline.In a sign of the times a major lithium battery recycler has entered bankruptcy.US retail sales were little-changed in April, following the upwardly revised +1.7% front-loaded pre-tariff surge in March. 2024 gains mean they are +5.2% higher than year-ago levels.The NAHB/Wells Fargo Housing Market Index in the US fell sharply in May to its the lowest since November 2023 and well below what was expected. Home builders are glum. Current sales conditions fell, sales expectations in the next six months edged lower, and they said traffic of prospective buyers has dropped recently.Meanwhile, housing starts in Canada jumped +30% in April from March and that was well above what was expected. It was their most since June 2023. US tariffs on Canadian softwoods is likely making Canadian house building costs lower.Across the Pacific, Japanese machine tool orders rose +7.7% in April from a year ago, but that growth was a slowing from +11.4% growth in March. But it was the seventh consecutive month of rising machine tool orders. Local orders dropped -5.4% from a year earlier while foreign orders jumped +13.3% on the same basis. India's exports were nothing special in April, certainly not reflective of a rising industrial power. They slipped from March but they were up +9.0% from a year ago due to gains in prior months.In Europe, industrial production rose by +2.6% in March from February, marking the strongest increase since November 2020 and rising from a good +1.1% gain in February. The result easily beat market expectations of a +1.8% rise. The surge was driven primarily by a rebound in output of durable consumer goods.In Australia, they added +75,500 jobs in April, almost 47,500 of them full-time positions. Their employed workforce grew +2.75% in the past year. Their jobless rate eased to 4.1% from 4.3% (although staying at 4.1% on a seasonally adjusted basis which is the metric others report). Inflation pressure plus this strong jobs report might have the RBA re-thinking the wisdom of a rate cut.Bulk freight rates fell -7.0% in the last week to be -18.5% lower than year-ago levels. Container freight rates were also -18.0% lower than year ago levels, but they did rise +8% last week with a surge in outbound cargoes from China across the Pacific on the sudden 'pause' in tariff hikes.The UST 10yr yield is at 4.45%, down -8 bps so far today.The price of gold will start today at US$3218/oz, and up +US$43 from yesterday.Oil prices are -US$2 lower today at just over US$61.50/bbl in the US and the international Brent price is just on US$64.50/bbl.The Kiwi dollar is now at 58.7 USc, down -40 bps from yesterday at this time. Against the Aussie we are down -10 bps at 91.7 AUc. Against the euro we are down -30 bps at 52.5 euro cents. That all means our TWI-5 starts today just over 67.2 and down a net -40 bps from this time yesterday.The bitcoin price starts today at US$104,020 and up +0.8% from yesterday. Volatility over the past 24 hours has remained modest at just under +/- 1.2%.You can find links to the articles mentioned today in our show notes.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 the price of gold is falling, long term benchmark interest rates keep on rising with larger risk premiums, and monetary policy regulators are coming round to the idea of rate cuts to bolster flagging economic expansion everywhere.But first in the US, mortgage application volumes rose marginally last week from the prior week for the period and holding on to the +11% jump of the previous period. Benchmark home loan rates were basically stable but at an elevated level averaging 6.86%.Canada building consents fell in March and by more than expected although to be fair it only cancelled the February rise and probably isn't too surprising given their election campaign and overall economic uncertainty around relations with the US.Meanwhile, Canadian vehicle sales took off in March, and to its best month since the pandemic, as buyers rushed to get hold of pickups, utes and light trucks ahead of the threat of sharply higher prices. On the other hand, car sales dived.In China, new yuan loan approvals were unusually weak in the April data released overnight. Banks approved loans at their lowest rate for an April since 2005, and at ¥280 bln, that was less than 10% of the good March level and less than half the year ago level, itself unusually weak. Of course, it reflects the initial impact of the trade war on Chinese businesses.In Australia we should note that large parts of Victoria and South Australia are in a severe drought condition, also even parts of Tasmania. Some say it is the worst "in a lifetime" with zero April rainfall extending into May. If there is any hope for livestock farmers it is that grain production has been high in other areas, enabling grain-fed beef to continue. Lucky for them, grain-fed beef demand is rising in China. Those drought conditions contrast with the endless rain Sydney is having.Next week on Tuesday, the Aussie central bank will be reviewing its 4.10% cash rate target. More analysts now see a -25 bps cut then. Although it is no certainty, financial markets also have it priced in.And staying in Australia, regulator ASIC is tackling Macquarie again. ASIC is suing Macquarie Securities alleging it engaged in misleading conduct by misreporting millions of short sales to the market operator for over 14 years. They allege that between 11 December 2009 and 14 February 2024, Macquarie failed to correctly report the volume of short sales by at least 73 million. ASIC estimates that this could be between 298 million and 1.5 billion short sales. The last ASIC action against Macquarie was just a week ago over compliance failures. Today's action is the fifth by ASIC against Macquarie since April 2024.The UST 10yr yield is at 4.53%, up +3 bps so far today.The price of gold will start today at US$3175/oz, and down -US$67 from yesterday.Oil prices are marginally lower today at just under US$63.50/bbl in the US and the international Brent price is just under US$66.50/bbl.The Kiwi dollar is now at 59.1 USc, down -30 bps from yesterday at this time. Against the Aussie we are up +10 bps at 91.8 AUc. Against the euro we are down -30 bps at 52.8 euro cents. That all means our TWI-5 starts today just under 67.6 and down a net -30 bps from this time yesterday.The bitcoin price starts today at US$103,147 and down almost -1.0% from yesterday. Volatility over the past 24 hours has remained modest at just under +/- 1.1%.You can find links to the articles mentioned today in our show notes.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 relief rally following the US-China trade de-escalation continues, for equities at least. But worries continue about recession and inflation. Investors want higher risk premiums. And it seems China is in no hurry to resume buying from US sources.But first up today, the overnight dairy Pulse auction delivered similar but slightly lower results for both SMP and WMP that were achieved at last week's full auction, basically confirming the recent shifts, especially the up-shift for WMP.The April US CPI inflation rate came in at 2.3%, a touch lower than the 2.4% expected and which applied for March. That was largely due to fuel costs falling more sharply (-11.8%). The costs of food (+2.8%), rents (+4.0%) and transport (+2.5%) were all higher.Last week's Redbook tracking of US retail sales recorded a +5.8% rise from the same week a year ago. We will likely see this fade as the tariff-induced buying eases off now.The NFIB Small Business Optimism Index dropped in April to its lowest level since October 2024. But the retreat wasn't quite as much as was expected.US household debt data updates were a mixed bag. Total household debt rose +$167 bln from the prior quarter to a record high of $18.2 tln in Q1-2025. Delinquency rates rose from the previous quarter, with 4.3% of outstanding debt now in some stage of delinquency.US importers of Chinese goods still face much higher costs. The net position after the tempest and pullback is 'worse' for inflation, and negative for trade. Struggle is all ahead for global trade.In India, CPI inflation fell to 3.2% in April, and that is its lowest rate since before the pandemic. Food prices were up only +1.8% within that. The current overall inflation rate is now well below their central bank's 4% mid-point target. If it stays there, a rate cut in India may be on the cards.In Germany, there was a sharp bounce-back in the ZEW sentiment survey tracking in May, putting the unusual drop in April behind it. The survey indicates growing optimism for the next six months, driven by the formation of a new federal government there, progress in resolving tariff disputes, and signs of stabilising inflation. Nearly all sectors reported improved sentiment in May.In Australia, updated data seems to indicate that Kiwis are losing the desire to visit there. That said there were 104,600 visits by Kiwis in March, -9.3% fewer than in March 2024 and almost -10% fewer than in March 2018 (a pre-pandemic equivalent). For the year to March 2025, we made 1.367 mln visits to Australia, little different (+1.4%) to the same year in 2024. It is a similar story for Aussies visiting New Zealand. In March 2025 it was -1.7% less than the same month a year earlier.Consumer sentiment in Australia has stayed weak in March, according to a widely-watched Westpac-MM survey.We should probably note that good weather and favourable growing conditions in almost all regions has boosted wheat production - and is pushing down prices. They are now back to levels they first achieved ten years ago and are almost -60% lower than their peak in 2022. For similar reasons, corn prices are falling now too.The UST 10yr yield is at 4.50%, up +4 bps so far today.There rate may go higher. A Reuters poll of bond investors shows them increasingly concerned about both a global recession, and rising inflation. That is, stagflation.The price of gold will start today at US$3243/oz, and up +US$20 from yesterday.Oil prices are up +US$1.50 today at just over US$63.50/bbl in the US and the international Brent price is just over US$66.50/bbl.The Kiwi dollar is now at 59.4 USc, up +90 bps from yesterday at this time. Against the Aussie we are down -50 bps at 91.7 AUc. Against the euro we are up +30 bps at 53.1 euro cents. That all means our TWI-5 starts today just under 67.9 and up a net +50 bps from this time yesterday.The bitcoin price starts today at US$104,161 and back up +2.7% from yesterday. Volatility over the past 24 hours has remained modest at just on +/- 1.7%.You can find links to the articles mentioned today in our show notes.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 mostly about the China-US Geneva 'agreement' and market reactions.First up, China and the US agreed to cut tariffs on each other by -115%. For the US that means they will go down to 30%. For China, down to 10%. Supposedly the deal is for 90 days to allow further negotiations, but it will likely be endlessly extended. Oddly, China was the only major power to impose reciprocal tariffs and this deal seem to make them a clear winner with the US meeting most of China's demands for de-escalation. Other countries who regarded themselves as friends and who have or are still 'negotiating' with the US are now in a much worse position. That includes neighbours Canada and Mexico, Japan, and of course the EU.Separately, India who made a big effort to deal with Trump, is spurned, and they have other security reasons to feel offended (justifiably or not).US merchants will rush to return to China supply. But it isn't clear that China will be doing the same with US products. The US trade deficit with China, already elevated, is likely to surge after this type of 'Trump negotiation success'.The equity markets liked the retreat and Wall Street took off. The USD strengthened, probably in a way the American's don't want. The bond market sees more risks and increased its risk premium. Gold and bitcoin fell sharply.The size of the tariff taxes became clear in April with the release of the US Budget Statement. These taxes cost US importers $16 bln in the month, an increase of +US$9 bln from a year ago, or +$500 mln/day, far lower than the +US$2 bln/day claimed by Trump. Of course they will now fall from here and it seems will never reach the claimed levels so any budget boost to tackle deficits - a clearly stated policy objective - is likely now in the bin.The May report from the USDA shows that grain production worldwide is rising while consumption isn't. So prices are falling especially in the US in response to their trade policies. More will be used there as feed grains. Oddly, this report noted lower production and export opportunities for beef but overlooked mention of what is presumed to be a surge in beef imports. They did say dairy production will be lower and imports higher.Across the Pacific, Chinese vehicle sales came in for April up +9.8% from the same month in 2024. These sales ran at 2.59 mln units an all-time record high for any April. NEVs took a record 47% share in the month. In all this, foreign brands are struggling to get a share, or even keep their share of this expanding market.The UST 10yr yield is at 4.46%, up +8 bps so far today. Wall Street has taken off today on the China tariff news, up +3.1% in Monday trade. The price of gold will start today at US$3223/oz, and down -US$100 from yesterday.Oil prices are up +US$1 today at just over US$62/bbl in the US and the international Brent price is just over US$65/bbl.The Kiwi dollar is now at 58.5 USc, down -60 bps from yesterday at this time. Against the Aussie we are down -20 bps at 92.2 AUc. Against the euro we are up +30 bps at 52.8 euro cents. That all means our TWI-5 starts today just under 67.4 and down -20 bps from this time yesterday.The bitcoin price starts today at US$101,401 and down -2.5% from yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.5%.You can find links to the articles mentioned today in our show notes.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 with claims of "substantial progress" and "a deal we struck" by the Americans in their Geneva talks with China, but no indications of anything from the Chinese. Bluster from the White House doesn't count for much these days.But first in the coming week, US attention will shift to Wednesday's CPI data for April although no real surprises are anticipated. There will be April data for retail sales too, PPI data, housing starts, and the next sentiment update from the University of Michigan at the end of the week.China will report new loan data, house price data, and updates for industrial production and retail sales. Japan will release its Q1-2025 GDP data, and both South Korea and Australia will release labour market data updates. Locally we will get travel, population, retail and productivity data, not to forget the Q1 ready mixed concrete data (!).In Japan, household spending rose +2.1% in March from a year ago and far better than the expected +0.2% gain. It was the strongest growth since December. Helping was that the previous retreats of spending on food basically stopped, while spending on furniture and on recreation rose a good levels.China's April CPI inflation dipped -0.1% from a year ago, holding the same easing for a second month and that was what was expected. It was the third consecutive month of consumer deflation. Within that result, food prices were up +0.3% but beef prices fell -4.9% from a year ago, lamb prices were down -3.8%. Milk prices fell -1.2%.Deflation was more pronounced for producer prices, down -2.7% from a year ago, the steepest retreat for any month in 2025.Staying in China, April exports came in very much better than the pullback that was expected. In fact their trade surplus was almost as strong as the unusual March trade surplus. Few were expecting this 'good' result. Here are the results by trading partner.New Zealand exported twice what we imported from them. For Australia it was almost the same but the Aussies have a higher dependency on China than we do. For the US, they are still taking more that 10% of all Chinese exports although that is down from nearly 13% usually. But Chinese buying of American goods is now under 6% of all Chinese imports, down from the usual 16%. The Americans may have initiated the tariff war, but the Chinese have reacted far faster.Meanwhile China said its Q1-2025 current account surplus hit a record high, more than treble what it was in the same quarter a year ago. US demand saw their merchandise trade surplus leap, while their services deficit narrowed slightly.Across the Pacific in the US, that foreigners are avoiding travel there has been confirmed by new data that shows an historic drop in inbound travel spending. It has only been a sharper drop in the aftermath of the 9/11 attacks and the early stages of the badly-handled response to Covid. The US as a travel destination is a significant reason they have run services surpluses. The travel boycott may build over fears it is unsafe, amid numerous reports of immigration officers detaining tourists or denying entry even for transit.Further the American spring real estate season is shaping up to be 'a dud'. High unsold inventories, high price expectations, and still-high mortgage rates are putting off buyers during this prime selling period.The US barbeque season is approaching and the cost of beef is rising and rising. Tariffs are raising prices and drought is thinning local cattle supply. That means the Americans are more dependent than ever on imported beef, especially ground beef. They are price takers so are paying both the premium for the supply shortfall, plus the full imported tariffs.Looking north, although the Canadian jobless rate rose a touch more than expected to 6.9% in April (and a 3 year high), and there was only a minor rise in overall payroll employment, there was in fact a strong rise in full-time jobs and an equally notable fall in part-time roles.The Canadian dollar fell on the jobless rise. The overall softness however probably means the Bank of Canada will cut its 2.75% policy rate again at their next meeting on June 5 (NZT).The UST 10yr yield is at 4.38%, unchanged from this time Saturday and up +16 bps for the week. The price of gold will start today at US$3323/oz, and down -US$15 from Saturday.Oil prices are holding today at just on US$61/bbl in the US and the international Brent price is still just under US$64/bbl.The Kiwi dollar is now at 59.1 USc, down -10 bps from Saturday at this time, down -30 bps from a week ago. Against the Aussie we are unchanged at 92.2 AUc. Against the euro we are still at 52½ euro cents. That all means our TWI-5 starts today just under 67.6 and little-changed from Saturday, down -20 bps from this time last week.The bitcoin price starts today at US$104,041and up +0.9% from Saturday. Volatility over the past 24 hours has been modest at just under +/- 1.7%.You can find links to the articles mentioned today in our show notes.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 US Fed looks more trapped in policy choices than it has for a long time.But first up today, a US-UK trade deal was announced to great fanfare. But in fact it isn't much. Rather it is a small set of carve-outs from the previous base case: Car tariffs on British-made cars would come in at 10% rather than 27.5%, steel tariffs would go to zero and the threat of future pharmaceutical tariffs would recede. The overall headline US tariff of 10% seems to still be in place; the UK has offered more market access to the US and a Boeing airplane order. But the US did not get changes on food standards or the UK's digital services taxation. The whole thing is very underwhelming. All headlines, no substance.But the equity markets liked it, even if the bond markets didn't. The USD rose on the news. Perhaps the equity markets also see progress coming in tomorrow's Swiss meeting between China and US representatives?Meanwhile, US jobless claims fell last week and by a bit more than seasonal factors would have assumed, coming in right at the level expected by analysts. There are now 1.846 mln people on these benefits, whereas a year ago there were 1.743 mln on them, a +5.9% rise.American labour productivity fell -0.8 in the March 2025 quarter as output decreased -0.3% and hours worked increased +0.6%. It is their first decrease in productivity since the volatile pandemic years, and prior to that, the first Trump presidency.March wholesale inventories rose marginally (+0.4%) but so did sales in the pre-tariff rush, so the inventory-to-sales balance was little-changed and not exhibiting any stress.Also not changing much were American inflation expectations in April, which isn't as sanguine as it sounds because they came in at the same elevated 3.6% level they jumped to in March. However, households’ perceptions about their current financial situations deteriorated, with the share of consumers reporting that they are somewhat or much worse off compared to one year ago increasing. Similarly, households’ expectations about their future financial situations deteriorated, with the share of those believing they will be somewhat or much worse off a year from now also rising.In Malaysia, their central bank held its policy rate at 3% overnight, as was expected. They have low inflation, 1.4%, and a good +4.4% economic expansion but one that is fading. And they are vulnerable to the tariff war. In the meantime, Malaysian industrial production is still expanding at a healthy clip.In Europe, German industrial production is on the come-back up +3.0% in March from February, and for the first time since May 2023, hardly lower than year-ago levels. Of course, this is data that predates the onset of the US tariff war.In England, their central bank cut its policy rate by -25 bps to 4.25%, also as expected. But two of their nine members voted for no change. It is their fourth rate cut since August 2023, when their rate reached 5.25% in the previous cycle. They currently have a 2.6% inflation rate, slowly easing, and a +1.4% economic expansion rate.With the Bank of England following the ECB down, along with Canada, soon Australia, and likely New Zealand, it does point out that the US Fed is now boxed in by US fiscal policy, basically unable to cut rates there because of the immediate inflation risks.In Australia, they changed their laws making it clearer that buy-now-pay-later contracts are covered by their National Credit Code (which is Schedule 1 to their National Credit Act). ASIC has now issued regulatory guidance for the BNPL sector.We should probably note that lithium prices have fallen further, with the bubble well and truly over, and prices back to their pre-bubble 2021 levelsThe reduction impetus is going out of global container freight rate changes, down just -1% last week to be -23% lower than year-ago levels. Bulk cargo rates stopped rising in the past week.The UST 10yr yield is at 4.37%, up +10 bps from this time yesterday.The price of gold will start today at US$3303/oz, and down -US$81 from yesterday.Oil prices are firmer today, up +US$1.50 at just under US$60/bbl in the US and the international Brent price is now just under US$63/bbl.The Kiwi dollar is now at 59.1 USc, down -60 bps from yesterday at this time, down a full -1c from Wednesday. Against the Aussie we are down -20 bps at 92.3 AUc. Against the euro we are unchanged at 52.6 euro cents. That all means our TWI-5 starts today just on 67.6 and down another -20 bps.The bitcoin price starts today at US$101,054 and up +4.6% from yesterday. Volatility over the past 24 hours has been moderate at just under +/- 3.0%.You can find links to the articles mentioned today in our show notes.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 the global economy's track is no clearer today.First up, the US central bank kept it key policy rate unchanged at 4.50% for a third consecutive meeting in line with expectations. They are keeping their wait-and-see approach but watching to see if the tariff taxes drive up inflation and slow economic growth. They say they still see expanded economic activity despite signs net exports are volatile. So far they haven't seen the jobless rate move "and labour market conditions remain solid". But they are seeing elevated inflation, and they foresee risks of higher unemployment and higher inflation.Equity markets dropped on the release, as did benchmark bond yields. The USD hardly moved however.Earlier, it was reported that US mortgage application volumes jumped +11% last week from the previous week, ending the three consecutive slumps from earlier in the month. The rebound came after there was another small drop in benchmark mortgage rates.Across the Pacific, China's FX reserves rose in April to their highest level in more than six months (in USD).And staying in China, their central bank said it will cut the reserve requirement ratio (RRR) by -50 basis points, injecting about ¥1 tln in liquidity into their domestic economy. But the cut won't come until May 15 and will then be the first RRR cut in 2025. They also said they will lower the rate on seven-day reverse repurchase agreements by 10 basis points to 1.40%, effective tomorrow, Thursday, May 8. This is the first cut to this key policy rate since September 2024 and could lead to cuts in market and other regulatory rates.And despite denials on both sides, both China and the US said they will meet in Switzerland to discuss stuff on Saturday. Interestingly, the Chinese side will be represented by their lead person for China-US economic and trade affairs, but the US side won't be led by its USTR, but the more senior Treasury Secretary.In the EU there were no surprises in their March retail sales volume data, holding flat again.However, there was positive data out of Germany, where factory orders rose +3.6% in March from February, well above market expectations of a +1.3% gain and putting behind it February's lackluster result. It was their strongest increase since December, with broad-based gains across sectors.Meanwhile, Poland cut its official interest rate by -50 bps to 5.25%. Falling inflation and weak economic activity prompted the move, but it was unusual because they have elections due on May 18 and they are battling Russian election interference.In Australia, regulator ASIC said it has imposed additional conditions on Macquarie Bank's Australian financial services licence after multiple and significant compliance failures – some going undetected for many years and one for a decade.And it seems Peter Dutton wasn't the only party leader to lose his seat at the weekend election. The Greens leader will too. In fact, like the Liberals, the Greens vote fell rather sharply at that election.Separately, the OECD said the global trade in fake goods reached almost US$½ tln in the latest data they have - which is for 2021, posing risks to consumer safety and compromising intellectual property. The breakdown in trade cooperation since won't have lessened the problem.The UST 10yr yield was at 4.28%, down -3 bps from this time yesterday before the US Fed announcement, then slipped slightly further to 4.27%.The price of gold will start today at US$3384/oz, and down -US30 from yesterday.Oil prices are firmer today, down -50 USc at just on US$58.50/bbl in the US and the international Brent price is now just under US$61.50/bbl.The Kiwi dollar is now at 59.7 USc, down -30 bps from yesterday at this time. Against the Aussie we are unchanged at 92½ AUc. Against the euro we are down -20 bps at 52.6 euro cents. That all means our TWI-5 starts today just on 67.8 and down -20 bps.The bitcoin price starts today at US$96,653 and up +2.2% from yesterday. Volatility over the past 24 hours has been modest at +/- 1.6%.You can find links to the articles mentioned today in our show notes.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 we are in for a day of significant announcements, but locally and internationally.But first up today, the overnight full dairy auction brought higher prices, up +4.6% in USD terms and up +3.0% in NZD terms. Of note, the butter price hit a new all-time record high of US$74992/tonne. Also, cheddar cheese rose a very sharp +12.0% from the prior full event, and the dominant WMP price was up a heady +6.2%. This has been a very positive outcome, even if it was on relatively low off-season volumes.There seemed to be two big background drivers. First, EU production is slipping and today's NZ auction prices seem to be equalising with European pricing. And secondly, there was a substantial increase in demand from Southeast Asian buyers, shifting from EU supply. Today's result will bring upside to the payout - if it is maintaintained in future events.Elsewhere, there was a good rise in US retail sales last week, up +6.9% from the same week a year ago in the Redbook survey. But as we have noted previously, it is now hard to separate the inflationary effect of the tariff taxes from volume gains. It is about now that the tariff-tax impact will start happening. All eyes are on Apple, because they won't be able to avoid price hikes much longer now.Retaliatory tariff taxes also juiced up US exports in both goods and services in March but it was minor and similar to February. US imports however shot up to a new all-time record high. So the American trade deficit also hit a new record exceeding -$140 bln for the monthNone of this is helping sentiment. The latest survey, this one the RealClearMarkets/TIPP Economic Optimism Index retreated in May from April when a gain was anticipated. It was at its lowest in seven months.Meanwhile, the US logistics managers index returned to more usual levels, but allowing it to do that were rises in inventory and freight costs, rather than the efficiency components.There was a well-supported US Treasury 10 year bond auction earlier today, and that delivered a median yield of 4.28% which was down -6 bps from the prior equivalent event a month ago.Tomorrow will be dominated by the US Fed's meeting outcome. Changed interest rates are unlikely, but there will be intense interest in how they view the present and future economic landscape.In Canada, the widely-watched local Ivey PMI turned into contraction in April.In China, the Caixin Services PMI expansion eased back in April, down from March’s three-month high to be below analyst forecasts. This is now the softest expansion in their services sector in seven months. But this Caixin version reported a slightly faster expansion than the official version.There is a lot going on today, and amongst that we are expecting a significant Chinese briefing by their central bank and other regulators about new moves to respond to their economic pressures triggered by the tariff war.In Europe, their April services PMI didn't fall into contraction as expected. Rather it stayed just on the positive side. But it is an anemic expansion all the same.In Australia, household spending slipped in March from February, to be +3.5% higher than March 2024. Of special note was the very sharp -1.3% dive in Queensland.There was an even sharper retreat in building consents in Australia in March with a big -15% dive in consents for building apartments.The UST 10yr yield is now at 4.31%, down -3 bps from this time yesterday.The price of gold will start today at US$3414/oz, and up +US$101 from yesterday, and heading back towards its April 23 record high.Oil prices are firmer today, up +US$2 at just on US$59/bbl in the US and the international Brent price is now just under US$62.50/bbl.The Kiwi dollar is now at 60 USc, up +40 bps from yesterday at this time. Against the Aussie we are up +0 bps at 92½ AUc. Against the euro we are up +50 bps at 52.8 euro cents. That all means our TWI-5 starts today just under 68 and up +10 bps. The Japanese yen has strengthened to limit the TWI-5 shift.The bitcoin price starts today down a mere -0.3% from yesterday at US$94,563. Volatility over the past 24 hours has been low at +/- 0.9%.Join us at 10:45am for the release of the important March quarter jobs report for New Zealand. We are expecting no rise in employment and a rise in the unemployment rate to 5.3%. Variations from that might be market-moving.And then at 2pm we will be covering the RBNZ's half-yearly Financial Stability Report. This will be Christian Hawkesby's first big set piece presentation as Governor, a role he holds until at least October.You can find links to the articles mentioned today in our show notes.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.