US belt-tightening takes hold, jitters haunt financial markets

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 the mess in the US is getting worse as 'retribution' is ramped up. Markets are getting nervous.

First, the US government shutdown is masking official data that would show growing troubles in their economy. Today the Challenger job cut report for October revealed that softening consumer demand, the shutdown, AI adoption and higher tariff-taxes are driving hiring freezes and actual labour force reductions. This report said there were 153,000 layoffs in the month, the most since 2003. For all of 2025 so far, there have been more than 1 mln people laid off as counted in this survey. Hiring activity is slowing fast. The last time it was this bad was in the first Trump presidency (in 2020) but there was an excuse then. This time its all on his policies.

Meanwhile, the New York Fed's Global Supply Chain Pressure Index has eased again as US consumer demand falls away.

Financial markets reacted badly to the jobs cut report, going into a more risk-averse mode. That had the effect of punishing commodity currencies as a second-level consequence.

And a new shutdown pressure is about to hit the US. The FAA is restricting air traffic control services to many airports because they can't pay the controllers and rostering of the ones they can pay is a "safety issue". In true Trump style, the cutbacks will focus on states with Democrat governors. Large numbers of flights are being cancelled today.

The US has added ten minerals to its Critical Minerals List. Being on the list invokes a US Section 232 legal probe for potential tariffs and trade restrictions. It is a stick used to beat its trading partners and gives Trump-supporting investors cover to profit from re-opening unprofitable US capacity.

In Canada, they have released the 2025 Budget and it is a bit unusual. Rather than focusing on short-term benefits, even in the face of painful reactions to the US border restrictions, they have chosen a long-term focus to re-orient their economy away from US dependence. That will no doubt bring short-term political stresses, but is an unusual approach by a democracy. More like the Chinese approach. Carney is betting Canadian voters will have the patience for the payoff. His opposition smells an opportunity.

Meanwhile across the Pacific, Taiwanese inflation ticked up from its unusually low 1.3% rate in September to 1.5% in October, a level they had been at for the prior four months.

There were three central bank rate decisions out overnight and all held unchanged; Malaysia at 2.75%, Norway at 4.0%, and England also at 4.0%.

In the EU, they measure their retail sales on a volume (inflation-adjusted) basis and in September it eased lower from August to be +1.0% higher than year-ago levels. The weaker September was less than expected, but the year-on-year gain was as anticipated.

In Australia, their merchandise exports are rising fast again. They were up +7.9% in September from August, up +10.3% from the same month a year ago. But the surge is largely due to exports of gold which took an unusual breather in August. Mineral exports were up +9.7%, rural exports were up just +0.7%. Interestingly it was China (and Hong Kong) that drove the demand. But also exports to the US rose by almost a quarter despite the tariffs. Those tariffs have had little impact because the Americans themselves are paying them, taxing themselves.

The rise of global container freight rates we noted last week has pushed on into this latest update, up +8% for the week, to take it to -39% lower than year-ago levels. Outbound cargoes from China are driving the resurgence. US importers are resigned to paying the tariff-taxes, the Europeans taking advantage of the Chinese desire to pivot away from dependence on the US. Meanwhile bulk cargo rates rose +3% in the past week to be +41 higher than year-ago levels.

Another measure of global shipping's prospects is Danish shipping giant Maersk's share price. It is up +1.3% for the month, up +20% from a year ago. Much of their optimism is centered on China.

The UST 10yr yield is now at 4.08%, back down -7 bps from yesterday at this time to the prior day's level.

The price of gold will start today at US$3979/oz, down -US$3 from this time yesterday.

American oil prices are -US$1 lower from yesterday at just on US$59/bbl, with the international Brent price now just on US$63/bbl.

The Kiwi dollar is now at just under 56.3 USc, and down -30 bps from yesterday. That makes it at its lowest level in seven months. Against the Aussie we are holding lower at 87 AUc but that is a 12 year low. Against the euro we are down -50 bps at 49.8 euro cents. That all means our TWI-5 starts today at just over 60.9 and down -40 bps from yesterday, basically equalizing the April dip and the lowest since July 2009 and a 16 year low.

The bitcoin price starts today at US$100,519 and back down -3.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.9%.

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 on Monday.