Countries work around Trump's flooded zone

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 - despite the US tariff news flooding the zone - the rest of the world economy is find a way to carry on.

But first we should note that a 15% tariff deal seems to have been concluded between the EU and the US but one that excludes drugs and aluminium. It looks very like the Japanese deal. And the tariff tussle between China and the US looks like it has been extended another 90 days. The pressure will be on European and Japanese companies to become 15% more efficient, but US companies will relax, allowed to be 15% less efficient in their home markets. In the intermediate term this won't be good for global US competitiveness.

In a look ahead this coming week, we will get our usual New Zealand monthly business and consumer sentiment survey updates. And our big end-of-month data dump from the RBNZ accentuated because it is end of quarter data. In Australia, it will be all about retail trade and inflation metrics.

And Wall Street will be very busy with many more large companies releasing earnings.

But the big interest rate influence will be from the central bank decisions from the US (no change expected), Japan (no change), and Canada (also no change). In all three cases the real interest will be on their commentary.

Underlying all this will be July PMIs from most major economies, plus more Q2 GDP data, and many inflation updates.

Over the weekend China released industrial profits data to June. They reported another slide, down -4.3% from June a year ago, the second straight monthly decline, amid persistent deflation pressures and growing trade uncertainty. State-owned enterprises experienced steeper losses while profit growth in the private sector slowed markedly. Profit gains were recorded in many sectors but one interesting one was in agriculture where profits were up more than +20%.

In Russia, and as expected, they cut their policy rate by -200 bps to 18%. They signaled another cut is likely in 2025. They see disinflation on the rise, and household consumption lower. Part of that is due to the size of the diaspora of working aged men trying to avoid the death trap of the attempted invasion of Ukraine.

In Europe, the ECB's survey of professional forecasters shows they don't expect much change in the coming year with things constrained by trade questions. They see inflation easing slightly, mainly due to the tariff effects, but GDP growth slightly stronger in the short term.

The Ifo Business Climate Index for Germany edged up in July from June, to the highest level since May 2024. But the report was still full of cautious sentiment.

In the US and as expected durable goods orders fell back in June after the May spike. Apart from the aircraft and defense sectors, it remained pretty ho-hum. New orders rose just +0.1%. Non-defense non-aircraft orders for capital goods fell when a rise was anticipated.

The UST 10yr yield is now at 4.39%, unchanged from Saturday.

The price of gold will start today at US$3,336/oz, down -US$2 from Saturday.

American oil prices have stayed softish at just on US$65/bbl with the international Brent price is still at just under US$68.50/bbl.

The Kiwi dollar is now at 60.2 USc and up +10 bps from Saturday and up almost +½c from a week ago. Against the Aussie we are unchanged at 91.6 AUc. Against the euro we are stable at 51.2 euro cents. That all means our TWI-5 starts today at just on 67.7, unchanged from Saturday but up +20 bps from a week ago.

The bitcoin price starts today at US$119,210 and up +2.4% from this time Saturday. Volatility over the past 24 hours has been low at just on +/-0.7%.

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.