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 risk premiums keep on rising.

But first, the OECD is reporting that the global expansion is leaking away, and quite quickly now. Economic activity rose by just +0.1% in the first quarter of 2025, significantly down from an +0.5% rise in the previous quarter. The US and Japan were the main drags in their data. And they say this is a departure from the higher and relatively stable growth rates recorded in the OECD area over the past two years.

US initial jobless claims eased lower marginally, all accounted for by seasonal factors. There are now 1.79 mln people on these benefits, +103,000 more than at the same time last year.

Existing home sales in the US fell -0.5% in April 2025, to their lowest in seven months and notably below what was expected. High mortgage rates are getting the blame.

The first of the US PMI survey is out for May, the S&P/Markit one, and that reported output growth improved in the month, but prices spiked higher from the tariff impacts. And this was true for both the factory category, and their services category. It is better than a decline but in a broader historical perspective this isn't very impressive.

Supporting that was the Chicago Fed's National Activity Index which not only recorded a decline in April, but March was revised lower too.

Meanwhile, the Kansas City Fed factory survey for May slipped more negative again, even if hopes for the future remain positive.

We don't usually report results of the US Treasury Inflation Protected Securities (TIPS), but today's 10 year event reveals the rising risk premiums investors are demanding, even as background inflation rises. Today's event delivered a median yield of 2.14% plus inflation, compared to the prior equivalent event a month ago of 1.86% plus inflation. These premiums are on the move wider, and are likely to widen substantially if Trumps 2025 Budget gets through Congress.

North of the border, and in a bit of a surprise, Canadian producer prices slipped in April to be just +2.0% higher than a year ago. It turns out that many components for Canadian factories are sourced from the US and the falling US dollar has made them cheaper. That is certainly true for energy products, but true for many other components as well. Cheaper input costs will help Canadian factories push back against the tariff taxes their US customers have to pay.

In Japan, they booked record high machinery orders in March, up +8.4% from a year ago, and far above what was anticipated. The outlook for the next three months looks good too. But we should note these gains are built on fast-rising domestic orders. Export order contributions were weak.

Meanwhile, the Japanese May PMIs both slipped lower to be essentially flat (a marginal contraction for factories, a marginal expansion for services).

In China, and in a sign of how broken their real estate development sector has become, local authorities are using bond funds to buy back unused land from struggling developers as a way to stop them completely collapsing.

Singapore reported its change in economic activity for March and that came in at +3.9%, lower than the 5.0% growth in the December quarter but better than the expected +3.6%. But officials there downgraded their full 2025 expectations saying they will be lucky to get +2.0% growth this full calendar year - for all the obvious reasons.

The Indian PMI for May stayed little-changed with a robust expansion. But they too are now noting rising price pressures.

The flash Australia PMIs for May report a growth stall, for both their factory sector and their services sector. That was because they had their slowest growth in new orders in 2025 so far.

Global container freight rates stayed low last week, up +2% from the prior week to be -28% lower than year-ago levels. And bulk freight rates rose +5.0% from a week ago but remain in the general low range they have been since early April.

The UST 10yr yield is now at 4.55%, and down -5 bps from this time yesterday.

The price of gold will start today at US$3,294/oz, and down -US$18 from yesterday.

Oil prices are -50 USc softer today at just under US$61/bbl in the US and the international Brent price is just under US$64.50/bbl.

The Kiwi dollar is now at 59 USc, and down -½c from yesterday at this time. Against the Aussie we are down -30 bps at 92 AUc. Against the euro we are down -10 bps at 52.4 euro cents. That all means our TWI-5 starts today still just under 67.4 and down a net -20 bps from yesterday.

The bitcoin price starts today at US$111,542 and up +5.0% from yesterday. Volatility over the past 24 hours has been moderate at just on +/-2.5%.

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 on Monday.

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