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 the US Senate has agreed the Trump budget, but only after the Vice President broke a deadlock with a casting vote. Financial markets are wondering about the wisdom in all this with equities hesitating, bond yields turning up, and the USD drifting lower. To be fair, none of these movements are large today. But the implications of massively higher US debt levels are as is the opening of the magic-money accounting they have adopted. It will be the bond market that makes the practical judgement.First however, the overnight dairy auction came in as weak as the futures market suggested it might. The SMP price fell -1.7%, but only to match the prior week's Pulse event. However the more important WMP price fell -5.1% and back to levels last seen at the beginning of the year. One local reason may have been the sharp increase in volumes offered, +10,000 tonnes more than at the prior event two weeks ago, and +6.7% more than the event in the same week a year ago. This volume offer jump came as milk production rose in all key producing regions (except Australia).Overall, prices were down -4.1% in USD terms at this even, down -5.2% in NZD as the greenback weakens further.The price downshift will have analysts reaching for their pencils although it might be too soon for them to backtrack on their 2025/26 payout forecasts. Fonterra's current season results are pretty much locked in and will be reported in late September. But their new year may be off to a soft start.Last week, the US Redbook index was +4.9% higher than year ago levels but still in the easing trend that started in early April.The May level of job openings rose unexpectedly to more than 7.7 mln largely on a surge for foodservice jobs. Analysts didn't see this coming but perhaps they should have given the sharp ICE immigration crackdowns underway. These roles at these volumes will be hard to fill.The latest factory PMI report from the ISM shows a sector still in contraction, being led by weak new order inflows. The internationally benchmarked S&P Global/Markit version reported an expansion and a moderate one at that, But both noted rising inflation pressures.It appears that the expected rise in June car sales didn't occur, dipping to its slowest pace of the year.Apparently its a good time to be in the logistics sector in the US with inventory levels rising and supply chains being stressed. The Logistics Managers Index is running at an unusually high level.The Dallas Fed regional services survey reported a continuing contraction, although not as steep in June as May.And the RCM/TIPP Economic Optimism Index was expected to bounce back in July but in fact it resumed the decline in a trend that started in December 2024.After falling to a recent low in April, Japanese consumer sentiment is on the rise again, back to where it was at the start of the year, but not yet back to 2024 levels. But at least it is rising.Yesterday we noted that the official factory PMI for China "improved" but was still showing a contraction. Today, the alternative Caixin factory PMI came in a little better than that, rising from May's tiney contraction to June's small expansion. These shifts don't mean a lot, but at least they are going in an improved direction. The Caixin survey noted "Higher new order inflows supported a renewed rise in production. That said, the rate at which new orders expanded was only marginal amid subdued exports." Trump's trade war may have kneecapped Chinese growth but it hasn't knocked them over.Overnight the ECB released the results of its May survey of consumer inflation expectations and they dipped to 2.8% when a small rise was expected. Consumers apparently thought inflation was running at 3.1% over the past 12 months. Separately the EU released its June CPI data and that shows it running at 2.0%, up from 1.9% in May.In Australia, large parts of the east cost is hunkering down for a lashing of strong winds and heavy rain. And that will include Sydney.The UST 10yr yield is now at 4.25%, and up +2 bps from yesterday at this time.The price of gold will start today at US$3,337/oz, and up +US$45 from yesterday.American oil prices are marginally firmer from yesterday, up +50 USc at just on US$65.50/bbl while the international Brent price is up the same at just over US$67/bbl.The Kiwi dollar is now just on 60.9 USc, unchanged from yesterday. Against the Aussie we are down -10 bps at 92.6 AUc. Against the euro we are down the same at 51.7 euro cents. That all means our TWI-5 starts today at 68.2 and unchanged from yesterday.The bitcoin price starts today at US$106,292 and down -1.3% from this time yesterday. Volatility over the past 24 hours has stayed low at just over +/-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 budget debate has financial markets on edge.But first up today, the Chicago PMI did not report the expected modest bounceback in June from the very weak May result. In fact is stayed in a severe contraction, disappointing everyone involved. It's been nearly three years since they have had any regular expansion and 2025 looks like it is shaping up the be the worst of the three.The Dallas Fed's factory survey for June was weak as well featuring shrinking new order levels. At least it was little-changed from May.As you read this, the US Senate is debating, and about to vote, on the big Trump budget bill. After years of complaining about US deficit spending and refusing to move the debt ceiling law, they are weighing whether to accede to Trump's demand to give him a free pass on both, including 'hiding' US$3.8 tln of tax cut costs. If they pass the budget, it is likely the bond market will deliver a thumbs down response, one that will affect global financial markets.On the US tariff trade bullying, there are few negotiations going well at present, for any of the parties involved.In Canada, they seem to have conceded the digital services tax issue to try and make progress on bigger issues. But the DST is still a live issue in the UK-US talks.Meanwhile, things are softening in India too. Their industrial production was up +1.2% in May from the same month in 2024, their weakest expansion in nine months and well weaker than expected.In China, there were no surprises and little movement in their official PMIs for June. Their factory sector contracted very marginally - again - and the services sector expanded marginally, also again. Basically they describe an economy marking time. But also one resilient to the trade shocks thrown at it which were designed to throw it off balance. That just hasn't happened, yet anyway.German inflation came in at 2.0% in June, a touch less than anticipated and little-different from April and May's 2.1% level. As small as it was, they weren't expecting a dip. Food prices there rose a modest +2.0% but keeping a lid on other rises was the -3.5% drop in energy prices.In Australia, Cotality/CoreLogic said its Home Value Index rose +0.6% in June from May, up marginally from the prior month but it is the strongest monthly gain since June 2024. Improved market sentiment in most major cities was behind the firming and active first home buyers are behind that. On a yearly basis, national home values climbed 2.7%. Meanwhile, rental growth continued to ease, with national rents up +3.4% over the past 12 months, the slowest annual increase since early 2021.Global air cargo demand rose +2.2% in May from a year ago, up +3.0% for international airfreight. The Asia/Pacific volumes were up a very healthy +8.2% on the same basis, no doubt related to the rush to beat US tariff deadlines. These overall volumes would have been better if the North American components hadn't been so weak (+-5.8%).Meanwhile, May air passenger travel rose +5.0%, up +6.7% for international travel and up +13.3% in the Asia/Pacific region. The only region to decline was North America (-0.5%) and mostly because of weak domestic travel.The UST 10yr yield is now at 4.23%, and down -4 bps from yesterday at this time.The price of gold will start today at US$3,2952/oz, and up +US$19 from yesterday.American oil prices are marginally softer from yesterday at just under US$65/bbl while the international Brent price is down -US$1, now just over US$66.50/bbl.The Kiwi dollar is now just on 60.9 USc, up +30 bps from yesterday. Against the Aussie we are unchanged at 92.7 AUc. Against the euro we are little-changed at 51.8 euro cents. That all means our TWI-5 starts today at 68.2 and +10 bps firmer than yesterday.The bitcoin price starts today at US$107,683 and up +0.2% from this time yesterday. Volatility over the past 24 hours has stayed 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 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 we are now halfway through 2025, closer to the next summer holiday break than the last one. We may need it more this time because economic 'progress' is hard to find.Looking ahead this week, the big end of month data dumps for May from the RBNZ will give us an updated look at mortgage and term deposit activity. The ANZ will also update us on their business sentiment survey for June. Then later in the week the June updates from the real estate industry will be released.In Australia it will also be about retail and trade updates for May.The week end with the US on another summer holiday break, this one for their Independence Day. Their June labour market report will come a day earlier this week (another low +129,000 is expected), preceded by PMI updates from all over. Markets also expect the US to announce tariff actions after the so-called 90 day pause. But Trump deadlines mean little in war and other diplomatic areas so don't be surprised if they mean little here too. He will go head if they don't hurt his own businesses, pull back if they do.Of more importance to us will be the results of both Chinese and Japanese data and surveys.In China, deflationary pressures not helped by the tariff war are keeping China's industrial profits in a low zone. They barely hit ¥600 bln in May and that was their lowest level for a May month since 2019 and -9.1% lower than May 2024. For the five months they were down -1.1% so the pace of decline is unfortunately building.Across the Pacific in the US, the squeeze on American household incomes shows up in the latest data for personal incomes and spending, this data for May. Incomes were only +1.7% higher than a year ago. Decreases in income support for struggling households is showing up in this data. And after inflation, they will be going backwards on the income front. On the consumption front, spending was up +2.2% from a year ago, also lower than the May 2.4% CPI inflation.This is a sure sign of rising economic stress that is spreading.The final reading of the University of Michigan survey of June consumer sentiment was out overnight and it confirmed the spreading household stress. This survey has been stuck at one of its worst readings on record for two months after plunging almost -30% in the first four months of 2025. Over the 80 years of the survey, a drop this large this fast has almost always predicted a recession. Sentiment readings improved slightly at the start of June but were -18% lower than at the start of the year to indicate Americans expect much higher prices and a much slower economy in the coming year. It should be no surprise this is the outcome of the changed US public policy direction - but the financial markets are ignoring this signal; willfully it seems.They seem to be overlooking these same survey results that show sentiment has fallen fastest this year for the most well-off consumers, whose post-pandemic spending spree helped insulate the American economy from recession then. They aren't there to do it this time, according to the UofM survey data.In Canada, they got weekend news that Trump is going to use tariffs to punish them for trying to tax US Big Tech companies via its Digital Services Tax initiative. The US wants free access to Canada and tax-free. Earlier the Canadians had confirmed the DST, which had been passed by their Parliament, would go into effect on June 30.Separately, Canada has ordered one of the world's largest video surveillance equipment manufacturers, State-owned Hikvision, to cease operations there on national security grounds. The order bars Hikvision from conducting business in Canada and prohibits government departments and agencies from purchasing its products. Existing installations of Hikvision equipment across government properties are under review to ensure their eventual removal. Hikvision cameras and monitoring systems are widely available in Australia and New Zealand.Economic sabotage may be spreading, but so are climate risks. It is early in the northern hemisphere summer season still, but both the US and Europe are struggling with dangerous heat dome conditions. China is not immune. These are sure to have economic implications if they extend through to September as expected.The UST 10yr yield is now at 4.27%, and unchanged from Saturday.The price of gold will start today at US$3,273/oz, and little-changed from Saturday. A week ago it was at US$3365/oz so a -2.8% fall from then.American oil prices are +50c softer from Saturday at just on US$65/bbl while the international Brent price is now just on US$67.50/bbl.The Kiwi dollar is now just on 60.6 USc, up +20 bps from Saturday. A week ago it was at 59.7 USc so a net +1.5% appreciation. Against the Aussie we are -10 bps softer at 92.7 AUc. Against the euro we are unchanged at 51.7 euro cents. That all means our TWI-5 starts today at 68.1 and +10 bps firmer than Saturday. A week ago it was at 67.7 so a net +40 bps gain.The bitcoin price starts today at US$107,509 and up +0.6% from this time Saturday. Volatility over the past 24 hours has stayed low at just on +/-0.6%.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 its all about the US and the sharp weakening of the greenback. It is now at its lowest level since early 2022. And a key part of the reason is worries about the Trump attack on the Fed's independence.Meanwhile, US initial jobless claims have stayed elevated although they fell from the prior week to +227,000 which is marginally above the same week a year ago. There are now 1.87 mln people on these benefits, +124,000 more than the 1.75 mln a year ago.US Q1-2025 PCE inflation was revised higher overnight to 3.7% in updated data - and that is up from 2.4% on Q4-2025. Early impacts of tariff-taxes are starting to show through here. Real consumer spending was revised down to just +0.5% growth from the initial estimate of +1.2% and well below the Q4-2024 rise of +4.0%. These revisions don't paint a very good picture about how American consumers fared in early 2025. Final GDP 'growth' fell -0.5% in the quarter, the first decline in three years.But there was a good rise in durable goods orders in May, up +17.5% from the same month a year ago. But non-defense capital goods orders rose only +2.4% suggesting board rooms remain hesitant, and see the tariff-related order rush as nothing more than temporary.Certainly the Chicago Fed's National Activity Index doesn't point to any upturn. Nor does the latest regional Fed survey, this one from the Kansas City Fed.The May US trade balance wasn't great either, coming in with a worse deficit than expected at -US$93.7 bln with exports dipping and imports rising from April. From a year ago the result was little-different.Globally, policy imbalances cause distortions as you would expect, and in the short term at least, they can juice up trade activity despite their intentions.Elsewhere in Singapore, industrial production slipped in May to be 'only' +3.9% higher than year-ago levels. In April the gain was +5.6% so a clear easing, even if it wasn't as much as was anticipated.More generally, we will need to be careful talking about commodity prices when the US dollar is on a downslide. Almost everything is quoted in USD so rising prices now largely reflect that depreciation.Freight rates are falling after the relatively brief 'Iran crisis' hot war. And they too are quoted in USD so the falls will be magnified in other currencies. Container freight rates were down -9% last week from the week before to be -38% lower than year-ago levels - but a year-ago they were in their own Suez crisis stress. Bulk cargo rates are falling too.The UST 10yr yield is now at 4.25%, and down -4 bps from this time yesterday.The price of gold will start today at US$3,334/oz, and up +US$12 from yesterday.American oil prices are unchanged from yesterday at just on US$65.50/bbl while the international Brent price is still just on US$68/bbl. Meanwhile Shell confirmed it isn't currently bidding for the underperforming BP, and that it is required to wait six month under UK law to take another look.The Kiwi dollar is now just on 60.7 USc, up +40 bps from yesterday and that's an eight-month high. However, against the Aussie we are -20 bps softer at 92.5 AUc. Against the euro we are unchanged at 51.8 euro cents. That all means our TWI-5 starts today at 68.1 and +10 bps firmer than yesterday.The bitcoin price starts today at US$107,338 and up +0.3% from this time yesterday. 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 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 tariff-tax cost threats to inflation are being joined by seasonal climate threats in the US.First, it is hot in large parts of the US, including the heavily populated North-East. Air-conditioners are working overtime. And that means electricity grids are overloaded. Retail electricity prices have spiked to nearly US$2,400/MWhr (NZ$4000/MWhr) during peak evening demand last night. Wholesale prices on Long Island topped US$7,000/MWh. Just for context, New Zealand prices this morning are about $60/MWhr. It's a crisis here they reach NZ$1000/MWhr.Meanwhile, US mortgage applications rose last week slightly from the week before, but only because refinance activity rose. Applications to buy a new home were down sharply from the prior week although up from the same week a year ago. Interest rates were little changed.But May sales of new single-family homes dropped sharply by almost -14% from the prior month to an annualised rate of 623,000 units and far below the expected 700,000 units rate and the sharpest decline since mid 2022. May 2025 was -6.3% below year ago levels. Getting the blame was uncertain economic conditions that is causing potential buyers to wait before committing to a purchase. And things could get worse - there are now 10 month’s supply of built but unsold homes at the current sales rate. We may start to see some aggressive discounting ahead - or more builders going bust.The big US Treasury 5yr bond tender earlier today was well supported even if not quite at the level of the last event. This event delivered a median yield of 3.82%, a bit less than the 4.01% at the prior equivalent event a month ago.And in Senate testimony, Fed boss Powell acknowledged that tariff-taxes could be a one-off threat to inflation, but he said that is not a law of nature, and they are worried they could also drive persistent rises in costs. He said they will stay on guard until they know the actual effect.In China, their central bank injected ¥300 bln into financial institutions through a one-year medium-term lending facility (MLF) into the country's banking system. This is what was expected.And in a first, President Xi will not attend the Brazilian-hosted BRICS meeting this year, the first time he has skipped that. The reasons why aren't clear, and that is fueling speculation.In Australia, their monthly inflation indicator fell to 2.1% in May, down from 2.4% in both March and April. That is a seven month low, and lower than the 2.3% rate expected. The main influence for the reduction were fruit & vegetable prices (from +6.1% to +2.8%), and travel & accommodation (from +5.3% to +0.6%).The UST 10yr yield is now at 4.29%, and down -1 bp from this time yesterday. The price of gold will start today at US$3,322/oz, and up an insignificant US$2 from yesterday.American oil prices are up +US$1 from yesterday at just on US$65.50/bbl while the international Brent price is now just over US$68/bbl.And we should probably note that the Wall Street Journal is reporting that Dutch oil company Shell is in talks to buy British rival BP. Currently, Shell is denying the report.The Kiwi dollar is now just on 60.3 USc, up +10 bps from yesterday. Against the Aussie we are +10 bps firmer at 92.7 AUc. Against the euro we are unchanged at 51.8 euro cents. That all means our TWI-5 starts today at 68 and +10 bps firmer than yesterday.The bitcoin price starts today at US$107,062 and up +0.9% from this time 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 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 US dollar is falling, and the benchmark US 10 year treasury yield is down also, near a seven week low. These are the key reactions to the easing of Middle East hostilities.But first up today, we should note that the weekly Pulse dairy auction for the two main powder products brought lower prices yer again. The SMP price fell -2.6% from last week's full auction to US$2704/tonne, which the WMP price fell -1.9% tp US$4006/tonne. The represent yet another retreat which essentially cancel the April to May price gains.In the US, Fed boss Powell was at Congress today giving his semiannual Monetary Policy Report. He is back again tomorrow. He repeated that they are in no rush to cut rates, certainly not in July, and that their scenario of two more -25 bps reductions in 2025 remains their current outlook. Their focus is on inflation risks which they still have worries about, not economic growth, and that is helped by a stable labour market.Meanwhile, the weekly Redbook survey of the US retail impulse showed sales volume growth easing lower, the lowest since the April tariff-tax induced price spike in early April. And if you exclude the seasonal dips at the end of 2024/25, this growth is the lowest since March 2024 even with the tariff-tax push effect on retail pricing.The US Conference Board's survey of consumer sentiment weakened in June. And this time the weakness spread to 'present conditions'. They report consumers were more pessimistic about business conditions and job availability over the next six months, and optimism about future income prospects eroded. It is a trend they have been noting since the start of 2025.Also fading was the Richmond Fed's latest factory survey for June. Although new order intakes declined more slowly, it still declined and the order backlogs in the region are now falling faster. Unless they get an improvement in new orders, production cutbacks are looking. And the service sector survey in the same mid-Atlantic states region is no better. In this district too, reshoring is not in evidence.We should also note that credit stress for US commercial real estate is staying unusually high. This extended trouble will force an increasing number of lenders there to book losses, and because the worst losses are coming from the largest buildings, it could be destabilising for some mid-sized banks. There was a large well supported US Treasury bond auction earlier today for their 2 year Note. This delivered a median yield of 3.73%, down from the 3.90% at the prior equivalent event a month ago.In Canada, their May inflation rate was reported overnight, unchanged at 1.7%, which was the expected result.Taiwanese retail sales were weaker in May, down -1.6% from the same month a year ago and extending a weaker trend. They were expected to rise marginally. However Taiwanese industrial production was outstandingly strong, up more than +20% from the same month a year ago and extending the April surge.In South Korea, consumer sentiment has improved sharply since the election of a reform-minded new president. Apart from a brief post-pandemic spike, they haven't been this optimistic there since 2017.And in case we don't miss it, the German economy is rising again, gaining in confidence and extending the gains that started in mid 2024. The turnaround hasn't been dramatic, but it has built more than you might have thought.The UST 10yr yield is now at 4.30%, and down -3 bps from this time yesterday. The price of gold will start today at US$3,320/oz, and down -US$61 from yesterday.American oil prices are down another -US$4.50 from yesterday at just over US$64.50/bbl while the international Brent price is now just under US$67.50/bbl as Middle East security concerns seem to fade.The Kiwi dollar is now just on 60.2 USc, back up +½c from yesterday. Against the Aussie we are +10 bps firmer at 92.6 AUc. Against the euro we are up +20 bps at 51.8 euro cents. That all means our TWI-5 starts today at under 67.9 and +20 bps firmer than yesterday.The bitcoin price starts today at US$106,141 and up +3.7% 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 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 markets seemed relieved that the Iranians responded in a localised and 'measured' way to the US attack. They took this as a sign the conflict will stay regional. Even the oil price eased back. To financial markets, 'normal' doesn't look like it is being threatened.But that is not to say 'normal' is great. And it looks like markets are stubbornly refusing to price in geopolitical risks, even when they are obviously high. If they have this collective judgement wrong, then the correction could be sharp.Meanwhile, the S&P Global/Markit PMIs for the US report that the factory sector held at a small expansion, one underpinned by a small rise in new orders, even if new export orders fell rather notably. More notable was the sharpish rise in costs and prices. This sector is losing its international competitiveness. Their service sector is expanding but the modest pace slowed in June.US existing home sales however brought a surprise surge in May from April to a sales rate exceeding 4 mln/year. However that is still lower than year-ago levels, and listings surged even more. Still, the average price rose to US$422,800, although to be fair that is only back to about the level it first achieved in June 2022.The US heatwave, which we noted yesterday may affect 200 mln people there, is worrying their electricity grid operators. They anticipate a 14 year high for electricity demand in the US north east. So it will be no surprise to know that they have issued warnings about supply interruptions.In China, Bloomberg is reporting that Beijing regulators are instructing state-owned developers to avoid defaulting on publicly issued debt. It is the latest attempt by authorities to keep a lid on their property crisis that just won't end or get properly resolved. There are about 20 SOE developers, all large, and all troubled. Clearly credit risk is still worryingly high.In Japan, although new order growth wasn't flash, their manufacturing sector expanded on a stock-build. And that was their first expansion in over a year. Meanwhile their services expansion extended, now for more than 12 months consecutively, and that was driven by new orders. These conclusions come from the early June PMI released by S&P Global/Markit.In India, their advance June PMIs show gains in both their factory and service sectors from already very good levels of expansion.In Europe, the same June PMIs show new order declines have basically ended, and in Germany in particular they rose for the first time in more than three years. Cost inflation is down, and now no longer an issue. Business sentiment rose. Their factory sector is expanding while their services sector stopped contracting in June. While none of this is vigorous, if it is a turning point, it is turning in the right way for themMeanwhile the modest expansion the S&P Global/Markit PMIs report in Australia extends this modesty to six straight months there. They haven't had a run like this since late 2022. While an expansion will be hard to notice on the ground, it is encouraging that both the factory sector and the service sector are moving in the same upward direction.The UST 10yr yield is now at 4.33%, and down -5 bps from this time yesterday.The price of gold will start today at US$3,381/oz, and up +US$14 from yesterday.American oil prices are down -US$4 from yesterday at just under US$74/bbl while the international Brent price is now just over US$72.50/bbl and down a bit more.The Kiwi dollar is still just on 59.7 USc, little-changed from yesterday. Against the Aussie we are holding at 92.5 AUc. Against the euro we are down -20 bps at 51.6 euro cents. That all means our TWI-5 starts today at under 67.7 and just marginally softer than yesterday.The bitcoin price starts today at US$102,349 and back up 2.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/-2.0%. There was a general recovery yesterday across most cryptos, but they are still down sharply from a week ago.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 the world's two largest economies are showing outsized vulnerabilities - geopolitical, economic, and environmental.First in China, the eye-catching retreat of foreign direct investment in April (a net outflow -US$4.8 bln) was arrested in May, positive by +US$17.8 bln for the month even if it was off the unusually declining base in April. Still, year to date, foreign direct investment into China remains unusually low, barely +US$50 bln in those five months and well below the almost US$70 bln in the same five months of 2024. For either year, these are not large amounts for a country the size of China. In 2023 the five month inflow was +US$84 bln, in 2022 it was +US$88 bln. It is a negative track that is sensitive for them.Separately, excessively hot weather and unusually heavy rain are affecting large parts of central and southern China.In Japan, May CPI inflation edged lower to 3.5%, the lowest annual rate of the year. Energy costs remained elevated, but dipped in the month. Also elevated and also dipping were food prices, now running at a +6.5% rate. However within that rice prices are almost double year ago levels, a very high profile marker that worries everyone.In the US, weekend data shows the Philly Fed's factory index booked another retreat, the third in a row although only a small one. They aren't yet benefiting from reshoring. New order levels fell. And price increases reported continued at a high level although the pace eased somewhat in this latest update.That data was just a part of the Conference Board's leading economic indicator series. And this slipped yet again in May, with the April index being revised sharply lower. They say this is "triggering the recession signal." Industrial production was the weakest contributor to the index in May. Readers may not be surprised that a Trump tariff-tax recession is on the way for the US, but we probably should brace for global consequences in 2025. It could be tougher than anticipated.At least one influential Fed governor thinks the FOMC will have to start cutting interest rates soon to lean against the recession threat. A July cut is what he suggested, saying “I think we’ve got room to bring it down, and then we can kind of see what happens with inflation.” Recession threats trump inflation threats for him.But inflation threats may just be starting. Until now, importers have been paying some of the tariff-taxes. But that can't last.And inflation isn't the only thing heating up in the US. Forecasters warn that dangerously hot and humid weather will blanket nearly 200 million people this coming week as a phenomenon known as a heat dome trap builds.Elsewhere, the weekend brought a raft of other central bank rate review decisions. In Turkey, their central bank left its policy rate unchanged at 46%, as expected. You may recall they raised it +350 bps at their May review.Meanwhile, at the Bank of England their governors voted 6-3 to keep their policy rate steady at 4.25% at its June meeting. Although this was the result expected, the three dissenters wanted a -25 bps cut and that was one more dissenter than was expected.In Norway however, they cut their policy rate by -25 bps to 4.25%. That was their first cut in five years.Taiwan held its official rate steady at 2%.The Philippines cut theirs by -25 bps to 5.25%.In China, their central bank left its Loan Prime Rates unchanged at their record low levels after the -10 bps dip last month.Meanwhile, Aussie miners are looking at some surprisingly weak May data for steel production in China. May and June are usually their peak months for production, but not this year. The May data shows it -6.9% lower than the same month in 2024, at 86.5 mln tonnes. That represents a very large fall away in looming iron ore requirements if it holds in June, a more than -6 mln tonne shortfall per month. (Steel production data can be seen here.)In the week ahead, we are watching for what a raft of early June PMIs tell us about the global economy. In Australia, the focus will be on the monthly CPI Indicator on Wednesday although little change at 2.4% is anticipated. Here, there will be key updates for the mortgage market activity on Friday. And in the US, Fed boss Powell will be testifying before Congress, and Trump is sure to have his attack dogs primed for that. Data on American durable goods orders are due (recovering from the sharp April drop expected), along with the May trade deficit update (no improvement expected).The UST 10yr yield is now at 4.38%, and unchanged from Saturday.The price of gold will start today at US$3,367/oz, and up +US$2 from Saturday.American oil prices are little-changed from Saturday at just on US$74/bbl while the international Brent price is now just over US$77/bbl.The Kiwi dollar is now just on 59.7 USc, little-changed from Saturday. Against the Aussie we are holding at 92.5 AUc. Against the euro we are still at 51.8 euro cents. That all means our TWI-5 starts today at on 67.7 and unchanged from Saturday.The bitcoin price starts today at US$99,713 down -3.5% from Saturday, its lowest since early May. Volatility over the past 24 hours has been moderate at just over +/-2.2%. The fall in the bitcoin price is the least of what other crypto prices are shifting. Generally stablecoins are holding with only very minor losses, but Binance is down -5.8% from a week ago, Bitcoin Cash is down -1.8% on the same basis, the official Trump coin is down -14.8%, and Ether is down -14.0%.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 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 Fed governors are clearly worried about the inflation threat from the new tariff taxes.The US Fed has kept rates unchanged in their decision earlier today, holding their core policy rate at 4.25%. The projection dot plot suggested that they have two more -25 bps rate cuts pencilled in for 2025 and one more for 2026. They also downgraded their expectations on growth in the US economy, dropping the 2025 estimate from +1.7% to +1.4%, and trimming their forecast for 2026 to +1.6%. Fed boss Powell said these growth downgrades will come as higher tariffs hinder the US economy and put upward pressure on US inflation.Meanwhile US initial jobless claims eased lower to 236,000 but the reduction is all accounted for by seasonal effects. There are now 1.82 mln people on these benefits, almost +100,000 more than this time last year.US mortgage applications fell last week despite the benchmark mortgage interest rate easing lower at the same time.Also falling and rather sharply, were new housing starts in May. They fell almost -10% from April to be -1% lower than the same month a year ago.Across the Pacific, Japanese machinery orders fell more than -9% in April, a sharp reversal from March’s +13% surge. This was the weakest reading since April 2020, but about what was expected. Still, they remain +6.6% higher than year-ago levels. Meanwhile Japanese exports fell in May after seven consecutive months of expansion. A retreat was expected and what they got wasn't a sharp as those expectations. However, imports slumped -7.7% from a year ago and more than expected.Meanwhile, Japanese car exports to the US fell in volume terms by almost -4% in May, but in value terms they were down almost -25%, suggesting that at the moment, Japanese carmakers are absorbing some of the new US tariffs to maintain their market share.The iron ore price is under pressure, unable to get out of its new lower range, and confirming the overall slowdown in the global economy.Meanwhile, the silver price has pushed up to a new all-time high.The UST 10yr yield is now at 4.40%, and up +1 bp from yesterday, clawing back earlier falls after the Fed commentary. The price of gold will start today at US$3,386/oz, and down -US$3 from yesterday.American oil prices are still in the higher zone, unchanged from yesterday at just on US$74.50/bbl while the international Brent price is now just over US$76/bbl.The Kiwi dollar is now just over 60.2 USc, unchanged from yesterday. The USD firmed slightly after the Fed decision. Against the Aussie we are down -30 bps at 92.7 AUc. Against the euro we are up +10 bps at 52.5 euro cents. That all means our TWI-5 starts today at on 68.2 and unchanged from yesterday.The bitcoin price starts today at US$104,247 and up +0.3% from yesterday. Volatility over the past 24 hours has been low at just under +/-0.9%.Tomorrow is a public holiday in New Zealand, Matariki, and this briefing will take a break. And remember, it is a holiday in the US tomorrow, Juneteenth. 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 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 seeing signs of the US economy losing steam just as the US Fed meets.First up today, the overnight full dairy auction brought slightly lower prices, down nearly -1% overall. This was a smaller decline than the futures market expected. In NZD terms the dip was marginally more, down -1.2%. In the end the dip in the WMP price was only -2.1% and far less than expected. The SMP price dipped -1.3%. The volumes sold were at seasonal lows. All-in-all an auction event that will change little.Also uninspiring were US retail sales in May. It slowed to a +3.3% expansion year-on-year from a downwardly revised +5.0% in the previous month. Given that US CPI inflation is being recorded at 2.4%, the volume steam has gone right out of the American retail impulse. It is surprising many analysts. Month on month, retail sales actually fell. Overall, this was the weakest result since November 2024.US industrial production in May fell too, down -0.2% from the prior month, to be +0.6% higher than a year ago. These are 'real' volume numbers and signal what the Beige Book has been suggesting - a factory sector that is losing ground.It is no better in their housebuilding sector. The NAHB/Wells Fargo Housing Market Index fell in June to its lowest since December 2022. Expectations were that it would improve, so another economic drag is building. Builders aren't happy facing higher tariff-tax costs when demand is leaking away.But these may be just the start. The tough new policies toward immigrants are being felt in ways some foresaw and will have a long term impact on American demographics. Suddenly the outflow of people from the US exceeds the inflow. And it is younger workers leaving which is making costs for servicing an expanding older population rise and much more suddenly that was expected. The speed of these changes is quite corrosive, the first time in 50 years they have had to face the fact that the US is no longer a magnet for the aspirational.And the big all-in-one US budget bill from the Trump Administration, which is struggling to get Congressional approval, is already having a depressive impact. International investors, including the giant sovereign wealth funds, face sharp new American taxes on their US investments. Most have now halted assigning funds to US opportunities. If the bill passes, there could be a rather sharp outflow of existing investments, one that would impact the USD and their current account.The US Fed FOMC is currently meeting and will report is decisions tomorrow. No change to their 4.5% policy interest rate is expected, but they will be watching the stagflation pressures of higher inflation and lower growth with some alarm, you would imagine.Across the Pacific, the Bank of Japan also held its key interest rate steady following a two-day policy meeting, keeping its rate at 0.5% amid economic uncertainty stemming from US trade policies. This marks the third consecutive meeting after which the central bank has maintained the rate; the last increase came in January.In China, new data forecasts out from the IEA shows that China's oil demand is set to peak in 2027, a trend that it calls a "fundamental transformation" in the global energy market. China has accounted for 60% of the growth in global oil demand in the past decade and slowing demand in the world's second largest economy is set to contribute to a significant surplus in oil by the end of this one.It is not all gloom. In Germany, the ZEW Indicator of Economic Sentiment surged in June to its highest level since March’s three-year peak and far exceeding market expectations. That sudden sentiment boost helped propel the wider EU survey results too.The UST 10yr yield is now at 4.39%, and down -7 bps from yesterday. The price of gold will start today at US$3,387/oz, and down -US$4 from yesterday.American oil prices are still in the higher zone, up +US$2.50 from yesterday at just on US$74.50/bbl while the international Brent price is now just under US$76/bbl.The Kiwi dollar is now just under 60.2 USc, back down -½c from yesterday. Against the Aussie we are up +20 bps at 93 AUc. Against the euro we are down -10 bps at 52.4 euro cents. That all means our TWI-5 starts today at on 68.2 and down -20 bps from yesterday.The bitcoin price starts today at US$103,962 and down -3.7% from yesterday. Volatility over the past 24 hours has been moderate at just on +/-2.4%.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.