Economy Watch

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 gold has taken off, hitting yet another new all-time record high as fear stalks markets today and risk is definitely 'off'. But the NZD is rising. As we publish, markets are moving quickly so this snapshot will date just as quickly.But first in the US, mortgage applications fell -8.0% last week from the same week a year ago, with the refinance component down a rather sharp -12% on the same basis. These retreats came as benchmark mortgage rates rose +20 bps from a week agoA rush to buy cars ahead of the April tariff taxes delivered a boost to March retail sales that was even more than expected. Without those car sales, March retail was barely improved, and that does not adjust for price inflation so in volume terms, core retail sales are declining now. That trend will have global implications.American industrial production rose +1.3% from a year ago and this does adjust for price changes, so a small improvement. But it did shrink in March compared to February.Sentiment by American house builders was little-changed in March from February, but it is -21% lower than a year ago, and -13% lower than two years ago. In fact, excluding the pandemic, you have to go back to the GFC to find it this poor in a March month. That is not good because it is the start of their Spring selling season. Survey results show that tariff taxes are not being paid by importing countries, rather by the builders at this stage. As profits dive, that will be passed on to buyers next.There was a US Treasury 20 year bond auction earlier today and demand was slightly lower so the median yield rose to 4.75%. That is a rise from the 4.59% at the prior equivalent event a month ago.Fed boss Powell was talking earlier today, saying that tariffs pose a real challenge to meet their dual inflation+jobs mandates. Inflation pressures are here now which argues for rate settings to rise, while economic growth is expected to leak away soon hurting jobs, arguing for a rate cut. He said they will "wait for greater clarity" to see where the dominant pressure comes from.These comments were not the magical thinking equity markets wanted to hear, and the realities of what faces the US economy has seen Wall Street pull back today. The Nasdaq is down -3.9%, the S&P500 down -2.8%. The Dow is down -1.8%. Gold is the safe-haven parking lot.In Canada, they are also waiting. Rather than continue with their rate cut track, the Bank of Canada has paused that track, keeping its policy rate at 2.75% as they too watch inflation rise and economic activity leak away. Interestingly, the TSX is only down -0.3%, hit far less than Wall Street.Across the Pacific, Japan's February machinery orders rebounded sharply, rising well above market expectations for a modest +0.8% increase to its highest level in a year. Manufacturing orders rose +3%, while non-manufacturing orders jumped +11.4%. This rise matches the separate machine tool order data for March which was also up sharply. And these first see prosperity ahead; The Reuters Tankan sentiment index rose sharply in April. But the same firms surveyed were gloomy for the months further out in 2025.China claimed its economy grew at a +5.4% rate in Q1-2025 (real), the same rate as for Q4-2024. They said retail sales were up +5.9% (nominal) in March from a year ago, better than the +4.0% in February and the best rise since December 2023 which benefited from a low base. They also said industrial production was up +7.7% (nominal) in March, far better than the +5.6% expected and far better than the +5.9% February gain. Electricity production was only up +1.8% (real) year on year in March, so either they are making spectacular energy efficiency gains, or something other than electricity powers their industry, or something doesn't add up. Anecdotal reports from many regions don't paint quite the picture these official stats paint.Meanwhile, Chinese new home prices in March edged lower from February, but there are range of changes in the 70 top Chinese cities. Still only Shanghai shows a year-on-year gain. Among the same cities, none show any gain for resales of existing houses and some declines are now as much as -11% (Jinhua, 7 mln population, and Tangshan, 7.7 mln).The UST 10yr yield is now at 4.27%, down another -6 bps from this time yesterday. The price of gold will start today sharply higher at a new record of US$3337/oz, and up +US$108 from yesterday or +3.3%.Oil prices have firmed marginally, up +50 USc from yesterday to be now just over US$62/bbl in the US and the international Brent price is now just over US$65.50/bbl.The Kiwi dollar is now at 59.3 USc, up +20 bps from yesterday at this time and still the highest since mid-December. The fall of the USD embeds. Against the Aussie we are unchanged at 92.9 AUc. Against the euro we down -40 bps from yesterday at just on 52.4 euro cents. That all means our TWI-5 starts today now just on 67.6 and unchanged from yesterday.The bitcoin price starts today at US$83,854 and holding again, down less than -0.9% from this time yesterday. Volatility over the past 24 hours has again been modest at +/- 1.3%.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. This podcast will take a break over the Easter holiday weekend and we will do this again Tuesday.

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 gears of the global economy are grinding disconcertingly as the unnecessary trade war is prosecuted with little strategy and no apparent viable end game.But first up today, the latest full dairy auction brought an overall rise of +1.6% in USD. However, the fall and fall of the USD has completely undermined this result, with prices in NZD falling -2.1%. In USD all categories except SMP rose, and demand was strong from "North Asia" (ie China). Milk fats were in demand, while global milk supply is waning in the major producers, underpinning the demand. Pity about the currency effect.Inflation is showing up in the retail trade in the US, with the weekly Redbook index up +6.6% from the same week a year ago. There is no way that reflects a volume riseBusiness activity continued to fall in March in the New York Fed's factory survey in the New York state. New order levels extended their decline/In Canada, their CPI inflation rate eased lower to 2.3% in March. That is after the eight-month high of 2.6% in February. The March result was tamer than expected (2.6%) and below forecasts by the central bank of 2.5%. It comes after some GST and other tax changes earlier have now been flushed through their data. The Bank of Canada next meets to review its official policy rate later today, but it will be the economic impact of their unfriendly neighbour that will dominate policy, rather than current inflation. They will likely hold off making rate changes for now, keeping the 2.75% policy rate. That is a change from the earlier expected cut.Canadian housing starts came in weak in March, down more than -11% from the same month a year ago.India CPI inflation rate fell in March to 3.3%, its lowest since 2019. Food price inflation fell to 2.7%. Both were much lower than expected and well below the central bank's policy rate mid point of 4%.Indian exports rose sharply in March from February in the normal seasonal pattern. Their imports rose even more so their trade deficit grew from the prior month, although only back to its usual level.In China, they are cancelling their orders for Boeing aircraft, a blow to the US aircraft industry.In February, EU industrial production rose, a surprise gain and the best monthly gain in two years.But that wasn't an indicator for economic sentiment. The latest ZEW survey reveals a sharp deterioration as they watched the US turn away from friend to foe, making them feel boxed in between the US and Russia. It was a shift reminiscent of the uncertainty during the pandemic.And it seems that trade talks between the US and the EU are making "litte" (ir no) progress.In Australia, the latest release of the RBA minutes was a dull affair, giving little guidance on how they are going to deal with the trade and inflation challenges. It's all 'wait-and-see' and 'respond-to-data' for them. But they do claim to be in a good position to be able to act decisively if it is needed. A cut on May 20 is still possible however.OPEC's latest monthly review lowered its demand outlook, although some observers thought the smallness of the cutback was brave in the circumstances.And we should also note that there are now three elections due soon. Canada goes to the polls on April 28. Australia votes on May 3. And now a snap election has also been called in Singapore, also for May 3. Being Singapore, that unsurprisingly leaves very little time for campaigning. All these elections will have the Trump shadow hanging over them, and it very much helps campaigning to present an anti-Trump stance. Trump has resurrected the fortunes of the centre-left candidates, enough to cancel the anti-incumbent mood.The UST 10yr yield is now at 4.33%, down another -4 bps from this time yesterday.The price of gold will start today at just on US$3229/oz, and up +US$16 from yesterday.Oil prices have firmed marginally, up +50 USc from yesterday to be now at US$61.50/bbl in the US and the international Brent price is now just over US$64.50/bbl.The Kiwi dollar is now at 59.1 USc, up +30 bps from yesterday at this time and the highest since mid-December. The fall of the USD extends. Against the Aussie we are down -10 bps at 92.9 AUc. Against the euro we up +30 bps from yesterday at just on 52.4 euro cents. That all means our TWI-5 starts today now just under 67.6 and up +30 bps from yesterday.The bitcoin price starts today at US84,616 and holding again, up a mere +0.1% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 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 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 week started with a strong risk-on mood and equities rose on Monday in Asia, and especially in Europe. Wall Street opened with the same vibe, but lost momentum in the middle sessions, although it is returning in the later session. It's volatile.But first in main street US, the New York Fed's consumer expectations survey mirrored the other recent sentiment surveys, noting a defensive turn in the mood. Consumers’ year-ahead expectations about their households’ financial situations deteriorated in March, with the share of households expecting a worse financial situation one year from now rising to 30%, the highest level since October 2023. Those surveyed said they see higher inflation in a year, up to 3.6% from 3.0% in the February survey. The expectations for earnings growth fell, and for joblessness to rise. Of course, this one was taken before the heavy tariff policies hit in early April. The April update will be available on May 9 (NZT).In Washington, the Trump administration is moving swiftly to end enforcement of white collar crime, dismissing federal prosecutors involved in enforcing foreign bribery cases, crypto crime, and money laundering crime. Its open season for white collar criminals. Washington is also apparently open for far-right Russians.It is so risky to visit the US, EU diplomats are now being issued with burner phones for their visits, just like they do when visiting China or Russia.On the tariff front, exemptions are coming for car parts, new tariffs for pharmaceuticals. The common thread is bolstering profits for campaign supporters. Need a favour? Go to Washington with money for Trump.In Canada, their central bank is about to review its monetary policy settings. It was on a rate cutting track, but is now more likely to leave its policy rate unchanged given the inflationary threats from the trade war.In China, their exports surged by +12.4% in March to US$314 bln, far above market forecasts of +4.4% rose and accelerating sharply from a +2.3% rise in the January–February period. It marked the fastest increase in overseas sales since last October, driven by the urgent frontloading before the American tariffs took effect. Since November when talk of tariffs first became a credible risk, the rise of Chinese exports has been exceptional. Meanwhile, March imports fell -4.3%. As a consequence, China's merchandise trade surplus has hit record levels in 2025.We exported +13% more to them in Q1-2025 from a year ago, and imported -5% less. Australia exported -29% less, and imported -5% less, for comparison.The UST 10yr yield is now at 4.37%, down -13 bps from this time yesterday. The price of gold will start today at just on US$3213/oz, and down -US$23 from yesterday.Oil prices have dipped -50 USc from yesterday to be now at US$61/bbl in the US and the international Brent price is now just under US$64.50/bbl.The Kiwi dollar is now at 58.8 USc, up +½c from yesterday at this time and the highest since mid-December. The fall of the USD extends. Against the Aussie we are up another +20 bps at 93 AUc. Against the euro we up +60 bps from yesterday at just on 51.9 euro cents. That all means our TWI-5 starts today now just on 67.3 and up +40 bps from yesterday.The bitcoin price starts today at US$84,546 and holding, and down a mere -0.3% from this time 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 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 things are turning sour in the trenches of the US economy - for consumers, many non-prime corporate borrowers, and even investors in some local manufacturing they did at the behest of Trump.But first in the week ahead our news will be dominated by the March quarter CPI release on Wednesday. Japan, India and the UK will also release inflation updates this week. The central banks of Canada, the ECB, Turkey and Korea will be re-assessing their monetary policy settings, and obviously they will focused on how the global tariff war by the US will affect them, and the role monetary policy can play to mitigate the coming negative influences.China will report its Q1-2025 GDP result, and Germany will report any changes in economic sentiment.On Wall Street, the Q1-2025 earnings season will kick off and reports from the major financial institutions will come in early. There will be a lot of attention on them, especially if they start to report a bumpy ride from the economic uncertainty.However, the big news over the weekend is that China is standing its ground. Beijing raised tariffs on American imports to 125% on Friday, hitting back against Trump's decision to hike duties on Chinese goods to 145%, and raising the stakes in the trade war. They repeated the "fight to the end" rhetoric, also saying they will "counterattack". "Even if the US continues to impose higher tariffs, it will no longer make economic sense and will become a joke in the history of world economy. At the current tariff level, there is no market acceptance for US goods exported to China."On immediate consequence of all this is that investors are turning away from the US dollar as a safe haven. And perhaps turning away from US Treasuries too.Equity markets seem to be ignoring a sharp change in US consumer sentiment. The University of Michigan survey plunged in April to its lowest level since June 2022 and well below what was anticipated. That's the fourth straight month of pullback, and this survey is now more than 30% lower since the November 2024 election. It is signaling growing worries about trade war developments that have oscillated over the course of the year.American consumers report multiple warning signs that raise the risk of recession: expectations for business conditions, personal finances, incomes, inflation, and labour markets all continued to deteriorate this month. The gauge for current economic conditions fell along with the component measuring expectations which is now at its lowest since May 1980. Meanwhile, year-ahead inflation expectations surged to 6.7%, the highest reading since 1981, from 5% in March. The five-year inflation expectations gauge edged up to 4.4% from 4.1%.To mitigate some of that, Trump cancelled his tariffs as they affect mobile phones, their components, computers and other electronics. Even for Trump, this is pretty odd. It is now very much cheaper to import iPhones and the like from China than make them in the US. There will be many investors, especially those who have started building out US manufacturing facilities at the behest of Trump, who are likely to be a touch unhappy with this flip-flop and they still have to pay 145% tariffs on their imported parts. Clearly Trump has zero idea about how tariffs work, although that is not news. Commerce Secretary Lutnick added confusion in a weekend interview saying the tech tariff cancellation will be temporary.Meanwhile, March producer price inflation in the US actually eased to 2.7% its lowest in five months, aided by a sharp drop in energy costs. Without those fuel cost drops, the index would have risen slightly to 3.3%.There are signs that lending activity is tightening sharply in the US. For two weeks, there have been no - zero - high yield leverage loans for corporates in the US. The funds making these loans are having sharp investor outflows, and banks have become quite risk averse. A credit crunch is underway for most non-prime borrowers. If it extends, there will be real trouble.In Canada, not only are they rejecting American products and travel options now, a new trend is that they are net sellers of US real estate they had as holiday homes.India released February industrial production data over the weekend and that showed growth decelerated sharply to +2.9% from a year ago, down from an upwardly revised +5.2% in January. Markets had expected a +4.0% rise in February, so this is a big miss and is the weakest expansion since August.In China, their March new yuan loans came in at +¥3.6 tln, sharply higher than the +¥1.0 tln in February and slightly more than anticipated. New bank debt support is flowing as they intend, but to be fair it isn't overly different to the usual seasonal pattern. It is even less that the record March new-debt flows in March 2023 of +¥3.89 tln, but it is the second highest March level ever, and +17.8% more than March 2024. Foreign currency lending dived -34% however.China's vehicle sales jumped in March from February to 2.9 mln units, but the near-term change is distorted by the Chinese New Year holiday period. NEVs rose to 1.2 mln of those units, now 42% of all sales. They seem to be on target to sell almost 33 mln vehicles in 2025, almost double the level in the US.Meanwhile, State-linked Chinese funds (the 'home team') stepped in to rescue Chinese stocks last week. But it’s an expensive exercise, involving more than ¥7 tln so far and likely to have to go up much more than that. China's own credit crunch is coming at some point, but they can put it off a while yet.Separately, China is also battling unusually cold weather at present with much travel in the north cancelled.In Europe, German CPI inflationcame in at 2.2% in March (2.3% on an EU harmonised basis), slightly lower than in February, and lower than expected. Food prices were up +3.0% and the price of services were up +3.5%. It is also falling energy costs that are keeping a lid on their inflation.Coal and steel prices are falling, with the coal price now down to a level it first achieved in 2016.The UST 10yr yield is now at 4.50%, up +1 bp from this time Saturday.The price of gold will start today at just on US$3236/oz, and up another +US$2 from Saturday, and yet another new record high. That is up +US$217 or +7.1% from this time last week.Oil prices are unchanged from Saturday to be holding at US$61.50/bbl in the US and the international Brent price is now just over US$64.50/bbl. These are the same levels we had a week ago.The Kiwi dollar is now at 58.3 USc, up +10 bps from Saturday at this time and the highest since mid-December. A week ago it was 55.6 USc so a mammoth +270 bps appreciation or +4.7%. Against the Aussie we are up +20 bps at 92.8 AUc. Against the euro we down -10 bps from Saturday at just on 51.3 euro cents. That all means our TWI-5 starts today now just over 66.9 and up marginally from Saturday, up +130 bps from a week ago.The bitcoin price starts today at US$84,792 and firming, and up +1.2% from this time Saturday. Volatility over the past 24 hours has been modest at +/- 1.3%.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 equity markets have cancelled yesterday's relief rally.But first in the US, initial jobless claims rose last week to 215,000, +7.7% higher than the week before, but identical to the same week a year ago. There are now just under 2 mln people on these benefits, up slightly from the 1.93 mln a year ago.US CPI inflation fell to 2.4% in March, its lowest level since February 2021. Because this was data taken before the tariff chaos, it seems this may be the low point for the foreseeable future. Food was up +3.0% and rents were up +4.0%. Medical care was up +3.0%. However petrol prices restrained the overall rises, down -9.8%. Very low oil prices will keep a lid on the total even if other living costs rise much faster.Today's UST 30 yr bond auction was well supported, but the median yield came in at 4.73%, up from 4.56% at the equivalent event a month ago.The US government reported a budget deficit of -US$161 bln in March, a -32% decrease from the previous year, largely due to a calendar shift in benefit payments. Despite this monthly decline, the broader fiscal picture remains concerning, with the US Treasury reporting a -US$1.3 tln deficit for the first half of fiscal 2025, a +23% rise from the previous year. This marks the second highest deficit for the first six months of any fiscal year, trailing only the -US$1.7 tln gap in fiscal 2021. Tax cuts for the rich in this environment looks exceedingly irresponsible, especially if the tax rises on consumers via tariffs don't raise the outlandish sums forecasted.Just how damaged the US government agencies have become, Musk's DOGE fired all the safety regulators that oversaw Tesla.The April USDA WASDE report out overnight shows that US corn inventories are lower than expected. Beef exports are expected to fall on retaliatory tariff actions against the US and beef imports are expected to be lower too for the same tariff reason. The net result seen in lower prices for US producers. Lower prices for US milk producers too as exports shrink. US farmers will be net losers from the tariff hostilities.Across the Pacific, Japanese producer inflation is rising, now its highest since mid-2023. Producer prices there rose +4.2% in March from the same month a year ago, above market estimates of 3.9%. It was their 49th straight month of producer inflation, with cost rising further for most components.Taiwanese exports surged again in March, up +18.6% from a year ago and a record high for any month. A +8.5% rise was expected. That is two consecutive months of outsized expansion. April tariff actions may well affect this impressive result going forward, but if US customers have no alternative sources, the tariff taxes will fall on the buyer.In China, they not only have to fight off the US tariff policies, they have a resurgence of domestic deflation issues. Their March CPI fell -0.1% when a +0.1% was anticipated. Their PPI fell -2.5% when a -2.3% retreat was anticipated. On the consumer price front, food prices are -0.6% lower than a year ago, of which beef prices fell -10.8% and lamb -5.4%. Milk prices fell -1.7% on the same basis. They want to shift to a consumer-based society, but in the meantime their existing export sector is going to take major hits which will affect consumption, and there seems little upside to consumer demand in the current circumstances. Their "over-capacity" is going to expose them. You wonder if they have any more appetite for capitalism's "creative destruction" than Western economies, who have proven to have virtually none.And staying in China, Beijing's drive to turn its economy into a consumption-led one relies of Chinese consumers spending and buying. But the evidence is that they are as spooked by the trade war as anyone and have turned consumption-shy.In March Australian inflation expectations fell to 3.6%, a four year low. But in April they jumped back up to 4.2% underscoring the ongoing uncertainty surrounding their domestic economic outlook and inflation trajectory in the face of fallout from the tariff war. Given they have both a jobs, and an inflation mandate, the RBA is in for a tricky period ahead with its policy choices.Container freight rates rose +3% in the past week to be -23% lower than a year ago. Basically trans-Pacific rates firmed slightly while trans-Atlantic rates eased. Bulk freight rates fell a very sharp -21% in the past week to be -20% lower than year ago levels.The UST 10yr yield is now at 4.40%, unchanged from this time yesterday.Wall Street is currently down -3.4% on the S&P500 in its Thursday trade as the tariff-pause relief rally runs out of puff in the face of realities and reverses. The price of gold will start today at just on US$3162/oz, and up another +US$92 from yesterday.Oil prices have fallen -US$2 from yesterday to be just under US$60/bbl in the US and the international Brent price is now just on US$63/bbl.The Kiwi dollar is now at 57.4 USc, up +120 bps from yesterday at this time and a three week high. Against the Aussie we are up +30 bps at 92.4 AUc. Against the euro we up +20 bps from yesterday at just on 51.3 euro cents. That all means our TWI-5 starts today now just under 66.5 and up +70 bps from yesterday.The bitcoin price starts today at US$79,207 and falling, and down -2.4% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.8%.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 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 that past notions of safe havens have been upended, and now it is the turn of the bond market to be roiled. The cost of long-term money is rising sharply as risk premiums leap.First, China has reacted in equal measure to Trump's capricious 104% tariffs on their goods, with their own extras, a 50% retaliatory tariff. The predictions any junior could see from the known Smoot-Hawley tit-for-tat protectionism are playing out.The first to blink hasn't been the Chinese. Trump has made an about-turn and paused higher reciprocal tariffs "for 90 days" that hit dozens of trade partners just after they became effective, while raising duties on China further to 125%. This u-turn surprised markets which is having an emotional relief reaction. But any gains today will be built on sand.So we are in a period of unmoored 'policy', with all the impacts ahead of us. History tells us this doesn't end well, for anybody including us.American homeowners know what's coming, and are rushing to fix their mortgage rates before they rise unaffordably. There was a sharp +20% rise in mortgage applications last week from the week prior, with the refinance component up an eye-popping +35% and almost double the level of a year ago. Borrowers sense they may not see rates this low again for a long time.Meanwhile, at the other end of the interest rate market, US Treasury yields are leaping, which means prices are dropping and holders are taking large losses. Today's US Treasury 10 year bond auction was well supported but at notably higher yields. Today the median yield was 4.34% whereas at the prior equivalent event a month ago it was 4.27%. This is a market where participants have regulatory obligations to buy.But in the open secondary market, the effects are starker. The UST 10 year yield rose +16 bps just from yesterday. (from a month ago, up +11 bps). Volatility is a new feature of these bond markets too.There was some US wholesale inventory data out overnight, but it was for February, and these were up just +1.1% from a year ago. But of course this was from a period well before the April omnishambles.Also out today were the US Fed minutes from their March 20 (NZT) meeting, but the views in these have all been overtaken by subsequent events, so have little current relevance. But even back then they sensed threats to inflation from Washington's tariffs, with heightened concerns about stagflation.In Japan, machine tool orders jumped sharply in March driven by export orders. They were up +11.4% year-on-year for the sixth consecutive month. Domestic demand remained stableIn India, and as expected, their central bank cut its policy interest rate by -25 bps to 6.00%. They cited easing inflation, slowing economic output, and growing global trade tensions as the reasons why they cut for a second successive time.The UST 10yr yield is now at 4.40%, up +16 bps from this time yesterday. Risk premiums are growing.Wall Street is currently up +7.4% on the S&P500 in its Wednesday trade as the tariff-pause relief rally kicks in. Who knows where it will end today. The price of gold will start today at just under US$3070/oz, and up +US$91 from yesterday. Perhaps this is one commodity exhibiting traditional safe-haven attributes.Oil prices have risen +US$2 from yesterday at just on US$62/bbl in the US and the international Brent price is now just on US$65/bbl.The Kiwi dollar is now at 56.2 USc, up +70 bps from yesterday at this time. Against the Aussie we are down -80 bps at 92.1 AUc. Against the euro we up +30 bps from yesterday at just on 51.1 euro cents. That all means our TWI-5 starts today now just on 65.8 and up +20 bps from yesterday.The bitcoin price starts today at US$81,930 and rising, and up +6.1% from this time yesterday. Volatility over the past 24 hours has been very high at +/- 4.2%.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 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 Wall Street and business titans who supported the 2024 Trump campaign are starting to turn on him, one calling the current situation "a clown show".The show has gotten even more extreme overnight. The US has added another 50% to tariffs on its imports from China, taking the total to 104%.But first up today, the overnight GDT Pulse dairy auction saw SMP prices fall a bit more than expected, down -2.6% from last week's full auction. But the WMP price slipped much less than expected, down just -1.8% on the same basis. The falling currency over the past week means there is no net change in NZD. The floating exchange rate is doing its job as a stabiliser.In the US, nominal retail sales surged last week, up +7.2% from the same week a year ago as consumers rushed to stock up on goods ahead of the tariff-induced hikes. That was its fastest rise since late-2022. Some of that 'gain' will have been from early price hikes, of course.Going the other way, the NFIB Small Business Optimism Index fell sharply in March, by its most since June 2022 and to its lowest level since October 2024. This was a much larger fall than anyone saw coming. They anticipated a fall but not like this. The component 'uncertainty index' stayed at record high levels.Americans' appetite for consumer debt actually fell in February by -US$810 mln, the first drop since November. This followed a downwardly revised increase of +US$8.9 bln in January and came in well below the +US$15 bln rise expected. There were sharp and notable drops in demand for credit card debt, and car loan debt.The latest UST 3 year bond auction was well supported. But there was a notable -8.5% drop in total bids this time, the largest easing of support we have seen. It delivered a median yield of 3.70%, down from 3.85% at the prior equivalent event a month ago.In China, there is a notable fall in the price of iron ore, down -12.5% from the start of April. That has yet to show up in the cash USD price of Australian iron ore, but it will soon. For reference the price of copper is down -18% in the same eight days.In China, the 'home team' is stepping up to buy equities to prevent them crashing further. State funds were reported to be very active yesterday. Separately, China is letting its currency weaken as a counterweight to the American tariffs. The yuan (CNY) isn't moving much but trending from the target 7.2:USD, but this official set rate is moving in the same direction as the offshore yuan (CNH) and heading to 7.35:USD. It is now at a 17 year low to the USD. China said it will "fight to the end" opposing the new US tariffs.Australia's NAB business confidence index ticked lower in March 2025 from a revised negative level in February, and it is now at its lowest level since November 2024.Staying in Australia, the Westpac Melbourne Institute consumer sentiment survey is seeing fear rising after the Trump tariff actions. Sentiment is -10% lower among those surveyed after the earlier April US tariff announcements. Aussies are now less confident on prospect of interest rate cuts by the RBA.Internationally, the IAEA says that while there is enough uranium being mined to support nuclear energy demand for the next 25 years, more will be needed if the current high-growth plans for capacity expansion continue, and the world could run out by 2080.The UST 10yr yield is now at 4.25%, up +10 bps from this time yesterday. Risk premiums are still rising.The price of gold will start today at just under US$2980/oz, and up +US$14 from yesterday.Oil prices have dropped -US$1.50 from yesterday at just over US$60/bbl in the US and the international Brent price is now just under US$63.50/bbl.The Kiwi dollar is now at 55.5 USc, unchanged from yesterday at this time. Against the Aussie we are up +40 bps at 92.9 AUc and that's a ten month high. Against the euro we up +10 bps from yesterday at just on 50.8 euro cents. That all means our TWI-5 starts today now just on 65.6 and up +10 bps from yesterday.The bitcoin price starts today at US$77,213 and falling, and down another -2.1% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.6%.Join us at 2pm later today for the Official Cash Rate review, the first by newly appointed interim Governor Christian Hawkesby. A -25 bps cut to 3.50% is widely anticipated, but given the global turmoil, most of the focus will be on how they see those pressures playing out in New Zealand and how they will respond to them.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 US Treasury yields are rising today on growing American recession fears may prompt investors to question the safety of US Treasuries as a haven asset. The risk premium jumped after a weekend to think about last week's yield falls.But Wall Street equities have stopped falling. They are not rising either as investors ponder what to do. But last week's sell-off is baked in. They rose after reports of a tariff pause, but fell when this was denied.Then Trump threatened China with 50% tariffs because they retaliated. Gloom returned.And EU ministers are meeting to coordinate their response, and 25% retaliatory tariffs are likely on "some goods".Everyone, except Trump (and his acolytes), can see that this mob-boss theatre will just produce a combination of recession and inflation. And the US won't be immune. The situation is an "urgent problem" for policymakers worldwide, including central banks. Ours meets tomorrow but because this is a fast developing situation, maybe it is too soon to expect a comprehensive response. It is a situation that will play out over years, but we will still want to see our fiscal and monetary policymakers working to contain the impending fallout as best they can.In Canada, their central bank's Business Outlook Survey is reporting widespread concern. Business conditions have deteriorated due to the trade conflict with the United States. Sales outlooks have softened, particularly for exporters. Firms reported having sufficient capacity, and many are delaying investment and hiring decisions amid uncertainty. Firms expect the widespread tariffs will raise costs and lead to higher selling prices. In this context, expectations for inflation are higher.China' FX reserves rose in March, but their overall reserves rose more mostly because they purchased a little more gold and that took their holdings to just under 2300 tonnes. The March gold price zoomed higher, bolstering other reserves. This may reverse sharply in April if the gold price keeps on tracking down.Away from the economic news, we probably should note that while China's overall population is in decline, not all regions are. The Pearl River Guangdong region in from Hong Kong grew by 740,000 to 127.8 million (+0.6%), and births rose by +100,000 to 1.13 mln (+0.8%) in the 2024 year. If this region was its own country, these demographic changes would be impressive. But it does highlight how fast some other parts of China are shrinking.Overall, the recent Qingming Festival (Tomb Sweeping) holiday saw 790 million cross-regional trips in China, an increase of +7.1, a record high for this holiday period.European retail sales rose +2.3% in February in the euro area on a volume (real) basis, quite a bit better than expected and its best rose since September 2024. In the wider EU it was up +2.0% and still a quite positive shift.German industrial production however was down a sharpish -4.0% in February from the same month a year ago, although to be fair the year-ago benchmark was unusually high. On a seasonally adjusted basis the decline was "only" -1.3%. German export growth is rising however.In Australia yesterday, their pre-election Budget update was released. The underlying cash deficit in the 12 months ending June 30 will be -AU$28 bln, swelling to -AU$42 bln through June 2026, they now say. That's going from -1.0% of GDP to -1.5% of GDP. "[The] escalation in trade hostilities has created significant economic uncertainty and exacerbates the risks to the economic and fiscal outlook", they say.The UST 10yr yield is now at 4.15%, up +15 bps from this time yesterday. Risk premiums are jumping. The price of gold will start today at just on US$2966/oz, and down -US$71 from yesterday, down -2.3% and "just another commodity". Holders are selling to cover margin calls now.Oil prices have dropped another +50 USc from yesterday at just on US$61.50/bbl in the US and the international Brent price is now just under US$65/bbl.The Kiwi dollar is now at 55.5 USc, down -40 bps from yesterday. Against the Aussie we are unchanged at 92.5 AUc. Against the euro we down -40 bps from yesterday at just on 50.7 euro cents. That all means our TWI-5 starts today now just on 65.5 and down -30 bps from yesterday.The bitcoin price starts today at US$78,846 and down -2.8% from this time yesterday. Volatility over the past 24 hours has been very high at +/- 4.1%.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 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 in a 'new world economy' and it will take some getting used to. The roll-out and consequences will develop over days, weeks, months, and years.The immediate past is irrelevant today. Tomorrow will be quite disconnected from the recent past.But first up, we have a busy week ahead. On Wednesday, the RBNZ will release the results of its OCR review, and a -25 bps cut is anticipated, taking it to 3.50%. It has been clearly signaled by the central bank, although we should note that much has happened to change the immediate economic outlook over the rest of 2025 and beyond.The Indian central bank will also review its policy rate, also on Wednesday, and a -25 bps cut is also anticipated there from the current 6.25%.Elsewhere both the US and China will release CPI and PPI inflation data. EU retail sales data and German industrial production data will also come this week.But nothing will be as influential as the tariff war hostilities, punch and counterpunch. Over the weekend China has responded to the US tariffs with its own sweeping restrictions on trade with the US, with more to come. In all, we count eight major announcements on restriction of trade with the US.China placed export restrictions on rare earth elements squeezing supply to the West of minerals. These materials are used in optical lasers, radar devices, high-powered magnets for wind turbines, jet engine coatings, communications and other advanced technologies. That leaves many manufacturers scrambling for fresh supplies of the critical minerals they have relied upon for decades.Late last week we reported that Canada retaliated. But so far, we haven't heard of EU retaliation, although they are huddling to plan a united response. (And oddly, no US tariffs were applied to Cuba, Iran, North Korea or Russia - even though the US runs a large -US$4 bln trade deficit with Russia.)Fed boss Powell was speaking over the weekend and he said the economic impact of new tariffs is likely to be significantly larger than expected, and the central bank must make sure that doesn’t lead to a growing inflation problem. "The same is likely to be true of the economic effects, which will include higher inflation and slower growth."All this will have very large secondary effects on New Zealand, and our currency dived sharply on the news at the end of last week. It was an even larger negative reaction for Australia.Commodity prices have taken outsized hits, all consistent with pricing for a deep recession. Copper is down -16.5% since its late-March peak. It is far from the only one, and the adjusting is still underway. Gold wasn't immune. Nickel, zinc, and aluminium are all also down sharply. So far, food prices haven't really moved much, and the FAO report for March confirmed that.Those secondary reactions will be widespread however. The airfreight market is expected to be thrown into turmoil, up in the immediate scramble to get ordered goods, then a deep drought, as it will be for shipping. Collapses will further hinder the reduced trade expected.The key takeaway from all this is unsettling - this isn't the bottom. It may only be the start of a steep decline. It certainly is a 'Black Swan' event. That tariffs were coming, no surprise. But the size and comprehensiveness were very much larger than anyone, friend or foe, expected. Everyone should be worried, especially savers. Stagflation is the most likely future we face.For the record, there was economic data out over the weekend. The US non-farm March payrolls came in better than anticipated with a +228,000 seasonally adjusted rise in the month. The monthly average gain in 2025 is now the lowest since the 2020 year (and also lower than any year 2016-2019.) Canada reported a -33,000 drop in March employment. Deeper rate cuts are the likely Bank of Canada response, and soon - on April 17, NZT.And across the Pacific, Japanese household income rose more than expected in February from the steep drop in January. But it wasn't enough to show a gain year-on-year.German factory orders remained low in February, and unchanged from January in an under-shoot.But none of this recent-history data really means much anymore.The following changes are outsized, and still moving. But this is what we see now.The UST 10yr yield is now at 4.00%, down -25 bps from a week ago. The VIX volatility index has jumped suddenly, moving up towards an extreme level.Wall Street fell hard in its Friday trade with the S&P500 down -6.0% on the day and the Nasdaq was down -5.8%. The S&P500 futures trade suggests a small part of that (maybe +0.7%) could be recovered when Monday trade resumes.The price of gold will start today at just on US$3037/oz, up +US$17 from Saturday but down a net -US$71 from Friday, a huge move as gold is just being classed as "another commodity". Also, even before the latest tariff chaos, the Germans were worried about a Trump America, and talking about relocating its gold reserves out of New York. Those voices are louder now.Oil prices have dropped another huge -US$4.50 from Friday at just on US$62/bbl in the US and the international Brent price is now just on US$65.50/bbl. This market faces steep demand drops just as it wants to increase production.The Kiwi dollar is now at 55.9 USc, up +30 bps from Saturday but an enormous -220 bps dump from this time Friday, down -4.3%. Against the Aussie we are down -10 bps at 92.5 AUc and the Aussie dollar took an even larger hit on Friday. Against the euro we up +20 bps but down -150 bps from Friday at just under 51.1 euro cents. That all means our TWI-5 starts today now just on 65.8 and down -120 bps from Friday to its lowest since the brief pandemic dive on March 20, 2020, and before that in March 2011 as the GFC bit hard..The bitcoin price starts today at US$81,097 and down -3.2% from this time Saturday. Volatility over the past 24 hours has been modest at +/- 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 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 all bets are probably off on how 2025 will turn out as the cascading impacts from the Trump tariffs surge around the world.We were anticipating we would be reporting some tariff retaliation news today, and there is some. But the most significant retaliation is from financial markets. It is comprehensive.So far there are no substantive retaliations announced, only threats to do so from China, Japan, South Korea, and the EU. But Canada has hit some US cars with a matching 25% tariff. Some countries - like New Zealand and Australia - have said they won't retaliate, but they tend to be the ones who only got slapped with a 10% rate on their exports. For them it is wise to see how much will be effectively paid by US consumers, and in NZ's case it will likely be most of it. Most of the impact on us will come from second-effect reactions in other trading partners.Perhaps most galling were the 32% tariffs Trump slapped on Taiwan.Back to the economic data releases, US jobless claims were unchanged last week from the week before and only marginally higher than year-ago levels. There are now 2.07 mln people on these benefits, about +7% above year-ago levels. But that is their highest since November 2021.There was a surge in job cuts reported in March, by far the highest since the early pandemic reaction. Although most are public service cuts, it seems unlikely they will be the only ones in the months ahead.The employment component of today's ISM services PMI was unusually weak, and the overall index tumbled to its weakest since July 2024. It was barely expanding in March. The internationally-benchmarked S&P Global/Markit version had its big drop in February, and the latest March version records a small bump up from then. But it reported cost inflation up to an 18-month high.Attention now turns to tomorrow's March non-farm payrolls where a most rise of +135,000 is anticipated.US exports rose in March as part of the repositioning in anticipation of tariffs and retaliation. But an interesting detail is that of the +US$8.3 bln rise to US$278.5 bln for the month, US$3.2 bln of that was the export on gold. US imports held very high for a second month at record levels. (Imports of gold decreased -US$1.3 bln. The market chatter was that gold was flowing into the US, especially from London. Apparently that was just rumour.)Across the Pacific in China, the Caixin services PMI rose in March and to its best level of the year. This was notably stronger than the official services PMI. New orders rose the most in three months, driven by increases in domestic demand, supported by a broad improvement in demand conditions. We see that in improved Chinese buying in the dairy auction.Australia is reporting sharp drops in job vacancies. The latest data is for February, and the levels reported are almost -10% lower than year ago levels, down for that -5% in the prior 90 days alone. Almost all the decreases are in the private sector.Container freight rates slipped -2% last week from the week before, to be -26% lower than year ago levels. However they are still +55% higher than pre-pandemic levels.Bulk freight rates fell -2.5% from last week to be -8% below year-ago levels. Basically, these rates are back to pre-pandemic levels.The UST 10yr yield is now at 4.04%, down -17 bps from yesterday at this time. The VIX volatility index has jumped suddenly, although not yet to an extreme level.Wall Street is in its Thursday session down -4.3% on the S&P500 after the tariff announcements and showing no signs of improving. The price of gold will start today at just on US$3108/oz and down a net -US$24 from yesterday.Oil prices have dropped -US$5 from yesterday at just on US$66.50/bbl in the US and the international Brent price is now just under US$69/bbl. Not only is demand expected to soften as tariffs take their toll, eight OPEC+ countries unexpectedly announced a +411,000-barrel-per-day production increase for May, far exceeding the planned +135,000 bpd. It seems an incredibly naive announcement from their self-interest point of viewThe Kiwi dollar is now at 58.1 USc and up +80 bps from this time yesterday. That is a +1.8% appreciation since the start of the week and a +3.8% appreciation since the start of March. Against the Aussie we are up +40 bps at 91.5 AUc. Against the euro we are down -20 bps at just over 52.6 euro cents. That all means our TWI-5 starts today now just on 67 and up +20 bps.The bitcoin price starts today at US$82,172 and down a sharpish -5.8% from this time yesterday. Volatility over the past 24 hours has been very high at +/- 4.1%.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 on Monday.