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 there are plenty of bumps in the economic road to note today.

But first up today, there was another full dairy auction overnight, one that analysts had been nervous about and the derivatives market saw downside risks (on the uncertainties of how dairy product distortions would fare in the growing tariff disputes). In the end overall prices were unchanged - so no bump here - which the industry will take as a 'win'. But that is in USD terms. In NZD terms it certainly wasn't with prices down -3.3% overall as the USD weakened. Butter inched higher, and to a new record level. So did cheese. But WMP was little-changed, and SMP fell -0.4%. China was in there buying although not with notable enthusiasm.

All eyes now turn to Fonterra's interim report on Friday, and the expectations are for only minor tweaks to their payout levels over that they have already announced at record highs.

In the US, the retail impulse tracking though the Redbook index still shows a strong year-on-year +5.2% gain compared to the same week a year ago, but the advantage is fading and has done so each week in March so far. We don't get a week-on-week reading but for that year-on-year gain to fall from +6.6% three week ago, there must be a sharpish recent fall away.

American housing starts unexpectedly jumped +11.2% in February from January, but that was just making back the -11.5% fall the prior month. The February 2025 build rate was at 1.501 mln units whereas the February buodl date was at 1,546 mln units so a -2.9% retreat on that basis.

It was a similar story for US industrial production - up more in February from January (+0.7%) than expected (+0.3%), but the gains were less (+1.4%) than year-ago levels (+1.7%).

There was a US Treasury 20 year bond auction earlier today and it brought less support, and at a median yield of 4.60%. The better supported prior equivalent event a month ago was at a median yield of 4.77%.

Canada reported its CPI inflation rate at 2.6%, which was a notable rise from their January level of 1.9% and an expectation of 2.2%. It is probably only going to get worse from here due to the snarky tariff war the Americans started and the Canadians collective reactions. Their monetary policy decisions are based on "trimmed mean" rates, and they only moved up slightly.

Across the Atlantic in Germany, and by a two thirds majority, their parliament has approved a massive €1 tln funding increase to allow it to build its defence capability and support Ukraine. It is a massive change in attitude to their fiscal policy direction.

In the Pacific, Indonesia's stock market halted trading yesterday for the first time since 2020 after their market plunged more than -7% from Monday's close. Substantial concerns over economic stability and consumer sentiment are behind the move.

In China the property sector woes are far from over. Another major developer, Sunac, has issued a major 'profit warning', actually a major warning about huge losses. Demand for its projects is very weak.

In Australia, a superannuation fund has been convicted of greenwashing and ordered to pay a fine of more than AU$10 mln for making false claims about how it invested funds.

The UST 10yr yield is now at 4.27%, down -3 bps from yesterday at this time. 

And we should probably note that the Tesla share price is down another -6% so far today.

The price of gold will start today at just on US$3036/oz and up a net +US$42 from yesterday, and another all-time high.

Oil prices are down -50 USc from yesterday at just under US$67/bbl in the US and the international Brent price is at just under US$70.50/bbl.

The Kiwi dollar is now at 58.2 USc and unchanged from this time yesterday and maintaining its recent gains. Against the Aussie we are up +20 bps at 91.4 AUc and a new three-month high. Against the euro we are unchanged at 53.2 euro cents. That all means our TWI-5 starts today just over 67.3, and marginally firmer.

The bitcoin price starts today at US$81,895 and down -1.9% from this time yesterday. Volatility over the past 24 hours has again been moderate at +/- 2.1%.

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.