Economy Watch

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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.

Today we lead with news global factories are mostly in expansion mode, driven by a new order surge and despite the rising cost pressures.

But first, monitored US job cuts stayed quite low in September at about 44,000, similar to August, and similar to the level in September a year ago.

US initial jobless claims dipped last week to 157,000, a shift that is explained by seasonal factors. There are now 1.5 mln people on these benefits, a substantial fall, as qualification restrictions keep many from extending this support.

The September ISM factory PMI was little-changed from its good August level. Price pressures persist but new orders are staying at good levels. The alternate S&P Global factory PMI showed a better result and to its best levels since the pandemic. The same new order drivers were picked up here too, and the cost pressures as well.

Little in these two reports will restrain the Fed from targeting inflation and with less worry about hurting jobs. But the tame PCE inflation report yesterday is shifting the tone among overnight Fed speakers away from an October rate hike. The Treasury market eased on the comments.

In New York, the US Court of International Trade has held hearings on whether Trump's revised tariff policies are legal. This three judge panel struck down his first approach. The next decision is expected before Christmas although it could be earlier if no new or novel arguments are presented.

In Canada, their factory PMI is still expanding but at a slower pace and now at a six month low. Output rose despite a decline in new orders affected by tariffs challenges Cost inflation surged to its highest since July 2022. Confidence in their outlook dropped as firms grapple with supply-side disruptions.

Across the Pacific, China is on its Golden Week holiday which will last until October 7.

Very strong new order growth has powered the September Taiwan factory PMI to a fast expansion. Apart from the pandemic recover, this puts their expansion back on par with the very good 2018 level. This is the sort of expansion you might see in an emerging economy (say like India) but unusual for a developed economy - and far faster than in its jealous, giant neighbour to its west.

South Korean exports came in very much higher than expected in August. Recall they it US$100 bln in June for the first time and have grown since then, hitting a new all-time record of US$121 bln in August which is up +83% from the same month a year ago. Of course, electronics are the key driver.

The S&P Global PMI for India reported a pickup in new orders too.

The EU factory PMI gathered pace in September from their fastest pace in new orders since March 2022.

And staying in Europe, Binance is thumbing its nose at regulators who have ordered it to wind down its operations there. It has no license to operate but is using an obscure legal exemption to stay active.

Meanwhile, August exports from Australia rose +15.3% from a year ago while imports rose +16.3% on the same basis. That means their merchandise trade surplus fell to just +$495 mln in August, its lowest August in ten years. the average August surplus over that period has been ten times that level (ie $5.2 bln).

Staying in Australia, Cotality’s Home Value Index fell -1.1% in September, the sixth straight month of falling values.‍ Brisbane had the sharpest monthly drop. Across the state capitals, almost every suburb (97%) has recorded value declines over the past three months, as a broad-based negative housing cycle sets in.

Global container freight rates were little-changed again this past week, and are now +166% higher than year-ago levels. The sharp rises in May and June have been sustained and are showing no signs of normalising. There were falls in the Chine to EU trade again, offset by rises in the China to US trade. Bulk cargo rates fell -9% and off their recent peak, to now be +44% higher than year-ago levels.

The UST 10yr yield is now just on 5.24%, down -6 bps from yesterday.

The price of gold is at US$4166/oz and up +US$12 from yesterday. Silver is at just over US$60.50/oz and up +50 USc.

Oil prices have risen +US$1/bbl from yesterday to just over US$92/bbl in the US, while the international Brent price is up US$3 to US$98.50/bbl.

The Kiwi dollar is down -30 bps from yesterday, now at just on 56 USc and that is a ten month low. Against the Aussie we are down -10 bps at 81 AUc. Against the euro we are up +20 bps at just on 49.9 euro cents. That all means our TWI-5 starts today at 59.9 and down -20 bps yesterday and close to a 17 year low.

The bitcoin price starts today at US$84,230 and essentially unchanged from yesterday. Volatility over the past 24 hours has been low at just under +/-0.8%.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again on Monday.

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Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

Shutterstock Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

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.

Today we lead with the bond market warnings don't seem to be being taken seriously by policy makers. They are ignoring them at their peril.

US mortgage applications fell sharply again last week as their benchmark 30 year home loan rate rose to 7.30% and a three year high.

However, after three months of slowdown, the precursor ADP employment report showed a +90,000 gain for private sector jobs. In a longer perspective this level is modest, but it is much better than recent outcomes. Saturday's non-farm payrolls are now expected to deliver a similar gain but that will be sharply less than the August one (one you may recall that was received with deep scepticism).

The third and final estimate of Q2-2026 US GDP growth came in at a +2.2% rate, down from the +2.5% rate in Q1-2025. But it was an upward revision from their second Q2-2026 estimate so it has had a positive impact on market views. Higher consumer spending, and more from the data center buildout activity were the main reasons for the upgrade.

Meanwhile, the August PCE inflation metric came in at 3.4% which was little-changed from July and lower than expected. Personal disposable incomes rose +4.8% in August from a year ago while personal consumption expenditures rose +6.1%. The bond market seems sceptical of this data as the softer-than-expected inflation number had no effect stopping the US Treasury yields rising.

The Chicago PMI bounced back in September after the August disappointment, back to levels it has had for most of 2026.

US crude oil stocks rose modestly last week when a small fall was anticipated. (There is no update on their Strategic Reserve holdings.)

The US booked a very elevated merchandise trade deficit in August of -US$132.6 bln and far above the high -$115 bln expected. Clearly the Trump tariff strategies are failing to restrain trade. Exports were up almost +14% (mostly aircraft) but imports surged +28% from the same month in 2025 (mostly data center goods). 

China said both its official factory and services PMI's shifted into a small expansion in September from a modest contraction in both in August. This was a better result than was expected. In addition, the S&P Global factory PMI for China was released. It recorded a modest expansion in August, and that improved in September. The unofficial version for their services sector remained very modest however - but at least it improved as well.

In something of a surprise, Korean industrial production came in sharply lower in August than anyone expected. It was expected to rise +4% as it did in July, but it actually fell -2.2%, so a notable miss.

German inflation came in at 3.3% in September, its highest since the end of 2023.

French sovereign bond risk is rising sharply and investors and analysts are warning of significant trouble if France does not get its fiscal house in order. The key metric being watched is the discount to the equivalent German bond yields which is suddenly at a 14 year extreme, a shift that has burst into the open in just the past few days.

Australian inflation rose from 3.5% in July to 4.0% in August in a rise at was basically expected (4.1%) by economists, the financial markets - and presumably the RBA. Their core (trimmed mean) inflation rates was unchanged at 3.6%. Fuel costs were obviously the big mover (+5.6%), but housing costs were up 5.7%, education up 4.7% and education costs up 3.9%. So the rising cost pressures are broadening out. Food was up 3.0%.

There was a notable fall-off in Australian building consents in August, down -6.1% and largely due to a retreat in multi-unit approvals.

Global air passenger travel fell in August, largely due to pullbacks in both North America and the Middle East. But the gains in the Asia/Pacific region were modest too with international travel in that region barely changed. But domestic air travel in Chin was up an impressive +5.8%

The UST 10yr yield is now just on 5.30%, up another +3 bps from yesterday and a new high since June 2007. The 30 year yield is at 5.65%, up +5 bps and its highest since January 2001.

The price of gold is at US$4154/oz and up +US$6 from yesterday. Silver is at just over US$60/oz and down -US$1.50.

Oil prices have risen +50 USc/bbl from yesterday to just over US$91/bbl in the US, while the international Brent price is down -US$5 to US$98.50/bbl. Iran said it had received a US response to its latest proposal to resurrect the ​collapsed ceasefire in the Gulf, days after President Donald Trump said he had rejected it.

The Kiwi dollar is little-changed from yesterday, still at 56.3 USc and that is still a ten month low. Against the Aussie we are up +30 bps at 81.1 AUc. Against the euro we are holding at just on 49.7 euro cents. That all means our TWI-5 starts today at just on 60.1 and up +10 bps yesterday and still hovering at a 17 year low.

The bitcoin price starts today at US$84,277 and up +1.6% from yesterday. Volatility over the past 24 hours has stayed modest, also at just under +/-1.6%.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.

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Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

Shutterstock Track 1219389

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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.

Today we lead with news  the bond market is shouting louder warnings at US policymakers. And China is rolling out more stimulus and subsidies to counter a growing slowdown there.

First today, the overnight Pulse dairy auction delivered mixed results although both the SMP and WMP prices rose from the prior event, up by about +1.6% in USD terms. But as the NZD took a bit of a thrashing overnight, these prices were up more than +3% in local currency terms.

Also mixed were the August US JOLTS labour market data. While much of it was little-changed, the number of job openings fell by an outsized -256,000 to just over 7 mln, the lowest in five months. Analysts had expected them to rise to 7.23 mln so this is a notable miss. And the fall was broad-based in most sectors and most regions, although the South did manage to book a small rise.

The US Conference Board reported a sharp fall in consumer sentiment in September, in fact taking it to its lowest since 2014. While it isn't as low as the University of Michigan survey yet, it is tracking in the same negative direction, both for its Present, and Expected monitoring of sentiment.

Yesterday we reported a positive Dallas Fed factory survey, even if it is suffering high cost challenges. But today's update on the Texas services sector is not so bright with a 'stall' reported and their first decline in four months. They also reported increased strain in input and selling prices.

Canada reported that their August economic activity rose, their tenth rise in the past twelve months and through a difficult period. That likely puts their GDP up +1.7% real from a year ago. Their 'resilient economy' may be enough for the Bank of Canada to start hiking rates again to contain the inflation pressures building again. The next rate review there is on October 28 (the same as the RBNZ).

In China, businesses there are said to be facing weak demand ahead of their Golden Week holiday. And that has pushed the Chinese central bank to lower a technical interest rate. And Beijing is to start subsidising mortgage interest rates for low income borrowers, aiming to create demand in their housing markets.

EU business and consumer sentiment sagged in September, but to be fair the overall level is still sitting close to its long-run average. The movement is basically due to lower confidence by consumers as they look forward to winter and an uncertain energy outlook.

In Australia, the RBA delivered the expected +25 bps rate change. That raises this rate to its highest in the developed world. They emphasised their strong commitment to the inflation fight and noted that more hikes may be needed before that is won. They are in an "whatever it takes" mindset now, and their new rate levels are 15 year highs.

Meanwhile, global air cargo demand rose +4.4% in August from a year ago, largely on work-arounds from the disrupted seas trade on major routes. International volumes were up +5.3% with Asia/Pacific volumes up +5.5%. But it was the +10.1% jump in North American volumes that is the standout feature, a notable rush to shore up supply lines ahead of more expected policy disruptions.

The UST 10yr yield is now just under 5.27%, up another +3 bps from yesterday and a new high since June 2007. The 30 year yield is at 5.60%, up +6 bps and its highest since January 2001.

The price of gold is at US$4148/oz and up +US$11 from yesterday. Silver is at just under US$61.50/oz and almost -US$1.

Oil prices have fallen -US$2.50/bbl from yesterday to just over US$90.50/bbl in the US, while the international Brent price is just under US$103.50/bbl and also down -US$2.50. This is all due to the US releasing more from their strategic reserves, although Saudi Arabia also confirmed that its pipeline repairs are complete too.

The Kiwi dollar is down a sharpish +40 bps from yesterday, now at 56.3 USc and that is now a ten month low. Against the Aussie we are unchanged at 80.8 AUc. Against the euro we are down -20 bps at just on 49.7 euro cents. That all means our TWI-5 starts today at just over 60 and down -40 bps yesterday and that takes us down to a level we last had in 2009, a 17 year low.

The bitcoin price starts today at US$82,936 and down -0.8% from yesterday. Volatility over the past 24 hours has been modest at just under +/-1.0%.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.

Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

Shutterstock Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

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.

Today we lead with news the rejection of the Iranian peace proposal by the US has meant diplomatic efforts to resolve the issue have lost momentum and financial markets have downgraded prospects across the board, even though the release of some recent data has generally been positive.

First, the very positive August Dallas Fed factory survey has been repeated in September even if not quite at the same level. The last time they had two successive positive reports at this level was in March 2022, and prior to the pandemic recovery, in 2018. If there is a downside in this report it is that cost pressures are rising fast and faster than prices are rising.

Fed Governor Lisa Cook said overnight that future productivity gains from AI may not be enough to offset near-term price pressures, warning this trend could drive up US inflation.

Meanwhile the US and China are working on a US$30 bln tariff reduction framework, have agreed to establish an AI dialogue, and agreed to Increase flights between the two countries. But all this just seem window-dressing talk at this stage. No actual deals have been agreed. Remember the Beijing meetings in May where large airplane and ag products were announced, neither of which resulted in contracts or trade.

China's industrial profits were up +4.2% in August to just over ¥690 bln from the same month in 2025. For the eight months of 2026 they are up +15.7% so this latest period is recording a notable slowing in their growth. But it is still growth. Most observers had expected the growth rate to pick up to +18% so there is a disappointment in this data, and reflected in today's Shanghai equity markets.

Singapore's industrial production rose a sharp +15.4% in August from a year ago and driven by a +28% surge in electronics products.

India’s industrial production rose +8.0% in August from a year earlier, up from an upwardly revised +7.4% in July and well above market expectations.

Later today we will be watching the RBA's monetary policy review which is widely expected to deliver a +25 bps hike to 4.6%. Financial markets have priced that change in at a 92% chance. Note, that isn't 100%. But of course most interest will be in how these policymakers see the track from here. Some observers think it will hit 5.35% before the middle of next year before the RBA is done hiking.

Before then we should note the release of the 2026 Global Cities Index from Oxford Economics. They say the top city is New York, followed by London, Paris and then Seattle ahead of San Francisco. Sydney came in at #13 (a fall from 7th), Melbourne at #16 (a fall from 6th) and Brisbane at #36 (a fall from 23rd). Auckland was ranked #60, Wellington ranked #75 and Christchurch at #96. No New Zealand rankings changed from last year. The index claims to assess  the strengths, weaknesses and future potential of the world’s 1,000 largest cities.

The UST 10yr yield is now just on 5.24%, up +7 bps from yesterday and a new high since June 2007. The 30 year yield is at 5.55%, up +5 bps and its highest since January 2001.

The price of gold is at US$4137/oz and down -US$148 from yesterday. Silver is at just over US$61.50/oz and down -US$3.

Oil prices have risen +50 USc from yesterday to just over US$93/bbl in the US, while the international Brent price is just under US$106/bbl and up +US$1.50.

The Kiwi dollar is unchanged from yesterday, still at 56.7 USc. Against the Aussie we are up +20 bps at 80.8 AUc. Against the euro we are also up +20 bps at just on 49.9 euro cents. That all means our TWI-5 starts today at just on 60.4 and up +10 bps yesterday.

The bitcoin price starts today at US$83,618 and down -0.9% from yesterday. Volatility over the past 24 hours has been modest at just over +/-1.3%.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.

Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

Shutterstock Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

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.

Today we lead with news nothing was resolved in the Xi-Trump talks, and nothing is resolved in the US-Iran standoff.

But first, this week will be dominated by the RBA policy rate decision on Tuesday as the next major set piece review in the midst of the global bond sell-off and inflationary pressures. They are widely expected to raise the rate +25 bps to 4.60%, widening the differential to New Zealand. Australia will also release important household spending data, its August CPI update, and building permit data this week.

In New Zealand it will be all about consumer and business sentiment updates, and the usual end of month RBNZ data dump.

The week will end with the US September non-farm payrolls report - expect +100,000, although its cred is being undermined from within. And there will be US data on personal income and spending out this week, other labour market data, and a key PMI report.

In China, the focus will be on the September PMIs, with data from both the NBS and private S&P Global ones expected to point to a modest improvement in manufacturing and services activity. August industrial profits will also be released. Meanwhile, Chinese markets will be closed from October 1 to October 7 for the National Day holidays.

Of course, the global geopolitical mess rolls on chaotically, so we will be watching for either diplomatic agreements or escalatory strikes between the US and Iran.

Over the weekend in the US, August durable goods orders were essentially unchanged from July, which was better than the expected -0.4% decline. From a year ago they are +8.4% higher although we should note that PPI inflation ran at 5.4% in the same period. Non-military capital goods orders are up +5.8% on a year-ago basis, but given the huge surge in data center buildouts this is surprisingly weak.

Late last week, US petrol prices breached the +50% rise since Trump's war on Iran started in early March. Diesel prices are now up +67% in that market.

The University of Michigan September survey of consumer sentiment tracks anxiety of the inflationary pressure these sort of cost increases are bringing and the weekend update is grim reading. Only once since this survey started in 1946 has this reading been as low as it is now - and that was in May. Year-ahead inflation expectations jumped from 4.0% in August to 4.6% this month, the highest reading since June. The current level substantially exceeds the 3.4% seen in February before the Iran conflict began, along with all 2024 levels.

Financial markets are betting that rising inflation will be more important to the Fed than falling sentiment and the US Fed will raise rates at its next meeting on October 29, which is just days ahead of their mid-term elections. This market positioning is more than 2:1 now, and is bolstered by recent Fed speakers who are clearly worried that delays could cause them to lose control of the US inflation impetus.

Over the weekend China was on holiday for Mid Autumn Festival and their central bank said it injected up to ¥1 tln of liquidity into their banking system for this holiday via reverse repos. (During the same holiday last year it injected ¥735 bln in reverse repo operations, but later it revealed another ¥500 bln in direct repo purchases.) And they have their Golden Week holiday starting this week (October 1 - 7) and much depends on their internal spending impulse during this period. Beijing economy watchers will be nervous.

The UST 10yr yield is now just on 5.17%, unchanged from Saturday but up a net +16 bps from this time last week.

The price of gold is at US$4285/oz and down a mere -US$4 from Saturday, down -US$96 from this time last week. Silver is at just over US$64.50/oz and unchanged but down -US$2 for the week.

Oil prices have held from Saturday to just on US$92.50/bbl in the US, while the international Brent price is still at US$104.50/bbl. The US has rejected Iran's plan to re-open the Strait.

The Kiwi dollar is unchanged from Saturday, still at 56.7 USc but down -50 bps for the week. Against the Aussie we are holding at 80.6 AUc. Against the euro we are also holding at just on 49.7 euro cents. That all means our TWI-5 starts today at just on 60.3 and little-changed from Saturday, down -40 bps for the week.

The bitcoin price starts today at us$84,386 and down +0.5% from Saturday but up a net +4.1% from a week ago. Volatility over the past 24 hours has been low at just over +/-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’ll do this again tomorrow.

Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

Shutterstock Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

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.

Today we lead with news US treasury yields are trading at multi-year highs, as stronger-than-expected economic data and elevated oil prices fuelled bets on another Fed rate hike. The 10-year yield topped 5.18%, its highest level since 2007, while 30-year reached a 2004 peak of 5.47%. The gold price is slipping. Many other asset prices face price risks too, especially commercial property and that also comes with leverage risks being exposed.

So far the US-China meetings in Washington DC between Xi and Trump have been all show and no substance.

In the US, there were 163,800 initial jobless claims last week, an increase from last week's unusual low but about the increase that can be accounted for by seasonal factors. That puts the continuing claims at 1.55 mln, a new 60 year low. The qualification restrictions are certainly biting hard now. Early estimates of the September US non-farm payrolls change doesn't support the idea that jobs growth is strong, and certainly not among workers who are being stripped from unemployment protections.

However there was positive news of expanding recent sales of new-built homes. Even though housing starts are falling, sales of these homes rose in August, up +6.4% from July, but still -2.0% below year-ago levels.

The Kansas City Fed factory survey stayed positive in September, holding the expansion level it has had since June. But price pressures intensified, the survey shows.

There was a still well-supported US Treasury seven year bond auction overnight (down only -3.2%) that delivered a median yield of 5.02% (high 5.09%) and that was up sharply from the median of 4.46% at the prior equivalent event a month ago. That is near its highest in 20 years.

Canada reported some positive economic data overnight. It's August retail sales were up +1.3% (real), and more than making up for the -0.7% monthly fall in July. They are up +1.9% (real) from a year ago. And its manufacturing sales were up +1.1% in August. This extends a string of good monthly gains in 2026, with only one month in the past seven showing a dip.

In China, they raised their petrol prices today to ¥8.90/L, up from ¥8.60/L (NZ$2.34/L from NZ$2.26/L).

In Australia, June 2026 data released yesterday by the ABS shows household wealth there has reached AU$19.4 tln, driven by superannuation, but now held back by recently falling housing values. That is average per capita wealth of AU$694,500. There are a vast number of Aussie 'super' millionaires now.

Meanwhile, the August update of their labour force data shows +39,500 more jobs in the month with 14.827 mln people employed. But their jobless rate rose to 4.6% with 722,900 adults unemployed and a rise of +28,200 in a month. Hours worked and participation both rose and underemployment fell (slightly).

Global container freight rates were little-changed overall over the past week. There were some falls in the China-EU trade, but a minor rise in the Chine-USWC trade. Overall prices are now +154% higher than year-ago levels and have topped out for the moment. Bulk cargo rates are +3% higher for the week but also seem topped out. From a year ago, these rates are +55% higher.

The UST 10yr yield is now just on 5.18%, up another +5 bps from yesterday. The 30 year yield is at 5.47%, up +7 bps.

The price of gold is at US$4264/oz, and down -US$30 from yesterday. Silver is at just over US$63.50/oz and down -US$1.

Oil prices have risen +US$4 to just on US$95.50/bbl in the US, while the international Brent price is up +US$4.50 to US$107/bbl. Saudi Arabia says its pipeline repairs will be completed "within days".

The Kiwi dollar is down -10 bps from yesterday, now at 56.6 USc. Against the Aussie we are up +10 bps at 80.7 AUc. Against the euro we are little-changed at just on 49.8 euro cents. That all means our TWI-5 starts today at just on 60.3 and down -10 bps.

The bitcoin price starts today at US$84,103 and down a minor -0.3% from yesterday. Volatility over the past 24 hours has been modest at just over +/-1.1%.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again on Monday.

Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

Shutterstock Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

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.

Today we lead with news stronger American economic data and higher oil prices have built expectations of more rate hikes by the US Federal Reserve. The USD has jumped in response.

However, US mortgage applications fell again last week but that is really no surprise because that market saw its benchmark 30 year mortgage rate jump to 7.12% and its highest since May 2024. It was refinance activity that saw the biggest pullback.

Meanwhile, US business growth surged to its fastest for over five years and job gains accelerated according to the S&P Global PMI. Both their service sector and their factory sector are sharing in the gains. But at the same time price pressures are also intensifying with a sharp spike in costs. Input costs surged to their highest since October 2022; selling prices jumped too but at a lesser rate.

US crude oil stocks were expected to fall again last week, but instead they rose and by much more than expected. However that didn't stop their strategic reserve holdings from falling again, staying at dangerously low levels. Nor has it curtailed retail pump prices. More generally, the world is running down its crude oil buffers - and the price signals seem to be ignoring that risk.

There was a fall in support for the US Treasury 5 year bond auction overnight which delivered a 4.95% median yield (5.04% high) which was up sharply from 4.34% at the prior equivalent event a month ago. Bessent's yield management is failing to deliver and restraint.

Fed governor Barr was speaking overnight and ho reiterated the view that higher rates will be needed to bring inflation back to target. Without much threat on the jobs front and their labour market mandate, markets see the Fed unconstrained in taking sharper action against inflation. He said "risks to achieving our inflation target have increased, while risks to the labor market have receded."

In the US all eyes will now turn to Trump's hosting of Chinese president Xi - who incidentally is coming with no Chinese business leaders.

Taiwan's August industrial production (+23.5%) and August retail sales (+6.5%) data both delivered the strong year-on-year gains we have come to expect from them.

Singapore's inflation rate came in at 2.3% in August, up marginally from July but the increase expected.

Indonesia's central bank reviewed its 5.75% policy rate overnight but left it unchanged.

In India, their flash PMI data for September pointed to a better improvement in business conditions. Output growth was higher in both manufacturing and services companies, with goods producers leading the latest upturn. New orders also rose at a quicker pace, prompting a solid expansion in jobs. Meanwhile, inflationary pressures faded and business confidence strengthened.

The flash S&P Global factory PMI in Australia saw a shift from a moderate expansion in August (52.0) to a minor contraction in September (49.3). Their services sector eased as well but is still expanding in September. On the prices front, the rate of input price inflation picked up to its highest in three months, but remained weaker than seen through the second quarter. Meanwhile, output charges rose at a strong rate that was more pronounced than in August. 

The UST 10yr yield is now just on 5.13%, up +16 bp from yesterday. The 30 year yield is at 5.40%, up +11 bps.

The price of gold is at US$4294/oz, and down -US$58 from yesterday. Silver is at just over US$64.50/oz and down -US$2.

Oil prices have firmed +50 USc to just on US$91.50/bbl in the US, while the international Brent price is up +US$3 to US$102.50/bbl.

The Kiwi dollar is down -50 bps from yesterday, now at 56.7 USc. Against the Aussie we are up +10 bps at 80.6 AUc. Against the euro we are down -20 bps at just over 49.8 euro cents. That all means our TWI-5 starts today at just on 60.4 and down -30 bps.

The bitcoin price starts today at US$84,343 and down -2.4% from yesterday. Volatility over the past 24 hours has been moderate at just over +/-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’ll do this again tomorrow.

Track 1219389

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Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

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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.

Today we lead with news inflation's pressures are building everywhere, even if oil prices took a small dip today.

But first, overnight there was a Pulse dairy auction where prices dipped marginally in USD except for SMP, but were all higher in NZD, although this too was only marginal.

In the US, the ADP weekly jobs data rose to an average of a +20,000 jobs gain per week over the past four weeks. That recovers it back to late June levels.

Meanwhile the Richmond Fed factory survey was expected to rise marginally in September, but it fell and its first retreat in  six months. This was essentially driven by retreating new order levels and order backlogs shrank as well. Input and output costs both rose however and at a faster pace in both cases.

There were a few Fed speakers out overnight. New York Fed boss Williams defended how they have been handling monetary policy, although he didn't give any guidance on what is coming next. Vice Chair Jefferson also avoided guidance comments although he has been on record recently of supporting their rate hikes. But Richmond Fed boss Barkin did address the recent rising trend and what comes next. More hikes are possible, he said.

There was a giant US Treasury two year bond auction overnight and this one did not display the sagging demand of the other recent events. However, it came with much higher yields. This lates one delivered a median yield of 4.74% (high 4.79%), up notably from the 4.16% at the prior equivalent event a month ago. This is a meaningful rise given the 2 year Note has the largest supply of any maturity they offer - US$79 bln. Just for this bond, that has the US Treasury paying +14% more in interest pa than just a month ago. Debt servicing is becoming an ugly problem, and fast.

Just when you might have thought Taiwanese export orders couldn't grow much faster, they did in August. They exceeded US$100 bln in the month for the first time, up a staggering +71% from a year ago (which itself was rising and close to a record at the time). In local currency, they were up +82%.

After improving since April (that is, betting less negative) EU consumer sentiment hit a setback in September, one that was not expected. Winter is approaching there and with the energy supply issues unresolved there, perhaps it is understandable that concerns are rising again.

In Australia, RBA governor Bullock suggested that their labour market is too tight and that is putting upward pressure on inflation. This suggests they will continue raising their benchmark rate until they see the jobless rate rise and labour-cost pressures ease. She is on a track that will create difficult politics. Not helping is the rise and rise of petrol prices, now approaching their pandemic highs again. An RBA rate rise is now almost a certainty next week, taking it to 4.6%. 

The UST 10yr yield is now just on 4.97%, up +1 bp from yesterday.

The price of gold is at US$4352/oz, and up a minor +US$7 from yesterday. Silver is at just over US$66.50/oz and up +50 USc.

Oil prices have fallen another -US$4.50 to at just on US$91/bbl in the US, while the international Brent price is down -50 USc to US$99.50/bbl.

The Kiwi dollar is unchanged from yesterday, still at 57.2 USc. Against the Aussie we are up +20 bps at 80.5 AUc. Against the euro we are up +10 bps at just over 50 euro cents. That all means our TWI-5 starts today at just over 60.7 and little-changed.

The bitcoin price starts today at US$86461 and up +0.8% from yesterday. Volatility over the past 24 hours has been low at just over +/-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’ll do this again tomorrow.

Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

Shutterstock Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

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.

Today we lead with news more policymakers are bracing for dealing with stagflation.

But first, in the leadup to the Xi-Trump talks in Washington, there is a focus on AI and its risks. And there is some pre-celebration from both sides of how good it is going to be. We recently noted that the May Beijing version of these talks has seen the announced 200 plane order for Boeing apparently die. It also seems that the May deal to buy US grains has never materialised either. So you should be sceptical of any current claims about the Washington DC meeting outcomes.

The Chicago Fed's National Activity Index dipped in August from July, suggesting US economic growth is no longer rising. In four of the last six updates, this measure has decreased. New orders are no longer rising in this data, production is contracting.

So that points to increasing stagflation.

Meanwhile Chicago Fed President Austan Goolsbee warned that bringing inflation back down to the 2% target may not be painless and could require pushing employment below target. "This is exactly the painful trade-off between employment and inflation that stagflationary shocks always impose on a central bank. Unfortunately, in environments like that, the only way back is the hard way."

And staying in the US, California has declared a state of emergency as a strengthening El Niño raises the threat of damaging storms, widespread flooding and mudslides across the state for their upcoming autumn and winter.

In Canada, their central bank boss has also been speaking, and warning that their trade difficulties with the US could cut Canadian growth in half to below +1%. It is actually oddly impressive that a dispute this large with an economic adversary as big as it gets can be navigated with any expansion.

In Australia, Reserve Bank Assistant Governor Sarah Hunter was on a Nine Network podcast this morning and emphasised that the RBA is worried about inflation and fighting that threat is where their energies currently are focused.

The copper price is making another push up towards its record high (reached on September 9), this time driven by growing logistics issues.

The UST 10yr yield is now just on 4.96%, down -4 bps from yesterday.

The price of gold is at US$4345/oz, and down -US$38 from yesterday. Silver is at just over US$66/oz and little-changed.

Oil prices have fallen -US$4.50 to at just on US$95.50/bbl in the US, while the international Brent price is down -US$4 to US$100/bbl. There is a bit of hopium involved here as traders watch diplomatic efforts to end the US-Iran war and watch for signs of oil cargo movements. But they are not significant, yet anyway.

The Kiwi dollar is unchanged from yesterday, still at 57.2 USc. Against the Aussie we are holding at 80.3 AUc. Against the euro we are up +10 bps at just under 49.9 euro cents. That all means our TWI-5 starts today at just under 60.7 and little-changed.

The bitcoin price starts today at US$88,791 and up a sharp +5.8% from yesterday. (And we should note that it has risen back to NZ$150,000 for the first time since late January.) Volatility over the past 24 hours has been high at just over +/-3.4%.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.

Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

Shutterstock Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

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.

Today we lead with news global financial markets are little-changed at near historic highs even though economic data releases seem to be still giving weaker signals.

This week will be dominated by the Fonterra annual result and dairy payout finalisation, a big dump of RBNZ lending data, and some credit card activity data.

In Australia, the week will be headlined by the August jobs data release which is expected to show +20,000 jobs growth.

Elsewhere, China is heading into its Mid-Autumn Festival which starts on Friday and runs through to Sunday.

In Japan it will be Silver Week with markets closed there today through Wednesday.

China made no changes to their Loan Prime Rates over the weekend. Ahead this week there will be many such decisions in Switzerland (no change at 0%), Sweden (no change at 1.75%), Norway (no change at 4.25%), Mexico (no change at 6.5%), and Indonesia (no change at 5.75%).

And there will be a major diplomatic set piece this week with Chinese President Xi visiting the US on Friday and Saturday (NZT). Don't expect much other than photo opportunities, although with Trump there is always the capacity for something to go badly wrong during or after the meeting. In May, China agreed to buy 200 Boeing jets during Trump’s visit to Beijing but no actual deal has been done so far, so anything announced at these summits doesn't mean anything will actually happen.

In the US they will release durable goods order data and most observers think they will fall in August from July.

From everywhere will will be getting PMI updates. And from Taiwan we will get its export order data.

All this, plus whatever happens in the Middle East wars.

Over the weekend we learned that, China posted another weak foreign direct investment result for August, down -5.3% on a year-to-date basis. But the incremental flows were tiny in August. up just +US$7 bln from July and virtually unchanged from year ago levels. From two years ago there is a large drop. For all the official propaganda about how well the Chinese economy is doing, it isn't enticing investment in. A key reason these flows are so low is that sovereign wealth funds are now on the sidelines.

Japan's CPI inflation rate held at +1.9% in August as it was in July, and their core inflation rate eased to 1.7%. Both results were at the bottom end of expectations, and should have taken pressure off the Bank of Japan who were meeting as this data was released. But they have other issues weighing on them including defending the yen, and facing bullying pressure from the Trump Administration. All the same, inflation this low when the global price pressure is high is an achievement, even if Japan is only one many Asian economies that are managing to replicate that result.

As universally anticipated and earlier implied, the Bank of Japan delivered its +25 bps rate hike on Friday, taking its policy rate to 1.25% which is a 31 year high. They said they will "continue to raise the policy interest rate and adjust the degree of monetary accommodation, in response to developments in economic activity and prices as well as financial conditions."

Meanwhile, the Bank of Japan made a 'rate check' in currency markets on Friday ahead of their holiday, after the yen fell on the rate hike, and that has strengthened sentiment for the yen, also likely underpinned by geopolitical considerations.

Across the Pacific, US industrial production stalled in August from July, a disappointing result because it rose in July and was expected to rise again in August. It is now +1.4% higher than a year ago, not exactly an indicator of a booming economy although that is up from +1.1% in July. Almost all of this is due to data center buildout ("business equipment" was up +7.1%).. In fact, production of consumer goods is now falling at a -1.1% annual rate.

Also disappointing was the US Conference Board leading indicator which edged lower in August when a small rise was anticipated and after a bigger rise was booked in July.

In Europe, the August ECB inflation expectations survey shows them at 3.0% (median) and 5.0% (average). These levels are little-changed from the June and July survey results.

Germany reported their August producer price levels overnight and that came in at +4.6%, higher than July's +3.0% and higher than the expected +4.1% rise. Of course, driving this were energy costs which were up +8.3% from a year ago, up +3.2% from July.

In Australia, after testimony to a parliamentary committee yesterday in which Governor Bullock have a hawkish briefing on inflation risks, economists have suddenly realised that the a rate hike is the most likely outcome at the nest monetary policy review there on September 29. That will take their cash rate target up to 4.60%. And it may go higher if inflation isn't restrained at that level.

The RBA isn't angling to save the Aussie housing market. It may well become collateral damage in the fight against rising inflation.

The UST 10yr yield is now now just under 5.00%, down -1 bp from Saturday up a net +2 bps for the week.

The price of gold is at US$4383/oz, and just +US$2 from Saturday, down -US$33 from a week ago. Silver is at just over US$66/oz and down -50 USc but up +US$2 from a week ago

Oil prices have held at just under US$100/bbl in the US, while the international Brent price is up +50 USc at US$104/bbl. A week ago these prices were US$100.50/bbl and US$104.50/bbl respectively, so little-changed.

The Kiwi dollar is unchanged from Saturday, still at 57.2 USc but down -90 bps from a week ago, down -190 bps from the start of the month. Against the Aussie we are holding at 80.3 AUc. Against the euro we are still at just on 49.8 euro cents. That all means our TWI-5 starts today at just under 60.7, unchanged at a six-week low.

The bitcoin price starts today at US$81,118 and little-changed from Saturday. Volatility over the past 24 hours has been low at just over +/-0.8%.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.

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Monetization ID TFGEPGEI0LHEIJAI

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI