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 stable

In 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 view

The 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.

Kia ora,

Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the international edition from Interest.co.nz.

And today we lead with news the Trump tariff announcement will be just after 4pm New York time today when Wall Street closes. That is 9am New Zealand time. After that, it will be all about the size and nature of the retaliation from its former allies.

In the meantime we should note that American vehicle sales surged in March as buyers rushed to get pre-tariff-cost vehicles. March's sales ran at a 17.7 mln annualised rate, the highest since October 2017 (if we ignore a pandemic-affected spike). Bringing forward purchases like this doesn't augur well for subsequent months. Not included in this surge were Tesla sales which fell -13% in the quarter, largely attributed to the anti-Musk factor. Production far exceeded sales which were at their lowest since 2022, and that was after "model changeover" production cutbacks. (Also not doing so well are the shares in Truth Social, which are down -44% so far this year.)

US mortgage applications decreased last week from the prior week but are now +9% higher than the low year-ago levels. Refinance activity fell and purchase activity rose. This is the third straight week of overall declines. Benchmark mortgage interest rates changed little over the past week.

US factory orders rose in February from January - marginally, but remain -0.5% lower than year-ago levels.

This weekend we get the American non-farm payrolls data for March and a modest rise of +128,000 jobs is anticipated. In advance of that, the ADP Employment Report out today said private payrolls rose +155,000 in March which was better than expected. Although low by historical standards, this is a 'good' result.

After two strong months, the US Logistics index fell back and quite sharply to a level they last had in August 2024. Every aspect except warehouse capacity slowed.

In India, they recorded a notable rise in their factory PMI. New order growth strengthened despite softer a softer rise in exports. This PMI result was their best since June 2024.

In the ASEAN countries, their March PMIs together painted a picture of a modest expansion even if it did slip in March from February. Price pressures eased, and sentiment remains solid. Malaysia was perhaps one of the weaker performers in this group.

The UST 10yr yield is now at 4.21%, up +5 bps from yesterday at this time.

The price of gold will start today at just on US$3132/oz and up a net +US$25 from yesterday and still just off its all-time high.

Oil prices are little-changed from yesterday at just under US$71.50/bbl in the US and the international Brent price is now just under US$75/bbl.

The Kiwi dollar is now at 57.3 USc and up +40 bps from this time yesterday. Against the Aussie we are up +30 bps at 91.1 AUc. Against the euro we are up +10 bps at just over 52.8 euro cents. That all means our TWI-5 starts today now just under 66.8 and up +30 bps.

The bitcoin price starts today at US$87,214 and up another +2.5% from this time yesterday. Volatility over the past 24 hours has been rising but still modest at +/- 1.9%.

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 world is bracing for the US to start a US$1.4 tln trade war. Tomorrow. The US says it is ready to start hostilities, supposedly with 20% across-the-board levies. Other governments have their retaliation plans ready. Americans are rushing to buy cars they can afford.

But first, the overnight dairy auction came in better than the derivatives market had signaled, with an overall rose of +1.1% in USD terms, up +3.2% in NZD terms. WMP prices held steady and avoided the expected dip. SMP prices rose more than expected. But volumes were light, as expected in this part of the dairy season, but actually lower than this time last year. Keeping demand up was bidding from China, while the recent new interest from Europe basically held. Nothing today will change current farmgate milk price forecasts.

In the US, retail demand is softening, with their Redbook survey off its peaks and back to average levels since October 2023. That is a notable drop from the November expansion.

There were two American factory PMI surveys out overnight. The widely-watched ISM one contracted. This is a turn from an expansion and is not unexpected, but the size of the shift was. New order flows were weak, and the mood is turning even weaker.

The internationally benchmarked S&P Global/Markit one fell too, and quite sharply, but not yet into contraction territory. But this one reported a big jump - an outsized jump - in input prices, surely a sign of what is to come. Firms were only able to pass on some of that, but even so it was at a two-year high.

American job openings in February fell by -194,000 to 7.57 mln from an upwardly revised 7.76 mln in January and below market expectations of 7.63 mln. Quits fell too as Americans prioritised holding on to the jobs they have.

The Dallas Fed services survey reported a notable contraction, with perceptions of broader business conditions worsening in March.

And that downshift was also picked up in the RCM/TIPP economic optimism survey which was expected to rise, but in fact fell in April, and to a six month low.

In China, although still modest, the Caixin China General Manufacturing PMI rose in March from February’s small positive, with a result that was better than market expectations. This marked the highest reading since last November, with output growth accelerating on the back of a sustained rise in new orders amid better demand conditions.

The EU March CPI inflation rate eased slightly to 2.2%, to a marginally lower level than expected. Lower energy costs are restraining this indicator.

In Australia, February retail sales were ho-hum, up +0.2% from January. That puts them essentially unchanged from the same month in 2024. So after inflation, that means they are -2.4% lower on a volume basis.

And as expected, the RBA sat pat with its cash rate target at 4.1%. But once the Federal election is out of the way, markets expect them to cut the policy rate by -25 bps on May 20, 2025.

Global air cargo demand is now coming off the boil as trade uncertainties build. The dip at that point wasn't large and it is still ahead year-on-year but with both US and European demand now negative on the year-ago basis, and the Asia expansion slipping rather quickly, it won't be long before we are reporting air cargo activity shrinking.

Global air passenger demand held up in February, with the impetus slowed notably. International demand is holding up better than domestic, and the Asia/Pacific region is the best of these. The main weaknesses are in North American air travel.

The UST 10yr yield is now at 4.15%, down -10 bps from yesterday at this time. 

The price of gold will start today at just on US$3106/oz and down a net -US$12 from yesterday and off its all-time high.

Oil prices are little-changed from yesterday at just under US$71.50/bbl in the US and the international Brent price is now just on US$74.50/bbl.

The Kiwi dollar is now at 56.9 USc and up +20 bps from this time yesterday. Against the Aussie we are unchanged at 90.8 AUc. Against the euro we are up +20 bps at just over 52.7 euro cents. That all means our TWI-5 starts today now just under 66.5 and up +20 bps.

The bitcoin price starts today at US$85,116 and up +2.1% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.8%.

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 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 NZD is falling again and sharply, now back to one-month lows as commodity prices suggested shifts to our disadvantage, and global trade flows became more uncertain.

The global risk-off trend is building. Wall Street opened weak, although it has pared back some of the losses in its afternoon trade.

Elsewhere in the US, a key MidWest factory survey, the Chicago PMI, contracted less in March than expected. The shift itself wasn't large, but it was unexpected because a worsening was expected. So it has gained attention. But more than a third of respondents to this survey said they would respond to tariff pressures by raising prices. Only 18% said they would on-shore supplies. New order growth only got also-ran mentions. Overall, this report is of a slower downturn.

The Dallas Fed factory survey was mixed. New order levels improved marginally but remained weak. Production levels rose more. But perceptions of broader business conditions continued to worsen in March. The general business activity index fell to its lowest reading since July 2024.

US factories are not gearing up for the 'benefits' of tariffs, yet anyway. And there are no significant signs of plans to do that.

In Canada, one party is advancing an election strategy to push back on the tariff impacts on their trade with the US, ramping up home-building sharply to a level that reminds them of the post WWII surge. This campaign pledge is likely to find a receptive audience, because by all accounts Canadians are really, really pissed-off at the US.

They will need something significant because all indications are that the impending tariff levels from the US are not being worked lower but in fact are more likely now to be at the upper end of earlier signals when they are announced on Thursday NZT.

Across the Pacific in Japan there was a good jump in industrial production reported for February, from January.

In South Korea, industrial production there was a rise on the same basis, although smaller.

In China, they reported official PMIs for March and the factory one rose marginally as expected to a small expansion. Their services PMI for March rose marginally more. Importantly, in both cases new order levels came in better than the overall indexes.

In India, they are moving into summer and all the indications are for extreme temperatures. So high are they being forecast that they could be at a level that causes parts of their economy to shut down, or at least stumble. Heatwaves are being normalised, with more energy consumption the only way to battle it on an individual level, and that means burning more coal.

In Germany, retail sales rose more than expected in February (in real terms), which was much better than expected. Meanwhile they said the CPI inflation was running at 2.2% and slightly lower than the February level, and a four month low.

Like Canada, Australia is also in an election campaign. US tariff impacts haven't really become an issue there yet although being anti-Trump is helping. But more of an issue is that China has another spy ship circling while at the same time its diplomats are calling for 'trade unity'. It is such an obvious carrot-and-stick play that it is winning China no friends. The trade fallout if Australia doesn't buckle, could be more serious for them than US tariffs.

Australian property prices continued to recover from a short-lived dip to hit fresh highs in March as borrowers and prospective home buyers await a decision on interest rates today. Data from CoreLogic showed house prices rose in all cities except Hobart last month, with the national median value of a home now over AU$820,000.

The UST 10yr yield is now at 4.25%, unchanged from yesterday at this time.

The price of gold will start today at just on US$3118/oz and up another net +US$34 from yesterday and easily a new all-time high.

Oil prices are up +US$2 from yesterday at just over US$71.50/bbl in the US and the international Brent price is now just under US$75/bbl.

The Kiwi dollar is now at 56.7 USc and and down -½c from this time yesterday. Against the Aussie we are down -10 bps at 90.8 AUc. Against the euro we are also down -½c at just under 52.5 euro cents. That all means our TWI-5 starts today now just on 66.3 and down -40 bps.

The bitcoin price starts today at US$83,350 and up +1.3% from this time yesterday. 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 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 commodity prices are falling away across the board, along with crypto, as a risk-off mood builds in financial markets.

In the week ahead, the most interesting developments will be close to home. There will be the usual monthly dump of February data from the RBNZ later today, and the real estate industry will start reporting its March results and listing levels. And in Australia, their central bank will be reviewing its monetary policy settings. But because they are in an election campaign it would be surprising indeed if they may any moves either way that might influence voters.

The week will end with American labour market data for March. But because the impacts of DOGE cuts or tariff hikes are yet to be felt, little-change is anticipated here either. But more PMI reports will start to reveal new order levels, which will give important early warning signals.

There will be PMIs out for China too, Japan business sentiment, EU inflation, and German factory orders, which will all help paint a picture of how the global economy is coping.

But first up today, there will be a lot of interest on tomorrow's Wall Street open. It ended its Friday session with the S&P500 down -2.0% and no signs of recovery late in the session. The Nasdaq fell -2.7% on the day. Weekend futures trading has the S&P500 recovering +0.8%, but that basically embeds the Friday retreat. Risk-off sentiment is strong with major investors selling, seeing this as a time to hold cash.

The core reason Wall Street is risk-off is that American consumers are increasingly anxious about their jobs, and the inflation pressures ahead. And both of those worries are over what higher tariffs will do to them. Town-hall meetings across the country are giving the message to Congresspeople that they aren't too happy about the self-serving government- by-billionaires either.

The final University of Michigan March sentiment survey was revised lower from its already low 'flash' result. Consumers are in full defensive mode, expecting inflation to jump, and job security to worsen. Wall Street can't ignore these signals.

Other data out over the weekend didn't help. The core US PCE inflation indicator for February rose its most since January 2024, and of course this doesn't include the effect of the recent policy missteps. This data is a little signal magnified by current policy settings.

US consumer spending came in lower than expected. Consumer savings rates rose. This is consistent with consumers shifting to a defensive mood ahead of their expected rough economic weather.

It isn't any better in Canada where their monthly GDP indicator for February revealed no net expansion, following a positive January expansion.

In China, talk about rate cuts that officials don't like brings prosecution. They say "the local public security organs" have dealt with two such people.

In Australia, they are off and running for their May 3, 2025 federal election. Like most elections, it will be fought on "cost of living" issues. The campaign starts with the incumbents in a strong and rising position on their two-party-preferred basis. Expect a sledge-a-thon for the next five weeks.

And for the record, when we are thinking of drought and rainfall in Australia, this resource is useful to keep perspective.

Commodity prices are under pressure. Worth watching is the price of copper. It is very high at present, but lower economic activity in both China and the US could bring about 'a collapse'. It would not be the only commodity to suffer.

We should also possibly note that the US Fed balance sheet shrunk again last week to be -US$745 bln lower than this time last year. So far we haven't seen any slacking in the pace of their tightening.

We should also note that in this current risk-off phase, the US dollar has not risen. This is very unusual and may portent a diminished role for the greenback in the global economy.

So far, the world has kept buying US Treasury paper, but the more the Federal finances are twisted by Trump, the less likely that demand will hold. But remember less than 24% of total US federal debt is held by foreigners (US$8.512 tln of US$36.218 tln in gross terms), so the impact from foreign demand will be muted. However, markets will notice any substantial pullback by this group, and that will colour its market status and price. The big impacts will come from the locals’ willingness to absorb this debt.

The UST 10yr yield is now at 4.25%, unchanged from yesterday at this time. 

The price of gold will start today at just on US$3085/oz and up another net +US$5 from Saturday. Although off it at the moment, gold keeps challenging it's all-time high levels.

Oil prices are little-changed from Saturday at just under US$69.50/bbl in the US and the international Brent price is now just over US$73.50/bbl.

The Kiwi dollar is now at 57.2 USc and unchanged from this time Saturday. Against the Aussie we are unchanged at 90.9 AUc. Against the euro we are also unchanged at just under 53 euro cents. That all means our TWI-5 starts today still just over 66.7.

The bitcoin price starts today at US$82,272 and down -1.9% from this time Saturday. Volatility over the past 24 hours has been modest at +/- 1.1%.

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.