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 US tariff threats are shifting from being aimed at trading 'partners' to a focus on commodities, today especially copper. Protection of favoured US business interests is the goal, cloaked in the labels of 'national security'.

But first up today, the overnight dairy Pulse auction delivered less change than expected, essentially holding on to the SMP and WMP prices at the prior week's full auction. But in the meantime the NZD has retreated so both delivered good gains in NZD, up +1.1% for SMP and up +3.1% for WMP.

The US retail impulse as measured by the Redbook survey delivered a very good +5.9% gain over the same week a year ago, but it should be noted that earlier base week was an unusual down one.

And the New York Fed's national survey of consumer inflation expectations returned to a 'normal' 3% in June, and a five month low. But some components remain a worry. Those surveyed thing food prices will rise 5.5%, rents will rise +9.1% and medical care by +9.3%

Meanwhile the NFIB Small Business Optimism Index for June was little changed at it long run level

The popular US Treasury three year bond auction delivered unchanged demand and little-change on the median yields achieved. Today that came in at 3.84%, whereas the equivalent event a month ago was at 3.92%.

US consumer debt grew a very modest +US$5 bln in May, half the expansion in April and well below the average for the past year. The slowdown was very acute for revolving debt, like credit cards.

In Canada, the widely-watched local PMI turned positive in June following two toughish months.

In Germany, both exports and imports were expected to decline in May from April, and they did, but by slightly more than was expected. But both remain higher than year ago levels.

In Australia, the widely watched NAB business sentiment survey picked up and that was a much better outcome than the contraction expected. In fact this June result for business conditions broke the mould of the long-running decline that started in June 2022.

That survey didn't point to anything special in terms of cost pressures. But those cost pressures clearly worried the RBA when it surprised financial markets with its no-change decision yesterday. The widely-expected rate cut didn't happen and so household budgets will have to wait for more relief. The RBA did pick up the resilience in the overall economy, but judged it too early to respond to perceptions of economic weaknesses. In fact they saw the balance of risks from trade and labour market cost activity not requiring a boost from a cut in interest rates.

We should note that US tariff uncertainty is screwing around with some key commodity prices, especially copper, which has soared over the past day or so to over US$12,000/tonne and easily a new record high. Some US futures contracts are now up over US$13,000/tonne. US products that use copper are going to get a cost jolt. Because it is a jolt directly related to a new US tariff-tax, it won't affect products made outside the US.

The UST 10yr yield is now at 4.42%, and up another +3 bps from yesterday.

The price of gold will start today at US$3,306/oz, and down -US$25 from yesterday.

American oil prices are up another +US$1 at just under US$68.50/bbl while the international Brent price is now just under US$70.50/bbl.

The Kiwi dollar is now just on 60 USc, little-changed from yesterday. Against the Aussie we are down -50 bps at 91.9 AUc. Against the euro we are down -10 bps at 51.2 euro cents. That all means our TWI-5 starts today at just on 67.6 and -10 bps lower from yesterday at this time.

The bitcoin price starts today at US$109,015 and up +1.0% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/-2.3%.

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.