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 latest data shows American business activity slowing further.

But first up this morning we should note that the overnight dairy Pulse event brought little-change to either the ASMP or WMP prices. This is as expected for SMP but 'better' than expected for WMP. In NZD however there was a rise because the Kiwi dollar fell. All eyes are now on tomorrows Fonterra annual report.

There were also no surprises in the S&P Global/Markit PMIs for the US for September. Both their flash factory and services PMI reading eased slightly, but are not contracting. Growth may be slowing, but selling price inflation is cooling too. The report noted weak new order growth and tariff-taxes were widely cited as the main cause of sharply higher costs, but the weaker demand and stiff competition reportedly limited the scope to raise selling prices,

And that is confirmed in the Richmond Fed factory survey which turned down sharply in September. New order levels were weak, cost pressures strong. Services in the same mid-Atlantic area were not very positive either.

There was another very large US Treasury 2yr Note auction today, one that saw another pull-back in overall support although the coverage remains strong. The median yield dipped to 3.52% from 3.60% at the prior equivalent event a month ago.

In China, Nikkei has found that retail consumer loans are going bad faster, the latest headache for Chinese lenders already plagued by the country's real estate problems. And it comes just when the government aims to stimulate consumption through increased consumer debt backed up by more public borrowings. Nikkei Asia combed through the latest interim disclosures by mainland banks listed in Shanghai, Shenzhen and Hong Kong and found that nonperforming personal loans rose at a faster pace than those in the real estate sector during the first half of the year.

Overnight, Taiwan reported yet another outstandingly good export orders data, again exceeding the expected very good expansion.

Super Typhoon Ragasa is expected to hit Hong Kong today, and they are still expecting up to a 5m storm surge (above chart datum). But the eye of the storm is passing slightly south, so it will affect large parts of southern China.

India's PMI's were again very expansionary in September for both their services and factory sectors. No signs of cooling in this market.

In Europe, their PMIs continue with a modest expansion, even if it is their best in 16 months. But new order levels are only holding, not growing. And the factory sector is now not expanding.

And the Swedes delivered a surprise cut to their policy rate, down -25 bps to 1.75%. They cited geopolitical tensions and uncertain US trade policy as the reasons for the move now even though they are experiencing good current growth with inflation up at 3.2% when 2% is their target.

In Australia, their PMI's reveal a pullback in September but both sectors are still expanding.

Globally, the OECD reported that the global economy was more resilient than anticipated in the first half of 2025, but downside risks loom large as higher barriers to trade and geopolitical and policy uncertainty continue to weigh on activity in many economies. New Zealand doesn't feature in this report, but is sees Australian growth rising, Chinese growth holding at a reasonably good level, and US growth halving to a weak level by 2026.

The UST 10yr yield is now at 4.12%, down -2 bps from yesterday at this time.

The price of gold will start today at US$3781/oz, up another +US$45 from yesterday and a new ATH. Silver was little-changed but still up over US$44/oz.

American oil prices are up +US$1 at just under US$63.50/bbl, with the international Brent price now just on US$67.50/bbl.

The Kiwi dollar is at just under 58.6 USc and down -10 bps from yesterday. Against the Aussie we are also down -10 bps at 88.8 AUc. Against the euro we are down -20 bps at 49.8 euro cents. That all means our TWI-5 starts today at just over 65.7, down -20 bps.

The bitcoin price starts today at US$111,974 and down -0.4% from this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 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 will do this again tomorrow.