Economy Watch

Interest.co.nz / Podcasts NZ, David Chaston, Gareth Vaughan, interest.co.nz

Business Investing

Latest episode

Available Episodes

5 of 615

Financial markets add war & protest to their calculus
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 the hot-war tensions in the Middle East from Israel's attack on Iran has generated substantial financial market reaction. And a 'hot' war between Israel and Iran could go on for a very long time. The first three days may only be the startThe gold price has jumped. The oil price has soared. Equity prices are falling, although the futures market suggests Wall Street may open tomorrow unchanged. Bond yields are up after an earlier risk-aversion fall. The US dollar has been falling but is now in a wavering phase.Coming up this shortened week locally are a first look at May inflation with the selected price indexes, and on Thursday, Q1-2025 GDP. Expect a +0.7% expansion from Q4-2024. And there will be a full dairy auction on Wednesday.Geopolitical tensions in the Middle East will remain in focus next week following Israel’s strike on Iran’s nuclear facilities, heightening fears of a broader regional conflict. Markets will also be closely watching any progress on trade negotiations between the US and its key partners.Meanwhile, attention shifts to the G7 Summit in Canada, where leaders of the world’s largest economies will meet to discuss major global challenges. But one not on the formal agenda is the US's trade war with these allies. Of course it will be a hot topic in non-official discussions. Of special interest will be the meeting between Australia's Albanese and Trump.It’s also a busy week for monetary policy decisions. The US Federal Reserve (4.50%), People’s Bank of China (LPR 3.0%), Bank of Japan (0.5%), and Bank of England (4.25%) are all expected to keep interest rates unchanged. Decisions are also due from central banks in Switzerland, Sweden, Norway, Turkey, Brazil, Indonesia, the Philippines, and Taiwan. On the data front, we get China’s industrial production and retail sales, and Japan’s trade data.Australia's May labour market data will be updated on Thursday. So a lot to absorb this week irrespective of the uncertainties swirling over the hot wars.Bur first in China, their banks extended ¥620 biln in new yuan loans in May, up from ¥280 bln in April, but that was the lowest level for that month since 2005. Despite the monthly rebound, the May new loan figure was way less than the expected ¥850 bln, and even lower than the ¥950 bln in May 2024. Low interest rates are not encouraging lending. The average rate in May was little-changed at 1.55%.Japanese industrial production also fell in April from March, down -1.1%, but remained +0.5% higher than a year ago.Malaysian retail sales were up +4.7% in April from a year ago, but as good as that sounds it is the weakest year-on-year rise since May 2023. And these gains are before inflation, which is running in Malaysia at only +1.4%.In the US was news American consumer sentiment improved in early June from May in the widely-followed University of Michigan survey which was taken June 2-7, 2025. Although this is the first improvement in the past six months, it is off a record low and is still -11% lower than year-ago levels. This survey pre-dates the current crises. And it predates the widespread (2000+) series of well-attended protest rallies in the US (attended by up to 5 mln people), even in the face of an assassination of one Democrat lawmaker and the attempted assassination of another. Given the Proud Boys Telegram chatter, this isn't so surprising.On the US West Coast, container traffic at the large Los Angeles shipping terminals fell in May. Import traffic was down -19% from April, down -9% from a year ago. Export loadings were down -5% from a year ago. (The Long Beach May data isn't available yet but it is likely to be similar.)North of the border, and perhaps somewhat surprisingly, Canadian vehicle purchases rose in April to 195,700, the highest level since June 2019. Perhaps this is boosted by buyers wanting to avoid tariff-related price hikes. The jump was country-wide and was +11% above the year-ago level.Meanwhile Canadian manufacturing sales fell -2.8% in April, with the tariff impacts starting to be felt. It was down -2.7% from a year ago. Recession risks are rising in Canada.EU industrial production sagged in April from March after a strong March gain, but managed to stay marginally higher than year-ago levels. The EU publishes this data on a volume basis, so this is a 'real' gain.Finally we should probably note that the price of lithium carbonate has now crashed -90% from its giddy height in 2022. It is now back to late 2020 levels before the frenzy.The UST 10yr yield is now at 4.41%, and unchanged from Saturday.The price of gold will start today at US$3,430/oz, and down -US$3 from Saturday but up +US$115 from a week ago. In contrast the silver price at US$36.17/oz is little-changed from a week ago.American oil prices are holding higher, although down -50 USc from Saturday at just on US$73/bbl while the international Brent price is now just under US$74.50/bbl. These are large jumps from a week ago on the war risks. And the full assessment of supply risks are not yet understood, so this price could be volatile this week.The Kiwi dollar is now just under 60.2 USc, down -10 bps from Saturday. Against the Aussie we are unchanged at 92.7 AUc. Against the euro we are down -10 bps at 52.1 euro cents. That all means our TWI-5 starts today at over 67.9 and down -20 bps from Saturday (shifted a bit by a fall against the British pound).The bitcoin price starts today at US$105,794 and up +0.6% from Saturday. Volatility over the past 24 hours has been low at just on +/-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 will do this again tomorrow.
--------
6:45
The greenback weakens on policy chaos
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 incoherent trade policies have driven the US dollar to its lowest level since 2022 as markets don't see any easing of geopolitical risks driven out of Washington. The US said it will set unilateral tariff rates on most trading partners at the end of the month.Meanwhile, US initial jobless claims came in at 245,000 last week, little-changed from the prior week. This embeds the recent higher level and extends the 2025 rising trend. We haven't seen two consecutive high-claims weeks since mid 2023. There are now 1.8 mln people on these benefits, +7.1 more than year-ago levels.The immigration crackdown on undocumented farm and hospitality workers is having ripple impacts on corporate America, with some major brands reporting stuttering sales.And the Congressional Budget Office has set out how the Trump Budget Bill will hurt middle and poor Americans, and enrich wealthy ones. It is a report sure to annoy the President.And he is already annoyed by the Fed not cutting interest rates.Separately, as analysts expected, US producer prices came in +2.6% higher in May than a year ago.The UST 30yr bond auction today saw a -7.5% fall in investor demand, mirroring the -10% drop in support we noted yesterday in the UST 10yr auction. The median yield came in at 4.80%, up from the 4.75% at the prior equivalent event a month ago.Elsewhere, India’s CPI inflation fell to 2.8% in May from 3.2% in April and dipping below analyst expectations of 3%. This is their lowest reading since February 2019, so a six year low. It is also getting closer to the bottom of their central bank's inflation target range of 2%-6%. Food price rises fell to the lowest level since October 2021, and drove the easing.In Australia, the Melbourne Institute survey for June shows inflation expectations there rising to 5.0%, the highest level since July 2023 and up sharply from the 4.1% in May.International container freight rates were unchanged last week from the prior week to now be -26% lower than year-ago levels. A year ago rates were in a strong rising trend which lasted until July, then they eased steadily until May 2025. Bulk freight rates rose +6.8% last week from the week before to their highest level since early November. They are now -5.2% lower than year ago levels.The UST 10yr yield is now at 4.36%, and down -6 bps from this time yesterday.The price of gold will start today at US$3,383/oz, and up +US$60 from yesterday.American oil prices are up another +US$1.50 at just over US$68.50/bbl while the international Brent price is now just over US$69.50/bbl.The Kiwi dollar is now just over 60.6 USc, up +20 bps from yesterday. Against the Aussie we are also up +20 bps at 92.9 AUc. Against the euro we are down -20 bps at 52.4 euro cents. That all means our TWI-5 starts today at under 68.3 and essentially unchanged from yesterday.The bitcoin price starts today at US$108,419 and down -0.6% from yesterday. Volatility over the past 24 hours has been modest at just on +/-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 will do this again on Monday.
--------
4:22
US-China trade deal resolves little
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 China and the US seem to have agreed some sort of trade deal although the details are still quite fuzzy. However a key part seem to be that the US will only get access to the rare earth minerals on a 180 day rolling basis. That means Beijing will retain key leverage over these negotiations as they develop.From data out in the US, CPI inflation was recorded at 2.4% in May, up marginally from 2.3% in April but coming in lower than the +2.5% expected. Food prices however were up +2.9%, rents up +3.9% in this survey. The only reason the overall level was modest is that petrol prices fell -3.5% from a year ago.Interestingly, US crude oil prices were near a one-year high a year ago at US$78/bbl. Today they are at US$67/bbl. But they have fallen steadily from there so after August it seems likely that US petrol prices will generate upward pressure on their CPI, just about at the time tariff-tax flow throughs start to bite. Could get "interesting" in about 90 days.Meanwhile US mortgage applications jumped more than +12% last week from the prior weak three weeks. It is a pattern we have observed since September - three weeks of declines followed by a single week of recovery, usually because those holding off refinancing while waiting for rates to fall can't wait any longer. The benchmark 30 year fixed rate was unchanged last week at 6.93% plus points.There was another US Treasury 10 year bond tender earlier today, and this one featured an outsized fall in demand. There were more than -10% less bids than at the prior equivalent event. The median yield achieved was 4.38% today, up from 4.28% at that prior equivalent event.This is the first time we have seen a big fall-off in demand in these official tenders, so it will be worth keeping an eye on it going forward to see if this is a one-off, or the feared pullback in investor appetite for Trump-debt.At the same time, the US Budget Statement for May showed a monthly deficit of -US$316 bln, only marginally less than the -US$346 bln for the same month a year ago. Higher tariff collections at the border are getting the credit, of US$23 bln in the month. That would mean the DOGE has had zero impact on the budget. They have booked a -US$2 tln deficit in the twelve months to May, and on track for more than that for their fiscal year to September. If the current Budget Bill passes with its tax cuts for the rich, and suspension of the debt ceiling, you can see why investors would want sharply higher risk premiums for holding US federal debt when the mismanagement is so rife.In Canada, April building consents came in -6.6% below March levels to be -16% lower than year ago levels (which featured a strong April 2024 surge).In China, May vehicle sales came in at almost 2.7 mln units in the month with almost half of them NEVs. That puts sales for the past year at a remarkable 32.7 mln, and more than double the level in the US (15.6 mln units in the past year). One key reason is the Beijing-backed trade-in incentives that are designed to support their manufacturing activity through the tariff-war and their drive to build and rely more on internal consumption. It seems to be working with this incentive in place, but can they wean themselves off it?The UST 10yr yield is now at 4.42%, and down -5 bps from this time yesterday. The price of gold will start today at US$3,323/oz, and virtually unchanged from yesterday.American oil prices are up +US$2 at just over US$67/bbl while the international Brent price is now just under US$69/bbl.The Kiwi dollar is now just over 60.4 USc, basically holding from yesterday. Against the Aussie we are also holding at 92.7 AUc. Against the euro we are down -30 bps at 52.6 euro cents. That all means our TWI-5 starts today at under 68.3 and down about -10 bps from yesterday.The bitcoin price starts today at US$109,115 and up +0.4% from yesterday. Volatility over the past 24 hours has remained low at just on +/-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 will do this again tomorrow.
--------
5:15
"The harm to living standards could be deep"
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 we are still waiting for indications of the China-US trade talks in London.Meanwhile, the World Bank said global trade expansion is now at its weakest since 2008 as the tariff tit-for-tat undermines it. They say without a swift course correction, "the harm to living standards could be deep". But they still see a global expansion of +2.3%, largely driven by China, Indonesia, Thailand and India. The retreat of growth in the US will be sharp they say halving in 2025 (+1.4%) from 2024 (+2.8%). The EU will be largely unaffected and maintain their low growth. Japan's low growth is expected to rise in the next three years. They don't review Australia or New Zealand.Elsewhere, the overnight dairy Pulse auction brought downbeat results. The key WMP price fell -1.1% in a retreat expected by the derivatives market. But even at this level it remains in the rising trend that started in mid-2024. However, the SMP price fell a hard -4.8% and much more than expected. In fact, SMP prices have now broken through their weak rising trend, and look quite vulnerable.Also showing signs of running out of steam were US retail sales growth as measured by their Redbook survey. They were up +4.6% from the same week a year ago, the weakest rise since March 2024. After inflation, this isn't any better.The the US NFIB small business optimism survey turned up in May, the first time it has done that in 2025.There was a US Treasury 3 year bond auction earlier today and that showed a small fall-off in support, something worth watching. The winning investors got a median yield of 3.92%, up from the 3.77% at the prior equivalent event a month ago.Across the Pacific, Japanese machine tool orders came in at a similar level in May as April, but that is only a +3.4% gain from the same month a year ago. It was kept positive by export orders, although domestic orders, which had been strong earlier in the year, are now cooling.In China, concerns persist about overproduction in their car manufacturing sector even though local new-vehicle sales overall, including exports, rose almost +10% in April. Those concerns are rippling through commodities that supply this juggernaut industry. Rubber prices, for example, are being hit hard as buyers lose confidence the China car industry can avoid a crash like the property sector. There are signs the government there is worried too, with Beijing telling carmakers to make sensible commercial decisions.In Australia, the Westpac-Melbourne Institute consumer sentiment survey wasn't particularly upbeat, coming in little-changed in June from May. But at least it isn't going backwards. Aussie consumers remain relatively averse to real estate as an investment option and to risk in general. Indeed, responses to a question on the ‘wisest place for savings’ suggest that the tariff-related turmoil this year has seen what was already a high level of risk aversion intensify even further.And staying in Australia, the closely-watched NAB business sentiment survey has improved marginally in May, recording its first positive reading in four months. But, business conditions weakened in this survey and it will be hard for sentiment to improve if business conditions get weaker. Those weaker conditions came from ongoing profitability pressures and soft demand, with signs of a further softening in labour demand.The UST 10yr yield is now at 4.47%, and down -2 bps from this time yesterday.The price of gold will start today at US$3,323/oz, and down -US$10 from yesterday.American oil prices are little-changed at just on US$65/bbl while the international Brent price is now just on US$67/bbl.The Kiwi dollar is now at 60.4 USc, and dipping -10 bps from yesterday at this time. Against the Aussie we are also down -10 bps at 92.7 AUc. Against the euro we are down -10 bps at 52.9 euro cents. That all means our TWI-5 starts today at under 68.4 and down a bit less than -10 bps from yesterday.The bitcoin price starts today at US$108,723 and up +0.4% from yesterday. Volatility over the past 24 hours has been low at just on +/-0.9%.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.
--------
5:13
Tit-for-tat gives way to negotiation
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 US and China are meeting in London to discuss China's block on exports of rare earth minerals that the US manufacturing sector needs. The hope is that the settlement will have the US pull back from its tariff-tax war. More likely, it will be a trade of US AI chips for Chinese rare earth minerals.In the background, the dismantling of civil society and the rule of law continues in the US, but you will have to get news of those overnight events elsewhere - even though they will have a corrosive impact on commerce.Our first item in the US is that consumer inflation expectations fell back in June to 3.2% for the year ahead, which wasn't what was expected. But a look at the components explains why. It was driven by the expectation that petrol prices will drop - on a weakening economy. On the other hand those surveyed expected food prices to rise to 5.5% which is a two year high, rents by 8.4%. The expectation that their jobless rate will rise remained high.And we should probably point out that analysts are noting that the UST 10 year yield (4.5%) is now well above the US nominal GDP growth rate (3.8%) for the fits time since 2011, and that is seen as a signal that corporate insolvencies will now rise noticeably after a long period of relative stability.China said its CPI price change held at -0.1% of deflation. That is the third month in a rose it has reported that, the fourth recording deflation. It does seem odd, and a tad unlikely, that Chinese consumer prices are consistently deflating at such a low level. Anecdotal observations talk of 'raging price wars'. According to the official data these are having zero impact. Year-on-year they say beef prices are down -0.1%, lamb prices are down -2.8% and milk prices are -1.5% lower. But beef prices did rise in May from April, according to this data.Meanwhile Chinese producer prices deflated more, down -3.3% from a year ago to their fastest rate of decline since July 2023.And China booked another bumper trade surplus in May. Exports rose +4.8% (about what was expected but historically low), while imports fell -3.4% and far more than expected. They benefited from the TACO trade in May. Their surplus with the US was +US$18 bln for the month although they did export less and import more. To New Zealand, they exported -3% less but imported +11% more, so our surplus rose. To Australia, their exports were little-changed but they imported almost -19% less in May.In Taiwan, they far outshone their neighbour and rival with a huge rise in exports (a new record high) and a large rise in imports from the same month a year ago. That contributed to a trade surplus of +US$12.6 bln in the month, now one eighth that of China even though their economy is only one twentieth as large.The UST 10yr yield is now at 4.49%, and down -2 bps from this time yesterday. The price of gold will start today at US$3,334/oz, and up +US$26 from yesterday.American oil prices are firmish, up +50 USc at just on US$65/bbl while the international Brent price is just under US$67/bbl.The Kiwi dollar is now at 60.5 USc, and up +30 bps from yesterday at this time. Against the Aussie we are up +10 bps at 92.8 AUc. Against the euro we are up +20 bps at 53 euro cents. That all means our TWI-5 starts today at over 68.4 and up +20 bps from yesterday.The bitcoin price starts today at US$108,312 and up +1.9% from yesterday. Volatility over the past 24 hours has been modest at just on +/-1.4%.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.
--------
4:48