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 we may be seeing the end of markets regarding US Treasuries as safe-haven assets – although to be fair it isn’t clear what would replace it.

Long-maturity US Treasury yields rose today to reverse the drop we noted yesterday. The yield on the US 10-year bond rose back towards the earlier 20-month high this week before the Bessent action, and the yield on the 30-year bond rose back too.

A couple of points are worth making first before we review today's data updates. The first is that it has been the role of the Fed to do QE activity. Maybe Warsh isn't keen now because he is committed to shrinking the Fed's balance sheet. It grew because the Fed wanted to push down rates, and that came with the consequence of massive bond buying. In fact, they moved the needle with "whatever it takes" to the tune of US$3.5 tln in the GFC and the subsequent stabilisation. And then another US$4.5 tln for the pandemic response that started in 2020. They have only paid down US$2.5 tln since. Warsh wants to get that significatly lower.

Now Bessent wants to do his own QE, in his case to avoid the political consequence his boss will face - at least push it off "till later'. But his announcement talks of a 'doubling', and that is only an extra of +$2 bln. The Fed was effective with trillions. But Bessent wants to do the same thing with billions. Wall Street hedge funds will be looking for a Bessent put, and unless he delivers his objective the hole thing might collapse rather quickly. Bessent should know - he was a billionaire hedge fund manager on Wall Street who made his fortune gaming the system. The Bessent initiative hardly lasted one day.

And this comes as the US Treasury's latest daily cash and debt balances statement shows public debt now exceeds US$40 tln (Table IIIC).

Why is this important for us? Well, the world's economy is still being driven by US middle-class consumer demand, the only economic engine large enough to shift the global needle. And we rely on a healthy upbeat global economy. China says it is making an attempt to duplicate this internal consumer demand, but by all accounts it is not succeeding, in part because Chinese consumers are still very risk averse and prioritising savings over consumption, and more so recently.

Meanwhile, initial jobless claims in the US fell to 172,000 last week, a slightly larger dip than seasonal factors would have indicated. There are now 1.8 mln people on these benefits, also marginally lower than the week before.

The August Philly Fed factory survey came in much stronger than expected, building on an outsized July expansion. This is all about current activity. Oddly, new order levels fell. But price pressures did moderate this month.

The Conference Board said its Leading Index for the US ticked up in July, marking the fourth increase over the past six months. Most components were positive in July except consumer expectations, which continued to be a notable drag.

In Canada, their July producer prices index rose from the prior month to be -12.4% higher than year ago levels. Their raw materials index is up more than +18% on the same basis.

Across the Pacific, Japan said its exports swelled +23% in July from a year ago and to an all-time record high, boosted by AI-related semiconductors and data center equipment. Meanwhile, imports were up almost +28%, boosted by fuel imports which were up more than +53% in value. and total imports also hit a new record high. The net was a small trade deficit on merchandise.

China held its key lending rates at ultra low levels in the regular monthly update. But these very low rates aren't exactly generating a boom, more just holding things together. The People's Bank of China kept its key lending rates at these record lows for a 15th straight month. And that is what analysts were expecting.

And remember Evergrande? Well yesterday a Chinese court sentenced its founder and boss to life imprisonment for "massive fraud".

Orders for Taiwanese exports soared +62% in July from a year ago to a new record high of US$98 bln. That follows an outstanding +59% jump in June. Booming global demand for AI-related and technology products continued to fuel overseas sales. This is on top of a July 2025 increase of +21% which at the time seemed like an outstanding achievement.

Malaysian exportsjumped an outstanding +38% in July from a year ago to a record high. This was led my electronic exports to the US. Meanwhile, their imports rose +36%, with the fastest rises from India, South Korea, and then China.

In Europe, German producer prices rose in July too, only at a +3.0% year-on-year rate but that was their fastest since April 2023.

Australian inflation expectations rose by 0.2 percentage points in August to 4.9%. This follows a three-month period of moderating inflation expectations. Wage expectations also rose in August, after remaining static for a prolonged period.

Staying in Australia, full-time jobs rose +16,300 in July but part-time jobs fell -32,200 in the month for a new decrease in employment levels. So instead of the expected +15,000 rise in jobs, they had a -15,800 net fall. While this may seem like a big movement, in fact the June positive result was quite elevated so a leveling out is probably to be expected.

Global container freight rates were up +4% last week from the prior week to be double what they were a year ago. Outbound rates from China to the US drove the increase with those up +9% for the week, up +180% from a year ago. Meanwhile bulk cargo rates fell -7.5% this past week to be +40% higher than year-ago levels.

The UST 10yr yield is now just on 4.70%, up +5 bps from this time yesterday. The 30 year yield is at 5.24% and up +4 bps. 

The price of gold is up sharply, now at US$4520/oz, up +US$17 from yesterday at this time. Silver has risen another +US$2 to just over US$68.

Oil prices are up US$1 from yesterday at just over US$86.50/bbl in the US, while the international Brent price is now just over US$93.50/bbl and up +US$2. 

The Kiwi dollar is up +10 bps from yesterday at just over 59.4 USc. Against the Aussie we have risen +30 bps to 83.6 AUc. Against the euro we are up +10 bps at 50.9 euro cents. That all means our TWI-5 starts today at just over 62.9, up +10 bps from this time yesterday.

The bitcoin price starts today at US$72,813 and up another large +6.8% from yesterday. Volatility over the past 24 hours has also been high at just on +/-3.5%.

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

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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 news the Trump Administration has been unnerved by the rising yield investors are demanding for their long-dated bonds. Thy have now moved to "provide liquidity support" for the UST 30 year bond, effectively spending deficit dollars to bid the yield down and the price up on secondary markets. They didn't like the free-market signals, so they are using resources to twist them. Bond professionals are sceptical today's move is anything but a short-term salve because they are still raising huge new funds to support their deficit spending, more than US$½ tln in just the past 60 days.

It is a move that has seen the USD fall, gold rise, and pushed up the price of commodities including crude oil. Bitcoin sparked back into life with a sharpish rise too.

Elsewhere today, the minutes of the July Fed meeting were released today, the one where there were three dissenters all who wanted to raise rates to counter inflation threats. And it also revealed many non-voting members supported hiking rates too. But to be fair subsequent data has shown that their labour market is cooling rather faster than they anticipated, and that inflation has dipped slightly. It is still well above their policy target however. Today's Treasury interventions and the related inflation-inducing market reactions will be being watched by the twelve voting members closely.

Meanwhile, US mortgage applications fell slightly last week, staying weak, and back to levels they were at in the first half of 2025.

And US commercial crude oil stocks rose sharply last week taking the rising run to three straight weeks. However, their strategic reserves fell again and is now a levels so low that there are concerns about the physical infrastructure.

The USMCA renegotiation deadline with Canada has been pushed back a few days. The Americans say it is because a deal is close. The Canadians say there is still details to be agreed although a deal is close and one far different to the "50%" threat. It will be interesting to see how the Canadian dairy sector fares in all this.

The exchange rate market reaction to the US Treasury move has taken the pressure right off the Japanese yen.

Japanese machinery orders continued their yo-yo pattern in June, now up +16.9% from a year ago (excluding volatile items). Export orders were particularly strong.

In Australia, Big Tech is raising bond financing to support their global AI rollout ambitions. Google raised more than AU$5 bln yesterday after being flooded with more than AU$18 bln in market offers. This is a honeypot sure to attract more Big Tech borrowers.

The UST 10yr yield is now just on 4.65%, down -6 bps from this time yesterday. The 30 year yield is at 5.20% and down -8 bps. 

The price of gold is up sharply, now at US$4503/oz, up +US$150 from yesterday at this time. Silver has risen +US$2 to just over US$66.

Oil prices are up another +50 USc from yesterday at just over US$85.50/bbl in the US, while the international Brent price is now just over US$91.50/bbl. 

The Kiwi dollar is up +50 bps from yesterday at just under 59.3 USc. Against the Aussie we have risen +40 bps to 83.3 AUc. Against the euro we are little-changed at 50.8 euro cents. That all means our TWI-5 starts today at just under 62.8, up +50 bps from this time yesterday.

The bitcoin price starts today at US$68,163 and up a sharp +5.4% from yesterday. Volatility over the past 24 hours has also been high at just on +/-3.7%.

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 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 global oil prices have risen again with no end to Trump's Hormuz adventure. In something of a gigantic own-goal, the US economy is losing momentum rather quickly now.

But first, the overnight full dairy auction came in better than the futures market had signaled, up +2.3% from the prior full event. This was largely driven by the milk powder gains with WMP up +3.0% and SMP up +7.6%. However, most of the milk fats fell. The overall gains in NZD were slightly better, up +2.6%. But despite this recent turn higher, prices are still almost -9% lower than year-ago levels, even if they are up almost +10% from the start of 2026.

In the US, the latest weekly jobs update from ADP has stayed low with less than a +10,000 gain over the past four week.

In contrast to the positive July factory report in the New York state region we noted yesterday, their services survey in the same region wasn't very good. The business climate index remained deeply negative, with almost half of respondents reporting unfavourable business conditions.

US industrial production data for July was modestly positive from June and that has resulted in a +1.1% gain from a year ago, although lower than the June +1.3% expansion.

US pending home sales were lower in July, both from June, and from a year ago. There is no spark in evidence in this sector, and perhaps not surprisingly when home loan interest rates are high at 6.8% and likely to rise from here. Every region is posting both month-on-month and year-on-year declines now.

US housing starts fell back sharply in July, down -13.5% from year-ago levels. In fact, the last time they had a July this low was in 2019.

And in Canada, they also reported a sharp drop in new housing starts in July, their lowest for that month also since 2019. But July housing market sales actually rose and delivered the highest levels they have had in 2026 (even if this isn't a particularly high bar).

Meanwhile, negotiations between Canada and the US over Trumps 50% tariff threat seem to be going nowhere, and they are due to come into effect tomorrow. Interestingly, included in the stoush is Canada's aluminium exports and if they are tariffed, the hurt to US businesses will be significant.

In China, they have a slowing momentum too. Households are clearly worried because they hare paying down debt faster and prioritising cash reserves in the face of a glum outlook.

In Australia, their consumer sentiment has improved from low levels but it is still net-negative and still below last year's level at this time. The improvement was driven by mortgages holders who were relieved that the RBA didn't increase rates at its last decision. The survey also shows house price expectations declined as the housing market weakened. But renters are less likely to expect price falls and are more downbeat about home purchases.

The UST 10yr yield is now just on 4.71%, down -2 bps from this time yesterday. 

The price of gold is falling back, now at US$4353/oz, down -US$30 from yesterday at this time. Silver has fallen -US$ to just under US$64.

Oil prices are up another +US$1 from yesterday at just over US$85/bbl in the US, while the international Brent price is now just on US$91/bbl and up +50 USc. Hormuz transits have stayed very low. There has been only one crude tanker and 4 cargo ship exiting over the past 24 hours (2 dark with transponders off) and eight entering for new loads (3 dark), again all Iran-linked. There have been deadly attacks on a few of these ships crossing. The Red Sea activity is still only about 20 exits at the Yemen chokepoint, little-change.

The Kiwi dollar is down -25 bps from yesterday at just under 58.8 USc. Against the Aussie we have dropped -20 bps to 82.9 AUc. Against the euro we are down -25 bps at 50.8 euro cents. That all means our TWI-5 starts today at just on 62.3, down -30 bps from this time yesterday.

The bitcoin price starts today at US$64,667 and up +0.7% from yesterday. Volatility over the past 24 hours has also been low at just on +/-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 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 Iran has decided to shift its policy from defensive to "fully offensive" due to the deadlock in efforts to agree a permanent end to its war ​with the United States, a senior Iranian official told Reuters overnight. Meanwhile, Trump has threatened to bomb Oman, a Gulf emirate and until recently an ally.

All this is unnerving bond markets with the yield on the US Treasury 30 year bond now at a 22 year high. And they aren't the only long bond yields to rise. Its a trend of higher money costs that is probably only getting started.

However domestically in the US, there have been two third-tier data items out today, and both somewhat positive. The NAHB home builder sentiment survey increased very slightly in August from its unusual July low. But it still remains lower than foir most of 2026 as the core affordability pressures haven't really gone away.

Meanwhile, the NY Fed's regional Empire factory survey was more positive in its August report with reporting strong current activity and new order flows stayed positive. Employment hardly changed however, and input cost increases rose fast again even if prices received eased.

Meanwhile, Canadian inflation was reported back at 3.0% for July, a bit higher than the 2.9% expected and possibly bringing a rate hike there back into play. Rising fuel prices are a key driver here.

Across the Pacific in Singapore, they reported very strong July export growth, up +24% from a year ago to a new all-time monthly July record of S$76 bln but not quite eclipsing their June levels. This is all based on the export of electronic equipment. Their big export destinations are the US, South Korea, Thailand, Taiwan and India. This exporting strength enabled them to post a very large trade surplus in July. (Imports from China were up, but nowhere near enough to account for the export gains overall. So this isn't a re-export story of the paranoid type.)

Japan reported a softer economic activity expansion in Q2-2026 than expected. Analysts had expected their GDP to grow by +2% and up from +1.9% in Q1. But the data released today only shows a +1.1% expansion. But today's data is preliminary and may well be revised higher.

Japanese industrial production rose +1.9% in June from May and exceeding the earlier flash indication (which was very good on its own), and far exceeding the May +0.1% rise. This was the third consecutive monthly expansion and the strongest growth since January. And it took the year on year expansion up by an impressive +4.9%.

China's industrial production was claimed to be up +4.5% in July from a year ago and basically meeting targets. Within that, they claim hi-tech +16.9% on the same basis. But just like most month before they claim they are doing this with electricity production up only +1.9% in July from the same month in 2025. It seems very implausible, the only country with fast growing industrial output with essentially no growth in electricity used - and over the very long haul.

More realistically, China said its retail sales were up only +0.6% in July from a year ago.

According to these official sources. China house prices are falling less now. New housing was down -3.2% from a year ago, essentially unchanged from June. In fact many more cities had no change or a small increase especially top-tier cities. Second tier cities aren't getting the same boost however. Existing home sales prices are easing less too.

The UST 10yr yield is now just on 4.73%, up +3 bps from this time yesterday. The 30 year yield is at 5.31% and up +4 bps, and that is its highest in more than 20 years. 

The price of gold is rising, now at US$4413/oz, up +US$37 from yesterday at this time. Silver has risen +US$1.50 to just over US$66.

Oil prices are up +US$1.50 from yesterday at just over US$84/bbl in the US, while the international Brent price is now just on US$90.50/bbl and up +US$2. 

The Kiwi dollar is up +10 bps from yesterday at just on 59 USc. Against the Aussie we have dopped -10 bps to 83.1 AUc. Against the euro we are up +10 bps at 51 euro cents. That all means our TWI-5 starts today at just on 62.6, up +10 bps from this time yesterday.

The bitcoin price starts today at US$64,245 and up +1.8% from yesterday. Volatility over the past 24 hours has also been modest at just on +/-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 the US economy is starting to show signs of exhaustion - just as the Chinese economy looks like it can't actually transition to one where internal demand replaces their industrial exports engine, as they were planning.

But locally this week it will be all about how July retail sales turned out, and an update on our June population. And there will be a rush of earnings reports out this week from listed companies.

In Australia we will get their July labour market update, and both the August Westpac consumer confidence survey results, along with an update of inflation expectations.

Globally. t\e ongoing standstill between Iran and the US should continue to dictate energy prices and influence global interest rates. Rates will also take the spotlight with minutes from the last divisive meeting of the Federal Reserve, which included three dissents. More US data is expected to confirm their slowing economy.

In Japan there will be a raft of data updates for the world's fourth largest economy, including for GDP, exports, inflation, machinery orders and flash PMI data.

Indonesia and Sweden will review policy rates and settings this week.

In China, July data released this week will include industrial production, retail sales, house prices, fixed asset investment and their unemployment rate. The People’s Bank of China is also widely expected to leave its one- and five-year loan prime rates unchanged at 3% and 3.5%, respectively

This will come even though they have surprised with their bank lending actually contracting in July, only the third time ever this has happened and by far the largest retreat. Net new yuan loans fell by -¥340 bln in July when a weak no-change was expected (actually a minor +¥45 bln). July is often a lowish month for new bank lending but this latest data represents some real weaknesses. A slowing economy and poor consumer sentiment, particularly for housing, limited the demand for loans. About -¥460 bln of this fall was for consumer debt. But the swing also reflects the downturn for the traditional business sectors of the economy. Their tech sector commonly raises cash in the bond market instead of bank loans. So within this result there may be evidence of a structural shift.

Taiwan said its economic activity came in +12.9% higher in Q2-2026 from a year ago, lower than the +15.4% rise in Q1-2026.GDP. It was still the second-best growth pace they have recorded in almost 50 years.

Malaysia said its economic activity expanded +6.0% in Q2-2026, a rise from the +5.4% in Q1-2026 and better than the expected +5.7%.

In India, the bank lending impulse has the taps open fully, with lending up more than +19% at the end of July from the same point a year ago. This is a new modern record rise rate, and to record levels.

Across the Pacific, US retail sales took an unexpected dip in July from June. They fell -0.6% on that basis when a +0.1% rise to compliment June's rise was expected. This is a big miss and was the first decline since October 2025 and the largest in over a year. Weaker sales at online retailers, car dealers, petrol stations and electronics stores shifted the needle, so it was a broad based dip. From a year ago, these July sales were still up +5.2% from earlier gains.

Also dipping was US consumer sentiment, but this is for August, so the dour mood is extending. The widely-watched University of Michigan survey came in back at levels that followed the US attacks on Iran, so the July rise was an anomaly. A small easing was expected, but not one this big. Year-ahead inflation expectations ticked up from 4.2% in July to 4.3% this month.

Inflation and inflation expectations are key for the Fed. The new boss Kevin Warsh may not want to talk about the elevated threats, but other regional governors are, some who vote. The Atlanta Fed's boss isn't one of those but she says inflation is too high and risks staying like that and embedding unless the Middle East situation resolves quickly. The Chicago Fed's boss is worried too. Current CPI is 3.4% officially, but the Cleveland Fed nowcasts the PCE measure of inflation and their latest update has it at over 3.7%. These levels are a long way from the mandated 2% policy rate and Warsh is likely to get out-voted when they next meet in Mid-September. Financial markets currently price in one chance in three of a +25 bps rise then.

And for the record, current US petrol prices are now +5.7% higher than month-ago levels. Diesel is +11% higher on that same basis. Their inflation threat is not receding.

Meanwhile the EU reported that Q2-2026, economic activity rose +0.4% in the euro area and by +0.5% in the overall EU compared with the previous quarter, up +1.0% and +1.2% respectively from a year ago. So recent activity is picking up, although in a way that was broadly anticipated.

The UST 10yr yield is now just on 4.70%, up +1 bp from this time Saturday, up +5 bps for the week. 

The price of gold is stable, now at US$4376/oz, up just +US$2 from Saturday, up +US$39 from this time last week. Silver has held at just over US$64.50/oz, up a net +US$1 for the week.

Oil prices are unchanged from Saturday at just under US$82.50/bbl in the US, while the international Brent price is now just on US$88.50/bbl. A week ago these prices were US$78 and US$83.50/bbl respectively, so a +6% weekly rise. 

The Kiwi dollar is little-changed from Saturday at just under 58.9 USc and unchanged for the week. Against the Aussie we are holding at 83.2 AUc. Against the euro we are still at 50.9 euro cents. That all means our TWI-5 starts today at just over 62.5, unchanged from this time Saturday and very similar to a week ago.

The bitcoin price starts today at US$63,102and up +0.4% from this time Saturday, down -2.6% for the week. Volatility over the past 24 hours has also been very low at just on +/-0.3%.

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