Economy Watch

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 imminent deal Trump talked up on Saturday seems to have faded, mainly because Israeli attacks on Beirut have undermined the situation. But if there was to be a deal, it is sure to dominate financial markets. In the meantime, war is the standard situation.

These same markets are also contending the implications of the wildly successful SpaceX float. It was full of animal spirits, FOMO, and gambling fever, and more than a few observers are seeing this as evidence of a gigantic bubble. After all it values SpaceX at 100 times its current revenues, and the business operates at a loss. At a US$2 tln 'value', to be sustainable it would need to generate after-tax profits of at least 10% or US$200 bln per year. And that is about double what Aramco-plus-Google do now, #1 and #2 combined.

In the real world, Thursday will bring the next US Fed policy meeting result, the first chaired by Kevin Warsh, Trump's replacement of Jerome Powell. Powell will still have a vote however. Most observers see them holding their key rate at 3.75%. The Fed has an inflation target of 2% for the PCE measure of inflation which is currently running at 3.8% with the CPI running at 4.2%, a three year high, with both rising sharply last time they were released. There will need to be some policy gymnastics to ignore those signals, but they may hope the fuel component reverses soon to save them. That is probably why markets think there will be no change on Thursday.

The US Fed won't be the only central bank on action this week. We will get reviews from the Bank of Japan (+25 bps to 1.00% expected), Sweden's Riskbank, Norway's Norges Bank, the Swiss National Bank, the English central bank, even in Brazil.

More importantly for us is that we will get the RBA's latest update on Tuesday, where no change from the current 4.35% is expected.

And the New Zealand Q1-2026 GDP result will drop this week and it will be a surprise it it isn't a year-on-year growth rate of +1.1%. Of course, this will be very dated data. In fact the RBNZ's own Nowcast suggests GDP will drop -0.2% in Q2-2026 from the prior quarter after rising +0.6% in the March quarter. Markets see a March quarterly rise of +0.9%.

In Japan, attention will focus on the Bank of Japan's policy meeting, where it is widely expected to raise the benchmark interest rate by 25 basis points to 1% amid persistent inflation and yen weakness. If delivered, it would mark the first rate increase since December last year and the highest policy rate since 1995. The country is also set to publish trade, inflation, and machinery orders data.

In India, producer inflation is projected to rise to 9.1% in May from 8.3% in April, driven by rising energy costs. Other major releases include trade, unemployment, and passenger vehicle sales figures.

In China, investors will monitor a series of key economic releases next week, including house prices, industrial production, retail sales, fixed asset investment, and their jobless data.

After April's surprise decline, China's May new yuan loans resumed their growth in data out over the weekend, up +5.5% from a year ago with a modest +¥520 bln rise, about what was expected (+¥550 bln). Still, at that level it is the weakest May increase in eighteen years, as the usual suspect - the property market - continues to drag on bank lending.

Across the Pacific, American consumers felt the cost of living pressure ease slightly in June as petrol prices came back off their recent war highs. The University of Michigan’s Consumer Sentiment Index rose in early June, up from May’s all-time low and a better than expected recovery. It was a modest recovery all the same with improvements seen across all age, education, and political groups. Lower-income consumers, for whom fuel represents a larger share of budgets, showed a particularly strong rebound even if it is still deeply negative and its second lowest of all time.

And in Europe, Switzerland had another set of national referendums. One proposal, to cap its population at 10 mln, has been voted down.

The UST 10yr yield is now just on 4.49%, up +1 bps from Saturday, down -5 bps for the week.

The price of gold has recovered a very minor +US$4 from Saturday to US$4222/oz but down -US$102 for the week. Silver is little-changed US$67.50/oz and the same as last week at this time.

Oil prices are up +50 USc from Saturday at just under US$85/bbl in the US, while the international Brent price is now just on US$87.50/bbl. A week ago these two prices were US$90.50 and US$93/bbl respectively. Hormuz transits have dried up again. And global oil reserves are draining into uncharted territory.

The Kiwi dollar is down -10 bps from this time Saturday at just on 58.3 USc, up +30 bps for the week. Against the Aussie we are unchanged at 82.8 AUc. Against the euro we are holding at just on 50.4 euro cents. That all means our TWI-5 starts today at just under 62 which is unchanged from Saturday, up +30 bps for the week.

The bitcoin price starts today at US$63,655 and down a minor -0.3% from this time Saturday. That is a +5.8% rise from this time last week. Volatility over the past 24 hours has been low at just over +/- 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’ll do this again tomorriow.

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Chinese officials are watching the 2026 election for a signal on whether New Zealand’s more United States-aligned security posture will become a permanent fixture.

If they assess that it is, the trade relationship might be at risk. That’s the opinion of David Mahon, a Kiwi business consultant based in Beijing.

“New Zealand–China relations are already at their worst stage since diplomatic recognition,” he told the Of Interest podcast.

“At the moment, there's not some sword hanging over us, partly because China is so busy dealing with a massive geopolitical mess, as all great powers and smaller and medium sized powers are.”

But Mahon sees two risks in the future: China could retaliate by blocking the import of some non-essential luxury goods, or it could simply become “indifferent” towards its relationship with New Zealand.

“New Zealand sells a lot of things to China. None of them are irreplaceable. In the end, it's just milk. In the end, it's just fruit or honey. That's something that we need to acknowledge.”

“If you look at our free trade agreement, the profit margin, the rationale for many of our companies trading with China is only based on the fact we pay no tax. If we lost that free trade agreement. We would lose much of our business with China”.

Mahon doesn’t think the Free Trade Agreement is currently at risk but there are signs Kiwi businesses in China are nervous about the deteriorating relationship.

An article written by China trade consultant Anna-May Isbey in a report published by the NZ Business Roundtable in China warned there could be direct consequences for geopolitical policies.

“The language used by governments when navigating geopolitical tensions can have real commercial consequences. Exporters consistently express the view that New Zealand’s longstanding, pragmatic, and independent approach to international engagement should continue,” she wrote.

This perspective contrasts against security analysts in Wellington and elsewhere who are increasingly concerned about China as a security risk, and want New Zealand to bolster its defence capabilities and diversify its export markets.

Government agencies have linked China to both foreign interference and cyber espionage in New Zealand, such as hacking the Parliamentary Service network in 2021.

But a political pivot towards the United States, which began while Jacinda Ardern was Prime Minister, has been complicated by the country’s plunging popularity in New Zealand.

The United States is now seen by Kiwis as more of a threat than China, according to an annual survey commissioned by the Asia NZ Foundation.

Mahon believes New Zealand should “learn to do less” and avoid taking sides in geopolitical competition which doesn’t directly affect it.

“Stop seeking the approval of these big countries that impress you so much, including Beijing … If we do less, and our need for the approval of other nations is less, then I think the navigation is going to be a lot simpler,” he said.

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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 Trump cancelled his latest planned military strikes claiming negotiating progress. That has been enough to settle financial markets today.

But first in the US, producer prices jumped +1.1% in May from April to be +6.5% higher than a year ago and to their highest since November 2022. And before the pandemic, their highest since this series began in 2009. Core PPI was up +5.1% and a similar high. These rises were more than expected.

US initial jobless claims also rose more than expected last week.to 228,400 and more than seasonal factors would have indicated. There are now 1.69 mln people on these benefits, less than a year ago and marginally less than two years ago.

In Canada, building consents were expected to fall back in April after the spurt in March, but they fell more than expected. Residential consents fell -5.5% and commercial consents fell an outsized -10.5%, both from the prior month. From a year ago, these consent levels were +2.5% high, but that is on a value basis and construction PPI rose +2.8% in that same time.

In Europe, the ECB raised its policy interest rate by +25 bps to 2.4% as widely expected, it first increase since 2023. It also raised its inflation expectation to 3% in 2026 and cut its growth forecast slightly to +0.8% this year and to 1.2% in 2027.

In Indonesia, their financial crisis is intensifying with their currency in freefall and their stock market too. The worry is it may drive a social crisis at our backdoor.

In Australia, the Melbourne Institutes survey of inflation expectations dipped in June to 5.5% following a dip in May after they peaked at 5.9% in April. The June result was well below the 6.5% jump some expected. But remember, their fuel tax concession (50%) is expected to end at the end of this month. If it does, it could put upward pressure on consumer inflation. (April actual CPI came in at 4.2% and the May result will be released on June 24.) In contrast wage expectations have remained unchanged for the past seven months.

The World Bank said overnight that global growth is leaking away due solely to the Middle East handbrake. It now sees 2026 expanding at 2.5%, and 2027 at 2.8%. These are slowdowns from 2025's +2.9% expansion and the prospect is slowest growth since the pandemic.

Meanwhile OPEC bravely says that world oil demand will recover quickly after the current Persian Gulf issues are resolved.

Global container freight rates rose another +3% last week to be level with the elevated rates of a year ago, when the Houthis were threatening the Red Sea access. It is all about outbound rates from China to Europe. In fact, China to the USWC rates are holding, but much lower on a year-ago basis. Bulk cargo rates fell -12% in the past week to be +68% higher than year-ago levels.

And official forecasters are now certain enough to warn of a severe El Niño climate event starting soon. The US issued its official warning after Australia said the chances are rising. We are being warned to expect 2026-27 to bring global risks of intense heat waves, sharp drops in rainfall in some key areas but deluges in other parts. India is expected to get a weak monsoon.

The UST 10yr yield is now just on 4.45%, down -9 bps for the day.

The price of gold has recovered +US$54 from yesterday at US$4152/oz. Silver is up US$1.50 at US$66/oz.

Oil prices are down -US$5 from yesterday at just under US$86.50/bbl in the US, while the international Brent price is now just on US$89.50/bbl. Hormuz transits are resuming today with 69 in the past 24 hours as owners rush to get their ships out.

The Kiwi dollar is up +10 bps from this time yesterday at just under 58.2 USc. Against the Aussie we are down -20 bps at 82.7 AUc. Against the euro we are little-changed at just on 50.3 euro cents. That all means our TWI-5 starts today at just over 61.8 which is also little-changed from yesterday.

The bitcoin price starts today at US$63,223 and up +2.3% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.0%.

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.

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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 US is frustrated with Iran and is promising even more military strikes. The deal Trump thought was close, isn't. The escalation threat has oil and financial markets reacting badly.

But first today, American CPI inflation jumped from 3.8% in April to 4.2% in May, largely as expected and largely based on higher fuel costs. This is its highest since April 2023. Today's geopolitical events and markets reactions probably mean it isn't finished with the current trajectory. Actually, for March, April and now May, their CPI index rose +2.0% in just those months, so the rate being experienced by consumers (annualised +8%?) is very much higher than the annual one reported.

The White House reaction was very unexpected: Trump said, "You know, I love the inflation." Certainly, financial markets were unimpressed.

There was a large jump in American mortgage applications last week even though benchmark home loan interest rates stayed elevated at about 6.6%. After six weeks of holding back, it seems borrowers are coming to accept that they have to pay these higher rates. Remember pre-war, these rates were under 6.1%. The jump in applications this week were from both new borrowers and those needing refinance.

For a seventh straight week, and including stocks in their strategic reserve, American crude oil stocks dropped in the latest update, and by almost double the rate expected.

Today's US Treasury 10yr bond auction was well supported and yield's rose only modestly for this one, coming in at 4.48% median (4.54% high bid), up from 4.41% at the prior equivalent event a month ago.

In Canada, their central bank kept its policy rate unchanged at 2.25% as expected, and for the fifth consecutive time. They had inflation at 2.8% in April so, so far, there is little evidence higher energy prices are being passed on or embedded in their consumer cost base.

Data out in Japan yesterday shows their May producer prices rose +6.3% from a year ago, up from 5.3% in April and the fastest rise since the end of the pandemic in March 2023. After the April spurt, they rose another +0.9% in May alone.

China's CPI inflation level was low and stable in May, coming in at 1.2% from a year ago, unchanged from April. Beef prices were up +4.2% however and lamb prices up +6.2%. Egg prices are up +6.6% on the same basis and a five year high. These were more than offset by a -16% drop in Chinese pork prices though. And dairy prices fell -1.2% on the same year-ago basis.

But China's producer prices are not so calm. In fact they rose an outsized +5.8% in May from a year ago for industrial products, up 3.9% overall when you broaden the categories to include food, clothing and other goods produced for consumers. Apart from the pandemic, the headline 3.9% is the highest they have had since August 2018.

In Australia, we should note that their emergency petrol tax concession will end at the end of June. That will juice up their inflation if it isn't extended.

The UST 10yr yield is now just on 4.54%, up +1 bp for the day. 

The price of gold will start today down another -US$160 from yesterday at US$4098/oz. Silver is down -50 USc at US$64.50/oz.

Oil prices are up +US$3 from yesterday at just under US$91.50/bbl in the US, while the international Brent price is now just on US$94.50/bbl. Hormuz transits are almost non-existent today, only 2 in the past 24 hours..

The Kiwi dollar is down -10 bps from this time yesterday at just on 58.1 USc. Against the Aussie we are up +10 bps at 82.9 AUc. Against the euro we are down -10 bps at just on 50.3 euro cents. That all means our TWI-5 starts today at just over 61.8 which is down -10 bps from yesterday.

The bitcoin price starts today at just on US$61,781 and little-changed (up +0.3%) from this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 1.7%.

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.

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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 uncertainty swirls in the Middle East as Iran has shot down an American Apache helicopter (and Trump is looking more like Jimmy Carter by the day). But more ships are transiting (paying Iran's toll), and that extra oil is easing the global price.

But first locally, the overnight dairy Pulse auction delivered lower prices for the four products offered. AMF was down -4.6% from last week's full auction. Butter was down -0.6%. SMP was down -5.5% and WMP was down -3.5%. But an intervening -2% fall in the NZD took some of the sting out of these retreats.

In the US, NFIB Business Optimism Index fell again and to its lowest since October 2024.. These businesses are struggling with "significant and unpredictable hikes in fuel prices", which they find harder to pass on to their customers compared to their larger corporate competitors.

The weekly ADP jobs report said new private sector jobs created were lower last week at +29,000, in fact their lowest since the end of March.

American existing home sales actually rose in May to an annualised rate of 4.17 mln, its highest of the year. This was impressive because mortgage interest rates rose in the period and seems not to have been the handbrake sometimes assumed. All the same, unsold inventory rose.

There was a small but notable increase in demand for the overnight and popular US Treasury 3 year bond which delivered a median yield of 4.15% (high of 4.19%), sharply up on the 3.92% median at the prior equivalent event a month ago.

In April, US exports of goods and services rose +2.6% from March +12.5% from a year ago, helped by better exports of crude oil, AI computer gear and aircraft, but most offset by a quite sharp fall in tourism receipts. Imports were up +1.9% from March, up +9.1% from a year ago, dominated by capital goods and rising transport and travel cost by Americans. Their trade deficit narrowed slightly, but big trade deficits remained with Taiwan (-$19.3 nln), Vietnam (-$19.3 bln), Mexico (-$14.8 bln), China (-$12.0 bln), the EU (-$7.2 bln), and Canada (-$6.2 bln).

The Texas screwworm outbreak is spreading which will affect their beef trade. The outbreak now includes for a dog.

Meanwhile, Canadian exports rose +1.6% from the previous month to C$75.2 bln in April, the highest on record and up +24.7% from the same month a year ago. Imports rose too, but they still managed to report their best monthly trade surplus since January 2025 and their best April since 2008.

Across the Pacific, China’s exports surged +19.4% in May from a year ago to a record high of US$377 bln, far exceeding forecasts of +15% and accelerating sharply from April’s 14.1% rise. It was the fastest increase since February and gave them a trade surplus of +US$105.4 bln. However, Chinese oil imports hit an eight year low in May.

Across the strait, Taiwan said its exports rose even more impressively, up +52% from a year ago. Their imports were up +55%. That means a trade surplus for them of +US$17.9 bln, middle-range for what they have had since October 2025 and wildly higher than in any prior period

Japanese machine tool orders fell in May from April after falling in April too. But they remain up +37% from a year ago. The monthly easing was for orders from both domestic and foreign customers.

Staying in Japan, reports are growing that their central bank will raise its policy rate by +25 bps to 1.0% when they meet on Friday week. And they are likely to pause their JGB bond sell-down program that is underway.

And in Indonesia, their central bank held an emergency meeting to assess the economic crisis growing in their financial and fx markets. At that meeting they hikes their policy rate to 5.50%, a hike of +25 bps. They last met only three weeks ago when they raised their rate by +25 bps at that time too. They started 2026 with a 4.75% rate. Their actions are required to stop the Indonesian currency falling sharply, down -7.8% in 2026.

In Europe, the Netherlands blocked an American company from buying a local firm that handles its national ID system, saying it would create a “threat to the public interest.”

The UST 10yr yield is now just on 4.53%, down -2 bps for the day.

The price of gold will start today down -US$75 from yesterday at US$4258/oz. Silver is down a sharp -US$3.50 at just under US$65/oz.

Oil prices are down -US$2.50 from yesterday at just under US$88.50/bbl in the US, while the international Brent price is now just on US$91.50/bbl. Hormuz transits are still very low despite the pricing optimism. China’s crude imports dropped to around 7.8 million barrels per day last month, the lowest level in more than eight years and nearly 4 million barrels per day below the 2025 average. Weaker shipments to from the world’s largest oil importer even if caused by Hormuz, combined with record US exports and emergency reserve releases, has limited the price impact of the Middle East conflict.

The Kiwi dollar is up +10 bps from this time yesterday at just on 58.2 USc. Against the Aussie we are up +30 bps at 82.8 AUc. Against the euro we are unchanged at just on 50.4 euro cents. That all means our TWI-5 starts today at just on 61.9 which is up +10 bps from yesterday.

The bitcoin price starts today at just on US$61,545 and down -2.95% from this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.6%.

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.

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