Economy Watch

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 markets are unsure about whether public efforts to calm the financial consequences of the war on Iran will work. Just at the moment, it's a wait-and-see situation.

But first in the US, the latest inflation expectations survey for February is out, revealing very little change. In the absence of subsequent events this stability might have seemed 'positive', but it is now only of historical note.

More currently, across the US, there are sharp rises in petrol prices. Those were responding to US$90/bbl crude prices. They are now up from there.

Meanwhile, we should probably note that there is a partial US shutdown underway. Among other impacts, security screening staff at airports are in layoff, not being paid. That is making travel in and through the US particularly messy.

Across the Pacific, Taiwanese exports fell in February to 'only' US$50 bln in the month, and up only +20.6% from the same month a year ago. But much of this can be explained by how the Chinese New Year holiday occurred this year,

China's CPI inflation rate jumped +1.0% in February from January to be up +1.3% from February a year ago. That takes them to a three year high. These were much sharper rises than expected and rises were expected. If both the US and China are now in a sharp-rising inflation period (and this data preceded the Iran crisis), then there is little chance New Zealand will be avoiding this pressure. Their beef prices are up +9.6% from a year ago, lamb prices up +6.6%. (Dairy prices there are down -1.1% on the same basis however.)

Now of course, an oil shock is likely to juice their inflation with a new burst.

Meanwhile China's producer price pressure eased in February, down just -0.9% from a year ago after their third [small] consecutive rise in month-on-month. Oil prices here will have an even larger impact.

Japan’s leading economic index, which gauges the outlook for the months ahead using indicators such as job offers and consumer sentiment, rose in January to its highest level since July 2022, confirming their improving economic outlook.

And here's something we don't normally look at. Business is picking up in Japan, enough that there is a notable rise in overtime pay there, the most since 2022.

In Europe, German factory orders slumped -11.1% in January from December, far worse than market expectations for a -4.3% drop. And December was downwardly revised as well. It was the first decline since August, largely driven by a -39% plunge in fabricated metal products after large orders in the prior month created a high base. Demand also weakened for machinery and equipment. However, from a year ago, German factory orders were up +3.7% in January. (All this German data is inflation-adjusted.)

In Australia, Commonwealth Bank has reported two mortgage brokers and a string of accountants to police as it works to unravel a gigantic loan fraud using fake documents and international funds that could extend to AU$1 bln, the AFR is reporting.

On the commodities front, the big overnight mover is sulphur, a key fertiliser ingredient, up another 6%, and which has now doubled from a year ago.

The UST 10yr yield is now just on 4.12%, down -1 bp from yesterday.

The price of gold will start today down -US$69 from yesterday at US$5103/oz. Silver is little-changed however at US$84.50/oz today.

American oil prices are up +US$3, at just under US$94/bbl, while the international Brent price is up +US$6 to be now just on US$99/bbl. In between they have been very volatile, at one point reaching US$116/bbl. Relative calm came after G7 ministers started discussing releasing some strategic oil reserves. But there is no agreement or action on that yet, only 'possibilities'.

The Kiwi dollar is up +30 bps against the USD from yesterday, now just on 59.3 USc. Against the Aussie we are unchanged at 84 AUc. We are up +50 bps against the yen. Against the euro we are up +20 bps at 51.1 euro cents. That all means our TWI-5 starts today up +20 bps at just over 62.9.

The bitcoin price starts today at US$69,073 and up +3.3% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.7%.

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.

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 of zero progress in the mess in the Middle East. In fact, it has probably gotten worse.

And in the week ahead, geopolitical developments will likely dictate global market directions. Reports by the IEA and OPEC this week will reveal how the institutions see the supply shock of seaborne energy from the Persian Gulf. The spotlight on US economic data will be on consumer inflation for February (Thursday) and PCE for January (Saturday). Both are expected to rise (CPI to 2.5%, PCE to 2.9%) but everyone will know this is the base on what the March data (released on April 11) will be built on.

Where US inflation goes, the bond market goes, and the cost of money locally, Of course, we will be tracking that for you.

In China, they will release February inflation data, with headline CPI expected to firm to 0.8% from 0.2%, while producer prices are likely to decline at a slightly slower pace of 1.1%. They will also release new yuan loans data which is expected to decline in February, partly reflecting seasonal weakness linked to the Lunar New Year holidays. In Japan, we will get updated machine tool orders results. In Australia, it will be about consumer and business confidence, consumer inflation expectations. In India, it will also be about CPI data.

Locally, apart from some retail data (card use) and more analysis on mortgage activity, data releases will be relatively quiet this week.

But there will be plenty of news to follow, especially flowing from the consequences of shrinking workforces in the US, which will have global implications.

The US economy shed -92,000 jobs in February at the headline level, the most in four months, following a downwardly revised +126,000 rise in January and much worse than forecasts of a +59,000 gain. From a year ago, payrolls are up +129,000 and that is unusually low. Apart from December's tiny +59,000 year-on-year gain you have to go back to the pandemic (and Trump 1) to find as weak a rise. It gets worse by broadening the view of all employment, not just payroll employment. That broader view shows overall employment down -391,000 in February from a year ago, the second consecutive shrinkage.

US retail sales inched lower by -0.2% in January from December, slightly less that the expected dip. It was the first decline since October. From a year ago, they are +3.1% higher. Most of this is accounted for by 2.5% CPI core inflation.

US inflation may be about to get a shock. Petrol pump prices are up today +10% from a year ago, up +18% from a month ago. And these costs are only just getting started with US crude oil up +35% in a week, up the same in a year. When US March CPI is reported, the Fed won't be able to look away. 

They are facing fast-weakening labour markets and fast rising inflation. They have a dual mandate so they will have to choose what to prioritise. The simple fact is that inflation problems are harder to remedy using monetary policy tools than the labour market. Absent political pressure, they would want to fight inflation first. (If they choose the other goal, they will embed inflation for a very long time.)

In Canada, their widely-watched Ivey PMI surged higher in February, a strong expansion signal, to its best since September 2025, and prior to that its best since July 2024.

In the Persian Gulf, the Qatari oil minister said in the next few days they have to decide whether to declare force majeure, releasing them from obligations to deliver supplies to customers. He said that could drive crude prices to US$150/bbl. There are still no ships transiting the Straits of Hormuz - except Iran-linked ones.

China’s foreign exchange reserves rose to US$3.428 tln in February, a small +US$30 bln increase over the previous month and the seventh consecutive monthly gain. These are now back to their highest level since November 2015. USD weakness helped, but it is clear US efforts to 'contain China' aren't working at the most fundamental level. Meanwhile, they bought slightly more gold and now have 74.22 mln troy ounces. American missteps have juiced the price of gold of course, so the value of their holdings rose +US$20 bln to US$388 bln at the end of February, now 11% of their total reserves.

After falling consistently since August, the FAO food price index rose in February, basically tracking similar levels for the start of 2025. But there is wide variation between categories. Meat prices are steady, Dairy prices are falling as is sugar. Dairy prices are now at their lowest since the start of 2024. But vegetable oils are rising, and fast, with cereal prices turning higher too.

Meanwhile, metals prices are rising, led by aluminium's overnight jump, and it is now approaching the heady heights of the pandemic peaks. Copper and zinc have been rising recently too, even nickel and zinc. Sulphur is another essential commodity at a peak, even higher than the pandemic levels. This is a particular problem for China. But iron ore prices are not joining the party.

The UST 10yr yield is now just on 4.13%, up +2 bps from Saturday. 

The price of gold will start today up +US$28 from Saturday at US$5172/oz. Silver is up +50 USc at US$84.50/oz today.

American oil prices are up +US$1, at just under US$91/bbl, while the international Brent price is up a bit less to be now just on US$92.50/bbl.

The Kiwi dollar is unchanged against the USD from Saturday, still just on 59 USc. Against the Aussie we are down -10 bps at 84 AUc. We are up +10 bps against the yen. Against the euro we are up +10 bps at 50.9 euro cents. That all means our TWI-5 starts today little-changed at just over 62.7.

The bitcoin price starts today at US$66,882 and down -2.0% from this time Saturday. Volatility over the past 24 hours has been moderate at just on +/- 2.5%.

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 tomorrow.

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 bankrupt US/Israeli decisions to choose war over peaceful pressure are having global consequences.

But first, the Federal Reserve Beige Book for February reported that overall US economic activity increased at a slight to moderate pace in seven of the twelve Federal Reserve Districts, while the number of Districts reporting flat or declining activity increased from four in the prior period to five in the current period. This is not a review that found strong growth.

US jobless claims rose last week by +18,000 from the prior week to 213,000 but most of that can be accounted for by seasonal factors. There are now 2.21 mln people on these benefits, similar to this time last year, but significantly higher than the 2024 levels.

February announced job cuts were lower than in January, but together the first two months have been almost as high as the equivalent 2025 levels. This survey also tracks hiring plans and that is down more than -50% from last year.

Tomorrow the February US non-farm payrolls will be released and analysts expect a low +59,000 gain. That would be half the +130,000 January level, itself historically low.

According to AAA monitoring, average petrol prices (91) in the US are now US$3.25/gal (NZ$1.46L / AU$1.23/L) This is up +9% from US$2.98/gal a week ago, up from US$2.89/gal a month ago, or a +12.5% rise.

US natural gas prices are up +7.2% over the same time-frame but to be fair are still very low. But in Europe, these prices are up +70% (in the UK) and up 53% (in Germany) for example. In India, natural gas prices have tripled for many users over the past few days. It is natural to wonder what Trump would say if the EU (or India) took unilateral actions that imposed similar cost jumps on the US. It is no longer safe to be a 'friend' of the US, or any country that pursues policies that "put me first".

American policymakers are scrambling to assess a wide range of materials where access is at risk. And institutions more broadly are doing the same.

We need to start keeping a closer eye on supply chain pressures. The NY Fed's February monitoring shows it elevated but nothing like the pandemic period, although not yet accounting for the current stresses.

Taiwanese industrial production rose +28.5% in January from a year ago, no surprise given the export order data we have been noting. But it is their sharpest rise in at least a decade, probably longer. However, things are not positive for Taiwanese retail sales; they actually decreased in January. But this was entirely due to Chinese New Year falling in a different period this year.

Singapore retail sales data for January also got twisted by the holiday timing.

The Malaysian central bank kept its policy rate unchanged overnight at 2.75%, saying inflation there is well contained. But they are worried about Middle East conflict effects.

China said it is lowering its growth target - slightly. Premier Li Qiang is set to announce a "around 4.5 to 5%" target while delivering the government work report, a key policy document, at the opening session of the National People's Congress later today. The departure from the "around 5%" growth target for the past three years signals the start of a period of slower expansion in China.

A big focus is on stabilising their moribund real estate markets. 'Stabilising' will undoubtedly mean subsidies and incentives to unlock buyer interest in the sector again. That will be a hard ask, given the widespread pain still in recent memory.

EU retail sales rose +2.3% in January, although slightly less in the Euro Area.

In Australia, household spending rose +4.6% in January from a year ago, the slowest pace since late May, following a +5.0% rise in December. This was a smaller increase than expected.

Global container freight rates, which had been falling every week in 2026 so far, turned +3% higher last week as the early signs of the Middle East pressures started to mount. Outbound China rates are up +10% for the week. However, they are still -23% lower than year-ago levels. It might be different when this week’s data is released next week, of course. More currently, bulk cargo rates are up +6% for the week. Shipping traffic in the Straits of Hormuz has ceased altogether. (Live here.) And we should note ships outside the Strait are under attack too, so the conflict stresses are spreading.

New Zealand and Australia have significant food exports into the Middle East region, and they are now disrupted. We noted the sharp rise in fertiliser costs yesterday and more broadly, that is bringing warnings of food shortage consequences.

And as if these crises aren't enough, overshadowed is the Blue Owl private credit car crash in the US, and the wider concerns about their risky loans. Some insiders are now talking about a consequential "bank run" being caused by this.

The UST 10yr yield is now just on 4.14%, up +6 bps from yesterday. 

The price of gold will start today down -US$71 from yesterday at US$5076/oz. Silver is down -US$2 at US$82/oz today.

American oil prices are up more than +US$5.50, up +7% in a day, at just under US$79.50/bbl, while the international Brent price is down the same to be now just on US$84.50/bbl.

The Kiwi dollar is down -40 bps against the USD from yesterday, now just on 58.9 USc. Against the Aussie we are up +20 bps at 84.1 AUc. We are down -30 bps against the yen. Against the euro we are down -10 bps at 50.9 euro cents. That all means our TWI-5 starts today down -30 bps, now just over 62.6.

The bitcoin price starts today at US$71,316 and down -2.6% from this time yesterday, although holding on to a large part of yesterday's rise. Volatility over the past 24 hours has been moderate at just on +/- 2.1%.

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.

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 both China and the US have parallel PMI surveys and this month each told wildly different stories about how their February economies were tracking.

But first, after flat-lining in each of the past four week, US mortgage applications rose notably last week, driven by strong refi activity, covering continuing weak new home purchase applications.

The US ADP employment report shows a gain of +63,000 jobs in February, the most since July, following a downwardly revised +11,000 rise in January. Analysts were anticipating a gain of +50,000. But all the gains were in the education and health sectors, and only in small (sub 20 employee) companies. As a result, the data shows data shows no widespread pay benefit from changing jobs. In fact, the pay premium for switching employers hit a record low in February.

The ISM February services PMI for the US expanded more than expected to its best level since July 2022 with gains in all subcategories.

Meanwhile the parallel S&P Global/Markit services told a quite different story, with the expansion in that sector falling to its lowest level since April 2025 amid a weaker rise in sales.

In Taiwan, their exporting miracle has extended with export orders soaring +60% to a new record of US$77 bln in January, besting market expectations of a +51% surge and accelerating from a +44% gain in December. Yes, electronics drove the rise, but they also had strong rises in chemicals, textiles, and metals. Orders poured in from the US, the EU and from China. Export orders a year ago at US$48 bln were not weak, so this is truly an astounding trend.

In China, their official February PMI's were dour affairs, even for them. Both the factory and service sector reports revealed contractions in the month, the factory sector worse than in January, their services sector a slightly less contraction than in the previous month.

But in complete contrast, the private S&P Global/RatingDog surveys found something different, strong expansions in both sectors. New orders drove the factory one to its best expansion in five years, they say. and new business drove their services expansion to its fastest pace in nearly three years.

In Europe, producer prices rose quite sharply in January from December, but most of that was retracing a sharp December fall. Year-on-year they are down -2.1% although most of that fall was earlier in the year.

Australia reported that its economic activity rose +2.6% in Q4-2025, compared to the same period in 2024. Analysts had expected it to rise +2.2% on that basis, so it was a very positive outcome. GDP per capita increased for the fourth consecutive quarter and is now +0.9% higher than a year ago, the highest year-on-year growth since December 2022. For the full 2025, this is +2.0% (real) higher than calendar 2024. Compensation of employees rose +6.5% in the year. The household saving to income ratio increased to 6.9%, up from 6.1% in the September quarter. This ratio is now at its highest level since the September quarter 2022. All this data is 'real' after inflation.

And we should note that the aluminium price surged overnight as Persian Gulf refineries declared force majeure on their orders due to the US/Israeli attacks in the area and Iran's response.

The same tensions are forcing up fertiliser prices sharply. Urea prices have jumped +11% in one day. Australia imports two thirds of its urea from the Middle-East. The same ratio applies to New Zealand.

And despite the "Trump guarantee" and promises of naval protection, if you can get it, insurance costs for shipping in the Persian Gulf has soared by +1300%. Insurers are completely dismissing Trump's 'promises'.

The UST 10yr yield is now just on 4.08%, up +2 bps from yesterday.

The price of gold will start today up +US$30 from yesterday at US$5147/oz. Silver is up +US$1 at US$84/oz today.

American oil prices are down -US$2 at just over US$74/bbl, while the international Brent price is up the same to be now just over US$81/bbl.

The Kiwi dollar is up +50 bps against the USD from yesterday, now just on 59.3 USc. Against the Aussie we are up +10 bps at 83.9 AUc. We are up +40 bps against the yen. Against the euro we are up +30 bps at 51 euro cents. That all means our TWI-5 starts today up +40 bps, now just on 62.9.

The bitcoin price starts today at US$73,236 and up +8.4% from this time yesterday. Volatility over the past 24 hours has been very high at just on +/- 4.0%.

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 tomorrow.

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 inflation spike fear is gripping financial markets today as equities fall, bond yields rise, some key commodities like the oil price are spiking, and there is a sharp move toward perceptions of financial 'safety' which is hurting commodity-based currencies like the AUD and the NZD.

The fear is based on seeing central banks hiking policy rates to weight against a looming inflation spike, just when economic activity is likely to weaken sharply on the consequences of Trump's wars. The fear is stagflation on steroids.

It is affecting investors from New York to Shanghai. And now Trump is blaming friends (Spain, the UK) for not being supportive enough and threatening new trade restrictions.

But it isn't universal - yet anyway.

First up today, there has been another very good dairy auction overnight, the fifth positive one in a row, delivering prices up overall by +5.7% un USD terms. With the falling NZD, prices are up +8.4% in NZD. Our charts tell the story overall and in product detail. Basically prices are now back to the high 2025 levels in both USD and NZD terms. Yes, analysts will be reaching for their pencils to reassess the season's payout forecast, although we should caution that we are well past the peak of the milk flows - and that volumes offered and sold overnight are falling away seasonally.

More broadly, in the US overnight, the February US Logistics Manager survey showed pressure on their system with rising inventories and strained capacity.

Meanwhile the RealClearMarkets/TIPP Economic Optimism Index retreated in March from February, and delivering a decline when an rise was expected. This is largely because personal investor sentiment fell sharply as confidence in US government economic policies slipped away.

In the Middle East, only one tanker, a Singaporean one, has managed to traverse the Straits of Hormuz in the past day. It's essentially closed still. Insurers have cancelled policies. Now the US says it is considering providing that, at taxpayer expense. The costs of war are broad.

The scheduled meeting between Chinese President Xi and US President Trump is still on for the end of March. Given the unhinged policy-making by the US, it is a lottery on how this will play out. Trump will undoubtedly look for short-term, face-savings wins. Xi will be playing a much longer game.

Meanwhile, China is putting the finishing touches to its latest five-year plan. We are approaching the rubber-stamp set piece.

In Europe, the Euro area inflation rate rose to 1.9% in February, up from 1.7% in January. Although minor it was an unexpected rise. And that pushed core inflation up to 2.4% in February. Given the global rise in uncertainty, and the US/Israel/Iran crisis pushing up their energy costs very sharply in the past few days, these inflation levels are unlikely to stay this low in March, giving the ECB a new headache.

In Australia, total residential building consents fell at a -7.2% rate in January, following a -30.7% drop in December. Year on year it is down -15.7%, the largest fall since late 2023. This may have ended the rising trend of approvals that started in July 2024. But there were 9,900 detached houses approved for construction nationally, a 41-month high. The big shortfall is in intensive housing.

Australia’s current account balance fell by -AU$2.8 bln in December 2025 to a deficit of -AU$21.1 bln. This is its second consecutive fall, driven by a net primary income deficit widening. This will take -0.1 percentage points from the December 2025 GDP result which will be released tomorrow.

In public comments yesterday, the RBA governor acknowledged the sudden increase in uncertainty in the global economy, on top of already high uncertainty from Trump's abandonment of an international rules-based order. She said "a supply shock could, for example, add to inflation pressures. And the potential implications for inflation expectations are something we are very alert to. But at the same time, a prolonged impact on energy markets could have adverse effects on global economic activity and result in downward pressure on inflation. It is not obvious how this might play out." Westpac says Brent crude at US$100 is entirely possible in the coming few weeks.

The UST 10yr yield is now just on 4.06%, unchanged from yesterday, although it did get up to 4.11% in between. 

The price of gold will start today down -US$179 from yesterday at US$5117/oz. Silver is down another -US$4 at US$83/oz today.

American oil prices are up +US$5.50 at just under US$76/bbl, while the international Brent price is up the same to be now just over US$82.50/bbl. These at +7.5% rises. A collapse in Iranian oil production could have quite deep impacts.

The Kiwi dollar is another -50 bps lower against the USD from yesterday, now just on 58.8 USc. Against the Aussie we are down -10 bps at 83.8 AUc. We are down -60 bps against the yen. Against the euro we are unchanged at 50.7 euro cents. That all means our TWI-5 starts today down -40 bps, now just on 62.5 and a new one month low.

The bitcoin price starts today at US$67,5755 and down -3.2% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 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.