Economy Watch

Interest.co.nz / Podcasts NZ, David Chaston, Gareth Vaughan, interest.co.nz
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We follow the economic events and trends that affect New Zealand.

  1. 21 hrs ago

    Markets demand rate rises to fight inflation

    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  the Gulf Cooperation Council meetings with Iran have been 'postponed'. So no progress there. That means we need to prepare for more pain at the pump, and aggressive competition for global fuel supplies. In the US a full +25 bps is now priced in for Thursday's US Fed review which would take their policy rate to 4.0%. In Japan, a full +25 bps is also priced in, taking theirs to 1.25%. If one or both don't deliver these rises where will be strong financial market reactions. And the inflation-fighting cred of both central banks will be in tatters. With no monetary policy resistance to inflation, things would get very messy and rather quickly. And while we are reviewing these chances, we should note that markets are pricing two chances in three (67%) of an RBNZ rise on October 28, a 75% chance of an RBA rate rise on September 29, and a 70% chance of an ECB rise on October 29. Meanwhile, Canada's August CPI inflation rate came in at 3.0%, the expected level and unchanged from July. Markets are currently pricing in a 75% chance of a +25 bps hike at the Bank of Canada's October 28 review. India's CPI inflation rate was reported overnight too, coming in at 4.8% for August and as expected, but notably higher than the 4.4% July rate. Food inflation, which makes up a dominant part of this measure, came in at almost 6%. Their 5.25% policy rate is next reviewed on October 7. China reported its August new yuan loans data overnight and it was weak again, extending the unnerving trend that started with the unexpected April fall, which was followed up with an even larger July fall. This August data was expected to be a very modest +¥400 bln expansion, but it only came in with a +¥60 bln rise. For an economy as large as China's this is very low. For example, August 2025 recorded a +¥590 bln rise and that was considered low. In August 2024 it was +¥900 bln. The UST 10yr yield is now just on 4.96%, down -2 bps from yesterday but essentially holding its new highs. It did top 5% at one point however over the past 24 hours. The price of gold is now at US$4310/oz, and down -US$40 from yesterday at this time. Silver is at just under US$63.50/oz and down -US$1. Oil prices have risen +US$1.50 to US$101.50/bbl in the US, while the international Brent price is up the same to just on US$106/bbl. The Kiwi dollar is down -30 bps from yesterday, now at 57.8 USc. Against the Aussie we are down -10 bps at 81 AUc. Against the euro we are also down -10 bps to just on 50 euro cents. That all means our TWI-5 starts today at just over 61.2, down -20 bps. The bitcoin price starts today at US$78,886 and up +1.9% from yesterday. Volatility over the past 24 hours has been modest at just under +/-1.6%. 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. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  2. 1 day ago

    Higher yields are here to stay

    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 price of money just keeps going up. Others have pointed out it is not only US policy management that is causing this trend, but also the generational shift of boomer savings starting to run down as they are used, generating a global imbalance. There are fewer savings for the investment demand in the global economy, so a fundamental supply/demand imbalance is growing. The US administrative incompetence is making this shift faster, however. This week will feature the US Fed's rate decision on Thursday as the key upcoming event. Financial markets are pricing a 75% chance of a +25 bps hike. Economists have the full +25 bps as their central expectation. The reason is clear - inflation isn't under control, not even close. Locally, Thursday will bring our Q2-2025 GDP result, expected to be +2.3% and up from Q1's +1.8%. But such is the disconnect between consumers lived experience, and sectors like farming, that it is likely to be dismissed as electioneering even if it is accurate. We will also get retail (electronic card) and inflation (selected price) updates this week too. And in the middle of this we will likely get the August REINZ data this week as well. In Australia, the key data releases will be minor, mainly for tourism and population, but they will both be grist for their culture war debates. China will report a broad range of data this week, and most of it is expected to deliver minor improvements. We will be especially watching their new lending data to see what has happened after the unexpected July decline. Japan will report inflation (2.1% expected) and its central bank rate review later in the week (+25 bps to 1.25%). On Friday, Japan said its producer prices rose +7.6% in August from a year ago, following an upwardly revised +7.7% increase in the prior month, which had been the fastest pace since February 2023. Although fuel is a big part of these rises it isn't the only part, and the outsized rises have been consistent now in each month since April. Despite that, Japanese business sentiment rose to its highest level since 2021, in a report out Friday. In the coming week, the US will release retail sales, trade terms, and industrial production data. But this is all being overshadowed by the fast-rising fuels costs, even if there is yet another 'hope' that talks can replace fighting in the Persian Gulf. Over the weekend the US released its official CPI for August (from the same agency that brought you the wildly optimistic non-farm payrolls data), and it shows no change at 3.4%. Apparently food prices were up +2.7%, fuel costs up +16.3%, electricity up +4.0%, drugs down -2.7% and rents up +3.0%. From July to August however, the overall rate rose +0.4% which is an accelerating recent rise. However, it is doubtful US consumers believe this sanguine official assessment. The widely-watched University of Michigan consumer sentiment survey for September reported a sharpish and unexpected fall, now to its lowest level since the record low in May. That is a -7.5% retreat since August and a -13.7% drop from a year ago. Year-ahead inflation expectations jumped to 4.6%, the highest since June. Year-ahead expectations for personal finances and business conditions deteriorated, as consumers anticipate greater pressure on household budgets amid rising fuel prices and trade tensions. US petrol prices have risen +4.0% in just the past week and are now up +45% since the start of Trump's war. In some earlier reviews we had noted that the copper price had hit a new record high of US$15,000/tonne. However since then it has pulled back on the prospects for a sharp increase in supply and an easing of demand as the world's two largest economies hesitate. The current price is now US$14,250/tonne so a -5% drop in the past three days. The UST 10yr yield is now just on 4.98%, unchanged from Saturday, up +20 bps for the week. All this sudden rise in benchmark interest rates is going to do extensive and expensive damage to government budgets which depend on high debt levels and more borrowed money. A reckoning is closer. The price of gold is now at US$4350/oz, and up a minor +US$4 from Saturday at this time, down -US$74 for the week. Silver is unchanged at just under US$64.50/oz, down -US$1.50 for the week. The Gulf Cooperation Council is expected to meet their Iranian counterparts later today to discuss a possible temporary arrangement for managing shipping through the strait. Adding to downward pressure, the US EIA raised its 2027 crude production forecast while the IEA sharply cut its global oil demand outlook. Oil prices have eased -50 USc to a still very high US$100/bbl in the US, while the international Brent price is little-changed just over US$104.50/bbl. A week ago these prices were US$91.50 and US$96.50/bbl so a net +9% rise in that time. The Kiwi dollar is unchanged from Saturday, still just over 58.1 USc but down -70 bps for the week. Against the Aussie we are also still just under 81.1 AUc. Against the euro we are holding at 50.1 euro cents. That all means our TWI-5 starts today at just over 61.4, unchanged from Saturday, down -70 bps from a week ago. The bitcoin price starts today at US$77,260 and up just +0.2% from Saturday at this time but down -3.0% from this time last week. Volatility over the past 24 hours has again been low at just under +/-0.6%. 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. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  3. 4 days ago

    The cost of money has just jumped

    Shutterstock Track 1219389 Monetization ID TFGEPGEI0LHEIJAI 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 bond prices and equity prices are falling as oil prices have jumped, and markets now see a much larger chance the US Fed will have to raise rates when it meets on Thursday next week (NZT). Bond yields have jumped today in an outsized shift. Inflation risks are mounting everywhere now. Copper, silver and gold prices are sliding today. Adding to anxiety, Iran-backed Houthis have seized another Red Sea port is a defeat for Saudi Arabia, putting more pressure on the Red Sea shipping lanes. And in the US, at a sparsely attended 'convention', Trump has added to his cash promises to American voters if they keep a Republican Congress after the November elections that now exceed US$1 tln. In the US, producer prices rose in August more than expected and more than in July. They were up +5.4% from a year ago, faster than the July +4.8% rise. Clearly inflation is embedding in the US economy and is likely to spill out to consumer prices very soon - though the risks of that for their service economy seem much less. US fuel prices have risen sharply too with diesel now almost averaging US$6/bal, petrol up at US$4.27/gal. These are both quite big rises just from yesterday. US initial jobless claims rose last week to 176,500, about what seasonal factors would have indicated. There are now 1.675 mln people on these benefits, much lower than last week as qualification standards bite very much harder now. US crude oil stocks fell again last week but by less than expected and by less than the prior week. US existing home sales fell -2% in August to under a 4 mln annual rate. Unsold inventories rose. These dynamics are unlikely to get better because benchmark mortgage rates are about to jump. After declining for all of 2026, the US inventory-to-sales ratio jumped unexpectedly in July with wholesale inventories up +1.3% from June to be +5.7% higher than year-ago levels. So it will be no surprise to know that the median yield for today's US 30yr bond auction rose to 5.25% (hi 5.31%), from 5.15% at the prior equivalent event a month ago. As expected, the European Central Bank raised its policy rate by +25 bps to 2.65% saying that they expect inflation to be elevated and this required pushback. Australian inflation expectations have remained unchanged at 4.9% in September as they were in August. That is far above the July 3.5% official CPI rate and the August CPI update won't come until the end of this month. And last month’s spike in wage expectations appears to have been a temporary blip, with expectations about year-ahead pay growth falling to just +1.2%. The squeeze is on and quite hard now. OPEC's monthly report showed that overall output rose by almost +350,000/bbl/day in the month led by Iraq. But they lowered their demand expectations for 2026 on the trajectory of the global economy. It is not often you see rising out put, lower demand, and a sharp jump in prices. That Trump guy is something 'special'. Global container freight rates were little-changed last week, staying at unusually high levels and up +119% from a year ago. Rises in China-to-US rates were offset by falls in China-to-EU rates. Meanwhile bulk cargo rates rose +12% last week, and are now +175% higher than year-ago levels. The UST 10yr yield is now just on 4.96%, a jump of +12 bps from yesterday at this time. The price of gold is now at US$4337/oz, and down -US$81 from yesterday at this time. Silver is down -US$4 at just under US$64/oz. Oil prices are up +US$6 at a very high US$102/bbl in the US, while the international Brent price has risen +US$6.50 to just over US$107.50/bbl. The Kiwi dollar is down -40 bps from yesterday, now just under 58 USc and a six week low. Against the Aussie we are up +10 bps at just under 81 AUc. Against the euro we are down -30 bps as well at 49.9 euro cents. That all means our TWI-5 starts today at just over 61.3, down -30 bps from yesterday. The bitcoin price starts today at US$77,113 and down -2.1% from yesterday at this time. Volatility over the past 24 hours has again been modest at just under +/-1.2%. 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 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  4. 5 days ago

    The risks of an unravelling rise

    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 both Iran and the US are targeting oil tankers in the Persian Gulf in the sharpest escalation in their conflict since Trump's war began. The oil price jumped +4% overnight, and other financial risk metrics rose too. Meanwhile, US Treasury Secretary is making moves that make him look desperate. His latest Treasury buy-back plan has been panned by markets after his pre-selling bluster, and US yields have risen. His meddling with the yen is in trouble too, raising expectations the Japanese are unable to meet, and causing its own market reactions. In the real economy US mortgage applications sank sharply last week, mainly on diving refinance applications. Not helping is a sharpish rise in the benchmark 30 year mortgage rate, now at 6.85% and its highest in more than a year. And that is likely to get worse. Today's UST 10yr bond auction brought a median yield of 4.77% (high 4.83%), up sharply from the prior equivalent event a month ago (4.63%). Trump has taken exception to Canada reacting and retaliating to his tariffs on them. He says he will hit Canada with more and higher tariffs. Central to the new American actions will be dairy products. In Japan, machine tool orders jumped sharply in August, up +65% from a year ago and continuing the surge that started in Match. The Japanese business sentiment index for manufacturers known as the Reuters Tankan index rose to its highest reading since December 2021, and before that, 2018, in a show of rising confidence. This survey predates the official Tankan survey which isn't due until October 1, 2026. Taiwanese exports continued their stellar growth in August, but this expansion seem to have become normalised now, which understates how impressive it is. They reported a +41% gain on top of last year's +42% gain in the same month. Of course, it was a new record high for them in one month, US$82.4 bln for the month. China's August CPI inflation rate came in very low again at +0.8% from a year ago, although a bit higher than for July, and marginally higher than expected. Food prices actually fell -0.6% on the same year-on-year basis, but within that beef prices were up +5.3% and lamb prices up +6.3%. Dairy products were -1.4% lower however, along with prices for pork, alcohol, and vegetables. Medical services, communications services, and fuel were all up. Meanwhile, China's August producer prices rose faster, up +3.8% from a year ago - so the July easing was essentially reversed. Industrial prices were up +5.8% with some metals and fuel components up more than +20% from a year ago. So key components of their export-oriented industries are under the cost pump. Meanwhile, Shanghai is rolling out a new policy to eliminate out-of-pocket medical expenses related to childbirth, covering routine medical services from prenatal checkups through hospital delivery. It is a bid to encourage births and make the city more family-friendly as China’s birth rate sinks to a new low. Overnight the copper price pushed up to a new all-time record, just shy of US$15,000/tonne (NZ$25.50/kg). It has dipped marginally in the hours that have followed, but that is nothing more than its regular volatility. The trend is still strongly up. (But chartists might sense that it will top out at US$15,500/tonne before establishing a new trend.)  The UST 10yr yield is now just on 4.84%, a rise of +3 bps from yesterday at this time. The price of gold is now at US$4418/oz, and up +US$32 from yesterday at this time. Silver is up +US$1.50 at just under US$68/oz. Oil prices are up +US$3.50 at a very high US$96/bbl in the US, while the international Brent price has risen +US$4 to just over US$101/bbl. The Kiwi dollar is down -20 bps from yesterday, now just over 58.4 USc. Against the Aussie we are also down -20 bps at 80.9 AUc at the lowest since April 2013. Against the euro we are down -20 bps as well at 50.2 euro cents. That all means our TWI-5 starts today at just over 61.6, down -20 bps from yesterday. The bitcoin price starts today at US$78,780 and up an insignificant +0.3% from yesterday at this time. Volatility over the past 24 hours has again been modest at just under +/-1.0%. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston and we’ll do this again tomorrow. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  5. 6 days ago

    Central banks realise they have to get more serious in the inflation fight

    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 inflation is high and rising around the world and central banks are confronting a change in priorities to get it under control. Their slow action is undermining their cred in the communities they serve. And that slow action has them facing some tough choices. But first, the overnight Pulse dairy auction brought slightly softer prices except for WMP which was little-changed. The dips in the other commodities was cushioned by the lower NZD. With the US back from holiday, more data has been released today. Of note is the ADP weekly employment data. The week-over-week change to their four-week moving average is less than +12,000 and that is nowhere near enough to confirm the last strong US non-farm payrolls report. Meanwhile, the New York Fed's August consumer inflation expectations survey held the one year ahead data at 3.6%, basically where it has been since rising to this level in April. Expected price growth for petrol rose to 4.6%, and for food to 5.3%. Worries about the labour market intensified, with those surveyed seeing unemployment will be higher in a year now 44% of the survey, the highest level since April 2020. And that is mirrored in the September update NFIB Business Optimism Index It fell away and by slightly more than expected. Inflation is now tied with taxes as the second top small business issue. Consumer debt rose again in July in the US, up an outsized +4.2% from a year ago. Driving this surge were non-revolving debt borrowings, like car loans, student loans, and personal loans. China has posted a strong trade result for August, with exports and imports up strongly, resulting in a fatter trade surplus. That surplus widened to +US$119 bln from +US$101 bln in July. It's surplus with the US accounted for +US$29 bln of that. Their August exports were up +25% and their imports were up +28.2% from the same month in 2025. Germany also reported a larger July trade surplus, but it did so in a defensive way. Exports fell from June (-0.8%) but imports fell more on that basis (-5.7%) so its surplus widened to €21.3 bln in the month. Year-on-year however, their exports were up +6.1% and their imports were up +3.0%. The key reasons for the July import fall were a -7.5% fall in imports from China, and an -8.3% fall in imports from the US. In Australia, consumer sentiment is retreating. The Westpac-Melbourne Institute August survey shows a raft of negative pressures. Household finances are coming back under pressure from higher fuel and rate rise fears. The housing downturn is starting to weigh on sentiment among homeowners. Nearly two thirds of consumers now expect mortgage rates to rise. And consumer unease about jobs, especially for construction and hospitality workers, is on the rise. And things are little better in the business sector. The August NAB survey of businesses shows business conditions fell 5 points and turned negative for the first time in six years. Business confidence fell 2 points and now 12 points below its January level, and worse, profitability fell 10 points as input costs continued to outpace price recovery increases. Meanwhile, RBA deputy governor Andrew Hauser said overnight that inflation is the major problem for Australia's central bank. He acknowledged Australians are struggling with the continued high cost of living and rising interest rates. But he also indicated those rates could rise higher in the coming months, because of their focus on fixing the key inflation problem. The Australian Government 10 year bond yield rose on the news, now its highest since 2011. Separately, it is also probably worth noting that the price of EU carbon permits is rising again, now at €85.40/tonne (NZ$160/tonne). That is far from the NZ$50/tonne available locally. The UST 10yr yield is now just on 4.81%, a rise of +1 bp from yesterday at this time. The price of gold is now at US$4386/oz, and down -US$21 from yesterday at this time. Silver is little-changed at just under US$66.50/oz. Oil prices are little-changed but still very high at just over US$92.50/bbl in the US, while the international Brent price has dipped -50 USc to just over US$97/bbl The Kiwi dollar is down -20 bps from yesterday, now just on 58.6 USc . Against the Aussie we are down -30 bps at 81.1 AUc. Against the euro we are down -20 bps at 50.4 euro cents. That all means our TWI-5 starts today at just over 61.8, down -20 bps from yesterday. The bitcoin price starts today at US$78,564 and down -0.8% from yesterday at this time. Volatility over the past 24 hours has again been modest at just under +/-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’ll do this again tomorrow. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  6. 7 Sept

    Commodities higher, global interest rates higher, yen higher

    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 global interest rates are still moving higher. And that is particularly true for Australian benchmark bonds. Money and commodities are transitioning somewhere, but it is not clear to where, just yet. But first, it is a public holiday in the US (Labor Day) with all their financial markets closed. Given their size, this has meant all other international markets are running at lower levels and in a hesitant mode. But some key shifts are not waiting for the Americans to return. In China, their August foreign exchange reserves were reported overnight and they rose to US$3.44 tln, the second highest level ever but not quite hitting their record May result. That puts them +3.6% higher than year-ago levels. Of note is that they added another +20 tonnes of gold to their reserves in the month, which makes the calendar year increase now almost +80 tonnes. Gold now makes up 10.2% of their overall reserves, although that is down from 11% at the start of  2026. And China announced major funding into eight large SOE institutions to enable them to lend more. It is injecting ¥300 bln (NZ$75 bln) in 'recapitalisation' the most it has done like this in 20 years. The funds will come from Ministry of Finance 'special bonds'. It is the latest and unlikely to be the last of economic support measures to 'reinvigorate' their economy. Japan's July leading index rose to its highest since January 2014 although the June level was revised down. The July level was also slightly below analyst's expectations despite the gain. Rising job offers and consumer sentiment were among the factors behind the rise. Singapore reported that its July retail sales were softer than expected. They were up by +1.5% from a year ago, the softest rise since May 2025 and slowing from a +4% increase in June. The EU reported a better rise in economic activity. The EU economy expanded +1.4% in Q2-2026 in its updated result, up from +1.0% in the previous estimate and much better than the +0.9% growth recorded in Q1-2026. The gain was driven by stronger growth in household spending and gross fixed capital formation, with exports also rebounded sharply. Euro area expansion came in slightly less than the overall EU levels. However German industrial production recorded a sharp and unexpected -1.1% fall in July, to now be -1.6% lower than year ago levels. (The Germans, as usual, report their data on an inflation-adjusted basis unlike many other countries.) The weakness there was from energy-intensive industries, and that includes car manufacturing. In a reaction toe the Saxony state election results, the German stock exchange dipped, and the 10yr German Bund yields rose to their highest since 2010. But they weren't the only bond yields to rise. The Australian 10 year bond yields rose to 5.22% and their highest since 2011. (Of course this has little to do with a German state election.) And the Japanese yen surged against the US dollar overnight, up to the 154 range as growing speculation over faster-than-expected Bank of Japan rate increases combined with renewed possibility of another round of currency intervention by the Japanese authorities drove the moves. We should also probably note that the copper price jumped to US$14,513/tonne on the LME, a record high. The UST 10yr yield is now just on 4.80%, up +2 bps from yesterday at this time. The price of gold is now at US$4407/oz, and down -US$26 from yesterday at this time. Silver is little-changed at just on US$66/oz. Oil prices are up +US$1 at just over US$92.50/bbl in the US, while the international Brent price is just under US$97.50/bbl. The Kiwi dollar is little-changed from yesterday, still just on 58.8 USc . Against the Aussie we are down -20 bps at 81.4 AUc. Against the euro we are holding at 50.6 euro cents. That all means our TWI-5 starts today at just over 62, down -10 bps from yesterday. The bitcoin price starts today at US$79,194and down -0.7 from yesterday at this time. Volatility over the past 24 hours has been modest at just under +/-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’ll do this again tomorrow. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  7. 6 Sept

    Eyes on global inflation

    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 we are heading into a week that will deliver a wide set of consumer and producer inflation reports. But locally, the data releases will be light. It is a light data week in Australia too, with only migration updates this week. But we will also get an update on the total value of all houses as at June and that may start to show a leveling off from the March record high AU$12.8 tln. We will also get August consumer and business confidence updates from Australia, and September consumer inflation expectations results. Globally we will be looking for signs of widening cracks in fuel markets as Trump's forever war drags on. In the US they are now on their long Labor Day weekend holiday, ending their summer holiday season. They face petrol prices +40% higher than when Trump started his Persian Gulf war with Iran. Diesel there are almost +80% higher now and that is having broad inflationary impacts in secondary goods costs. That these are rising faster recently is not a sign that Kevin Warsh will be able to ignore, even if he is under renewed pressure from the White House to do so. So of special interest will be the US August CPI update, brought to you by the good folks at the same agency that delivered the strong headline labour market data on Friday (the agency Trump fired the head of a while ago because he didn't like the results they released). A 3.4% headline rate is anticipated, but markets are taking that sceptically. After all, the PCE inflation measure for July was 3.7%. Even if you take both at face value, and the payrolls data at face value, there seems little justification for them not to weigh against inflation at this time. But Warsh & the Fed probably won't, so American inflation is set to be outsized and rising for some time yet. They will also release August PPI data this week, expected to remain elevated at 4.7%. The first September University of Michigan sentiment survey will drop this week too, and this has been very low reflecting unease over unconstrained inflation. And American consumer inflation expectations survey commissioned by the NY Fed will also drop this week Meanwhile, the ECB will decide on interest rates (expect a +25 bps rise to 2.5%), and Germany will unveil August industrial production data. There will be more trade and inflation data out elsewhere and that includes from China. We expect a larger trade surplus and their low inflation to rise again marginally. From Japan, a raft of economic reports is due, including revised Q2 GDP, July wages and current account data, as well as August PPI, which is expected to show producer inflation accelerating to 7.4%. Their machine tool order update is due too. Over the weekend, the Japanese household spending data that was weak in June got weaker for July, a result that wasn't expected. It was a contraction at the sharpest pace since January 2024. Only the furniture and recreation categories were positive. The US non-farm payrolls was out over the weekend and rose much more than expected in both the headline version and the actual version, up +154,000 in August from July when just a +15,000 rise was expected, up +456,000 from a year ago to 158.9 mln people on payrolls. This result is sharply different to the ADP Employment report which tracks most of this weekly. The broader employed civilian labour force data however isn't so upbeat, showing a -133,000 fall from July, down -621,000 from August a year ago and to 162.7 mln employed people. Take your pick from these two official results, but it does suggest a widening gap where it is substantially harder to sustain employment unless you are on a company payroll. Markets seem sceptical of the strong headline jobs report, suspecting it is something that will be corrected in future. Wall Street is lower, benchmark bond yields are higher, both shifts you may not expect if they did believe the headline data was genuine. Across the border, Canada reported a tougher labour market. Employment there declined by -41,700 in August, missing expectations for a +15,000 increase and following a +75,100 gain in July. In the overall EU, retail sales volume growth slowed to just +1.0% in July from a year ago, from an upwardly revised +1.7% in June. This was slightly lower than market expectations of a +1.1% gain and was the smallest increase in retail trade since April. But at least they have positive volume growth. In Germany they reported a sharp rise in factory orders in July, up +2.5% from June to be more than +13% higher than year-ago levels. This was much better than observers were expecting. In Norway, their gigantic US$2 tln sovereign wealth fund is moving to sharply cut back on its exposure to US Treasury bonds. Yesterday we noted the Dutch move to insulate risks by moving their gold holdings out of the US. Global food prices rose notably in August to their highest since November 2022. All food groups rose including for meat and dairy, although the biggest rises were for cereals, sugar, and vegetable oils. Also globally, perhaps we should note that the value of the top 50 mining companies surged on stock exchanges by a monster +US$350 bln in August alone, taking them back to February levels when the value of gold was US$1000 higher than it is now. The UST 10yr yield is now just on 4.78%, unchanged from Saturday at this time, up +5 bps for the week. The price of gold is now at US$4433/oz, and up +US$9 from Saturday at this time, down -US$29 from a week ago. Silver is little-changed at just on US$66/oz, down -50 USc for the week. Oil prices are holding at just on US$91.50/bbl in the US, while the international Brent price is just under US$96.50/bbl and also little-changed. A week ago these prices were US$83.50 and US$88/bbl respectively. The Kiwi dollar is little-changed from Saturday at just on 58.8 USc but down -30 bps from a week ago. Against the Aussie we are still at 81.6 AUc. Against the euro we are down -10 bps at 50.6 euro cents. That all means our TWI-5 starts today at just over 62.1, unchanged from Saturday, down -50 bps for the week. The bitcoin price starts today at US$79,745 up +0.2% from Saturday at this time, but up +2.7% from last week at this time. Volatility over the past 24 hours has been very low at just under +/-0.4%. 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

  8. 3 Sept

    Pretending inflation is under control

    Shutterstock Track 1219389 Monetization ID TFGEPGEI0LHEIJAI 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 financial markets are in a holding pattern today. First we should note that this coming weekend will be a major long weekend holiday in the US, for Monday's Labor Day. The means US markets will likely be quieter than normal until Tuesday their time, Wednesday ours. But they will still release their August non-farm payrolls report tomorrow and that is expected to show a +56,000 jobs gain and continuing the low expansion that has been usual in 2026. Today, the US initial jobless claims data for last week was released coming in at just over +170,000 and slightly more than seasonal factors would have indicated. There are now 1.74 mln people claiming these benefits, lower than a year ago and two years ago on much tighter eligibility requirements. The widely watched ISM services PMI came in marginally better than expected and better than for July with gains in activity and new business, but falling employment metrics. Twelve industry sectors indicated growth in August, one fewer than the previous month, while five reported contraction, up one compared to July. Price pressures remain very elevated at its highest level since August 2022. The S&P Global services PMI was also out overnight showing a similar expansion even if the details were different; jobs growth hits highest since January 2025, and input costs and selling prices increases were at a slower rate. Take your pick. There was an interesting speech from Fed heavyweight Christopher Waller, someone once floated as a possible Trump pick to replace Powell. Perhaps predictably he lined up with Kevin Warsh on pulling back on forward guidance communication, although he has staked out a full need to communicate of most other aspects of Fed thinking. This speech shows he isn't in the camp worried about current inflation risks because he thinks the peak pressure has passed. That tone took some sting out of the US Treasury bond yields today. The US also released its broader trade result for July, covering both goods and services. This confirmed the trade deficit spike we saw in the earlier merchandise-only data. In this case their services surplus was weak, so had a minimal impact on the large and growing goods deficit. Both exports and imports of services fell, notably for travel and financial services. Overall this deficit is now its largest in sixteen months when the pre-tariff stockpiling was at its peak. Canada also reported trade data for July, and while they still have a surplus, it was much narrower that expected. Exports fell while imports rose. It was their first export decline in six months. The Japanese yen has climbed to the ¥155:USD level, its highest since early August as traders priced in the chance of faster Bank of Japan interest rate hikes. The Bank of Japan next meets in two weeks from today. In China, their private services PMI by S&P Global (RatingDog) came in positive and certainly better than the contracting official version. The rise was soft but better than market forecasts. The increase was from better domestic demand, while foreign sales rose for the fourth straight month, but at a more modest pace than in July. The EU said producer prices there rose more sharply in July than June, but only by what they had in May - although that was a fast pace, and well above what they were expecting. For the whole EU, they were up +5.6% from a year ago and largely driven by the +12.5% rise in fuel costs. They were expecting only a +4.6% rise in overall PPI increases. Of special worry however will be that these costs rose at a very fast +1.4% in July from June. In Australia, they advised that their exports fell in July from June by -3.3% and their imports fell by -2.5%, giving them a reduced merchandise trade surplus of AU$1.9 bln. A year ago, that surplus was +AU$6.2 bln. Global container freight rates were unchanged from last week, and are now +110% higher than year ago levels. Global bulk cargo rates are +8.5% higher than week ago levels, in fact now their highest since May 2022. That puts them up +68% from a year ago. The UST 10yr yield is now just on 4.77%, down -3 bps from yesterday at this time. The price of gold is now at US$4486/oz, and up +US$114 from yesterday at this time. Silver has risen +US$2 to just on US$67/oz. Meanwhile the Dutch central bank has confirmed it has moved it gold holdings out of the US "to improve tradability", but likely also to prevent the Trump Administration from using them as a bargaining chip. Oil prices are -50 USc lower at just on US$91/bbl in the US, while the international Brent price is just over US$95/bbl and down -US$1. The Kiwi dollar is up +40 bps from yesterday at just on 58.9 USc. Against the Aussie we are up +20 bps at 81.7 AUc. Against the euro we are up +10 bps at 50.6 euro cents. That all means our TWI-5 starts today at just on 62.2, up +30 bps from yesterday. The bitcoin price starts today at US$81,011 and up +4.7% from yesterday at this time. Volatility over the past 24 hours has been moderate at just on +/-2.8%. 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 on Monday. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

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We follow the economic events and trends that affect New Zealand.

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  • Creator
    Interest.co.nz / Podcasts NZ, David Chaston, Gareth Vaughan, interest.co.nz
  • Years Active
    2019 - 2026
  • Episodes
    613
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    Clean
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    © 2019-2026 Interest.co.nz
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    Economy Watch

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