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. 14h ago

    Global bond selloff deepens

    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 US treasury yields are trading at multi-year highs, as stronger-than-expected economic data and elevated oil prices fuelled bets on another Fed rate hike. The 10-year yield topped 5.18%, its highest level since 2007, while 30-year reached a 2004 peak of 5.47%. The gold price is slipping. Many other asset prices face price risks too, especially commercial property and that also comes with leverage risks being exposed. So far the US-China meetings in Washington DC between Xi and Trump have been all show and no substance. In the US, there were 163,800 initial jobless claims last week, an increase from last week's unusual low but about the increase that can be accounted for by seasonal factors. That puts the continuing claims at 1.55 mln, a new 60 year low. The qualification restrictions are certainly biting hard now. Early estimates of the September US non-farm payrolls change doesn't support the idea that jobs growth is strong, and certainly not among workers who are being stripped from unemployment protections. However there was positive news of expanding recent sales of new-built homes. Even though housing starts are falling, sales of these homes rose in August, up +6.4% from July, but still -2.0% below year-ago levels. The Kansas City Fed factory survey stayed positive in September, holding the expansion level it has had since June. But price pressures intensified, the survey shows. There was a still well-supported US Treasury seven year bond auction overnight (down only -3.2%) that delivered a median yield of 5.02% (high 5.09%) and that was up sharply from the median of 4.46% at the prior equivalent event a month ago. That is near its highest in 20 years. Canada reported some positive economic data overnight. It's August retail sales were up +1.3% (real), and more than making up for the -0.7% monthly fall in July. They are up +1.9% (real) from a year ago. And its manufacturing sales were up +1.1% in August. This extends a string of good monthly gains in 2026, with only one month in the past seven showing a dip. In China, they raised their petrol prices today to ¥8.90/L, up from ¥8.60/L (NZ$2.34/L from NZ$2.26/L). In Australia, June 2026 data released yesterday by the ABS shows household wealth there has reached AU$19.4 tln, driven by superannuation, but now held back by recently falling housing values. That is average per capita wealth of AU$694,500. There are a vast number of Aussie 'super' millionaires now. Meanwhile, the August update of their labour force data shows +39,500 more jobs in the month with 14.827 mln people employed. But their jobless rate rose to 4.6% with 722,900 adults unemployed and a rise of +28,200 in a month. Hours worked and participation both rose and underemployment fell (slightly). Global container freight rates were little-changed overall over the past week. There were some falls in the China-EU trade, but a minor rise in the Chine-USWC trade. Overall prices are now +154% higher than year-ago levels and have topped out for the moment. Bulk cargo rates are +3% higher for the week but also seem topped out. From a year ago, these rates are +55% higher. The UST 10yr yield is now just on 5.18%, up another +5 bps from yesterday. The 30 year yield is at 5.47%, up +7 bps. The price of gold is at US$4264/oz, and down -US$30 from yesterday. Silver is at just over US$63.50/oz and down -US$1. Oil prices have risen +US$4 to just on US$95.50/bbl in the US, while the international Brent price is up +US$4.50 to US$107/bbl. Saudi Arabia says its pipeline repairs will be completed "within days". The Kiwi dollar is down -10 bps from yesterday, now at 56.6 USc. Against the Aussie we are up +10 bps at 80.7 AUc. Against the euro we are little-changed at just on 49.8 euro cents. That all means our TWI-5 starts today at just on 60.3 and down -10 bps. The bitcoin price starts today at US$84,103 and down a minor -0.3% from yesterday. Volatility over the past 24 hours has been modest at just over +/-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 on Monday. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  2. 1d ago

    US bond yields hit 20 year highs

    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 stronger American economic data and higher oil prices have built expectations of more rate hikes by the US Federal Reserve. The USD has jumped in response. However, US mortgage applications fell again last week but that is really no surprise because that market saw its benchmark 30 year mortgage rate jump to 7.12% and its highest since May 2024. It was refinance activity that saw the biggest pullback. Meanwhile, US business growth surged to its fastest for over five years and job gains accelerated according to the S&P Global PMI. Both their service sector and their factory sector are sharing in the gains. But at the same time price pressures are also intensifying with a sharp spike in costs. Input costs surged to their highest since October 2022; selling prices jumped too but at a lesser rate. US crude oil stocks were expected to fall again last week, but instead they rose and by much more than expected. However that didn't stop their strategic reserve holdings from falling again, staying at dangerously low levels. Nor has it curtailed retail pump prices. More generally, the world is running down its crude oil buffers - and the price signals seem to be ignoring that risk. There was a fall in support for the US Treasury 5 year bond auction overnight which delivered a 4.95% median yield (5.04% high) which was up sharply from 4.34% at the prior equivalent event a month ago. Bessent's yield management is failing to deliver and restraint. Fed governor Barr was speaking overnight and ho reiterated the view that higher rates will be needed to bring inflation back to target. Without much threat on the jobs front and their labour market mandate, markets see the Fed unconstrained in taking sharper action against inflation. He said "risks to achieving our inflation target have increased, while risks to the labor market have receded." In the US all eyes will now turn to Trump's hosting of Chinese president Xi - who incidentally is coming with no Chinese business leaders. Taiwan's August industrial production (+23.5%) and August retail sales (+6.5%) data both delivered the strong year-on-year gains we have come to expect from them. Singapore's inflation rate came in at 2.3% in August, up marginally from July but the increase expected. Indonesia's central bank reviewed its 5.75% policy rate overnight but left it unchanged. In India, their flash PMI data for September pointed to a better improvement in business conditions. Output growth was higher in both manufacturing and services companies, with goods producers leading the latest upturn. New orders also rose at a quicker pace, prompting a solid expansion in jobs. Meanwhile, inflationary pressures faded and business confidence strengthened. The flash S&P Global factory PMI in Australia saw a shift from a moderate expansion in August (52.0) to a minor contraction in September (49.3). Their services sector eased as well but is still expanding in September. On the prices front, the rate of input price inflation picked up to its highest in three months, but remained weaker than seen through the second quarter. Meanwhile, output charges rose at a strong rate that was more pronounced than in August.  The UST 10yr yield is now just on 5.13%, up +16 bp from yesterday. The 30 year yield is at 5.40%, up +11 bps. The price of gold is at US$4294/oz, and down -US$58 from yesterday. Silver is at just over US$64.50/oz and down -US$2. Oil prices have firmed +50 USc to just on US$91.50/bbl in the US, while the international Brent price is up +US$3 to US$102.50/bbl. The Kiwi dollar is down -50 bps from yesterday, now at 56.7 USc. Against the Aussie we are up +10 bps at 80.6 AUc. Against the euro we are down -20 bps at just over 49.8 euro cents. That all means our TWI-5 starts today at just on 60.4 and down -30 bps. The bitcoin price starts today at US$84,343 and down -2.4% from yesterday. Volatility over the past 24 hours has been moderate at just over +/-2.4%. 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

  3. 2d ago

    Inflation embeds

    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's pressures are building everywhere, even if oil prices took a small dip today. But first, overnight there was a Pulse dairy auction where prices dipped marginally in USD except for SMP, but were all higher in NZD, although this too was only marginal. In the US, the ADP weekly jobs data rose to an average of a +20,000 jobs gain per week over the past four weeks. That recovers it back to late June levels. Meanwhile the Richmond Fed factory survey was expected to rise marginally in September, but it fell and its first retreat in  six months. This was essentially driven by retreating new order levels and order backlogs shrank as well. Input and output costs both rose however and at a faster pace in both cases. There were a few Fed speakers out overnight. New York Fed boss Williams defended how they have been handling monetary policy, although he didn't give any guidance on what is coming next. Vice Chair Jefferson also avoided guidance comments although he has been on record recently of supporting their rate hikes. But Richmond Fed boss Barkin did address the recent rising trend and what comes next. More hikes are possible, he said. There was a giant US Treasury two year bond auction overnight and this one did not display the sagging demand of the other recent events. However, it came with much higher yields. This lates one delivered a median yield of 4.74% (high 4.79%), up notably from the 4.16% at the prior equivalent event a month ago. This is a meaningful rise given the 2 year Note has the largest supply of any maturity they offer - US$79 bln. Just for this bond, that has the US Treasury paying +14% more in interest pa than just a month ago. Debt servicing is becoming an ugly problem, and fast. Just when you might have thought Taiwanese export orders couldn't grow much faster, they did in August. They exceeded US$100 bln in the month for the first time, up a staggering +71% from a year ago (which itself was rising and close to a record at the time). In local currency, they were up +82%. After improving since April (that is, betting less negative) EU consumer sentiment hit a setback in September, one that was not expected. Winter is approaching there and with the energy supply issues unresolved there, perhaps it is understandable that concerns are rising again. In Australia, RBA governor Bullock suggested that their labour market is too tight and that is putting upward pressure on inflation. This suggests they will continue raising their benchmark rate until they see the jobless rate rise and labour-cost pressures ease. She is on a track that will create difficult politics. Not helping is the rise and rise of petrol prices, now approaching their pandemic highs again. An RBA rate rise is now almost a certainty next week, taking it to 4.6%.  The UST 10yr yield is now just on 4.97%, up +1 bp from yesterday. The price of gold is at US$4352/oz, and up a minor +US$7 from yesterday. Silver is at just over US$66.50/oz and up +50 USc. Oil prices have fallen another -US$4.50 to at just on US$91/bbl in the US, while the international Brent price is down -50 USc to US$99.50/bbl. The Kiwi dollar is unchanged from yesterday, still at 57.2 USc. Against the Aussie we are up +20 bps at 80.5 AUc. Against the euro we are up +10 bps at just over 50 euro cents. That all means our TWI-5 starts today at just over 60.7 and little-changed. The bitcoin price starts today at US$86461 and up +0.8% from yesterday. Volatility over the past 24 hours has been low at just over +/-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

  4. 3d ago

    Painful tradeoffs coming

    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 more policymakers are bracing for dealing with stagflation. But first, in the leadup to the Xi-Trump talks in Washington, there is a focus on AI and its risks. And there is some pre-celebration from both sides of how good it is going to be. We recently noted that the May Beijing version of these talks has seen the announced 200 plane order for Boeing apparently die. It also seems that the May deal to buy US grains has never materialised either. So you should be sceptical of any current claims about the Washington DC meeting outcomes. The Chicago Fed's National Activity Index dipped in August from July, suggesting US economic growth is no longer rising. In four of the last six updates, this measure has decreased. New orders are no longer rising in this data, production is contracting. So that points to increasing stagflation. Meanwhile Chicago Fed President Austan Goolsbee warned that bringing inflation back down to the 2% target may not be painless and could require pushing employment below target. "This is exactly the painful trade-off between employment and inflation that stagflationary shocks always impose on a central bank. Unfortunately, in environments like that, the only way back is the hard way." And staying in the US, California has declared a state of emergency as a strengthening El Niño raises the threat of damaging storms, widespread flooding and mudslides across the state for their upcoming autumn and winter. In Canada, their central bank boss has also been speaking, and warning that their trade difficulties with the US could cut Canadian growth in half to below +1%. It is actually oddly impressive that a dispute this large with an economic adversary as big as it gets can be navigated with any expansion. In Australia, Reserve Bank Assistant Governor Sarah Hunter was on a Nine Network podcast this morning and emphasised that the RBA is worried about inflation and fighting that threat is where their energies currently are focused. The copper price is making another push up towards its record high (reached on September 9), this time driven by growing logistics issues. The UST 10yr yield is now just on 4.96%, down -4 bps from yesterday. The price of gold is at US$4345/oz, and down -US$38 from yesterday. Silver is at just over US$66/oz and little-changed. Oil prices have fallen -US$4.50 to at just on US$95.50/bbl in the US, while the international Brent price is down -US$4 to US$100/bbl. There is a bit of hopium involved here as traders watch diplomatic efforts to end the US-Iran war and watch for signs of oil cargo movements. But they are not significant, yet anyway. The Kiwi dollar is unchanged from yesterday, still at 57.2 USc. Against the Aussie we are holding at 80.3 AUc. Against the euro we are up +10 bps at just under 49.9 euro cents. That all means our TWI-5 starts today at just under 60.7 and little-changed. The bitcoin price starts today at US$88,791 and up a sharp +5.8% from yesterday. (And we should note that it has risen back to NZ$150,000 for the first time since late January.) Volatility over the past 24 hours has been high at just over +/-3.4%. 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

  5. 4d ago

    Weaker data signals but markets stay upbeat

    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 global financial markets are little-changed at near historic highs even though economic data releases seem to be still giving weaker signals. This week will be dominated by the Fonterra annual result and dairy payout finalisation, a big dump of RBNZ lending data, and some credit card activity data. In Australia, the week will be headlined by the August jobs data release which is expected to show +20,000 jobs growth. Elsewhere, China is heading into its Mid-Autumn Festival which starts on Friday and runs through to Sunday. In Japan it will be Silver Week with markets closed there today through Wednesday. China made no changes to their Loan Prime Rates over the weekend. Ahead this week there will be many such decisions in Switzerland (no change at 0%), Sweden (no change at 1.75%), Norway (no change at 4.25%), Mexico (no change at 6.5%), and Indonesia (no change at 5.75%). And there will be a major diplomatic set piece this week with Chinese President Xi visiting the US on Friday and Saturday (NZT). Don't expect much other than photo opportunities, although with Trump there is always the capacity for something to go badly wrong during or after the meeting. In May, China agreed to buy 200 Boeing jets during Trump’s visit to Beijing but no actual deal has been done so far, so anything announced at these summits doesn't mean anything will actually happen. In the US they will release durable goods order data and most observers think they will fall in August from July. From everywhere will will be getting PMI updates. And from Taiwan we will get its export order data. All this, plus whatever happens in the Middle East wars. Over the weekend we learned that, China posted another weak foreign direct investment result for August, down -5.3% on a year-to-date basis. But the incremental flows were tiny in August. up just +US$7 bln from July and virtually unchanged from year ago levels. From two years ago there is a large drop. For all the official propaganda about how well the Chinese economy is doing, it isn't enticing investment in. A key reason these flows are so low is that sovereign wealth funds are now on the sidelines. Japan's CPI inflation rate held at +1.9% in August as it was in July, and their core inflation rate eased to 1.7%. Both results were at the bottom end of expectations, and should have taken pressure off the Bank of Japan who were meeting as this data was released. But they have other issues weighing on them including defending the yen, and facing bullying pressure from the Trump Administration. All the same, inflation this low when the global price pressure is high is an achievement, even if Japan is only one many Asian economies that are managing to replicate that result. As universally anticipated and earlier implied, the Bank of Japan delivered its +25 bps rate hike on Friday, taking its policy rate to 1.25% which is a 31 year high. They said they will "continue to raise the policy interest rate and adjust the degree of monetary accommodation, in response to developments in economic activity and prices as well as financial conditions." Meanwhile, the Bank of Japan made a 'rate check' in currency markets on Friday ahead of their holiday, after the yen fell on the rate hike, and that has strengthened sentiment for the yen, also likely underpinned by geopolitical considerations. Across the Pacific, US industrial production stalled in August from July, a disappointing result because it rose in July and was expected to rise again in August. It is now +1.4% higher than a year ago, not exactly an indicator of a booming economy although that is up from +1.1% in July. Almost all of this is due to data center buildout ("business equipment" was up +7.1%).. In fact, production of consumer goods is now falling at a -1.1% annual rate. Also disappointing was the US Conference Board leading indicator which edged lower in August when a small rise was anticipated and after a bigger rise was booked in July. In Europe, the August ECB inflation expectations survey shows them at 3.0% (median) and 5.0% (average). These levels are little-changed from the June and July survey results. Germany reported their August producer price levels overnight and that came in at +4.6%, higher than July's +3.0% and higher than the expected +4.1% rise. Of course, driving this were energy costs which were up +8.3% from a year ago, up +3.2% from July. In Australia, after testimony to a parliamentary committee yesterday in which Governor Bullock have a hawkish briefing on inflation risks, economists have suddenly realised that the a rate hike is the most likely outcome at the nest monetary policy review there on September 29. That will take their cash rate target up to 4.60%. And it may go higher if inflation isn't restrained at that level. The RBA isn't angling to save the Aussie housing market. It may well become collateral damage in the fight against rising inflation. The UST 10yr yield is now now just under 5.00%, down -1 bp from Saturday up a net +2 bps for the week. The price of gold is at US$4383/oz, and just +US$2 from Saturday, down -US$33 from a week ago. Silver is at just over US$66/oz and down -50 USc but up +US$2 from a week ago Oil prices have held at just under US$100/bbl in the US, while the international Brent price is up +50 USc at US$104/bbl. A week ago these prices were US$100.50/bbl and US$104.50/bbl respectively, so little-changed. The Kiwi dollar is unchanged from Saturday, still at 57.2 USc but down -90 bps from a week ago, down -190 bps from the start of the month. Against the Aussie we are holding at 80.3 AUc. Against the euro we are still at just on 49.8 euro cents. That all means our TWI-5 starts today at just under 60.7, unchanged at a six-week low. The bitcoin price starts today at US$81,118 and little-changed from Saturday. 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 tomorrow. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  6. Sep 17

    Financial market relief

    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 it seems yesterday's unanimous Fed decision to prioritise the inflation fight has financial markets reassured. The US Treasury yields have pulled back from their highs, although still at Tuesday's high level. One thing millions are watching is whether US mortgage rates will hit 7% again. They haven't quite yet but it is close. Not only are new home and refinance borrowers affected, the house building industry and all that it supports are anxious as well. But first in the US today, their weekly initial jobless claims fell last week and by more than expected and by more than seasonal factors would have indicated. There are now 1.58 mln people on these benefits, also a notable fall as the much tighter qualification rules start to bit hard now. US housing starts fell and to their slowest pace since 2019, with the exceptions of the sharp and unusual May dip, and the pandemic. That was matched by low building consent levels, so the easing off in this homebuilding sector will continue. The regional Philly Fed factory survey for the important Pennsylvanian rust belt region was expected to fall in September from August and it did, but not by as much as expected. New orders and shipments remained elevated, while the employment index declined but stayed positive, signaling continued job growth. Both input and output price indicators moved higher and at a faster pace. US pending home sales were down -4.7% in August from a year ago, but at least they did manager to level-peg from July. There was a US 10 year TIPS bond auction overnight which delivered a median yield of 2.58% (high 2.65%), which is a notable rise from the 2.37% at the prior equivalent event a month ago. Although not as dramatic as the -17% fall off in demand for yesterday's 20 year bond, this auction attracted lower demand as well, -12% less. And we should probably note that Chinese president Xi will be visiting the US next week and there is a frenzy of advanced negotiations underway in preparation so that both he and Trump can announce something 'substantial' and worth the visit. What will be interesting will be the moves after the event glad-handling. In Canada, their producer prices rose sharply again, up +13.5% from a year ago in August, driven of course by high fuel costs. On the same basis their diesel is up +75% and petrol up +42%. Both rose notably from July as well. Singapore's electronics sector had a boom month in August helping power the country's non-exports to a +46% gain from the same month a year earlier. That was up very sharply from a downwardly revised +24.1% rise in July and far above forecasts of +35%. It was the twelfth straight month of expansion and the strongest growth since October 1988. The US was a small customer in August than July. But every other major country was a much larger customer (other than the EU).(Meanwhile their imports rose +39% but that includes oil.) Overnight the Bank of England reviewed their policy rate and left it unchanged at 3.75. Three of their nine voters wanted a rise. That kept their no-change streak of 2026 intact. Taiwan reviewed its 2.0% policy rate, also keeping it unchanged. And later today the more important Bank of Japan review is expected to announce a +25 bps hike to 1.25%. In Australia, they released updated population data yesterday. This is a hot topic politically. Their population grew by +1.4% in the 12 months to March 2026, now 27.9 million people. That's 392,700 more than the same time in 2025. The natural increase was +100,000 and the net migration increase was +292,100 (and down from +309,500 in the previous year). The state with the biggest increase was Victoria (+109,500); the state with the fastest increase was Western Australia (+2.1%). Global container freight rates have stayed very high but are in fact little-changed from last week at this time. From a year ago they are up +135% however. Within the recent no-change, rates from China to Europe were down about -5% while rates from China to the US rose about +5%. Bulk cargo rates fell -8% in the past week, but are also historically high still and up +55% from a year ago. The UST 10yr yield is now just on 4.94%, down -7 bps from yesterday. The price of gold was at US$4360/oz, and recovering +US$111 from yesterday. Silver is at just over US$65.50/oz and up +US$2.50/oz. Oil prices have eased -50 USc to US$102/bbl in the US, while the international Brent price is little-changed at US$104.50/bbl. The Kiwi dollar is down -30 bps from yesterday, now at 57.3 USc. Against the Aussie we are down -20 bps at 80.6 AUc. Against the euro we are unchanged at just on 49.9 euro cents. That all means our TWI-5 starts today at just under 60.8, down -20 bps and still at a six-week low. The bitcoin price starts today at US$76,622 and up +1.5% from yesterday. Volatility over the past 24 hours has been modest again at just over +/-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

  7. Sep 16

    US Fed hikes, sees more tightening ahead

    Shutterstock Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Kia ora. Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand. I'm David Chaston and this is the international edition from interest.co.nz. Today we lead with news the US is raising interest rates and the Middle East war is spreading. First, as expected and in a very brief Warsh-style statement, the US Fed raised its key policy rate by +25 bps to 4.0% in a unanimous vote. It was its first rise since 2023. It did note that "inflation remains elevated" and they "will deliver price stability". However their forward looking interest rate 'projections' were raised although only to the new 4% levels. A strong majority of members thing another rate rise is possible this year. Immediately after their decision was released, Wall Street held its small pre-decision gains. The UST 10 year yield dipped slightly but has since risen back over 5%. The US dollar rose. That USD rise has been maintained but Wall Street has changed direction sharply lower and the UST 10yr has jumped back over 5%. Trump's reaction to the rate rise, and the prospect of another, has so far been conspicuous silence. He had demanded that rates be cut. US mortgage applications fell last week, essentially driven by refinance applications. They say their 30 year benchmark home loan interest rate has risen to just under 7% and its highest since January 2025. US retail sales rose in August and by more than expected, up the most month-on-month in five months following a fall in July. But the monthly +1.2% rise was essentially driven by higher fuel purchases, up +3.1% in the same period. From a year ago, these retail sales are up +5.3% of which fuel was up +20.5% at petrol stations,  US crude oil stocks took another fall last week and by more than the prior week although not as much as was expected. And their strategic reserves fall again, but only marginally this time. The New York Fed's survey of the service sector activity in the New York region shows the July and August improvements have not continued into September, with a notable backslide in the latest survey. Meanwhile the NAHB/Wells Fargo Housing Market Index of house builder sentiment has retreated to its lowest level since December 2022 with higher costs and higher interest rates getting the blame. Canadian housing starts stayed low in August, almost the same as in July and well down on the unusually high year-ago Austr level EU industrial production fell in July from June, but it is still up marginally from a year ago. The UST 10yr yield is now just on 5.01%, unchanged from yesterday and its highest since 2007. Wall Street was firmish ahead of the Fed decision today, up +0.3% in Wednesday trade on the S&P500, and up +0.8% on the Nasdaq. But then it retreated, now down -0.8% with the Nasdaq down -0.4%. The price of gold was at US$4328/oz, and up +US$34 from yesterday just after the Fed decision. But now it is at US$4249 and a -US$79 reaction. Silver ws at just over US$64/oz and up +50 USc bu has subsequently dropped to US$62.50/oz. Oil prices have eased -US$4 to US$102.50/bbl in the US, while the international Brent price is down -US$4.50 to just on US$104.50/bbl. Saudi Arabia is scrambling to fix or bypass their war-damaged key oil pipeline, one that delivers as much as 4% of global oil supplies. And for Saudi Arabia this is a major economic threat, choking their revenues in a significant way. The Kiwi dollar is little-changed from yesterday, now at 57.6 USc. Against the Aussie we are also holding at 80.8 AUc. Against the euro we are unchanged as well at just on 49.9 euro cents. That all means our TWI-5 starts today at just under 61, little-changed and still at a six-week low. The bitcoin price starts today at US$75,518 and down -1.6% from yesterday. Volatility over the past 24 hours has been modest at just over +/-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 tomorrow. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  8. Sep 14

    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

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About

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
    612
  • Rating
    Clean
  • Copyright
    © 2019-2026 Interest.co.nz
  • Show Website
    Economy Watch

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