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. 2d ago

    Investors brace for AI debt reckoning

    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 long bond yields are falling fast today on worries about long-term growth prospects, while short term yields are holding with a much smaller pullback, kept up on expectations the Fed will hike in its battle against inflation. A bull flattening is underway. a signal that will worry bond traders even as they see the face value of their bonds rise. Investors would rather hold US Treasuries than be exposed to AI debt in what they see as an AI debt reckoning coming soon. US initial new jobless claims were little-changed last week, at +190,600, an increase from the prior week but all explained by seasonal factors. There are now 1.47 mln people on these benefits, down -11% from the prior year at this time as sharp qualification restrictions push people off this support. But US inflation in their factories is leaping. Producer price inflation ran at a high +5.6% in August and was expected to ease to +5.3% in September. But in fact it came in at +6.3% in September in something of a shock. Everyone noticed, and expectations for a firm Fed response on October 29 have risen. Not doing so would be a signal that they aren't serious about tackling inflation. And that inflationary urge helps explain why US retail sales rose +6.3% in September from a year ago - most of the increase is goods inflation. And that is bolstered by the tariff taxes they are now paying at the border. This seems slam-dunk evidence Americans are paying Trumps tariffs, not the world's exporters. The correlation between retail sales, tariffs and inflation is just too obvious. And tariffs insulate American factories from facing global competition, giving them a false sense of prosperity - and enabling them to raise prices. The latest Philly Fed factory survey remained quite positive despite an easing in October. A key feature is the sharp rises in prices received, built on the excuse of rising prices paid. Meanwhile the New York Empire State factory survey also sees activity increasing protected by very elevated cost and price pressures due to the insulation from global pressures. The logical result will be uncompetitive industries in export markets. But that has yet to dawn on their policy-makers. US crude oil stocks fell again last week and by more than expected, down -1% in a week. However, their very low Strategic Petroleum Reserves were unchanged having fallen -31% from a year ago and at just 283 mln barrels it is down to just 17 weeks of use at the current rate. Indian exports in September maintained the level they have been at since April, but that does mean ther are up +22% from year-ago levels. Unfortunately for them, their imports rose much faster that in August, although these are only up +9% from year-ago levels. Together, they reported a larger trade deficit. In China, not only do they have serious over-capacity in their manufacturing sector, they also have it in their domestic aviation market. Now their government is moving to cull competitors so that those that remain can be viable and stop posting large losses. Singapore's haze is turning dangerously unhealthy. There are a lot of angry people at Indonesia in Singapore and Malaysia at present. EU industrial production fell in August from a year ago and by more than expected. But it is still in the higher range from two years ago. There was a very big surprise in the Australian labour markets data released today for September. You will recall they added +29,300 jobs in August and were expected to add another +20,000 in September. In fact, jobs contracted there by -39,300. It was distorted by the even sharper fall in part-time jobs, down -73,700 and saved somewhat by a +34,400 gain in full-time jobs. The number of unemployed people only rose marginally and their jobless rates was unchanged at 4.7% although that remains at a five year high. As unexpected as this labour market data was, analysts still expect the RBA to hike again on November 3 because inflation is the larger worry. Global container freight rates rose again last week to be +166% higher than year-ago levels, driven by demand from China to the US and to some extent to the EU and the end of year holiday trade builds. But bulk freight rates tumbled -11% over the past week, to now be just +33% higher than year-ago levels The UST 10yr yield fell sharply again, down -10 bps to 5.08% in an extended defensive reaction. The price of gold is at US$4147/oz and up +US$67 from yesterday. Silver is up +US$1.50 at just under US$57/oz. Oil prices have risen another +US$2 from yesterday to just under US$98/bbl in the US, while the international Brent price is down  -50 USc at US$106/bbl.  A big release of strategic reserves is about to happen, but this isn't trimming prices. The Kiwi dollar is back up +40 bps from yesterday, back to just on 56.1 USc. Against the Aussie we are up +110 bps at 81.2 AUc. Against the euro we are down -10 bps at just on 50 euro cents. That all means our TWI-5 starts today at just on 60 and up +40 bps from yesterday. The bitcoin price starts today at US$81,997and essentially unchanged from yesterday at this time. Volatility over the past 24 hours has been modest at just under +/-1.7%. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston and we’ll do this again on Monday. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  2. 3d ago

    Markets reverse in risk-off shift

    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 of a developing spiral of higher energy costs and higher money costs. Wall Street is recoiling at the prospects. The NZD is collateral damage. US mortgage applications fell again last week from the week before with both new lending and refinance activity retreating equally. That extends the declines to eight of the past nine weeks and it now at its lowest level since early 2025. The benchmark 30 year mortgage interest rates is little-changed at 7.5% but still very high and now just off its late 2023 brief peak. Prior to that you have to go back 25 years to find a rate this high. Also higher than expected was the September US CPI inflation rate. You may recall it came in at 3.4% in August, and analysts had expected it to come in at 3.6% as the fuel cost increases bit. But it actually came in at 3.7%, its highest since May's unusual +4.2% spike, and prior to that in early 2023 and off the pandemic splurge. Yes, it was largely driven by fuel costs, but electricity prices were up +4.4% and rents up +3.2%. Many other costs were flat or lower however. Bond yields rose on the news and a Fed rate hike on October 29 is more likely now. The October Fed Beige Book was released today, describing an economy just chugging along. Since last month, two of the twelve Federal Reserve Districts reported moderate growth in economic activity. Three Districts reported modest growth, while four reported slight growth, and three reported no significant change. It is clear that any expansion they have is from the AI buildout, but elsewhere it is absent. Some 76 million Americans receiving Social Security benefits will see their monthly ​payments rise +3.6% in 2027, accelerating from the prior ‌year's +2.8% increase for a second straight year. Announcing this just before the November elections will lock in an even worse fiscal result in the new year. Across the Pacific, China also released September CPI data overnight and it was expected to rise to +1.0% there from +0.8% in August. But in fact it came in at +0.9%. Their fuel costs were up +14.9%, their food costs fell -0.9%. Within that, beef prices rose +7.5% and lamb prices +6.4%. Dairy products fell -1.5%. Things were not so tame for Chinese producer prices where were up +5.0% in September from a year ago, +1.2% from August. They also booked a very strong export performance for September, up +36.3% from a year ago, their best non-February month ever and generating a +US$133.5 bln monthly trade surplus, easily a new record high apart from January 2025 and that rush to avoid impending US tariffs. Cars and electronics are driving the boom. Exports to ASEAN nations have been strong. To the US, exports climbed +39.6%. Trump's containment adventure is a failure - Americans are just paying his tariffs while buying record volumes. Tariffs certainly are not hurting the Chinese, just as most analysts knew. Tariffs are a tax on yourself. And for the first time in a while, China saw new bank lending rise more than expected, up just over +¥1 tln from August (+NZ$290 bln). The rise was modest in their context, and less than in any September in the past ten years, but is was a recent improvement and that will encourage Beijing. Singapore and Malaysia are suffering under a severe haze emergency from Indonesia's annual illegal burning operations. This year it is the worst on record. El Nino conditions aren't helping. OPEC's monthly report released overnight reports very weak demand growth for oil, (+0.2% from a year ago) but they bravely see it recovering in 2027 to a +2.6% expansion. From this vantage point, that look 'hopeful'. The UST 10yr yield rose +2 bps to 5.24% before falling sharply to 5.18% in a short term defensive reaction. The price of gold is at US$4080/oz and down -US$74 from yesterday. Silver is down a very sharp -US$3.50 at just under US$55.50/oz. Oil prices have risen +US$1.50 from yesterday to just under US$96/bbl in the US, while the international Brent price is up +50 USc at US$106.50/bbl. The Kiwi dollar is down -40 bps from yesterday, back to just on 55.7 USc and testing its lows again. Against the Aussie we are down -30 bps at 80.1 AUc. Against the euro we are down -10 bps at just on 50.1 euro cents. That all means our TWI-5 starts today at just on 59.6 and down -30 bps from yesterday and back at its recent lows. The bitcoin price starts today at US$82,005 and down -1.7% from yesterday. Volatility over the past 24 hours has been modest at just over +/-1.5%. 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. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  3. 4d ago

    Northern winter to challenge oil prices

    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 as winter gets closer in the northern hemisphere, the energy situation is worrying the supply industry and consumers. American heating oil prices are rising again, approaching their record highs. The overnight Pulse dairy auction was a positive one with WMP and butter up more than +2% from the prior week's full auction event, and SMP continuing its rose, up +1%. Prices in NZD were up slightly more. At its meeting in Bangkok, the IMF says 2026 growth is holding up a bit better than expected mainly due to the AI buildout. But 2027 is almost definitely slow they say. The pick the 2026 advanced economy's expansion at +2.1%, and the 2027 one at 1.8%. But they see emerging economies' growth rise from +3.7% ins year to +4.4% next year, and they say neither China nor India will drive that expansion. It will be all due to a recovery in the Middle East because the assumption is that the US ar in Iran will be over then. They see Australia's expansion slowing from +1.9% this year to +1.6% in 2027. The jobless rate is expected to rise to 4.7%. In contrast they see New Zealand's expansion going from +2.0% this year to +2.6% in 2027. But our jobless rate will stay high at 5.1%. Separately, the latest update of the US labour market was positive, with slightly more jobs reported in the weekly ADP monitoring, almost +25,000. That will suppress any worries Fed voters will have about their jobs mandate and focus everything on their inflation mandate. Small businesses are finding labour harder to get, at a time their views of future prospects are souring. The September NFIB optimism index slipped again and currently sits lower than in the past three months and lower than last year, but it is still at about its two year average. US existing home sales stayed at a lowish level and slightly above the level expected. But they remain down -2.2% in September from a year ago. The realtors who release this data are clearly worried that high mortgage rates are setting the scene for a tougher period ahead. There were another Fed speaker out today. Christopher Waller noted that higher yields are doing some of the Fed's work for it, and that Trump's pressure to its independence isn't succeeding.  In Canada we should probably note that the Canadian province of Alberta will vote on October 20 on a local referendum about ceding from the country and joining the US. But support is reported to be low for the proposal. Across the Pacific, Japan's producer price index growth slowed slightly in September. They are up +6.8% year-on-year, slowing from August’s pace and the market expectation of +7.6%. In Australia, the widely watched NAB business confidence survey fell in October although business conditions were little-changed from the prior month. The drop in confidence is still well below long run averages, holding at weak levels. The latest RBA minutes release confirms they are very focused on upward inflation pressures. They see signs of tech-driven price pressures from the AI boom emerging in Australia.  On top of that the Middle East clashes have intensified, and oil prices exceed their forecasts. The increase in global neutral rate may weigh on the Australian dollar if domestic rates stay flat, they say. The AUD dipped when these minutes were released. The UST 10yr yield is down -2 bps at just on 5.22%. The price of gold is at US$4154/oz and down -US$10 from yesterday. Silver is down -US$1.50 at just under US$59/oz. Oil prices have risen +50 USc from yesterday to just over US$94.50/bbl in the US, while the international Brent price is down -50 USc at US$106/bbl. The Kiwi dollar is back up +30 bps from yesterday, back to just on 56.1 USc. Against the Aussie we are up +10 bps at 80.4 AUc. Against the euro we are also up +10 bps at just on 50.2 euro cents. That all means our TWI-5 starts today at just on 59.9 and up +20 bps from yesterday and off its recent lows. The bitcoin price starts today at US$83,393 and up +1.0% from yesterday. Volatility over the past 24 hours has been modest at just over +/-1.7%. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston and we’ll do this again tomorrow. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  4. 5d ago

    NZD falls to 2009 lows

    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 oil prices are rising again with Russia answering Trump with energy strikes on Ukraine and the Yemeni fighting raging. But first, two American economists have been awarded the Nobel Prize in economics “for microeconomic foundations of macroeconomic stabilisation”. Or, showing how well-timed fiscal and monetary policy measures can reduce the economy’s peaks and troughs, and developing ground-up models currently used by central banks and finance ministries across the world. In the US, there was another Fed voting member out overnight signaling that rate hikes are likely. She warned that an inflationary mindset is taking hold. "I generally think it’s preferable to make smaller adjustments, and to do so relatively quickly, rather than to wait and risk needing a larger course correction," she said. She said the current "stable labour market" gives them room to move. In China, they reported that less than 3 mln vehicles were sold in September, -8.5% less than in the same month in 2025. September to December is peak season for Chinese car sales so this flop will likely have tough consequences. Despite the fall, that is far more than the equivalent +1.35 mln in the US. But this fall in Chinese EV sales and the immediate prospect exports to the EU will be capped, has seen a very sharp fall in the lithium carbonate price on oversupply fears, down -19.5% over the past month, down -42% from its recent peak in Mid-May. Indian inflation rose again, now at 5.5% in September and up from 0.2% a year ago. Food makes up most of their index and that was up 7.7%, driven by the cost of onion. Inflation in rural areas was higher than in urban areas. The UST 10yr yield is little-changed at just on 5.24%. The price of gold is at US$4164/oz and down -US$30 from yesterday. Silver is down -50 USc at just under US$60.50/oz. Oil prices have risen from yesterday by +US$2.50 to just over US$94/bbl in the US, while the international Brent price is up +US$2 at US$106.50/bbl. Transiting ships in the Strait of Hormuz are under constant daily attack now. The Kiwi dollar is down -30 bps from yesterday, now at just on 55.8 USc. Against the Aussie we are down -10 bps at 80.3 AUc. Against the euro we are holding at just on 50.1 euro cents. That all means our TWI-5 starts today at just on 59.7 and down -20 bps from yesterday and a new low since 2009. The bitcoin price starts today at US$82,540 and down -1.4% 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 tomorrow. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  5. 6d ago

    Oil prices stay elevated

    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 of new Trump delusions. But first in the US, it will be a federal holiday tomorrow, Columbus Day, and many official agencies aren't working. But many businesses are treating it as a normal day, so it is sort of a long weekend for some, but not others. It is a normal day for financial markets, Wall Street will open, but there are no federal government data releases. There will be some early Q3 earnings reports coming through this week from some heavy-hitters including some big banks and big tech. There is optimism ahead of these, underpinning markets. Along the way, they will also release CPI (expect 3.6%) and PPI results (expect 5.9%) later in the week Locally, we will get migration data this week along with the September PMI (expect another expansion) and selected inflation data, and retail sales (electronic cards) data (expect another contraction). In Australia, we will be watching the September labour market data this week where a rise of +20,000 jobs is anticipated, after August's surprisingly good +40,000 gain. We will also get the NAB business sentiment report. And some will find the RBA minutes interesting. China will release export data, inflation data, new car sales results, and new lending data this week too. China's new minimum wage levels are now in place. These range from Beijing's ¥27.7/hr (NZ$7.35) down to just ¥18/hr (NZ$4.80) in some rural areas. Over the weekend, Japan said its machine tool orders hit a record high in September, underpinned by strong foreign orders, although the growth of domestic orders was strong too. This augers well for their factory sector over the next six months or so. Malaysia released some positive August data over the weekend, with manufacturing output rising +9.9% from a year ago, retail sales up +3.8% by volume, and jobs growth of +28,800 in the month - although you might have thought the strong factory activity data would have generated a better labour market expansion. The type of production they are getting in electronics isn't particularly job-heavy. In the US, the latest update of the widely-watched University of Michigan consumer sentiment index has it falling again, now down to its second lowest level ever after the record low recorded in May. (Don't forget, this is from monitoring that started in 1946.) Frustration over the cost-of-living continues to mount. Inflation expectations crept higher again. In Canada, and as expected, their jobless rate inched up to 6.5% and they recorded a loss of -68,300 jobs in September, about half of them full-time jobs. It is the second month in a row they have had a net jobs decline, and they have never had three consecutive job-loss months. But it is looking likely that could be the case when the October data is released. And that in turn might reduce any chances of a rate hike there. In Europe, China and the EU have inked a deal to cut Chinese ​exports of hybrid cars by more than half. This comes after an EU negotiator went to Beijing to try an stem their ballooning trade deficit with ‌China. China also agreed to release more rare earths supply to the EU. In Australia, the weekend real estate auction activity was unusually weak, with less than half the properties offered selling, an unusually low level for them - and now a trend after the prior weeks drop. The UST 10yr yield is down -1 bp, now just on 5.24%, unchanged from Saturday, down -4 bps from this time last week. The price of gold is at US$4194/oz and little-changed from Saturday, up +US$59 from this time last week. Silver is at just under US$61/oz, unchanged but up almost +US$2 for the week. Oil prices have held firm from Saturday to just over US$91.50/bbl in the US, while the international Brent price is holding at US$104.50/bbl. A week ago these prices were US$91.50 and US$102/bbl respectively. The US deal to buy diesel from Russia which will help them fund the war on Ukraine seems to have had no impact yet on prices in the oil market. 'Friends' at the White House will make money out of it but there is certainly no impact at the pump. (And Trump's overnight "energy ceasefire' was news to both Zelensky and Putin neither of whom seem to know anything about it, and Moscow hasn't commented. So it is probably just Trump talking to himself.) The Kiwi dollar is up +10 bps from Saturday, now at just on 56.2 USc and essentially unchanged from this time last week. Against the Aussie we are holding at 80.4 AUc. Against the euro we are still at just on 50.1 euro cents. That all means our TWI-5 starts today at just on 59.9 and unchanged from Saturday, unchanged for the week. The bitcoin price starts today at US$83,723 and up +1.3% from Saturday. Volatility over the past 24 hours has been low at just over +/-0.7%. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston and we’ll do this again tomorrow. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  6. Oct 8

    Investors reassess AI prospects

    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 that while the tech industry is driving key parts of global trade, investors are pulling back from funding the splurge. But first in the US, initial jobless claims came in at 170,300 last week, a +12,000 rise from the previous week but about what seasonal factors would have anticipated. There are now just over +1.5 mln people on these benefits, a notable fall from a year ago (1.68 mln) and largely due to changed qualification criteria. Demand at today's US Treasury 30yr bond auction was lower than at the prior event and considerably lower than the same event in August. The median yield came in at 5.57% (high 5.62%), up sharply from the 5.25% at the prior event a month ago. US wholesale inventories rose in August but at a slower pace than in July. Still, when related to sales levels, these inventories are not elevated. They are held down by stocks of computer equipment and fuel, but are elevated for 'farm products'. The Atlanta Fed's GDP Now update for the Q3-2026 result has come in at +3.5%, lower than any estimate they have made previously but still well above the 'consensus forecasts' of about +2.5%. Either way, these are good levels for the US. Meanwhile, US consumer debt rose just +1.9% in August, about half than the expected level and even less than the July level. Perhaps it is a sign of exhaustion given that spending has been rising much faster than incomes recently. Borrowing capacity may have been maxed out. As the spending habits of the American middle class is one of the key driver of the world's economy, the implications of this updated data should not be overlooked. American farm debt is also causing problems. Reuters is reporting a notable rise in US rural debt along with sharp rises in farm bankruptcies, as a shift to more costly debt sources underlies the struggles American farmers are facing. US-China trade promises sound good when they are made, but the Chinese are using the order flow to keep the pressure on the US Administration. Farmers are caught in this in an ugly way. Across the Pacific, Taiwan reported another record export result in September, at US$87 bln in the month and a +61% growth from the same month in 2025. They are really cashing in on the AI boom and robust demand for technology products. (Taiwan's exports are more than 20% of China's even though they only have 1.6% of their population.) In Australia, consumer inflation expectations rose to 5.3% in October, up from 4.9% in both August and September and reaching their highest level since June. And Australia seems to be ground zero for data-center scepticism by investors. The widely-touted and Nvidia-backed Firmus float will probably fail - and that has rippled all the way to Wall Street where the Nasdaq is down -1.6% so far today. OpenAI's revenues had a huge miss in updated filings out overnight as well. Reality in the tech sector is setting in. Up till now, valuations were based of all the aggressive promises panning out. That was never realistic. Firms like Infratil are taking a hit too. Since they bought into CDC, their share price has fallen -15%. Of course, this example is just on the edge of the whole AI world of overselling. Global container freight rates eased again this week from the prior week (-2%) but are still up +164% from year ago levels. Longer journeys avoiding the Suez and Panama canals may be a significant factor. Bulk cargo rates eased -4% last week to be +53% higher than year-ago levels. The same journey factors may be at play here too. And staying global, the World Trade Organisation has raised its forecast of global trading levels in an update out overnight. According to their latest Global Trade Outlook report, merchandise trade volume is now expected to grow by +3.9% in 2026, up from the March forecast of +1.9%, before increasing further by +4.1% in 2027. The revision reflects evidence that global supply chains adapted to disruptions in energy and fertilizer markets, while strong investment in AI-related infrastructure boosted that trade. Services trade growth is expected to remain positive, although prospects have moderated due to the impact of the Middle East conflict on transport and international travel. Services trade volume is expected to grow by +3.3% in 2026, down from +4.8% in the March forecast, before rising by +6.4% in 2027. The UST 10yr yield is rising, now just on 5.24%, down -5 bps from yesterday. The price of gold is at US$4125/oz and up +US$14 from yesterday. Silver is at just under US$59/oz and down -US$1. Oil prices have risen +US$2/bbl from yesterday to just over US$91/bbl in the US, while the international Brent price is up +US$3 to US$103.50/bbl. The Kiwi dollar is little-changed from yesterday, still at just under 56 USc. Against the Aussie we are up +10 bps at 80.5 AUc. Against the euro we are also little-changed at just on 50 euro cents. That all means our TWI-5 starts today at just on 59.8 and virtually the same as yesterday. The bitcoin price starts today at US$81,025 and down -2.4% from yesterday. Volatility over the past 24 hours has been modest at just over +/-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 on Monday. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  7. Oct 7

    Risk weighs heavier in financial markets

    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 risk appetites seem to have weakened overnight as the cost of money shows little sign its rising trajectory is ending. First in the US, their benchmark 30 year mortgage rate has risen sharply again over the past week, now at 7.49% and its highest since the brief spike in late 2023. Prior to that, it is highest since December 2000. So it will be no surprise to know that mortgage application levels fell sharply again and led down by refinance activity. Meanwhile, Americans expect inflation to rise faster and be 3.9% in one year's time. That is up from the expected 3.6% a month ago, and higher than the 3.7% rise expected by analysts. Adding pressure, households expect their earnings to rise just 2.6%. US crude oil stocks took an outsized tumble last week, down much more than expected and down by much more than the prior two weeks of gains. There has been no update of their weekly Strategic Petroleum Reserve data since September 25, but it is very likely to have fallen again. Rising however are bond yields. The latest US Treasury 10yr bond auction brought a very large jump from the prior event. It was well supported although the US Government had to pay 5.26% median yield (5.30% high) compared to 4.77% at the prior equivalent event a month ago. But the resilient support suggests investors are interested in yields at this level, and that vibe spilled over into secondary market trading and capped rises there. The US Fed released the minutes of their September 17 meetings at that showed surprising unity of the need for the rate hike they delivered. Clearly they are worried about inflation, less so about risks to jobs. Across the Pacific, China said its foreign exchange reserves fell slightly to US$3.4 tln in September, their lowest since March, all because of a strong US dollar and rising yields on their foreign bond holdings (which depress that face value of those bonds). Meanwhile their gold holdings rose almost +1% in one month, now at 77.47 mln ounces. That is up from 74.19 mln ounces at the start of the year, up from 73.95 mln oz a year ago or +4.8%. They are clearly picking up the pace of building these gold reserves. And staying in Chine, car retailers are reported to be having to offer deep discounts to move vehicles, especially luxury vehicles. Taiwanese inflation might be accelerating again. It was 2.1% in August and September's rate was expected to be similar. But it actually came in at 2.7%, far higher than anticipated. It was their highest rate in 20 months. In India, and as widely expected, their central bank raised its policy rate by +25 bps to 5.5% overnight, partly to defend the weakening rupee. They indicated that further rises may be necessary. In Germany, and after a string of declines, industrial production jumped there to be +2.3% higher in August that the same month a year earlier. That is their strongest gain since March 2023. A small gain was expected but the size of the increase wasn't. In data supplied by the New Zealand Initiative, the 2026 Fraser report of economic freedom ranks New Zealand at 4th in the world behind Hong Kong, Switzerland and Singapore. It does undermine the NZI carping on about New Zealand regulatory restrictions somewhat. Australia ranks #8, the UK #10, Japan #13. The US is #5. The Australian data was supplied by the Institute of Public Affairs, another right-wing think tank. The UST 10yr yield is rising, now just on 5.29%, up +3 bps from yesterday. The 30 year yield is at 5.6-%, up +4 bps. The price of gold is at US$4109/oz and down -US$48 from yesterday. Silver is at just under US$60/oz and down -US$1.50. Oil prices have eased another -50 USc/bbl from yesterday to just over US$89/bbl in the US, while the international Brent price is up +50 USc to US$100.50/bbl. The Kiwi dollar is down -20 bps from yesterday, now at just under 56 USc. Against the Aussie we are down -10 bps at 80.4 AUc. Against the euro we are little-changed at just on 50 euro cents. That all means our TWI-5 starts today at just under 59.8 and down -20 bps from yesterday. The bitcoin price starts today at US$83,424 and down -2.6% from yesterday. Volatility over the past 24 hours has been modest at just over +/-1.7%. You can get more news affecting the economy in New Zealand from interest.co.nz. Kia ora. I'm David Chaston and we’ll do this again tomorrow. Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI

  8. Oct 6

    Bonds back from the brink

    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 that although the Strait of Hormuz is essentially shut again, alternate flows of crude oil are starting to ramp up. And benchmark bond yields have eased back today. But first, the overnight dairy auction was a full one and prices rose +1.2% in USD terms, up +3.6% in NZD terms from the prior full event three weeks ago. SMP starred again, up +4.3% while WMP was up +1.2%. But the milk fats were all lower with butter dipping slightly, butter down -1.1%, cheddar down +3.9% and mozzarella down -3.9%. However the overall result is likely enough to confirm Fonterra's recent raising of its payout forecasts. In the US, the weekly ADP Employment pulse report recorded a 23,750 rise, continuing a trend that started in mid-August. Meanwhile the US logistics industry has issues. Their LMI rose in September to its second-highest reading in four years, behind only June’s level. It is being driven by high and rising inventory levels and inventory costs. Transport costs are surging. Supply chain pressure is not easing. We have reported US merchandise trade data for August before, but the same data is now out including services, and that has a similar negative result - a monster US$105.6 bln monthly deficit, worse than in any pandemic month, and only exceeded by the pre-tariff rush in 2025. So after the new tariff levels were introduced - the situation is worse. However, the optimism survey by RCM/TIPP is marginally better in October than for September. But it remains well below 2025 levels, and those themselves were lower than pre-pandemic levels. Investors are much more optimistic now than non-investors. Canada is reporting a wider trade surplus in August, in fact its best result since 2022. Interestingly, its surplus with the US is particularly strong. In Asia, the World Bank has updated its growth forecasts, noting that many countries in the region are getting a very sharp boost from the AI adoption investment. China seems to be excluded from that growth pulse although the eased the rate of growth decline in this latest assessment for China, seeing a +4.3% expansion in 2027, +4.2% in 2028. Indonesia, Vietnam, Malaysia and the Philippines will all do better than China, they say. And of course the World Bank ignores Taiwan at China's insistence and they will do better as well. (Not doing well are the Pacific Islands, unfortunately, lumbered with high fuel costs and without the electronics industry.) German factory orders tumbled an outsized -10.6% in August from July, but this is more about the unusual jump in the prior month. From a year ago, these order levels ae +2.7% higher. And, as with most German data, this is inflation-adjusted. In Australia, the Westpac-Melbourne Institute consumer sentiment survey for October makes grim reading too. This is how they introduced these results: :"Australian consumers remain stuck in a cost-of-living nightmare that seems to have no end in sight. At just over 80, the latest sentiment Index is amongst the forty worst reads since our monthly survey began in the early 1970s. We have had two others in this unfortunate group already this year – in April and June – with another eight recorded in 2022–23. Altogether this marks the worst period of recurring extremely weak sentiment since the disastrous recession in the early 1990s." The UST 10yr yield is easing, now just on 5.26%, down -8 bps from yesterday and off its highs. The 30 year yield is at 5.65%, down -5 bps. The price of gold is at US$4157/oz and up +US$27 from yesterday. Silver is at just under US$61.50/oz and up +50 USc today. Oil prices have eased -50 USc/bbl from yesterday to just over US$89.50/bbl in the US, while the international Brent price is down -US$1 to US$100/bbl. The Kiwi dollar is back up +30 bps from yesterday, now at just on 56.2 USc. Against the Aussie we are up +20 bps at 80.5 AUc. Against the euro we are up +10 bps at just on 50 euro cents. That all means our TWI-5 starts today at just under 60 and up +30 bps from yesterday and a 17 year low. The bitcoin price starts today at US$85,687 and up +0.5% from yesterday. 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

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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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