Breakfast briefing: Focus turns to the US Fed

Economy / news

US services surveys vary widely but markets prefer the optimistic one; no tariff deals yet; Canada faces recession; Singapore & Australia elections assessed; UST 10yr at 4.34%; gold rises sharply and oil stays down; NZ$1 = 59.6 USc; TWI-5 = 67.9

6th May 25, 7:19am by David Chaston

Here's our summary of key economic events overnight that affect New Zealand, with news all eyes are now turning to the US Fed and the results of their meeting about to start.

But first up in the US, the widely-watched ISM services PMI for April came in better than expected with a modest expansion, off a nine month low in March. New orders drove the result as did higher inventories. Employment contracted again. Activity was little-changed but still expanding. However price pressures jumped to their highest since February 2023.

This contrasts with the globally-benchmarked S&P Global/Markit version which reported its slowest growth for 17 months amid subdued demand and a slump in business confidence and rising costs. Financial markets are preferring to look at the ISM one, however.

All eyes now turn to Thursday's (NZT) US Federal Reserve board meeting where most observers think they will hold policy unchanged to see how the price impact of tariffs works out.

There was a well supported UST 3yr bond auction this morning and that delivered a median yield of 3.77%, up slightly from 3.70% at the prior equivalent event a month ago.

In Washington, there are still no tariff deals. There are negotiations but it seems no-one is rolling over in the way the new US Administration assumed.

And as you will already probably know, Warren Buffett has announced his retirement as CEO at the end of this year, when he will be aged 95 years. But he will remain chairman of Berkshire Hathaway.

In Canada, things aren't good with their service sector suffering a steep contraction of activity in April.

And recession fears are putting a real downer on their real estate markets.

Across the Pacific, China is still on holiday. Singapore's April retail sales weakened from March, down a sharpish -2.8% to leave them up just 1.1% from the same month a year ago. Car sales were a significant factor in the month-on-month drop, but not all of it.

The results of the weekend's Singaporean general election are in and there was no surprise that they had engineered a dominant win for their ruling PAP party, enough to retain their two-thirds-and-more majority. They won 87 of the 98 seats 'contested' with 67% of the vote. Their courts ensured the opposition could only run weak candidates. They have a 'democracy' in name only.

Post-election in Australia, the ASX200 fell -1.0%, and their benchmark 10 year bond rose +10 bps from pre-election levels. Investors think they are facing at least six more years of a Labor-led government, three at least with a majority-Labor government.

The key trends in the Aussie election were a stark gender divide with women overwhelmingly repelled by the Liberals, immigrant votes, including Chinese votes, increasingly attracted to Labor, and the rise and rise of Teal candidates (who are social liberals, economic conservatives). The opposition Liberal Party are likely to compound their mistakes by selecting two older socially conservative men to the top leadership.

The other notable trend from the Aussie election was the near wipeout of the Greens. Even their leader is having trouble holding his seat.

Global food prices rose in April but are only back to the same level they were in 2023 and well below March 2022 levels. But the rise was largely down to rises for meat (up +4.3% from year-ago levels), and especially dairy (up +23% on the same basis).

The UST 10yr yield is now at 4.34%, unchanged from this time yesterday. The key 2-10 yield curve is now at +52 bps. Their 1-5 curve is still inverted by -7 bps. And their 3 mth-10yr curve is now not inverted, now +6 bps. The Australian 10 year bond yield starts today at 4.31% and up +4 bps from yesterday. The China 10 year bond rate is unchanged at 1.62% due to their holiday. The NZ Government 10 year bond rate is down -2 bps at 4.50%.

Wall Street is down -0.3% in Monday trade on the S&P500 to start the week. Overnight, European markets were quite mixed with London up +1.2% while Paris was down -0.5%. Yesterday Tokyo rose +1.0% in Monday trade. Hong Kong and Shanghai were closed for their May Day holidays. Singapore was up +0.2%. The ASX200 ended its Monday down -1.0% but the NZX50 rose +0.8%.

The price of gold will start today at US$3313/oz, and up +US$74 from yesterday.

Oil prices are weaker again, down -US$1 at just on US$57/bbl in the US and the international Brent price is now just under US$60/bbl. These are still four year lows, hurt by the combination of easing global demand along with rising output.

The Kiwi dollar is now at 59.6 USc, down -20 bps from yesterday at this time. Against the Aussie we are down -20 bps at 92.3 AUc. Against the euro we are little-changed at 52.3 euro cents. That all means our TWI-5 starts today just under 67.9 and up +10 bps.

The bitcoin price starts today down -1.0% from yesterday at US$94,803. Volatility over the past 24 hours has been modest at +/- 1.1%.

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39 Comments

by Foxglove. | 6th May 25, 8:13am 1746475992

The negative swing against the Green parties in both the Canadian and Australian elections is noteworthy and may be attributable to the public viewing the respective parties evidencing greater political priorities at the expense of the founding environmental causes. In other words the basics of the “Green”movement have been hijacked by individuals who are seen as too politically extreme. The NZ counterpart should take note as there have been here, displays of unsavoury and intemperate behaviour. Presently their vote is holding up in the polls but that may be largely due to dissatisfied Labour supporters.

by rastus | 6th May 25, 8:38am 1746477493

To have any chance here Labour have to distance themselves from the Greens and Maori Party.

They also need to rid themselves of the man who doesn't know what a women is.

Do it all at once I say.

by Pa1nter | 6th May 25, 8:56am 1746478579

You just created NZFirst

by rastus | 6th May 25, 9:10am 1746479456

If Lab did the above, NZF would become key.

by Pa1nter | 6th May 25, 9:54am 1746482044

They've got into bed in the past, but going forward their interests will more likely diverge; one party is firmly interested in retaining or improving entitlements to the elderly, while the other is going to come under increasing pressure to allocate more resources to the working age population.

by interesting1234 | 6th May 25, 11:37am 1746488241

Bingo. I see everyone as valuing the core sectors such as healthcare, but to beef the healthcare system back up AND maintain universal pension isn't going to be palatable to working age people given the level of tax they would need to pay to support it. I see it becoming a core election issue in the next 1-2 elections where the youth will be even further disenfranchised from having the NZ opportunities of their predecessors, as the wealth gap continues to grow and wages get further suppressed from a glum economy.

by rastus | 6th May 25, 1:24pm 1746494678

Politics and demographics closely intertwined i.e baby boomers and super. So time will resolve. But the other major factor we have and not openly discussed is the impact of immigration.

Inward immigration last 10 years 1-1.2 mill. I can't site any data but pretty good guess as to who they won't vote for.

by Pa1nter | 6th May 25, 2:23pm 1746498192

It's usually split, depending on the origin of the voter. East Asians prefer National-ACT, Polynesians lean more towards Labour, etc. The core philosophy of both parties requires more bodies though, so they'll both be appealing to migrants in one way or the other.

I'd say NZFirst is down the rankings though.

by powerdownkiwi | 6th May 25, 8:51am 1746478273

In simple terms, people are choosing to believe that they can 'improve', and that impediments to that fable are to be rejected. In a way, the Greens have done that too; away from real science into wokeism.

Tells us we will pursue consumption (of ever-more of the ever-worse remaining parts of a finite planet) faster until physics intervenes. Well, physics and biology and chemistry, combined. The result will be collapse, rather than a gentle-as-possible landing.

I was at an LG future-economic-planning jam-session last night. Long on testosterone and short on stature (if I were to describe the largely-invited crowd). They were woefully ignorant of humanity's trajectory, or limits of any kind - one trotted out the old 'we need just a bit more' that I've heard from every echelon of that type, for decades.

They brought to mind this: https://www.youtube.com/watch?v=UjCV-FayxXc

by Pa1nter | 6th May 25, 8:59am 1746478777

You went to a seminar on future economic planning and expected them to talk about economic decline?

That'd be like going down to the Rugby Club and being surprised no one was talking about feelings.

by murray86 | 6th May 25, 9:11am 1746479516

or better still Soccer!

by interesting1234 | 6th May 25, 11:38am 1746488284

Correction: Football

by murray86 | 6th May 25, 9:24am 1746480251

I've heard, although not seen it yet, Trump too is talking about needing more population. The ignorance across the world is woeful and dangerous. It was either Foxy or Pa1nter or both who identified historical exhortations towards high birth rates was about staffing armies, to both defend yourself and to invade and conquer. Without that need the old religious demands for multiplication (the fun stuff, not mathematics!) are not valid and create the problem.

Did they talk about too many people on the planet at all? Having some form of population limits?

by Pa1nter | 6th May 25, 9:36am 1746480967

It's very hard to have a rebellion without a decent population of young males.

All governments are aware of lowering global population, the rest of the century will see them all competing for a shrinking pool of migrants.

I wouldn't be surprised if countries start cloning workers, and wouldn't rule out that people are already being cloned for research purposes.

by singautim | 6th May 25, 10:23am 1746483837

Women are displacing men everywhere; from politician to newsreader to CEO so expect them to lead the revolution. At our universities women outnumber men about 3 to 2, universities still have their protests, expect them to be led by young women. Ref "Liberty Leading the People" by Eugène Delacroix.

by Pa1nter | 6th May 25, 10:36am 1746484577

If it's a violent revolution, you need lots of young testosterone.

But yeah dudes everywhere are being displaced. That higher education level leads to less coupling, and less kiddies.

by BradJ | 6th May 25, 9:40am 1746481242

Elon is the champion of reproduction. In NZ it is the Greens, breed more it is your right.

by mfd | 6th May 25, 9:48am 1746481685

Word is that $15 million one off and $100k a month is Elon's going rate for women willing to have his babies (remotely I think - I suspect a higher rate would be needed for the personal touch).

On condition of a C-section delivery because he believes this allows development of a larger brain, plus a non-disclosure agreement. Moving to his Austin compound with some of the other mothers is optional.

What a weird dude.

by kiwikidsnz | 6th May 25, 10:01am 1746482484

That scenario would take 2 weirdos (& reminds me of an old joke about haggling I can't really repeat here).

by KH | 6th May 25, 10:32am 1746484356

Is that like working from home !

by rastus | 6th May 25, 10:56am 1746485771

So basically its the same as what we do with WINZ, but privately funded.

by mfd | 6th May 25, 11:10am 1746486612

It's always more lucrative to work in the private sector, I guess.

by mfd | 6th May 25, 9:09am 1746479387

I often vote Green, and I would love the party to pay less attention to social issues and more to environmental issues. As it stands we're basically a collection of everyone past a certain threshold of 'left', whether that be socially or environmentally but it feels that the balance is a little out of whack. More time celebrating and supporting successes like the Cap and Trade scheme please, and less focus on immigration which is essentially in conflict with our environmental aims.

by Jean Valjean | 6th May 25, 11:43am 1746488619

There's feedback that people that might otherwise have voted Green voted for Labour in Australia "...because they wanted to keep Peter Dutton out of The Lodge."

I wonder if something similar was an influence in Canada.

"

But in addition to the boundary redraw, Mr Bandt said a number of people had told him during the campaign that they had previously voted for the Greens but would change their ballot to Labor this election because they wanted to keep Peter Dutton out of The Lodge.

More than a dozen Victorian voters who have previously voted Green, wrote in to the ABC's Your Say project to explain why Labor got their vote this time around — and keeping Mr Dutton out was one reason.

"

https://www.abc.net.au/news/2025-05-06/goldstein-melbourne-federal-elec…

by powerdownkiwi | 6th May 25, 10:39am 1746484786

The Green vote - and I mean the real Green, not the woke who-knows-what - never got above 10% anywhere.

I think this is a clue as to why? https://dothemath.ucsd.edu/2015/04/programmed-to-ignore/

An oldie but a thought-provoker. So they are left with intelligent strategic use of a minority vote. Not surprising, but a tad sad, given the human trajectory...

by profile | 6th May 25, 11:32am 1746487924

"You Call this Science?

Well, no. I’m not calling what I’m doing here “science.” It’s analysis, based on a couple of selective sets of survey data."

by powerdownkiwi | 6th May 25, 12:31pm 1746491503

Indeed.

A balanced, analytical mind based in the sciences, we can conclude.

So well worth perusing his site.

But you cherry-picked in the hope of denigration, didn't you?

by interesting1234 | 6th May 25, 11:41am 1746488502

They have always had all ideas and no execution. One could argue it is from lack of opportunity to do so, however that one isn't me. There's a difference between coming up with an idea, and being able to formulate a cohesive plan, taking into account the various spectrum of factors, in executing it. the previous Labour government were a key example of this.

by Ty Coch | 6th May 25, 12:02pm 1746489779

Don't they have preferential voting in Aus, so you can safely vote for a minor party knowing that it will switch to your second preference if the minor doesn't get in.

by Jean Valjean | 6th May 25, 12:47pm 1746492476

I guess the point is that these voters that would otherwise vote Green with their first preference (the most important preference) instead voted Labour first preference to "keep Peter Dutton out" ie they were voting to primarily support a Labour candidate win in their electorate rather than a Green one.

I'm assuming they dutifully put Green as their second preference.

by KH | 6th May 25, 1:59pm 1746496743

Canada results show something different. Yes the small parties were wiped downwards. The government did not change but different from Australia. Both main parties (yes BOTH) increased their share of seats.

by Jean Valjean | 6th May 25, 2:34pm 1746498844

by Kate | 6th May 25, 10:59am 1746485946

Meanwhile MAGA Pope continues to be an

https://www.youtube.com/watch?v=ggIl-dA27i8

by kiwikidsnz | 6th May 25, 12:53pm 1746492824

Cat, meet pigeons...

Government halts all current pay equity claims, makes it harder to lodge new ones | RNZ News

Van Velden told reporters at Parliament any current claims would be stopped and need to restart under the new threshold, to show "genuine" gender discrimination and make sure the comparators were right.

She gave a figure of 33 current claims that would be stopped, as the legislation was put through under urgency.

"You have librarians who've been comparing themselves to transport engineers. We have admin and clerical staff at Health New Zealand comparing themselves to mechanical engineers."

Social workers had compared themselves to air traffic controllers, she added.

"We don't believe we have that setting right."

Any comparison would now be between female employees and male employees at the same employer, or if that was not possible, then to other similar employers.

"But you cannot go fishing for discrimination across the New Zealand workforce."

by Kate | 6th May 25, 2:42pm 1746499353

Point is, under the current law the outcome of the social workers case would likely have failed - as there is nothing similar about those jobs. ATCs have less than a year of training needed but the intake is heavily restricted based on a small set of specialist cognitive abilities. And ATCs have no 'public facing' duties. My guess is they were going for a comparison of stress levels and burnout rates.

I'd have thought social workers ought more to be compared with nurses and police officers. All public facing; all stressful; all needing to attend to the public in home (community nurses anyway); responsibility to maintain high level of documentation (and appear in court for police and social workers).

To my mind it has more to do with entry level and top of the band.

Social workers: $57K-$92K per year with top of the pay scale at $109K

Police Officers: $75K-$83K per year with top of the pay scale not given.

Nurses: $68K-$84K per year (enrolled nurse) - $74K-$153K per year (registered nurse)

Looks to me like social workers are underpaid on entry into the profession and they 'cap out' at a much lower rate than nurses.

The governments idea of pay equity within a particular profession is dumb. But, so is the notion that pay equity is a male v female issue.

by Pa1nter | 6th May 25, 2:55pm 1746500145

The police and nurse comparison doesn't stack up well, Police have a much higher exposure to physical danger, and nurses are often handling hazardous waste/fluids.

Although I do agree social work is underpaid, partner is one, my income subsidizes hers. But that should be more of a priority issue than pay equity - not only does the pay suck, but there's no where near enough of them.

by rastus | 6th May 25, 3:19pm 1746501582

The Nurse and Cops comparison Kate made is flawed. A cop is trained and paid during it - i.e no job qualification required, no debt. Same by the way with firefighters (a great little number if you can get in).

Nurses are equally if not more exposed to violence with way less ability to cope. Take a swing at a cop and see how you you get dealt to. Then whilst nursing your wounds at A&E take a look at violence there. Or take accompany a Nurse doing home visits in the community.

Social workers can either have no qualifications or as a little as a certificate. Comparing them to a RN is ridiculous.

A registered Nurse is on another level to you average cop and social worker.

by kiwikidsnz | 6th May 25, 4:15pm 1746504904

I don't know anything about cops lives however my late wife was a RN & Midwife (UK trained under the old hospital system which covered everything). Over 1000 babies delivered in 4 countries, living with life & death every day.

by Kate | 6th May 25, 6:01pm 1746511285

I was using the careers.govt.nz information to make the comparisons - which suggests social workers need 4-6 years of training;

https://www.careers.govt.nz/jobs-database/health-and-community/communit…

And sadly, you are right about exposure to violence;

https://www.rnz.co.nz/news/national/559995/palmerston-north-hospital-st…