Here's our summary of key economic events over the weekend that affect New Zealand, with news with claims of "substantial progress" and "a deal we struck" by the Americans in their Geneva talks with China, but no indications of anything from the Chinese. Bluster from the White House doesn't count for much these days.
But first in the coming week, US attention will shift to Wednesday's CPI data for April although no real surprises are anticipated. There will be April data for retail sales too, PPI data, housing starts, and the next sentiment update from the University of Michigan at the end of the week.
China will report new loan data, house price data, and updates for industrial production and retail sales. Japan will release its Q1-2025 GDP data, and both South Korea and Australia will release labour market data updates. Locally we will get travel, population, retail and productivity data, not to forget the Q1 ready mixed concrete data (!).
In Japan, household spending rose +2.1% in March from a year ago and far better than the expected +0.2% gain. It was the strongest growth since December. Helping was that the previous retreats of spending on food basically stopped, while spending on furniture and on recreation rose a good levels.
China's April CPI inflation dipped -0.1% from a year ago, holding the same easing for a second month and that was what was expected. It was the third consecutive month of consumer deflation. Within that result, food prices were up +0.3% but beef prices fell -4.9% from a year ago, lamb prices were down -3.8%. Milk prices fell -1.2%.
Deflation was more pronounced for producer prices, down -2.7% from a year ago, the steepest retreat for any month in 2025.
Staying in China, April exports came in very much better than the pullback that was expected. In fact their trade surplus was almost as strong as the unusual March trade surplus. Few were expecting this 'good' result. Here are the results by trading partner.
New Zealand exported twice what we imported from them. For Australia it was almost the same but the Aussies have a higher dependency on China than we do. For the US, they are still taking more that 10% of all Chinese exports although that is down from nearly 13% usually. But Chinese buying of American goods is now under 6% of all Chinese imports, down from the usual 16%. The Americans may have initiated the tariff war, but the Chinese have reacted far faster.
Meanwhile China said its Q1-2025 current account surplus hit a record high, more than treble what it was in the same quarter a year ago. US demand saw their merchandise trade surplus leap, while their services deficit narrowed slightly.
Across the Pacific in the US, that foreigners are avoiding travel there has been confirmed by new data that shows an historic drop in inbound travel spending. It has only been a sharper drop in the aftermath of the 9/11 attacks and the early stages of the badly-handled response to Covid. The US as a travel destination is a significant reason they have run services surpluses. The travel boycott may build over fears it is unsafe, amid numerous reports of immigration officers detaining tourists or denying entry even for transit.
And this sort of data will be influential in driving trade-related sentiment in the US.
Further the American spring real estate season is shaping up to be 'a dud'. High unsold inventories, high price expectations, and still-high mortgage rates are putting off buyers during this prime selling period.
The US barbeque season is approaching and the cost of beef is rising and rising. Tariffs are raising prices and drought is thinning local cattle supply. That means the Americans are more dependent than ever on imported beef, especially ground beef. They are price takers so are paying both the premium for the supply shortfall, plus the full imported tariffs.
Looking north, although the Canadian jobless rate rose a touch more than expected to 6.9% in April (and a 3 year high), and there was only a minor rise in overall payroll employment, there was in fact a strong rise in full-time jobs and an equally notable fall in part-time roles.
The Canadian dollar fell on the jobless rise. The overall softness however probably means the Bank of Canada will cut its 2.75% policy rate again at their next meeting on June 5 (NZT).
The UST 10yr yield is at 4.38%, unchanged from this time Saturday and up +16 bps for the week. The key 2-10 yield curve is little-changed at +49 bps. Their 1-5 curve is inverted by only -6 bps. And their 3 mth-10yr curve is slightly more positive at +9 bps. The Australian 10 year bond yield starts today at 4.29% and down -5 bps from Saturday. The China 10 year bond rate is down -1 bp at 1.63%. The NZ Government 10 year bond rate is unchanged at 4.51%. But that is up +5 bps for the week.
The price of gold will start today at US$3323/oz, and down -US$15 from Saturday.
Oil prices are holding today at just on US$61/bbl in the US and the international Brent price is still just under US$64/bbl.
The Kiwi dollar is now at 59.1 USc, down -10 bps from Saturday at this time, down -30 bps from a week ago. Against the Aussie we are unchanged at 92.2 AUc. Against the euro we are still at 52½ euro cents. That all means our TWI-5 starts today just under 67.6 and little-changed from Saturday, down -20 bps from this time last week.
The bitcoin price starts today at US$104,041 and up +0.9% from Saturday. Volatility over the past 24 hours has been modest at just under +/- 1.7%.
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8 Comments
Progress in Geneva?
Even if Trump removed the high Chinese tariff today, it'd be months before their looming inventory shortage got resolved.
Meanwhile back in the jungle European leaders, with the USA in the background, intend to force Putin himself into face to face negotiations Russia with Ukraine by way of threats of imposing greater sanctions. To date the current sanctions have neither affected nor slowed Russia much at all, for over three years of conflict. The obvious question then is, if the additional sanctions now being threatened are so potent, why then has it taken so long for them to be introduced rather than all the pussyfooting around. Guess the answer therein, is likely to be rather embarrassing.
Yes to this.
When the annoucement came through over the weekend I was left wondering what could these sanctions be and why does anyone think they will have any effect?
Added pressure for peace, at best.
Geneva?
Well, rarely...
Sanctions are ineffective if Russia is able to find suppliers for most things, which seems to be the case.
most likely the flood of Middle East oil which has knocked maybe $15 a barrel of what the Russians can sell theirs for -- combined by 3 years of slow attrition and decline is forcing Putin to the Table -- after all he has more than a war to lose -- he still needs to keep control in Mother Russia and this is not the Russia of old -- Queuing for Bread and Milk in the snow is no longer a pastime!
With the Minerals deal he knows America has real skin in teh game -- not just old missile inventory and live fire weapons testing - and this is probably the height of his negotiation powers -- With the EU also getting more engaged there is a real chance his bargaining chips will start to wane over the summer
Suffering, centuries of it, is in the Russian DNA whether under the Tsar regimes or that commenced by the Bolsheviks. But yes the world has changed rapidly and dramatically in the last fifty years or so, Russia is not isolated in that regard and the internal pressures cannot easily be dismissed. If the Americans intend to build and operate infrastructure in Ukraine then they will undoubtedly protect those investments and that presence must greatly alter the playing field. Get a sense that the next six months or so could be rather eventful.
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