Here's our summary of key economic events overnight that affect New Zealand, with news the relief rally following the US-China trade de-escalation continues, for equities at least. But worries continue about recession and inflation. Investors want higher risk premiums. And it seems China is in no hurry to resume buying from US sources.
But first up today, the overnight dairy Pulse auction delivered similar but slightly lower results for both SMP and WMP that were achieved at last week's full auction, basically confirming the recent shifts, especially the up-shift for WMP.
The April US CPI inflation rate came in at 2.3%, a touch lower than the 2.4% expected and which applied for March. That was largely due to fuel costs falling more sharply (-11.8%). The costs of food (+2.8%), rents (+4.0%) and transport (+2.5%) were all higher.
Last week's Redbook tracking of US retail sales recorded a +5.8% rise from the same week a year ago. We will likely see this fade as the tariff-induced buying eases off now.
The NFIB Small Business Optimism Index dropped in April to its lowest level since October 2024. But the retreat wasn't quite as much as was expected.
US household debt data updates were a mixed bag. Total household debt rose +$167 bln from the prior quarter to a record high of $18.2 tln in Q1-2025. Student loan balances rose to $1.63 tln with a large uptick in the rate at which balances went from current to delinquent, due to the resumption of reporting student loans on credit reports after a nearly five-year hiatus. Also, mortgage balances rose +1.5% to $12.8 tln. On the other hand, credit card balances fell by -$29 bln to under $1.2 tln and car loan balances fell by -$13 bln to $1.64 tln. Delinquency rates rose from the previous quarter, with 4.3% of outstanding debt now in some stage of delinquency.
US importers of Chinese goods still face much higher costs. The net position after the tempest and pullback is 'worse' for inflation, and negative for trade. Struggle is all ahead for global trade.
In India, CPI inflation fell to 3.2% in April, and that is its lowest rate since before the pandemic. Food prices were up only +1.8% within that. The current overall inflation rate is now well below their central bank's 4% mid-point target. If it stays there, a rate cut in India may be on the cards.
In Germany, there was a sharp bounce-back in the ZEW sentiment survey tracking in May, putting the unusual drop in April behind it. The survey indicates growing optimism for the next six months, driven by the formation of a new federal government there, progress in resolving tariff disputes, and signs of stabilising inflation. Nearly all sectors reported improved sentiment in May.
In Australia, updated data seems to indicate that Kiwis are losing the desire to visit there. That said there were 104,600 visits by Kiwis in March, -9.3% fewer than in March 2024 and almost -10% fewer than in March 2018 (a pre-pandemic equivalent). For the year to March 2025, we made 1.367 mln visits to Australia, little different (+1.4%) to the same year in 2024. It is a similar story for Aussies visiting New Zealand. In March 2025 it was -1.7% less than the same month a year earlier.
Consumer sentiment in Australia has stayed weak in March, according to a widely-watched Westpac-MI survey.
We should probably note that good weather and favourable growing conditions in almost all regions of the world has boosted wheat production - and is pushing down prices. They are now back to levels they first achieved ten years ago and are almost -60% lower than their peak in 2022. For similar reasons, corn prices are falling now too.
The UST 10yr yield is at 4.50%, up +4 bps so far today. The key 2-10 yield curve is steeper at +48 bps. Their 1-5 curve is now inverted by only -1 bp. And their 3 mth-10yr curve is more positive at +18 bps. The Australian 10 year bond yield starts today at 4.47% and unchanged from yesterday. The China 10 year bond rate is up +3 bps at 1.68%. The NZ Government 10 year bond rate is up +6 bps at 4.62%.
These rate may go higher. A Reuters poll of bond investors shows them increasingly concerned about both a global recession, and rising inflation. That is, stagflation.
But Wall Street is higher again today, up +1.0% in Tuesday trade. Overnight, European markets were up too but more modestly mostly by +0.3%. Yesterday Tokyo ended up +1.4%, Hong Kong fell -1.9% and Shanghai was up a minor +0.2%. Singapore rose just +0.1%. The ASX200 ended its Tuesday session up +0.4% but the NZX50 rose double that, up +0.9%.
The price of gold will start today at US$3243/oz, and up +US$20 from yesterday.
Oil prices are up +US$1.50 today at just over US$63.50/bbl in the US and the international Brent price is just over US$66.50/bbl.
The Kiwi dollar is now at 59.4 USc, up +90 bps from yesterday at this time. Against the Aussie we are down -50 bps at 91.7 AUc. Against the euro we are up +30 bps at 53.1 euro cents. That all means our TWI-5 starts today just under 67.9 and up a net +50 bps from this time yesterday.
The bitcoin price starts today at US$104,161 and back up +2.7% from yesterday. Volatility over the past 24 hours has remained modest at just on +/- 1.7%.
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4 Comments
Good weather and favourable growing conditions in almost all regions of the world has boosted wheat production - and is pushing down prices.
If only Israel allowed some of the many food trucks passage for delivery to the thousands of starving children in Gaza 😪
I thought with global warming, grain production would drop. Or is it just me reading things wrong
Up in some regions, down in others. It depends to some extent on whethe the temperatures have moved into an ideal range or out of that ideal range.
Plus, climate change is bringing increased rainfall, which should be good for crops - but maybe too much in some regions.
“Give us each day our daily bread.” You would think, even hope, that that plea would not be forgotten particularly given the history and the relative players of the region.
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