Here's our summary of key economic events over the weekend that affect New Zealand, with news analysts and investors are looking at the unfolding trade-war skirmishes through different lenses.
The week ahead will be dominated for us by the 2025/26 Government Budget announcements on Thursday and before that the RBA rate decision tomorrow. Important in the background will be the bond vigilantes and their global assessments of risk premiums.
While this is going on, the May PMIs will come through for most of the major economies. A number of countries will release their April CPI data too. And we will keep a close eye on Chinese data releases later today including for retail sales, industrial production, house prices and foreign direct investment levels. And Chinese demand will have an influence on the Wednesday full dairy auction as well.
But first we should note that equity analysts are changing their tune. But it is not clear yet that investors are following them. Globally, Q1-2025 earnings have been good, with widespread results that beat forecasts. But for an increasing number of analysts, those good recent results are being dismissed because they now want to know how a company will fare in the Q2 and ahead world of trade disruption, sagging sentiment and higher costs. Stagflation offers few places to hide.
The separate views between analysts and investors is probably clearest in the world's largest economy.
Influential analysts at Moody's credit rating service are worried and have joined S&P and Fitch in a notable downgrade over the weekend of the US sovereign credit rating.
That followed news that falling American consumer sentiment is hanging over the global economy. The University of Michigan consumer sentiment index dropped sharply in May from April when analysts expected it to rise. This is the fifth consecutive monthly decline, the lowest reading since June 2022, and the second-lowest on record. Hurting was rising inflation expectations largely around the impact of the tariff taxes. Sentiment is down by a quarter in a year.
And retailing giant Walmart is only now starting to roll out tariff price increases, so the pressure on inflation will become even more apparent in the coming months
Current assessments of personal finances sank nearly -10% on the basis of weakening incomes. Tariffs cost fears were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April. Inflation expectations for the year ahead surged to 7.3%, a new all-time high from 6.5% and long-run inflation expectations edged up to 4.6% from 4.4%.
US housing starts stayed at a relatively low level and that was lower than expected. Given the impact of the tariff taxes, that won't really be any surprise. This is largely why new building consents fell further.
Meanwhile, Bloomberg is reporting that the US Fed will trim 2500 jobs or about 10% of its workforce "over the next several years".
And we should probably note that the Trump tax cut bill failed in a key US House of Representatives committee, mainly because conservative Republicans want greater spending cuts, including to Medicaid programs. (Also, the Trump SEC is now considering "revisions" to public disclosure requirements of CEO compensation.)
In Canada, their senior loan officer survey of credit conditions tightened for both home loan lending and other lending. "Price" (the expectations of higher interest rates) was a key factor. But for non-mortgage lending the impact of tariffs was prominent also.
In China, later today we get a big data dump for April activity which could be revealing on how they weathered the initial tariff-war impacts.
And they may say they are best-buddies with Russia, but Russia can't afford to buy Chinese cars and has moved to block imports. It is hard to imagine China being happy with that because it will kill a trade of over 1 mln vehicles annually.
Singapore's non-oil exports surged +12.4% in April from a year ago, far exceeding expectations of a +4.0% increase and accelerating from a +5.4% rise in March. It is the third consecutive month of export growth and the fastest pace since last July. There were sharp rises in exports of both electronics and non-electronic products.
Although slightly dated now, we can report the Eurozone's trade surplus surged to a record +€37 bln in March, up from +€23 billion a year earlier, fueled by a sharp rise in exports, particularly to the US as buyers rushed orders ahead of incoming tariffs.
The UST 10yr yield is at 4.44%, unchanged from Saturday. But it is +6 bps higher for the week. The key 2-10 yield curve is still at +45 bps. Their 1-5 curve is still inverted by -6 bps. And their 3 mth-10yr curve is at +15 bps. The Australian 10 year bond yield starts today at 4.46% and down -5 bps from Saturday. The China 10 year bond rate is down -3 bps at 1.66%. The NZ Government 10 year bond rate is holding at 4.61%. A week ago it was at 4.51% so a +10 bps rise since then.
The price of gold will start today at US$3201/oz, and up +US$14 from Saturday. But it is down -US$137 from this time last week.
Oil prices are holding today at just over US$62.50/bbl in the US and the international Brent price is still just under US$65.50/bbl. But both are up +US$1.50 from a week ago.
The Kiwi dollar is now at 58.8 USc, unchanged from Saturday at this time. Against the Aussie we are down -10 bps at 91.8 AUc. Against the euro we are unchanged at 52.7 euro cents. That all means our TWI-5 starts today still just under 67.4 but up +40 bps from a week ago.
The bitcoin price starts today at US$105,306 and up +1.3% from Saturday. Volatility over the past 24 hours has been modest at just under +/-1.4%.
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15 Comments
CBS reports Trump as telling Walmart to absorb rather than raise prices due to tariffs. Trump in thumb in the dyke mode. No more prescient place in America than the shop floor in Walmart to illustrate how things are going along for Americans.
He's also taken credit for preventing nuclear war in Kashmir, and told Tim Cook he can't make iPhones in India for US supply over the weekend.
There's an interesting interview with Steve Bannon a few years back which highlights one of the Trump regimes core strategies; flood the airwaves with as much chaff and noise as possible. While media outlets and commentators are flapping and working out where to look, you can get on with your real agenda.
TPM assisted by media are flooding the airwaves with chaff and noise as well. eg: Treaty principles.
Meanwhile the coalition are quietly getting on and undermining them. eg: NZTA is back named NZTA.
https://www.odt.co.nz/news/national/pivotal-project-cutting-greenhouse-…
CCS takes too much energy, and it is the energy we crave.
So it will NEVER 'stack up commercially'.
Put that another way: We can no longer afford ourselves. I remember a lecture back about 2007, where we learned that CCS was all artists impressions (sure indication of no real infrastructure). The takeaway was that it will never happen; that in energy terms we won't afford it.
Slow learners...
We can no longer afford ourselves.
I think we can deduce that some of the population can live like this, but not most of it. Now that much of the world kinda can, in that there's way less technology and structural disparity between the West and everyone else, there's likely a new baseline, lower than our expectations, that'll be met, at an unknown point in the future.
I think that new baseline is with a majority now. When you think about it from the Maslow hierarchy of needs - every news site reports about people's physiological needs not being met: food, shelter, heating/cooling; rest/sleep; clean/safe water for drinking.
About the only thing that seems to be affordable in this area is clothing. Aside from school uniforms (an unbelievably outrageous cost to our young families).
We are there now - just think about it... the price of eggs seems to have been a major factor in winning Trump the US election.
That's because the government isn't involved in clothing!
https://x.com/Mark_J_Perry/status/1811872736064475635/photo/1
I think that new baseline is with a majority now
I think it's probably still being buffered by a decent degree.
About the only thing that seems to be affordable in this area is clothing. Aside from school uniforms (an unbelievably outrageous cost to our young families).
Might depend on the school. When I was a kid, there was a monopoly on school uniforms where you'd only be able to get them from one source, who'd charge you $200+ in 1990 dollars for a jersey. On the weekend as I was trawling through the Warehouse, I noticed all the areas school uniforms for sale, at a cost comparable to the cheap generic clothing.
I recall my daughters first Wellington Girls College uniform set in 1989 costing around $1200. According to the RBNZ inflation calculator thats ~$4000 in today's wages - however today's clothing inflation would say its only equivalent to $1400
Weapons grade public service.
"...Nothing says “climate policy implementation” quite like a weekly 200km journey by road to Reporoa.
...As The Centrist revealed this week, the Council’s food scrap collection scheme – rolled out across 470,000 homes, whether anyone asked for it or not – achieves gross emissions reductions at the bargain price of $1,440 per tonne.
...Meanwhile, the bins are made in Australia and the liners manufactured in China – leaving a hefty global emissions trail from production to delivery. The result? A $36 million scheme that might actually increase global emissions. But at least it feels green.
All while poor families in South Auckland – many of whom can’t afford groceries to generate food waste in the first place – pay $77.20 a year to subsidise their wealthier neighbours’ righteous composting habits.
Whanganui Council has since scrapped its own version after calculating carbon savings at $1,650 per tonne. Even tree planting, at $120 per tonne, looked cheap by comparison.
Industry insiders call the programme “a knowingly inefficient model propped up by political signalling.” Or as Council calls it: policy."
https://pointofordernz.wordpress.com/2025/05/17/auckland-councils-1440-…
Said it before and say it again - any form of public service that is opinionated, self serving and unaccountable is a threat to society and democracy itself.
NZ has come to fancy itself as a progressive trailblazer. In the past, some of the changes we've made have been monumental.
Now that those have been accomplished, we've moved onto increasingly spurious endeavours. Public composting, free range underpants, that sort of thing. All of these carry a cost, born by the public, who may or may not be on board. All the while our core services lack the resources and attention to perform to a decent standard.
My view is if we can get a government that'll excel at these core services first, then we can contemplate entertaining lofty virtuism.
Sad reflection on the state of NZ, a back read of his blogs are good reading.
Down to Earth Kiwi | Economics Blog
National, Labour and Big Business NZ have begun to complain & threaten me at the highest levels about my writings. The game has become clear. Continue doing so and it will mean the end of your future in this country. DownToEarth.Kiwi has been told in no uncertain terms that for me, as principal writer, due to this commentary
Yes, I also enjoyed many of Professor MacCullochs educational commentarys.
Terrible news!
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