Here's our summary of key economic events overnight that affect New Zealand, with news the trade war mess is doing what was predicted, making losers out of everyone.
But first, the US PCE indicator slipped to 2.1% in April, down from 2.3% in March. Real disposable personal incomes were up +2.9% in the month from a year ago, real personal consumption expenditures were up +3.2% on the same basis. Savings fell.
US inventories were little-changed in April, and the level of imports dived in the month after the new tariffs became effective, the expected shift following the rush to beat those tariffs. But the -US$88.4 bln April 2025 trade deficit actually wasn't too different to the -US$99.9 bln deficit in April 2024. And that is decause April 2025 imports - after the new tariffs went into effect - were +1.8% higher than the same 2024 month. It's early days of course but the first-month effect of the tariff policy isn't for fewer imports, only more expensive ones.
The Americans are finding that their trade negotiations with China aren't going as they expected. The Chinese aren't rolling over for a lop-sided deal and Treasury Secretary Bessent described them as "a bit stalled". A central issue is that Chinese consumers are avoiding buying US goods and Trump can't understand why, accusing Beijing of 'violating' some 'agreement' he thought he had. It looks more like Americans are going to have to pay the tariff-taxes Trump is imposing on them without getting any export boost. An own goal looks more likely than ever.
Yesterday's news of the court loss on tariff legality has been stayed while the issues are worked through, presumably at the US Supreme Court.
Meanwhile, the Chicago PMI reported a very downbeat mood in May, erasing all the 2025 gains and back to its post-election lows.
The final University of Michigan consumer sentiment survey recovered its early month drop in the second half of the month, ending similar to the April level. The pause in the tariff war and the hope this would ease inflation pressures during the survey period was said to be behind the mood change. Still, this level is very pessimistic, -24% lower than year-ago levels.
Canada reported an expanding economy in Q1-2025, gaining +0.5% in the quarter to be +2.2% higher for the year. Both these indicators of economic activity are better than analysts had expected. Of course these are only of historical interest because they pre-date the tariff-war actions of the US that started in April.
India also reported Q1-2025 GDP outcomes, claiming a heady expansion of +7.4% from a year earlier, far better than the +6.7% expected and the +6.4% expansion in Q4-2024. This expansion was led by both the construction sector, and consumer spending.
In China, Beijing is spending big to counter the downward pressure on its economy. As a result, the country’s broad fiscal deficit expanded at its quickest clip since 2023 in the first four months of 2025, reaching a -¥2.7 tln (-NZ$630 bln) deficit in the period, almost 60% more than in the same period in 2024.
In South Korea, early voting started on Thursday and ended on Friday, in advance of the official vote on Tuesday in their snap presidential election. And voters rushed the early voting opportunity, with more than a quarter of eligible voters voting early. The final poll had the opposition candidate 43%:37% ahead of the ruling conservative party candidate.
In Australia, April retail sales slipped unexpectedly from March and this was despite a solid expansion in Queensland. The April levels are +3.8% ahead of the same month in 2024, after inflation a 'real' volume gain of +1.4%.
And staying in Australia, the AFR has a revealing story about how the founding shareholders of Chemist Warehouse are rushing the exits, selling their holdings very fast after the company's backdoor listing. More than AU$4.7 bln of stock holdings have been sold, more than a third of the unrestricted holdings, they report.
The UST 10yr yield is now at 4.40%, and down -3 bps from yesterday and down -11 bps from this time last week. The key 2-10 yield curve is now at +50 bps. Their 1-5 curve is still inverted by -15 bps. And their 3 mth-10yr curve positive at +12 bps. The Australian 10 year bond yield starts today at 4.28% and down -5 bps from yesterday at this time, down -11 bps for the week. The China 10 year bond rate is down -2 bps at 1.70%. The NZ Government 10 year bond rate is now at 4.57% and down -8 bps on Friday, down -10 bps for the week.
Wall Street is marginally firmer with the S&P500 up +0.1% in Friday trade. But that is up +2.4% for the week. Here is the latest update of Wall Street earnings reports. Overnight, European markets were mixed between London's +0.6% gain and Paris's -0.4% dip. Tokyo ended its Friday trade down -1.2% for a net rise of +2.0% for the week. Hong Kong also fell -1.2% on Friday to be down -0.9% for the week and Shanghai was down -0.5% on Friday for a weekly no-change. Singapore ended down -0.2%. The ASX200 was up +0.3% at the end of Friday trade for a +0.9% weekly rise while the NZX50 rose +1.1% on Friday for a -1.4% weekly loss.
The Fear & Greed index is still in the 'greed' zone, unchanged from a week ago.
The price of gold will start today at US$3,294/oz, and down -US$28 from yesterday. That makes it -US$68 lower than a week ago.
Oil prices are down -50 USc in the US at just over US$60.50/bbl and the international Brent price is down -US$1.50 at US$62.50/bbl. A week ago these prices were US$61.50 and US$65/bbl. North American rig counts fell again in an extended retreat.
The Kiwi dollar is now at 59.7 USc, a -20 bps slip from yesterday at this time, and the same slip from a week ago. Against the Aussie we are little-changed at just under 92.8 AUc. Against the euro we are also little-changed at 52.6 euro cents. That all means our TWI-5 starts today at just on 67.9 and down -10 bps from yesterday but up +10 bps from a week ago.
The bitcoin price starts today at US$104,760 and down -1.4% from yesterday. And that is down -3.8% from this time last week.Volatility over the past 24 hours has been modest at just on +/-1.3%.
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20 Comments
Starting to think the USA in one aspect, is heading to where NZ ended up under Muldoon’s prime ministership whereby he thought to ban inflation by way of price, rent and wage freezes. The tariffs are increasing American retail prices. Trump as reported 19 May, has spoken to Walmart to warn them not to raise prices. Hence my comparison.
Someone tell Chloe.
Capital gains tax receipts fall 10% as wealthy exit UK
The basic and higher rate of CGT rose to 18 per cent and 24 per cent respectively at the start of this month
https://www.thetimes.com/uk/politics/article/capital-gains-tax-receipts…
I guess Chloe knows the wealthy have been exiting the UK for a decade and for reasons more than CGT increases
https://www.standard.co.uk/news/london/london-millionaire-exodus-moscow…
https://moneyweek.com/personal-finance/tax/where-rich-relocate-to
I guess you misunderstood the Times article and/or didn't read the first sentence of your link? Particularly -"Now, these plans appear to have accelerated amid Labour’s tax-raising measures". Try harder.
Record numbers of millionaires are fleeing Britain due to higher taxes and the end of non-dom status after Labour came to power last year.
...Now, these plans appear to have accelerated amid Labour’s tax-raising measures affecting inheritance tax, private school fees, and employer national insurance contributions.
https://moneyweek.com/personal-finance/tax/where-rich-relocate-to
Canada is moving to strengthen military ties with Europe and Asia. Their next batch of fighter aircraft are likely to come from Europe. Trump bullying friends and allies is a very strange thing to do.
Only from a flawed intellectual perspective.
In Systems-speak, the dominant System will subsume all others in an attempt to continue. Even if that continuance is doomed (as is, say, economic growth on a finite planet).
The US was the dominant System, in the 'global economy'. It is trying to maintain that stance, on a half-mined planet. Against pretenders. The only way is to displace prior 'allies' (subsume subservient Systems) to attempt continuance. Yes, the move will fail (not enough remaining planet, too many skills exported, too much encroaching entropy) but it will be - is being - made anyway.
The sub-Systems - Canada, Europe - are also going to attempt continuance... but as the feed-back-loops for the US reverse, they will react. No surprise.
Could we not determine that in order to put America first, you need to place everyone else last?
Not really, you could have first, second, third....last. Plus I would have thought you would want to be perceived as first, for example, first country to buy military equipment and other things from. Being "first" is being the model, or example, that others follow.
So at no point did you pick up that "America First", or "Make America Great Again" conveys a notion that America's problems are because it'd been relinquishing greatness to others?
By a guy who's never once talked about global inclusion, setting a good example, and working towards the betterment of the planet/humanity?
There's a tendency for people to project their own inclinations on leaders with the flimsiest of evidence. They will ignore red flags. Time and again politicians will exploit this.
I wasn't as enthusiastic about Trump the second time around. There were a lot of red flags showing up during his first Presidency after about three months in.
The US has always been "America First", becoming most apparent, from a British perspective, during and after WW2. It's a shame as the US could be really great if it truly tried to be the greatest example of advanced humanity.
The Wikipedia article on Trumpism is a pretty good summary of the situation.
There's a tendency for people to project their own inclinations on leaders with the flimsiest of evidence.
Once you've had decent encounters with a prick, spotting the same personality type gets easier.
The US has always been "America First", becoming most apparent, from a British perspective, during and after WW2. It's a shame as the US could be really great if it truly tried to be the greatest example of advanced humanity.
They were more "America First" before the war. Relatively isolationist, trade barriers, and not too concerned about looming war in Europe.
Learning from the post WW1 experience, where a Germany burdened with war reparations evolved into Nazism, they took a different path with post WW2 Japan and Germany. Helped them develop, and secured the oceans to allow for free and open global trade on the basis countries that trade, grow prosperous and are less likely to start throwing rocks at one another. The US benefitted greatly from this plan, as did everyone else.
Fast forward, and via a lack of prudent governance over the past few decades, America is now in a tight spot. Rather than look inwards, they have elected a President that's very pointy finger, it is everyone else's fault but ours. Europe's negligent on its defence. China is an unfair operator. Countries that America buys more from than it sells to, apparently are robbing the US blind.
Trump is a no compromise person, wanting to win 100% of the time, and ideally to someone else's detriment. Anyone that's done well near him, has only done so via accident, or an ability to stroke his ego. He is incapable of seeing that the best, lasting outcomes are as a result of cohesion.
Nicola Willis and Co were banging on about the recent dairy exports windfall yesterday; how it's going to underpin economic growth etc.
But in reality, how much do farming boom times really flow through to main st?
Yes it did back in the heyday post WWII but I think it's much less so nowadays. Most dairy booms follow a period of debt accural by farmers negotiating the tough times. The windfalls tend to go into repaying debt along with maybe a new tractor or Hilux.
Anyone got any data on the flow through of farming profits to the real economy?
It definitely has an impact on rural towns, and our trade balance.... all that USD needs to buy NZD pushing it up and technically reducing inflation on the import side.
Probably one of the few times GDP has relevance. So much of our economy is dependant on non producing services that even a big shift in income receipts will move total GDP very little, except perhaps in the regions as itguy noted.
I agree. The old NZ saying, "when the farmers are doing well, everyone's doing well" is long gone. Some, particularly opportunistic politicians, still like to pedal it though.
Japanese stocks just saw a weekly outflow of almost $12 Billion, the largest in history.
https://www.investing.com/news/stock-market-news/bofa-flags-biggest-equ…
In the same article it states, "Europe extended its streak to a seventh consecutive week of equity inflows". It's hard to know how significant this all is. The large Japanese outflow in one week may be the largest ever but by how much? Were there similar outflows in the past just not quite as high?
This is a good analysis of the situation in Ukraine
Yeah that analysis is exactly why USA should pour the weapons in to Ukraine now. Lets hope Europe manages to ramp up production quickly. Germany seems to finally get it now and are doing just that.
The Military Show is a bit of a biased propaganda machine. I try to take what they say with a pinch of salt.
But it also rings semi-true. The channel Covert Cabal has over the past year or two provides detailed analysis of the state of Russian stockpiles using satellite images. Most of Russias storage yards are empty, or what remains are rusting hulks.
Anders Puck Nielson is another good channel for breaking things down
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