Here's our summary of key economic events overnight that affect New Zealand, with news the US budget bill has now been approved by Congress setting up a big shift in fortunes for big business at the expense of those on low incomes - and handing their future generations a substantially larger deficit headache. In fact, one so large, it will impact the global economy.
In the US, they are about to have another national public holiday, Independence Day, so there has been an early data dump there in advance.
US non-farm payrolls expanded +147,000 in June, very similar to the May expansion and better than the expected +110,000. The variance from yesterday's ADP Employment Report will raise a few questions. Average weekly earnings went down in June from May, but were up +3.4% from a year ago. In May that annual gain was +3.8% so this metric is tightening. Month on month decreases have happened before but they are relatively infrequent and usually indicate overtime earnings are drying up.
US initial jobless claims came in a 231,500 has week and similar to what was expected, taking the continuing claims level to 1.91 mln, +90,000 higher than year ago levels.
These two labour market reports probably take pressure off the Fed to cut their policy rate at their next review at the very end of this month.
US exports fell -4.0% in May whereas imports dipped a minor -0.1%. That saw their trade deficit rise from the prior month but stay considerably lower than the same month a year ago.
US services exports dipped in the month. But locally the June ISM service sector PMI improved from its tiny May decline to a small June expansion. The S&P Global/Markit services PMI told a similar story. But both noted the rising cost worries.
May American factory order levels were up sharply from April, to be +3.2% higher than year-ago levels. But aircraft orders drove the rise and without that the year-on-year gain was just +0.2% and far less than can be accounted for by inflation. Even the month-on-month gain without aircraft wasn't significant, but at least it was a gain.
And Trump's boast he will do "90 deals in 90 days" resulting from his tariff pressure looks like it will fall completely flat. The US has announced one, with Vietnam, but the Vietnamese will only say they are still working through the details. The talks on all the others are dragging on inconclusively.
In Canada, their export and import data for May was little-changed overall. But in fact that hides some pretty significant shifts. Their trade with the US fell a lot, and they now have the smallest share going to the US since 1997, twenty eight years ago. In short order, Canadians have managed to reorient their trade to others successfully.
Across the Pacific, analysts had expected the Caixin services PMI for China to maintain its small but steady expansion. But it weakened. Not a lot, and it is still expanding, but it will be disconcerting all the same. And it is now at a nine month low.
Surprising analysts who expected a +AU$5 bln monthly trade surplus, the actual Australian trade surplus for May came in at half that level, to its lowest level in five years. May exports fell faster, down -2.7% from April while May imports rose faster, up +3.8% from April. Interestingly, exports of gold are down -3.4% in May from a year ago - and that is in AU$ terms, not volume.
Container freight rates fell -5.7% last week from the prior week to be -45% lower than year ago levels. Trans-Pacific rates fell -15% as the trade war crimps these supply chains. Bulk freight rates fell -13% in the past week and are now -33% lower than year-ago levels.
The UST 10yr yield is now at 4.34%, and up +5 bps from yesterday at this time. The key 2-10 yield curve is less positive at +46 bps. Their 1-5 curve is now inverted by -15 bps. And their 3 mth-10yr curve is now +11 bps positive. The Australian 10 year bond yield starts today at 4.21% and unchanged from yesterday. The China 10 year bond rate is little-changed at 1.64%. The NZ Government 10 year bond rate starts today at 4.54%, up +4 bps.
Wall Street is firmer again today with the S&P500 up +0.8%. And a new record high. This market closed early for their holiday. Overnight European markets ended up about +0.5%. Tokyo rose a minor +0.1%. Hong Kong fell -0.6%, but Shanghai was up +0.2% in Thursday trade. Singapore rose +0.2%. The ASX200 ended its Thursday trade unchanged while the NZX50 fell -0.6%.
The price of gold will start today at US$3,326/oz, and down -US$20 from yesterday.
American oil prices are little-changed at just under US$67/bbl while the international Brent price is down -50 USc at just over US$68.50/bbl. Last week's North American rig counts took an unusually sharp dip. There is certainly no evidence yet that investors are piling in to drill more aggressively.
The Kiwi dollar is now just under 60.7 USc, down -10 bps from yesterday. Against the Aussie we are down -20 bps at 92.3 AUc. Against the euro we are unchanged at 51.6 euro cents. That all means our TWI-5 starts today at just over 68 and down -10 bps from yesterday.
The bitcoin price starts today at US$109,173 and up +0.5% from this time yesterday. Volatility over the past 24 hours has been low at just over +/-0.8%.
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18 Comments
US strategy is clear: keep oil cheap, run deficits to enrich the few, and force the rest of the world to pay tribute to US defence and tech sectors. Obviously it's abhorrent, but at least they have a plan. What's ours?
We don't have one. Our pollies are too stupid to see that they need a national resilience plan. they still think trade will be enough in an unstable geopolitical world. It's been this way since David Lange and Helen Clark screwed us. But it's not just them, many of the current crop cling to their BS still in the face of evidence to the contrary.
Don’t know that NZ has much to fall back on other than trade. Positioned way down here at the Sth East end of the line the nation made its start on culling seals and whales, flax native timber, wool etc. The introduction of reefer shipping galvanised the meat and dairy industry but that took some heavy investment by the British industrialist who took all the picking along the way. Since then some viticulture and horticulture has become significant but that is obviously trade too as too underneath it all is tourism. Anyway you look at NZ has been and remains predominantly as a mercantile nation. The biggest hurdle NZ continues to face is the dead hand weight of its bureaucracy, not only in cost but the oppressive, often slow witted over control it imposes. The dramatic restructuring, SOEs etc, of the Lange/Douglas lot failed to really address that. Similarly for instance, the so called electricity reforms of Bradford in Bolger’s government seem to have done little else than more than fivefold increase the echelons of highly paid board members, executive’s and all the usual accompanying layers of shiny arses.
Come on foxy, you're better than that. and I've discussed this before. We don't have a manufacturing industry or even an economic policy and infrastructure to support the creation of one since Prebble and Lange destroyed it by introducing the Free Market policies, and Richardson entrenched them even deeper. So today we depend on trade to import even most of our most basic needs. This was highlighted during COVID when international shipping transport virtually stopped. No oil refinery and so on.
Try this; understand how money works in today's economy and change the financial structure of the country. Remove the right to print money from the private banks. Change the taxation structure to chase excessive profits, but encourage and support R&D, support businesses to start, employ people at higher wages than the minimum wage and be located in places other than the major centres. Build a tax structure where a business will have no tax liability when profitable if it pays its staff decent wages. Allow people to earn the first $10 to $20k tax free. Regulate social housing better and limit rents to 25% of the average take home pay, but capped at a set value. Sponsor the development of local companies that build on the research coming from the Uni labs. Restrict the sale of high value assets, yes business's and land to overseas buyers.
That's just a start but none of it is impossible or even hard when you're putting our people and our country first.
I worked in manufacturing all my life, both NZ SMEs & multinationals. Far from acting to "destroy mfg", the 4th Labour govt n the 1980s reset a reasonable foundation for NZ mfg industry (& farming) to become internationally competitive without the historic endless & excessive taxpayer subsidised welfare. The fact that this initiative didn't last much beyond the millennium was primarily due to increasing globalisation of mfg sourcing, global profit shifting tax avoidance regimes (both massively enabled by the 3rd industrial revolution & broadband internet) & successive NZ govt's & banks addiction to residential property forcing both house prices & wage/salaries higher. A country of 5M does not have an adequate domestic base to develop scale mfg industries, it can only export &/or be niche.
As for Govt bureaucrats defining "excessive profits", "decent wages", telling businesses where they should locate & rent controls I suggest you refer your nation destroying policy proposals to the Greens who'll appreciate them.
Apart from what we produce naturally locally, primary production namely, NZ has to import just about all the componentry for its manufacturing, from cotton to iron so to speak. The reality, like it or not, is that economic overseas labour has stripped away the competitiveness. Hence for instance, vehicles arrive fully made up. NZ’s situation is hardly unique, for instance on that score, in Australia Holden and Falcon production disappeared ten or so years ago.
These are not 'nation destroying' ideas. it's about self sufficiency and national resilience. We can't make everything but we can do much better.
Rent controls are a part of an industry that is out of control, produces no wealth, insignificant employment and fleeces the lower half of society by a parasite class.
The 80's deregulation opened the door to exporting jobs, giving money printing authority to the private banks. Manufacturing has essentially died since then with the exception of a few pockets. The benefits of the 'free market' economic deregulation were short lived and the destructive manipulations it created were exposed.
Work out how money works in the economy and then look at what's really occurring and think about how to fix it. I've asked a lot of questions over the years on this site and else where. Challenge the existing paradigms because they've been proven not to work.
Canutism Muz, canutism. And I appreciate the wily old king was doing the exact opposite to what history maligns him for. The far isolated position protected NZ from covid initially at least, but not for the incoming tide of globalisation, which is the base argument for my earlier point, I would love to still buy that quality Lichfield shirt that lasted 10 years work instead of the flimsy disposables of today but all that type of manufacturing simply got swamped. At the end of the day NZ is but a bit player on the world stage , at the mercy of what the great industrial nations do or don’t do. The sad reality is, if the islands should sink overnight, in six months time, the rest of the world commercially at least, would hardly be noticing.
Agree.
That being the case, the disappearing act I mean, why do we participate in their game playing by their rules?
Because its the only game in town
Redcows question is a good one, but that doesn't mean we can't be more resilient. Extrapolate on the current geopolitical situation if you will and consider the possibility that the melt down continues and the world goes to war, again. What side are we likely to be on and what supplies will we be able to be sure of? COVID made that point. To the very extreme - anything coming from the northern hemisphere may be radioactive. Will we want it then?
Being less dependent does not mean being competitive, although that may well be achievable in some industries with investment in technology. Some industries demonstrate this but a focus on high quality occasionally outweighs cost of products for export.
Our size ensures we are never going to be a threat to the big nations, but it can mean we have some bargaining power because of that. It really just depends on how you see the hand we've got, and how we decide to play it.
Yes covid made that point exactly. From the 19th century NZ accepted the undeniable security blanket of Great Britain. In that capacity soldiers were sent to the Boer War. Later NZ as a nation purchased the battlecruiser HMS New Zealand (note not HMNZS) as an investment into its security in the Sth Pacific arising from a perceived Russian threat. That and the excellent and unwavering display of valour and commitment in WW1 & 2 provided political, geographical and economic balance to that relationship. Now of course the USA is more or less occupying that capacity. Again going back to HMS New Zealand the equivalent of that contract in today’s environment would be for NZ to invest into one of the forthcoming Australian nuclear subs. Not saying that it could or even should but that illustrated somewhat just how the world has changed in not much over 100 years.
consider the possibility that the melt down continues and the world goes to war, again.
We would need to rely on our own coal for electricity generation and on Australia for fuel shipments and protection of said shipments given all of our crude oil distillates come from Asia (if they can get so far as Australia as a safety proxy). We would be lucky to get any parts to NZ if planes weren't flying and ships blockaded, and our economy would be changed to human survival mode given our reliance on the rest of the world. Dire scenario of course, but food for thought.
You've been watching too much CNN. We can only dream of having living standards close to those of the USA. We won't stem our continuing long term economic decline chasing the socialist nonsense peddled by most NZ politicians these days.
"...the rock 2 miles deep is by any geologist’s reckoning as good, if not better, than in the Permian, the world’s largest and most prolific shale field. That helped drillers to push breakeven costs lower than their US rivals, according to Rystad Energy. To quicken the boom, Milei had only to tear away obstacles: He all but extinguished price caps on oil; relaxed capital controls that have especially been the bane of supermajors like Chevron Corp.; and granted energy investors legally-bulletproofed tax breaks for 30 years."
https://www.bloomberg.com/news/features/2025-07-02/argentina-shale-oil-…
The only way out of our predicament and continuing long term economic decline, is to drill baby drill and hope there is enough oil, gas, minerals to exploit to lift us back into the top 3 countries' living standards, like we were 60 years ago. Relying on primary products and tourism for our foreign income keeps the wolves at bay, and I'm very grateful for those two activities, but they alone will not improve our economic decline.
US government deficit spending is good for the global private sector - it is new money that will be created and added to the global US dollar money supply over the next decade. That will stimulate domestic and foreign production and consumption.
The biggest risk to the US economy is cuts to government spending, employment and direct transfers - this will have a contractionary impact on their domestic economy.
US Treasuries are savings not debt - government bonds are a term deposit for private sector savings - pension funds, investors etc. It is not 'debt' in the form of a bank loan. If there are US dollars to save (and there certainly will be) then the US government can issue bonds.
If needed the Federal Reserve can 'buy' unsold bonds to maintain fiscal stability. These are all well known and standard fiat currency monetary operations that have sustained nearly all modern economies since the 1930's.
The real risk is inflation but this can probably be offset by the deflationary impact of Chinas productive output.
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