Here's our summary of key economic events over the weekend that affect New Zealand, with news US President Trump is "making progress" is bending independent agencies (BLS, the US Fed) to respond to what is best for him, rather than the US economy.
But the week ahead will all be focused locally on Wednesday's Household Labour Force survey results for July. Our jobless rate is expected to rise to 5.3% from 5.1% in June (and May). That would make it its highest since 2016 and exceeding anything we had in the pandemic period.
Elsewhere the week will feature a raft of PMI and factory order releases. Plus, China will release key trade and inflation data.
But the big economic driver for the week will be market reactions to Trump's tariff-war moves and his drive to bend both the Fed and the economic data agencies in the US to show loyalty to him and avoid any negative reports. On Friday they sensed all this isn't good for the US economy and turned sharply risk averse even though corporate earnings reports have stayed positive.
And that was because of Trump's response to official data he didn't like. He moved to fire the head of the data agency who reported it.
Then a voting Fed official resigned, giving him a chance to twist more independence out of this crucial institution.
The release of the July US labour market report showed the headline jobs gain was only +73,000 when +110,000 was expected. But worse, the June data was revised sharply lower to just +14,000 from the original +147,000. Their jobless rate edged higher to 4.2%. The number of people unemployed for at least 27 weeks has topped 1.8 mln now, the highest since the pandemic. Wage growth for the low-paid was unusually weak. This is a huge miss and there were sharp financial market reactions.
Those are the seasonally adjusted numbers. The actual numbers are much worse, down -1,066,000 in July from June. To be fair much of that actual shrinkage is seasonal, but at 159.3 mln people employed, that is lower than in November 2024 when Trump won office.
But with this July stumble in their labour market, it will be no surprise to know that the ISM factory PMI shows the same sharp retreat. In June this PMI was contracting with a 49.0 index level. It was expected to improve to a smaller contraction of 49.5. (An index level of 50 is the fulcrum between expansion and contraction.) But it went the other way, deepening its contraction to 48.0. Driving the retreat were new orders and order backlogs contracting, along with input costs increasing and exports falling. Overall, this is reporting their factory sector is contracting faster. (The internationally benchmarked S&P Global/Markit factory PMI version also reported a sharp drop info contraction in July, also largely on stagnating new order levels.)
In China, like the official China factory PMIs had signaled, the independent Caixin PMI also signaled that their factory sector went backwards in July too. The Caixin survey isn't as negative as the official survey, but it now shows the overall sector in contraction. The Caixin survey tends to account better for mid-sized private manufacturers whereas the official survey includes the very large state-owned enterprises.
China recognises the need to do more to stimulate internal consumption, and they are now committed to using subsidies as a key tool. Essentially they are subsidising trade-in prices to generate sales of new items. The target is to raise this subsidy level to ¥300 bln in 2025. On Friday they announced another ¥69 bln in ultra-long special treasury bonds will be issued for this purpose, the fourth tranche in the program.
Another policy action announced on Friday involves their war on "involution", which they take to mean excessive or irresponsible competition involving a general race to the bottom. It was a feature of their housing crisis, and is a big worry for their car manufacturing industry. Top-down pressure to rein in this sort of behaviour is intense now. In fact, BYD is now indicating their production levels will be lower in future.
However in Japan, Toyota has told suppliers that it aims to boost 2025 global production to about 10 million vehicles, underpinned by strong sales of hybrids despite concerns over the impact of American tariffs. (In the US, carmaker Ford is noting that tariffs are not helping them.)
In Singapore, the latest PMI readings painted a mixed manufacturing outlook with the electronics sector in continued expansion whereas the overall manufacturing sector reverted to a marginal contraction. Declining new order levels caused the shift.
In India, the growth of factory orders and production strengthened in July, driving their factory PMI up to an impressive 59.1, although that was a touch less than the result expected. Indian factories are easily the star of the show on a global basis.
The EU released its July inflation data on Friday, and there were no surprises there with inflation stable at 2.0% in the Euro area. The overall level is still being restrained by falls in energy costs.
Australian producer prices rose 3.4% over the past year to June, down from a 3.7% rate in the year to March, and down from a 4.8% rate in the year to June 2024. Cost pressures are still high, but they are easing, even if slowly.
The UST 10yr yield is now at 4.22%, up +1 bp from Saturday, down -18 bps for the week. The key 2-10 yield curve is little-changed at +52 bps. Their 1-5 curve is now less inverted, now by -10 bps. And their 3 mth-10yr curve is holding at -15 bps. The Australian 10 year bond yield starts today also at 4.32% and up +10 bps from Saturday. The China 10 year bond rate is still at 1.71%. The NZ Government 10 year bond rate starts today at just under 4.56% and unchanged from Saturday, but down -8 bps from a week ago.
The price of gold will start today at US$3,362/oz, up +US$14 from Saturday.
American oil prices have slipped back again, now just over US$67/bbl with the international Brent price holding at US$69.50/bbl. A week ago these prices were US$65 and US$68.50/bbl. OPEC has agreed a big increase in oil production. And we should probably note another fall in North American oil rigs in action, now down to their lowest level since September 2021.
The Kiwi dollar is at 59.2 USc and up +20 bps from Saturday but down nearly -1c from a week ago. Over all of July the fall was -180 bps. Against the Aussie we are unchanged at 91.5 AUc. Against the euro we are down -40 bps at 51.1 euro cents. That all means our TWI-5 starts today at just on 67.1, unchanged from Saturday, down -60 bps for the week.
The bitcoin price started today at US$114,109 and up +0.8% from this time Saturday, but down -2.0% from a week ago. Volatility over the past 24 hours has been low at just under +/-1%.
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8 Comments
A friend, who is politically right leaning, at least in liberal old NZ, went to both the US and Canada last month on a month-long road trip for the first time in a decade. She came back saying Canadans were lovely, while the US vibe was insular and "grumpy". A lot of people seem to have bought into "the world owes the US" idea and bring it up in conversation - her words.
I've lived in America and the people I got to know were super nice and welcoming, and curious about other countries. Hopefully this was just a small sample size.
Don't bank on it.
My experience of America is that the news, all of it in most places is internal, not external. The vast majority of Americans have utterly no understanding of America's place in the world, and they really do believe what the media brings them. The old America is gone. They're finding new targets to blame for the mess they live in, and Trump is feeding it to them through all his sycophants.
My view is that this is eerily like Germany of the 1930's, except in the 30's the west did impose restrictions on Germany that denied them development. In this case today, America did it to themselves and they're blaming everyone else for it. I do wonder what they teach of higher level history there. Insular ignorance seems rampant, which would explain the level of conspiracy belief.
Read All Gore's 'The Assault on Reason'.
The problem is that the narrative peddled and championed by many - that economic growth is good and can be permanent (just listen to Corin Dann this am for a classic example of indoctrination) - is a lie. A falsehood. Worse, the ramifications of continuing to pursue it, for both humans and the rest of the biosphere, is potentially catastrophic.
The US is (chronologically, not cranially) ahead of us in the need to fudge truth with lie, and as such are further down the social-disintegration ladder.
The difference between the 1930s and now, is there are 6 billion more people, and half the crustal resources of the planet have been used up.
Could it be that economic growth forever and life itself is in the same 'thought basket'?
I mean we don't live our life as if its a temporary blip and will be extinguished at any moment...i.e we ignore or, carry on regardless and accept there is nothing we can do about the inevitability of it all.
I'm not going down your rabbit hole, but here's a divergent idea from what Al Gore suggests; Will those reasonable, intelligent thinking people who can see the BS and call it for what it is in the US going to be labelled 'enemies of the state'? It is a question I often ponder when I see a video of say Jeffery Sachs calling out the BS.
Trump just sacked a Federal staffer who gave him employment figures he didn't like. Is political America going to become some nightmarish version of Wonderland where honesty, frankness and telling the truth will get you sacked or worse?
We're not yet a year into this presidency. What will the rest of this term look like? Trump decries war, but I do wonder whether in his incompetence he will start the next global one?
In the meantime he wants, and his sycophants are promoting it for him, at least one Nobel Prize, but they don't have one for idiocy in politics.
The fed staffer should be sacked because even in Bidens term it was also overstating the employment numbers. If you had a job in the private sector you would be fired for being so far out.
The problem is systemic....and by design
John Gray on Trump's America
Trump in the wilderness: Having led his supporters into the looking-glass world of conspiracy, the US president finds he is trapped inside it.
https://www.newstatesman.com/world/americas/north-america/2025/07/trump…
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