Here's our summary of key economic events overnight that affect New Zealand, with news we are ending the week with Wall Street not finding much to like about future trade prospects, especially as policy shifts seem to be highly chaotic and involve personal retributions.
US initial jobless claims rose last week to +195,000 when seasonal factors indicated it would fall. There are now just over 2 mln people claiming these benefits. This time last year there was just over 1.9 mln, a rise of +99,000.
American consumer inflation expectations for the year ahead rose to 3.1% in July from 3% in June. This was held back only because of the widespread perception that petrol prices would fall. The median year-ahead expected change in food prices remained unchanged at 5.5%. Looking further ahead inflation expectations in five years rose to 2.9% from 2.6%.
Meanwhile Q2 American labour productivity improved in data released today. It rose by 2.4% in the quarter following a revised -1.8% drop in the prior period. Analysts expected a +2% increase. Output increased by 3.7% (vs -0.6% in Q1) and hours worked increased by 1.3% (vs 1.2%).
The US agricultural sector used to be a powerhouse export driver. But no more. Data released yesterday shows it has turned into a net importer, a trend that started in 2018 in the first Trump presidency. The first half of 2025 has now recorded its largest deficit on record, mainly on stuttering exports.
Meanwhile, American consumer credit rose in June but only modestly. Total consumer credit rose by just +US$7.4 bln in the month, up from a +US$5.1 bln in May. These are minor changes and don't indicate any impending credit stress.
Across the Atlantic in a tighter than expected vote, the Bank of England cut its policy rate by -25 bps to 4.0%. They have inflation running at 3.6% with a target of 2%. Five of the nine voting members voted for the cut, four wanted no-change. This was much closer than the 7:2 vote expected.
In China, they are not only subsidising trade-in programs to help juice their domestic economy, now they are subsidising interest rates on personal loans. Consumer credit has not been traditionally popular in China, but young people are signing up much more freely. It is a sector that may grow to hold financial stability risks.
Standard & Poors have affirmed China's sovereign credit rating at A+ Stable. China's government gets a AAA rating from its own domestic ratings agencies, but Beijing was pleased anyway with the S&P result.
Container freight rates fell -3% last week from the week before to be -58% lower than year-ago levels, although to be fair those were an unusual peak. Outbound from China was again the main weakness although outbound from the US is now showing up as a weakening trade too - and that starts with very low rates anyway. Bulk cargo rates were essentially unchanged over the past week and are now +18% higher than a year ago.
The UST 10yr yield is now at 4.25%, up +3 bps from yesterday. The key 2-10 yield curve is still at +51 bps. Their 1-5 curve is still at -14 bps. And their 3 mth-10yr curve is holding at -11 bps. The Australian 10 year bond yield starts today at 4.25% and down -1 bp from yesterday. The China 10 year bond rate is softer at 1.70%. The NZ Government 10 year bond rate starts today at just over 4.44% and down -3 bps.
Wall Street is soft today, down -0.4% from yesterday on the S&P500. Overnight, European markets were mixed with London down -0.7% but Frankfurt and Paris up more than +1%. Tokyo ended its Thursday session up another +0.6%. Hong Kong was up +0.7%, Shanghai was up +0.2% and Singapore was also up +0.7%. The ASX200 closed its Thursday session down -0.1%. But the NZX50 ended up +0.1%.
The price of gold will start today at US$3,391/oz, up US$17 from yesterday.
American oil prices have slipped back again, down another -US$1 to just on US$64/bbl with the international Brent price down at just over US$66.50/bbl.
The Kiwi dollar is at 59.5 USc and up +10 bps from yesterday. Against the Aussie we are up +20 bps at 91.5 AUc. Against the euro we are up +10 bps at 51.1 euro cents. That all means our TWI-5 starts today at just on 67.3, up +20 bps.
The bitcoin price started today at US$116,442 and up +0.8% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/-1.1%.
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30 Comments
I commented a couple of weeks ago that orders for US grains were drying up. Canada is picking up the business hand over fist. Canada's grain prices are near recent highs, while offers for the US's are reported as being below the cost to produce. And US farmers are subsidised! Trump's economic acumen is coming back to roost. It's amazing what the genius can achieve in such a short time! So far Trump has been exceptionally good for Canada's agrisector.
Oh and perhaps the NACT coalition should pay attention. One of the reasons the Europeans are not buying US grains apparently is Canada has rigorously blocked GM plants. Canada is big on organics apparently.
Have you got that the right way around murray? I thought the Europeans would prefer Canada.
Thanks should be not will fix now.
Gold pushing US$3500
ERoad yesterday up 26%
Will be interesting market watching today
Watching everything eventually culminate is going to be a great watch.
Why did Eroad double late May early July? Long before any announcements.
Because those in the know bought up shares of course. That's the way politics work, perk of the job.
They have been talking about moving to RUCs for a long time, even Labour were talking about it.
They did make some management changes and announced some new contracts too. After the original CE left a few years ago it crashed, but was trading lower than fair value
Encouraging folk to borrow is never going to be healthy. Especially the younger generations if that is actually now a CCP policy. Some may recall a time when banks here would solicit similarly. We once got a letter advising that with our equity in the house now, why not increase the mortgage, have yourself a holiday or upgrade the car. Likewise unrequested increases to credit card limits that were advised. The consequences of such aimless borrowing are still overhanging NZ from the borrow to spend to save the economy promoted during the pandemic.
One way of controlling the population. A form of slavery? Are the banks in china private or publicly owned (local or state government)? Not that it really matters.
But if you've bought into the mantra from your leaders and borrowed to the hilt, then you live in fear of them foreclosing on the debt. Control by any means.
Sort of reminiscent of those novels Victorian times and earlier, the villainous buying up of the debt and promissory notes of an individual so as to have the power to potentially ruin them.
Should roads be fully user pays once we have RUCs?
Currently 50% of local roads are paid for by rates, and with National's RONs spend up, about 50% of state highways are paid by general tax. If we had electronic RUCs that knew whether you were on a local road or state highway, then the money could automatically go to the responsible authority, and that authority could set the rate to be enough to cover the full cost. Building new roads would directly increase the RUC cost, so there would be more scrutiny on what gets built.
We wouldn't expect to subsidise anything else to this extent, it would create all sorts of issues with excessive demand etc. Imagine if the government subsidised food by 50%! Where are the ACT party, they should be all over this shouldn't they?
30% of Auckland Council rates bill is for transport, not sure about other councils.
Cyclists are also road users...
Lets bill by weight. So effectively 0 for cyclists and trucking costs through the roof. Chur
& motorcyclists...they'll be looking forward to reduced petrol tax, haven't seen anything about RUCs for them?
It's the cost of construction, modifications (eg cycle lanes, signals) as well as maintenance
Cycle lanes are only needed because of cars, right? I could safely ride a cycle as a kid 40 years ago when families only had one car each and didn't park it on the road.
And people weren't super paranoid of death lurking at every intersection.
We also used to walk the streets as children. Then a couple kids got abducted in the 80s and we went full on stranger danger, kids must be driven to school, etc.
Basically we let any negative possibility, no matter how remote, dictate our physical movement.
Unfortunately the feature of danger on the streets has developed well beyond such as school children. But in that regard for instance nearb to where we lived in the USA there would be, coming and going, a parent or adult at every school bus stop. It is unhappily for any parent or relative a consideration of consequences. That is what they are if I’m there with our child as opposed to what might happen if I’m not. Can only agree it s a sad indictment on our society today.
I wouldn't be surprised if the per km cost of cycling on our roads is greater than a cars. With no ability to claw back any revenue from the users.
Only because of the situation we have created where we have to create new space for cycles due to the existing shared space being too dangerous.
Lets bill by weight. So effectively 0 for cyclists and trucking costs through the roof. Chur
Then the trucking company would charge you more to deliver your bicycle.
We want cyclists to use roads instead of their cars, so charging cyclists would be extremely dumb.
Who is "We..."?
I don't think the regional road network would survive that model.
i don't think it's that simple Jimbo. Roads are essentially the skeleton on which the economy runs. Transport is so intrinsic to the economy at every level that just presenting an argument that the user should pay, down plays the complexity too much. A big part of this picture which is not being acknowledged and discussed to any significant degree is the effect of the costs on those users. I would argue that the government should create a plan to fully fund roading infrastructure through deficit funding. This would require a significant project to look forward at transport needs for the next 20 50 and 100 years for the economy, what ever shape it takes, to function efficiently and effectively. on top of that a comprehensive understanding of how money works today. Taxing low end users is harmful to the economy while insufficient tax on high end users (trucking companies) is an effective subsidy and discourages efficient use of transportation networks and infrastructure (rail, coastal shipping, aviation).
None of the current discussion looks like that to me.
I disagree, the user should pay. Why should a parcel that you want delivered today be subsidised by the rate payer? Why should you be able to make a subsidised trip across town to Bunnings to get your drill bit when you could have got it from the local Hammer Hardware for the same total cost without the subsidy? Subsidies create all sorts of problems.
Food is essential to the economy, without it we'd be dead. The guys who drives the truck that delivered your parcel needed food as well as a road, so shouldn't food be subsidised too?
You're taking an extremist perspective. The transport infrastructure supports communications, jobs, and trade as well as social needs. In a successful economy that delivers what society needs there is less crime, less need for prisons, less social welfare requirements and in general terms a happier population. High quality roading infrastructure is the base on which that can happen. The benefits belong to everyone, why should that not be centrally funded?
If you're concerned about someone not paying RUCs, how about a different taxation model where the Government doesn't have to tax to spend, but has a tax structure to manage the amount of money in the economy, to support the creation and development of business and jobs? In all that roading is fully funded and properly maintained because the government can prioritise the economic needs of society to ensure they're funded.
Nice thinking.
Another point made about this tax switch - is that no longer will petrol tax be collected on pleasure crafts and other non-road uses of petrol. So there is a "gap" there to be filled by the alternate RUC tax. With everything I've read about it - I think our tax contribution to roading will almost double. And here in TGA we've got a number of toll roads - I wonder if the kms travelled on those will be RUC-free? I doubt it - so any toll road charge is a double tax whammy.
the Bank of England cut its policy rate by -25 bps to 4.0%. They have inflation running at 3.6%
And that's a perfect example of Central Banks cutting rates despite inflatiron being above target. That's why I have been insisting for over a year that the OCR will drop by more than just about everyone is expecting!
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