Here's our summary of key economic events overnight that affect New Zealand, with news the financial world is waiting for Fed boss Powell's Jackson Hole scene setting speech.
In the meantime, US initial jobless claims held steady last week from the prior week at +195,000. But in fact seasonal factors should have produced a good fall. So seasonally adjusted, they are reporting an unexpected rise. The number of people on these benefits held at 1.97 mln when they usually retreat at this time of year. Analysts are flagging concerns about the lack of progress. A year ago they fell to 1.86 mln, so they are +110,000 higher now than then.
US existing home sales rose, and by more than expected in July and only the second month-on-month gain of 2025. They ran at the rate of 4 mln per year, the best level since February. However, the stock of unsold homes swelled (to 19 weeks of supply), and the latest sales came with the average selling price dropping, now at US$422,400.
More generally, around their overnight earnings release, the Walmart CEO noted that tariff-tax price pressure is driving up prices on a weekly basis now. However, they reckon they will get a net benefit as shoppers turn to them from others forced into even higher increases.
And the Conference Board's index of leading indicators fell in July, extending its 2025 retreat and at a faster pace in the past six months than the prior six months. Keeping the pressure on this index are the retreats in new orders, and weak consumer sentiment.
The Philly Fed's factory survey certainly shows the new order problem which turned negative in August. And firms report that inflation is embedding at higher levels for their input costs. There is a sense that this heartland manufacturing region is starting to go backwards again. Those in this survey 'expect growth' in the future, but they have been signaling that for all of 2025 and if that aspect turns, things will possibly feel a bit grim there.
But the early August S&P Global/Markit PMIs for the US are not downbeat. On the factory side, they report a good recovery from July. On the services side a slip from a still-expanding base. They also report faster input inflation as they paid the tariff-taxes.
The Canadians also reported rising input costs in their PPI release overnight.
Japanese business is on the rise. Business activity across Japan's private sector expanded at the fastest rate since February midway through the third quarter, according to the August PMI survey data. The upturn was supported by a fresh increase in factory production alongside a further solid rise in activity at service providers. Total new business also expanded at the quickest rate in six months, though this was driven solely by the service sector. New export business fell at a steeper rate, however.
In China, it is becoming clearer that officials are increasingly worried about strained finances at central and local government agencies, and that both firms and employees are suffering from delayed payments. Apparently, the pressures are severe, warranting President's Xi's attention. Special bond issues are underway to juice up the necessary funding.
In Europe, the flash PMI reports indicate an improving situation for both manufacturers, and in the service sector. New orders increased for first time in 15 months in August. The factory PMI rose to expansion and its best in more than three years. Its services sector expanded faster, although like everything in Europe the benchmarks are not high compared to the rest of the world.
Overall EU consumer sentiment held at modest levels in August, although to be direct, they are still substantially negative and remain lower than their long-run average.
In Australia, the S&P Global/Markit August PMIs are quite upbeat. They said Australia's business activity growth accelerated midway through the third quarter, with faster expansions across both the manufacturing and service sectors. This was supported by higher new work inflows, including a renewed expansion in exports. In turn, Australian private sector firms raised their staffing levels at a faster rate to cope with additional workloads. Business sentiment also improved slightly from July.
Australian consumer inflation expectations fell to 3.9% in August from 4.7% in July, easing for the second straight month and marking the lowest level since March.
And energy regulator AEMO says more wind, solar and storage capacity was added over the past year to the electricity grid in Queensland, NSW and Victoria than in any year before. The risk of blackouts and service disruptions is fading, they say.
Globally, container shipping freight rates fell -4% last week from the prior week to be -60% lower than year-ago levels, although year-ago there was extensive stress from tensions in the Red Sea. All the weakness currently is in outbound cargoes from China. Bulk cargo freight rates fell -5% over the past week, but they are still +10% higher than year-ago levels.
The UST 10yr yield is now at 4.33%, up +4 bps from yesterday at this time. The key 2-10 yield curve is still at +53 bps. Their 1-5 curve is still inverted by -10 bps. But their 3 mth-10yr curve is now inverted only by -1 bp. The Australian 10 year bond yield starts today at 4.32% and up +4 bps bps from yesterday. The China 10 year bond rate is down -2 bps at 1.77%. The NZ Government 10 year bond rate starts today at just under 4.39% and down another -3 bps.
Wall Street has eased again today with the S&P500 down -0.3% in Thursday trade. Overnight, European markets were mixed again between London's small +0.2% gain and Paris's -0.4% retreat. Tokyo ended its Thursday session down -0.6%. Hong Kong was down -0.2% while Shanghai was up a tiny +0.1%. Singapore was up +0.3%. The ASX200 rose a good +1.1%, while the NZX50 also had a good day, up +0.9% in Thursday trade.
The price of gold will start today at US$3,337/oz, down -US$10 from yesterday.
American oil prices have risen +US$1 to just under US$63.50/bbl with the international Brent price up +US$1 to just over US$67.50/bbl.
The Kiwi dollar is at just on 58.2 USc and down -10 bps from yesterday. Against the Aussie we have held at 90.6 AUc. Against the euro we are up +10 bps at 50.1 euro cents. That all means our TWI-5 starts today at just on 66.2, and up +10 bps helped by a gain against the yen.
The bitcoin price starts today at US$114,270 and essentially unchanged from this time yesterday. Volatility over the past 24 hours has been modest at just under +/-1.1%.
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46 Comments
Walmart here makes an interesting analysis. Consider consumer spending as if a triangle. At the bottom layers, basic commodity necessities. At the top, high end, luxury nice to haves. When the going gets tough the ratio soon evidences consumption moving, more or less en masse, from the top layers to the bottom.
I believe Louis Vuitton aren't looking too flash. Around half of their revenue comes from low to middle class consumers.
Which sorta highlights how nuts consumerism is.
Japan is a low wage society and young women save up for the stuff. Mind you, other costs are much lower there.
I'm not sure about that Foxy, the very rich (top of the triangle) are generally unaffected by tougher times, they have too much reserves. As a local example a very expensive house in my street was listed recently, and it sold within a few weeks (it will go for $ 8 figures!).
Might be true for the very rich, but most premium products are aimed at the upper middle class, and those products will be hurting.
Even the very rich are probably downgrading their evening champers.
What do you base that on? In Ibiza in July there were >100 private jets parked on the apron, the ratio of PJ to commercial arrivals/departures was 3 to 1 on my count. Many were trans atlantic capable as well, NZ$100m+
We went to places with NZ$15k minimum spend tables and they were packed. There has never been such wealth in our history - finance, tech, property, energy & commodities... So don't kid yourself, the rich are doing better than ever.
Maybe the NZ$15k minimum spend tables were more packed a few years earlier. Maybe there were more private jets a few year earlier.
I'm not saying the rich have gone broke by any means, but they have probably cut back, and that will still hurt some busineses. I wonder if the high end shops in Queen Street or the high end restaurants are doing better today than there were before the recession?
Do rich people go into the Auckland CBD to spend money?
It is pretty crazy the amount of big money out there. At the moment most of the construction work I'm doing or pricing is for monied people/entities with cash, more than would be normal. Presumably they have all seen the lull in general residential construction and are taking advantage of the availability.
The high interest rates have just affected the aspirationally wealthy who need the debt to live beyond their station.
"It is pretty crazy the amount of big money out there" - I don't doubt that. But I do feel like the level of craziness was higher a few years back. Could be wrong.
It could even be the number of people with extreme wealth has diminished. That must have happened in NZ with house prices dropping.
I'm inclined to think they've stayed static or increased, just look at the values of various assets over the last 12-24 months.
The argument we like to have on interest about house prices is really only about the moderately wealthy and middle class at best.
I know of a guy who had ~100 south Auckland rentals. His equity may have gone from say $50 million to almost nothing within 5 years (I don't know, but that is possible).
Surely a good percentage of NZs wealthiest own a significant amount of property. Maybe that has been offset by the other gains.
"I don't know, but that is possible"
Sorry but that's nothing more than a wild assumption, anything is "possible", it doesn't mean it's worth consideration. How about we focus on facts, rather than "I don't know, but that is possible"
I don’t know him well enough to know his financial situation, I don’t even know if he owns that property still. But it’s more than possible that there are many people that were very rich from property 5 years ago that aren't now. In fact I’d say that is almost a given.
If they owned ~100 rentals, they would have significant buffer to sell off their assets to maintain a portion of the portfolio. I doubt they accumulated all that since 2020 therefore they would still be sitting on cap gains from many.
Not necessarily. A lot of these guys buy more whenever they have enough equity to do so. Could have been sitting on 30-40% equity at peak which would have been a lot of paper wealth, and now almost none. Or maybe they were smart enough to recognise the craziness and sold the lot, who knows.
The high interest rates have just affected the aspirationally wealthy who need the debt to live beyond their station.
Public servants and their mates drive up the cost of sections, and building costs with their social engineering/net zero vanity projects, and then all of a sudden the plebs are living above their station. That is a high horse you are riding chap.
I wasn't referring to NZ (clearly), your idea of wealth is not mine. I'm referring to the 18 yo kids I saw spending $20k on bottle service, coming off $100m boats. Beers were NZ$50, cheapest bottle of wine $250, place was absolutely packed.
NZ is not wealthy, this is my point. Unless you travel, you have no idea.
I think my point remains- you wouldn’t know if they have to cut back due to recession (if they are in one). Maybe the $150 million boat was downgraded to $100 million, or dad dropped their credit card limit from $120k a month to $100k.
JJ, most stock markets are on all-time highs. Private equity exits are at enormous multiples, there is still a lot of cash chasing returns.
The wealthy are doing very well.
I'm referring to the 18 yo kids I saw spending $20k on bottle service, coming off $100m boats. Beers were NZ$50, cheapest bottle of wine $250, place was absolutely packed.
Quite ostentatious booze prices. The crypto kids set in Dubai seem to spend their money on things like luxury cars, watches, etc.
Anyway, Ibiza is dreadful in 2025 FWIU. Full of rich pr__ks and UK/Euro trash. Seems to happen over time, much like Burning Man.
I used to think that but after a few trips, I love it. The big clubs are there if you want that sort of thing, but it's very contained in a certain area and I never even saw one. It's not as ostentatious as I made it sound. There is something for everyone, weather is stunning, food is great, lots of energy.
Sure activity at the top remains but the consideration is how overall the activity averages out. Try and see it this way. If the triangle is coloured in with white at the very top and black at the bottom, and darkening shades of grey descending in between, which evidence the percentage of spending by value top to bottom, then in say Walmart’s consideration the darkness of the triangle will rise as more consumption drops down towards the bottom black. This explanation was demonstrated to me in class, many years ago by the wonderful Rufus Dawes. I am afraid that my attempt at explaining it falls well short in comparison.
We're talking about Walmart here :-). No one rich, let alone very rich, shops at Walmart.
We’re actually talking about the volume of trade at Walmart and unsurprisingly that would hardly ever include those considered to be on the upper end of wealthy. The point Walmart is making is that their thick band of middle class shoppers etc broadens when folks budgets are being squeezed and they see it as necessary to forgo on the nice to haves, drop down a notch or two. To put it crudely, men and women may switch shopping from Nordstroms to Walmart for respectively, their briefs and knickers, and who would know.
Imagine if Luxon railed against the RBNZ the way Trump does. He'd be out on his ear!
"Much has been written this year about how foreign investors – spooked by U.S. President Donald Trump's unorthodox, populist policies – were going to reduce their exposure to U.S. markets and deploy that capital elsewhere. But that is not how it is panning out.
...Zooming out a little further, net inflows in the first half of this year stood at $643 billion, on course to match the record $1.3 trillion net inflow from 2022. And in the 12 months through June, a net $1.27 trillion was poured into U.S. stocks, Treasuries, agency and corporate debt.
The end of American exceptionalism? It sure doesn't look like it."
https://www.reuters.com/markets/us/if-america-is-trouble-why-do-foreign…
Yes, the US has been written off a few times in my lifetime. I remember after Viet fxxx nam how the US economy rebuilt. But this time it’s different…😁…well maybe, the hollowing out/ offshoring, lack of trade training, populism vs sound policy, social cohesion, choose your poison. Time will tell.
For me, older but not necessarily wiser, I have moved a significant portion from exposure to the risks in the US, but of course, now face other risks. And diversification, well my bet on the US is still there, directly smaller, but if the doomsayers are correct, what rock can I hide under? None. So I wish them well.
Here’s a thought. Perhaps the worker bees / drones like you and me don’t need a fancy leader like for example those paragons at RBNZ, we just need to endure their efforts and put one foot after another, and enjoy the day.
Verity sums up how Auckland Business feels
https://www.stuff.co.nz/nz-news/360799112/were-broke-exhausted-doing-ev…
Not all, some are getting through. Its real clear that this recession will kill more business then covid killed people.... any help
crickets.
Great article. Ironically, and sadly for this person, I think we are almost through it.
Very hard to gauge where things are at when the spectrum of opinion is from "this is economic end times" to "sunny days have come again".
Read interest too long, you'd believe this was the Armageddon. But I just looked at my books and my winter trading is up 200% yoy, and my forecast is telling me I need to take on 2-3 more people. And springs not even here.
Then again none of what I do is related to things like retail or hospo.
Publicly reported earnings are improving, so are share prices. Markets are usually the first to move in a recovery.
That's my whole analysis. A bit of employment confidence and things should start to move.
Interest rate cuts will eventually work. Main threat is if inflation comes back and they have to raise again.
I think just the fact they stopped going up marked a bit of a turning point. Just based on the tenders I see coming through.
One needs to be able to filter the opinions Pa1nter, and balance them against the wider data. Most people in discussions tend to be extremists to get noticed, but it can still be fairly grey, but seeing as you've been following the news, and the opinions for more than a while I'd suggest you also trust your gut.
My view is that were are bouncing around the limits to growth, and that needs to be adapted to. Denial is rampant, but the powers will work to ensure the sky doesn't fall catastrophically. Decide where your thresholds are and act accordingly. FOMO is as dangerous as denial.
My view is that were are bouncing around the limits to growth, and that needs to be adapted to
I think in relation to this country (and many others), they reached a point of development and affluence quite some time back, but acceptance is hard to come by.
Unless there's some sort of genuine technological breakthrough, like limitless energy, or some sort of cheap item replicating technology, it'll likely stay that way.
Very likely you're right I'd think.
My on the ground anecdote is still on the way down.
Locally long standing hospitality in liquidation - they were busy... huh?. Another doing less turnover in their seasonally busy times than they were doing in their quiet times. Construction professionals commenting in social circles about how little work they have. Colleagues at work talking about how they are personally headed towards some stress. Hours cut back for family members and young people not being able to find work.
I'm pretty insulated... but last week I had a bit of an "oh sh×t" I think it's got some more momentum yet moment....
Hopefully I'm wrong. I can't help but feel theres a few tough years ahead. Feeling are useless... or a subconscious amalgamation of data and experience popping up....
Yup, too much money being vacuumed up in mortgage payments, associated with the over-priced houses we've been selling back and forth to each other, such that there's no money left for all the other non-bank, non-RE-related businesses out there.
How much easier would life be if our petrol prices were the same as Australia? How many more of us would eat better, be able to afford a night out?
Bishop said currently, petrol drivers pay a tax of about 70 cents per litre. However, the AA says that the full cost of fuel excise, duties and taxes such as GST altogether was over $1.20 per litre as of mid-2024.
If you are a multi car family with teenagers still at school or live rural where no buses.... this is a lot of tax...
This is my point.
Australia has no GST on food staples and petrol prices ~40% lower than here. Whatsmore, they have CGT on investment properties and we don't. This gives working class families some breathing space.
And we wonder why young families emigrate to Australia. We hate our working class and young, your mad if you stay.
Except every working class Australian complains about the same core things as the average Kiwi. If the tax difference made a significant difference, you'd expect to see it.
Oops, I just posted that below before seeing your link. Yes, it is certainly on point.
"A man believes he has 'cracked the code' to getting his local council to fill in potholes - painting them with a St George’s Crosses."
https://uk.news.yahoo.com/man-cracks-code-getting-potholes-082215111.ht…
So what's been found, by those peering deeply into Jacksons Hole?
Special kaolin mud deposits or natural gas?
Or something more monetaristly interesting, from deeply within the bowels of the Powell?
A really good opinion piece from Stuff today;
https://www.stuff.co.nz/nz-news/360799112/were-broke-exhausted-doing-ev…
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