Here's our summary of key economic events over the weekend that affect New Zealand, with news there was an unexpected turn in the US tariff situation late last week.
In a dramatic ruling, most of Trump’s global tariffs were declared illegal by a US appeals court that found he exceeded his authority in imposing them. He will almost certainly appeal to his Supreme Court.
Then, over the weekend we got the official Chinese PMIs for August and they extended the sluggish environment their manufacturing sector finds itself in. Despite the 90 day 'extension' before punitive tariffs kick in with the US, orders contracted for a fifth consecutive month. On the services side however, they maintained their small expansion in August, albeit marginally better.
But early data suggests their housing slump is not ending, maybe even getting worse. Sale volumes in August are likely to be more than -17% lower than a year ago.
Although it is a shortened week in the US, it ends with the August jobs data. Markets expect another weak result (just +78,000). You will recall the weak data last month saw Trump fire the agency head who compiled it. So there will be special attention this time on its believability under the BLS agency's deputy. Before that we will get lead-up jobs data, and the ISM PMIs for the US.
Canada will also release labour market data. The EU inflation data, and others will release GDP data for Q2-2025, including from Australia on Wednesday.
At the end of last week, July data out in the US showed that disposable personal income was up +2.0% from a year ago, personal consumption expenditure was up +2.1% on the same basis. On a month-on-month basis, the income was up +0.4% and expenditure up +0.5%. These elements are not major but they do indicate a tightening in household financial budgets.
Nested deep within this release was that core PCE index rose +2.9% year-on-year in July, its largest rise since February and above the Fed’s target and comfort zone. Tariff costs are getting the blame. Financial markets noticed.
And that is the same sort of tightening indicated by the widely-watched University of Michigan sentiment survey. It's final August version fell back markedly from its initial readings, a clear indication households are finding it tougher. It is now -14% lower than a year ago. The Biden boom is now just a memory.
On the factory floor, the latest indicators are shifting down too. The August Chicago PMI headed south quite sharply to be -10% below year-ago levels.
And the US seems to be losing the tariff war it started - and Americans are paying the tariff-taxes. The latest trade data for July shows that the US merchandise trade deficit jumped to -US$104 billion in the month, exactly the same as July a year ago, and far above expectations of -US$90 bln deficit. It is their largest in four months. Imports jumped +7.1% from a month earlier, led by industrial supplies, capital goods, food, and consumer goods. Meanwhile, exports slipped -0.1%.
Certainly, American farmers are not happy. And they have a President who probably doesn't even know where Pakistan is, let alone most other simple facts.
In Canada, they got a sharp dose of shock in their Q2-2025 GDP result from the sharp turn on them from their southern neighbour. Their GDP fell -0.4% in the quarter and cancelling out the +0.5% gain in their first quarter. Year-on-year their GDP is still up +0.9% however.
Across the Pacific the economic data is generally much more positive. South Korea’s retail sales surged +2.5% in July from June, a big jump from a revised +0.7% increase in June and marking the fastest growth in over two years. From a year ago it is up +2.4% and that too is the most since January 2022.
South Korean industrial production grew solidly in July as well, up +5.0% from a year ago.
After a good gain in June, Japan’s industrial production fell -1.6% in July, reversing a +2.1% June gain and much more than the -1.0% decline anticipated.
Japanese retail sales only rose by +0.3% in July from a year ago, slowing sharply from a downwardly revised +1.9% gain in June and falling well short of market expectations for a +1.8% increase.
But Japanese consumer confidence actually rose in August to its best level of the year with gains across all surveyed questions.
We should also note that protests in Jakarta on Friday that turned deadly have put Indonesia on edge. They have spread over the weekend. Canberra will be watching nervously.
In Europe, the ECB's survey found that consumer inflation expectations were stable ("well anchored") in July at 2.6% for the year ahead.
Globally, air passenger demand was up +4.0% in July, driven by the Asia/Pacific +5.7% rise and held back by the North American +1.9% rise. Most of this is due to international travel. Meanwhile, air cargo traffic was even stronger in July, up +5.5% from a year ago, up +6.0% for international trade. Asia/Pacific was the strongest region here too, up +11.0% for international cargoes. But North American international cargo volumes only rose +1.5%, the weakest global region.
The UST 10yr yield is now at 4.23%, unchanged from Saturday, but down -3 bps from a week ago. The key 2-10 yield curve is still at +60 bps. Their 1-5 curve is now inverted by -16 bps. And their 3 mth-10yr curve is now inverted -10 bps. The Australian 10 year bond yield starts today at 4.30% and up +2 bps from Saturday, down -1 bp for the week. The China 10 year bond rate is up +1 bp at 1.79%. The NZ Government 10 year bond rate starts today holding at just over 4.39%, down -3 for the week.
The price of gold will start today at US$3,447/oz, up another +US$5 from Saturday, and close to a new record high, but basically a measure of the USD markdown. A week ago it was at US$3,371/oz so a net +US$76 gain.
American oil prices are again little-changed at US$64/bbl with the international Brent price holding just under US$67.50/bbl.
The Kiwi dollar is at just under 59 USc and unchanged from Saturday at this time, up +30 bps for the week. Against the Aussie we are holding at 90.1 AUc. Against the euro we are unchanged as well at 50.5 euro cents. That all means our TWI-5 starts today at just under 66.5, and unchanged from Saturday, up +20 bps for the week.
The bitcoin price starts today at US$109,022 and up +0.5% from this time Saturday. But is down -6.7% for the week. Volatility over the past 24 hours has been low at just on +/- 0.5%.
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14 Comments
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Sigh...Shane Jones economics
"The Government has announced $30 million in concessionary loans for regional airlines, alongside further investment to improve interline capability, aimed at better connecting smaller carriers with the national transport network."
https://www.stuff.co.nz/travel/360808388/regional-airlines-welcome-30m-…
Yep. the government doesn't want to stop the 'User Pays' imposition that those who fly have to pay when in truth the whole country benefits from the aviation sector, regardless of whether they fly, plus the cost of operating smaller passenger aircraft is not small. I know from personal contacts Air Chathams margins are very thin and they are continually walking a knife edge and looking for ways to reduce costs. The aircraft they use are relatively cheap to buy and operate but spares and maintenance are expensive, so it is a continuous trade off, and sometime a real struggle to remain profitable.
I'm not sure the 'cheap' loans will have much effect as in the end they are just more debt, which means more liability.
You seriously think those that don't fly should subsidise those that do? Next we'll be subsidising caviar.
If they can afford caviar they aren't flying Sounds Air or Air Chathams.
Do you ever receive airmail? Or packages that have been airfreighted, or benefited from the rapid delivery of products? You don't have to fly on an airline to benefit from the existence of aviation.
Internationally User Pays has been used as an example of how not to run an airways system. The Government imposed systems within our aviation sector have not necessarily benefited the aviation sector, but have been to the benefit of the non-flying sector. Why shouldn't those who don't fly contribute towards that?
Oh dear.
I love flying - the sensation, the 3d freedom (vs 2d with sailing) but in the history of humanity, and vis-a-vis it's long-if-any future, flying was a blip.
Needs vs wants - the Trotter thread doesn't realise it, but it's about that too. Flying - and all its services - is a want. Not a need.
And the collective purchasing-power is reducing - for physical reasons - hitting the bottom-end first. And the top-end have more political clout, so will get them at the bottom to susidise, by socialising the debt as they always do. Which won't solve the problem.
Get over it PDK. Ever since the dawn of time humans have travelled (as have other species), and they've done so to the extent of the technology available, on foot on beasts, on canoes and sailing ships and now on aircraft. It is a part of who we are as a species. Saying it shouldn't be done is like telling a bird they can't fly, or a fish it can't swim.
Your problem is the bigger one - too many people on the planet and political systems who either don't understand that as they indulge in other ideologies, or frankly deny it. Travel, however it is done is not the problem. Reduce the number of people on the planet and the amount of travel reduces. Problem(s) solved.
You miss the point Murray...the systems required to support air travel require too many resources and consequently will decline regardless of the worlds population. That is not to say the two facts are unconnected rather it will be a question of priorities that cannot be met.
I occasionally get stuff delivered. I’d rather pay for my usage than everyone’s usage, as I reckon I probably do it less than average. I also don’t want it to be real cheap to fly pointless crap around at the expense of the environment.
Personally I very rarely fly regional these days because it’s bloody expensive. To then tax me so someone else gets to a cheaper flight is a double whammy. Surely user pays is better, the people that use the service more pay more.
Flight safety is as much about not having aircraft fall on you as it is about not having your aircraft fall out from under you.
Everyone benefits.
"According to NewsWeek, Russian researchers have reported finding one of the largest untapped oil reserves beneath Antarctica’s frozen surface. With an estimated 511 billion barrels of oil, the discovery could dwarf some of the world’s most significant existing reserves. To put this in perspective, the amount is around ten times greater than the output of the North Sea over the last 50 years and nearly double Saudi Arabia’s known oil reserves. The location of this massive find is in the Weddell Sea, a region claimed by the United Kingdom as part of its territorial interest in Antarctica."
https://www.businesstoday.in/world/story/antarcticas-oil-jackpot-russia…
Interesting stuff. Couple of thoughts that arise - I wonder what price of oil would be required to make it economical? Pretty remote region. Secondly - what are Russia doing there? Haven't they got enough Arctic exploration to be getting on with?
Lets assume the reported reserves are accurate (you may guess it is highly unlikely) and that they can be extracted and processed....that equates to around 13 years at current rates of consumption....it will take longer than that to develop the resource for a start.
The dairy acquisitions are potentially continuing. Lots of chatter going around about OCD 100% buying out Miraka. It would give OCD a foothold in an area they aren't currently in.
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