Here's our summary of key economic events overnight that affect New Zealand, with news the world is in a slowdown period as the globally large economies show signs of culminating.
But we start today with some tough news. The overnight dairy auction saw prices fall to a two year low, the eight consecutive drop in these auctions. Apart from cheddar cheese which made an unexpected large recovery, everything else fell, especially butter which fell to a two year low in NZD and a three year low in USD. Overall, prices retreated +4.3% in USD and -5.4% in NZD. Falls this large haven't happened since mid-July 2024. Analysts had already trimmed their current season payout forecasts, and today's event may have them thinking about revisiting them again. Certainly, the trend isn't positive.
The OECD says global economic growth to ease to +2.9% in 2026 from +3.2% in 2025 as tariffs, weak trade and geopolitical uncertainty weigh on activity. In the US, growth is projected to slow to +2.0% in 2025 and +1.7% in 2026. For China, they see economic growth of +5% in 2025 and weaken to 4.4% in 2026 and 4.3% in 2027. Consumption will be dampened by high precautionary savings and the payback effect of the now winding down trade-in program.
For New Zealand they said after contracting in 2024, the economy is projected to expand by +0.7% in 2025, +1.8% in 2026 and +2.8% in 2027. Growth will be supported by lower interest rates, improving household real incomes, buoyant tourism, and firm commodity export earnings. However, weak confidence, high energy costs, easing net immigration, and elevated uncertainty surrounding trade restrictions are expected to remain headwinds to the near-term recovery. Inflation is projected to remain within the central bank’s target band, easing towards 2%. The unemployment rate is projected to decline from its peak in 2025.
For Australia, they said economic growth is now strengthening and becoming more private-sector-driven. GDP growth is projected to quicken to +2.3% in 2026 and 2027, up from 1.8% in 2025. This is consistent with a gradual closing of the small negative output gap, keeping unemployment low while allowing inflation to remain close to target. Risks are balanced, with downside risks from a greater-than-expected softening of labour market conditions while, on the upside, strengthening disposable incomes could bring a faster acceleration of private consumption.
The signals in the US were not as negative today. The RCM/TIPP economic optimism Index recovered in December from is sharp November dip. But to be fair, this only returns it to the below-average levels it reported from March to October.
But that rebound was not seen in their logistics sector. The Logistics Manager’s Index eased back to its slowest growth in the sector since June 2024. The slowdown is driven by a continued softening of inventory and warehousing metrics but tempered by some expansion in transportation. Warehousing utilisation contracted for the first time in the 9-year history of the index.
However, by some accounts the US holiday retail activity was strong, especially for online trade. Shoppers there spent US$14 bln online on Cyber Monday, pushing total online sales over the Thanksgiving weekend to US$44 bln. Spending rose +7.7% during the so-called Cyber Week - the five days from Thanksgiving to Cyber Monday - compared with an +8.2% increase to $41 bln last year and above its prior expectations of $43.7 bln.
Across the Pacific, Japanese consumer confidence rose sharply in November from October to its best level since April 2024, with all components improving.
In the EU, inflation is running in their sweet spot. Euro area consumer price inflation rose to +2.2% in November, up from 2.1% in October and slightly above market expectations of 2.1%. Services inflation accelerated to +3.5% however (from 3.4%) and its highest level since April, while energy prices declined at a slower pace.
In Australia, and after a big September surge, October's residential building permit levels were expected to be tame by comparison. But in the event it was negative and the September rise was revised lower. And that meant the annual level of consents to October were lower than a year ago and its first year-on-year retreat since June 2024.
The UST 10yr yield is now just under 4.10%, up +1 bp from this time yesterday. The key 2-10 yield curve is now at +58 bps. Their 1-5 curve is now positive by +6 bps and the 3 mth-10yr curve is positive by +24 bps in a big move. The China 10 year bond rate is holding higher at 1.83%. The Australian 10 year bond yield starts today at 4.61%, up +2 bps. The NZ Government 10 year bond rate starts today at 4.50%, up +5 bps from yesterday.
Wall Street has started its Tuesday with the S&P500 little-changed, up just +0.1%. Overnight, European markets were mixed between Frankfurt which rose +0.5% and Paris which fell -0.3%. Yesterday, Tokyo closed essentially unchanged, Hong Kong was up +0.2%, but Shanghai ended down -0.4%. Singapore closed essentially up +0.3%. The ASX200 ended its Tuesday session up +0.2%. The NZX50 ended up +0.4%.
The price of gold will start today at US$4186/oz, and down -US$47 from yesterday. Silver has held up at US$58/oz.
American oil prices are -50 USc softer at just under US$59/bbl, while the international Brent price is now at just over US$62.50/bbl. And we should note that natural gas prices dropped back yesterday after the prior day surge.
The Kiwi dollar is down -10 bps from yesterday, still at just under 57.3 USc. Against the Aussie we are also down -10 bps at under 87.4 AUc. Against the euro we have held at 49.4 euro cents. That all means our TWI-5 starts today at just under 61.9, and little-changed from yesterday.
The bitcoin price starts today at US$90,852 and recovering +6.4% from this time yesterday. Volatility over the past 24 hours has been high, at just on +/- 3.6%.
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11 Comments
NZ needs to look at what AU achieved by having a more flexible inflation target and a dual mandate. I said 3 or 4 years ago that it will be interesting to see how it pans out, and now it’s very obvious that the Australian approach has been far superior.
Their unemployment rate is 4.4%, ours is 5.3%
Their GDP growth last 12 months is 1.80%, ours is -0.6%
Or you can measure it by the number of people jumping ship if you prefer
Well said JJ, including your original post.
Sounds like you're desperate for a return of the 'good times'....you know, out of control immigration and house prices rising way above the general level of inflation (ie how we were and how Australia still is).
Both of which are not signs of a strong economy - but signs of something completely unsustainable and being managed very poorly that in the long run is going to blow up in your face - even though it might 'feel' and 'look' good at the time.
Like getting drunk, calling yourself a rockstar, and thinking you're a 9 instead of the 5 you really are.
Yvil has the NZ housing Ponzi bases loaded and wants just one more hit at the NZ housing Ponzi casino.
Sorry that bus exploded and is now not operating anymore since 2021. The Ponzi disciples are still at the Ponzitopia bus stop, looking for their upslope ride, forlorn and now totally bereft of ideas.....
I want a reserve bank that creates stability, not one that yanks the OCR around trying to get inflation to exactly 2% with no consideration of the consequences.
House prices are not a consideration for either the NZ or AU reserve bank, and in fact the AU OCR is higher than ours
So butter is at 2 year lows in price. Not at my supermarket !
Up like a rocket, down like a feather
Reminds me of petrol. An increase in oil prices on the international exchanges is reflected at the local BP the next day, despite their having locked in tomorrow's gas prices months and months ago.
Aye we have to play their game and for that they game our play.
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