Here's our summary of key economic events over the weekend that affect New Zealand with news of zero progress in the mess in the Middle East. In fact, it has probably gotten worse.
And in the week ahead, geopolitical developments will likely dictate global market directions. Reports by the IEA and OPEC this week will reveal how the institutions see the supply shock of seaborne energy from the Persian Gulf. The spotlight on US economic data will be on consumer inflation for February (Thursday) and PCE for January (Saturday). Both are expected to rise (CPI to 2.5%, PCE to 2.9%) but everyone will know this is the base on what the March data (released on April 11) will be built on.
Where US inflation goes, the bond market goes, and the cost of money locally, Of course, we will be tracking that for you.
In China, they will release February inflation data, with headline CPI expected to firm to 0.8% from 0.2%, while producer prices are likely to decline at a slightly slower pace of 1.1%. They will also release new yuan loans data which is expected to decline in February, partly reflecting seasonal weakness linked to the Lunar New Year holidays. In Japan, we will get updated machine tool orders results. In Australia, it will be about consumer and business confidence, consumer inflation expectations. In India, it will also be about CPI data.
Locally, apart from some retail data (card use) and more analysis on mortgage activity, data releases will be relatively quiet this week.
But there will be plenty of news to follow, especially flowing from the consequences of shrinking workforces in the US, which will have global implications.
The US economy shed -92,000 jobs in February at the headline level, the most in four months, following a downwardly revised +126,000 rise in January and much worse than forecasts of a +59,000 gain. From a year ago, payrolls are up +129,000 and that is unusually low. Apart from December's tiny +59,000 year-on-year gain you have to go back to the pandemic (and Trump 1) to find as weak a rise. It gets worse by broadening the view of all employment, not just payroll employment. That broader view shows overall employment down -391,000 in February from a year ago, the second consecutive shrinkage.
US retail sales inched lower by -0.2% in January from December, slightly less that the expected dip. It was the first decline since October. From a year ago, they are +3.1% higher. Most of this is accounted for by 2.5% CPI core inflation.
US inflation may be about to get a shock. Petrol pump prices are up today +10% from a year ago, up +18% from a month ago. And these costs are only just getting started with US crude oil up +35% in a week, up the same in a year. When US March CPI is reported, the Fed won't be able to look away.
They are facing fast-weakening labour markets and fast rising inflation. They have a dual mandate so they will have to choose what to prioritise. The simple fact is that inflation problems are harder to remedy using monetary policy tools than the labour market. Absent political pressure, they would want to fight inflation first. (If they choose the other goal, they will embed inflation for a very long time.)
In Canada, their widely-watched Ivey PMI surged higher in February, a strong expansion signal, to its best since September 2025, and prior to that its best since July 2024.
In the Persian Gulf, the Qatari oil minister said in the next few days they have to decide whether to declare force majeure, releasing them from obligations to deliver supplies to customers. He said that could drive crude prices to US$150/bbl. There are still no ships transiting the Straits of Hormuz - except Iran-linked ones.
China’s foreign exchange reserves rose to US$3.428 tln in February, a small +US$30 bln increase over the previous month and the seventh consecutive monthly gain. These are now back to their highest level since November 2015. USD weakness helped, but it is clear US efforts to 'contain China' aren't working at the most fundamental level. Meanwhile, they bought slightly more gold and now have 74.22 mln troy ounces. American missteps have juiced the price of gold of course, so the value of their holdings rose +US$20 bln to US$388 bln at the end of February, now 11% of their total reserves.
After falling consistently since August, the FAO food price index rose in February, basically tracking similar levels for the start of 2025. But there is wide variation between categories. Meat prices are steady, Dairy prices are falling as is sugar. Dairy prices are now at their lowest since the start of 2024. But vegetable oils are rising, and fast, with cereal prices turning higher too.
Meanwhile, metals prices are rising, led by aluminium's overnight jump, and it is now approaching the heady heights of the pandemic peaks. Copper and zinc have been rising recently too, even nickel. Sulphur is another essential commodity at a peak, even higher than the pandemic levels. This is a particular problem for China. But iron ore prices are not joining the party.
The UST 10yr yield is now just on 4.13%, up +2 bps from Saturday. The key 2-10 yield curve is holding at +58 bps. Their 1-5 curve is steeper at just on +17 bps (+2 bps) and the 3 mth-10yr curve is now at just on +43 bps (+2 bps). The China 10 year bond rate is up +1 bp at just on 1.80%. The Japanese 10 year bond yield is down -2 bps at 2.16%. The Australian 10 year bond yield starts today at 4.85%, down -4 bps from Saturday. The NZ Government 10 year bond rate starts today at 4.52%, unchanged from Saturday.
The price of gold will start today up +US$28 from Saturday at US$5172/oz. Silver is up +50 USc at US$84.50/oz today.
American oil prices are up +US$1, at just under US$91/bbl, while the international Brent price is up a bit less to be now just on US$92.50/bbl.
The Kiwi dollar is unchanged against the USD from Saturday, still just on 59 USc. Against the Aussie we are down -10 bps at 84 AUc. We are up +10 bps against the yen. Against the euro we are up +10 bps at 50.9 euro cents. That all means our TWI-5 starts today little-changed at just over 62.7.
The bitcoin price starts today at US$66,882 and down -2.0% from this time Saturday. Volatility over the past 24 hours has been moderate at just on +/- 2.5%.
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50 Comments
Bought a PHEV last year and now fill up once every 3 months when I have to drive far. It feels strange to think about petrol prices when schools are being bombed, but in my little isolated and protected pocket of the world it is really nice for that to not to be a thing right now.
Imagine if more people had them, and if the government had invested in renewable generation! Nah why think ahead when we can just deal with the problem as it happens.
One positive we have over the US is that a big part of our fuel price is excise tax. So if crude goes up 30%, our fuel prices only go up around 15%
As above “the Middle East. And in fact it has probably gotten worse.” More likely getting worser and worser. The offensive will soon reach a point where there is nothing strategic left to bomb except for whats already been bombed. The removal of the Iranian leadership has removed any authority over the Republican Guard and confirmed it holds and enforces the real power and quite obviously on their part there is no inclination to lay down their arms and relinquish said power. Nor will it obey and such order from any new Iranian government. Why should it when the people have no ability to rise unless they are suicidal and there is no sizeable invasion land force is apparent. There is here now an unfortunate parallel of sorts to Japan in 1945. The nation had been pummelled and burnt to the ground yet even after two atomic bombs the armed forces would not surrender, even plotting to kidnap the Emperor to prevent him from doing so. In Iran now the military is neither answerable nor assailable and so far at least nothing looks likely to break that stranglehold.
USA and Israel can always bomb the people. Gaza 2.0 is coming.
Freedom in life or death, the Iranian civilians will need to be the USA's boots on the ground whether they like it or not.
HeavyG. Contrary to the many commentators who insist otherwise, aerial bombing has been successful in effecting regime change without requiring boots on the ground. NATO's 1999 air campaign in Yugoslavia a relatively recent example, with intelligence penetration and bomb targeting having become far more effective than back then.
Yugoslavia was a barrel of suppressed seething ethnic hostilities and vendettas that burst out on Tito’s death. Hence the old Yugoslavia is now seven different nations. NATO wasn’t attacking one very large country with one very large and fanatical army still intact as a ground force.
FG. The proposition was that bombing alone won't deliver victory, that boots on the ground are always required. Yes, Serbia a much smaller and geographically different scenario to wider scale Iran but the same principle of degrading institutions by targeted bombing still applies. I hesitate to invoke memories of the callously brutal US bombing of Haiphong that helped force the NVA to negotiate but do so to point out that an intact army remaining in place is not necessarily a barrier to bringing an enemy to the table.
I am coming at it from a different direction in that the IRG are actually the dominant power in Iran and the only control on that was really the now deposed Ayatollah because he was so long established. It is just over six years since Trump’s orders sent the revered General Soleimani into martyrdom. Now the current top generals will obviously not be looking for the same fate but it is very doubtful that it is not still viewed as a cardinal insult that must somehow be avenged. It is very difficult therefore to see that body surrendering to the actual instigator and leader of a nation that is accursed in all their doctrine. So the question is what is going to break that down when even the old Ayatollah had scarce control over them. A military coup might well be more likely than a surrender.
Yep, agree with that, a military coup is a definite possibility. The IRGC hierarchy will be well aware of this risk and be seeking to exercise control of the Artesh regular army which operates separately to the IRGC, with its own chain of command. The core IRGC is around 200K strong, bolstered by the Basij volunteer enforcer thugs of possibly several hundred thousand, mostly youthful and of limited actual military capability outside terrorising the 90m populace. This is not a great number to maintain control of this large country and its geographically dispersed population. Citizens are not allowed to possess firearms but a high ppn of Iranian men have served as conscripts in the Artesh so know how to use weapons. The US now has complete fire control over land routes into Iran making the transporting of materiel into the country not difficult.
Yeah that elementary school in Iran would beg to differ. You seriously can't compare Yugoslavia to Iran? Iran is 6 times the size with unrelenting geography, has a hardlined Shia theocracy and have been planning this for decades.
Albert, Yugoslavia and Iran obviously very different in multiple respects. Happy to discuss the operational challenges of those differences but this debate thread is about whether regime change can be effected by aerial bombing alone. The extent to which the religious nature of Irans dictatorship might influence this conflict is highly relevant. It certainly was pivotal in the hideous 1980 Iran/Iraq war where Iranian troops were highly motivated by religious impulse but the intervening 45 years of theocratic brutality visited upon the people will have tilted that ground.
There's obviously plenty of differences, but how about the names of the operations? Yugoslavia 1999, NATO code name Operation Allied Force, US code name Operation Noble Anvil.
Compare to the current administration's choice of Operation Epic Fury. The thoughtful professionals are no longer calling the shots.
mfd. It's cringe inducing eh. A bit surprised an edict has not been issued that it must always be written in bold caps.
If we need the best example of bombing causing an unconditional surrender nukes on Tokyo and Nagasaki are the most obvious ones that spring to mind. Don't put that past a cornered Donald who is facing rebellion at home when petrol prices double.
Or when the Epstein files reveal his true deeds.
Trump couldn't give a r/a about the Epstein files.
He has no empathy - so why would he care? How? Care with what?
That's just a 'reason' put up by those who need not to know that the reason is energy; oil under the Iranians.
Without which nothing happens.
As I've said here. More than once.
Have there been any examples where civilian bombing has done anything other than harden public opinion against the aggressors?
No. But putting it brutally public opinion of civilians in the war zone is largely irrelevant once regime change has been decided upon and the dogs have been released. Iran is not Gaza where Hamas strategically located its forces and facilities in civilian areas. The US will have calculated that collateral Iranian civilian casualties will hopefully be moderate.
Nukes on Japan spring to mind.
Yes, fair point, although that was accompanied by the Japanese being relentlessly pushed back on land and at sea, and their ability to continue to fight being thoroughly degraded.
So... What do you think Iran will do if USA nuke Tehran? Then if they do not surrender in 24 hours drop one on Mashhad... then Isfahan... etc...
Good question. Probably an attempt by the surviving leadership to surrender, followed by failed state status and civil war? The emergence of a new generation of terrorists out for revenge against the West?
There is much opinion & speculation, including a lot from me, but it is still very early. My guess is that it will be at least another two weeks before any likely outcome becomes perceivable, be it an Iranian regime collapse or an ongoing stalemate. Watch this space then, which from the south east end of the world is a great vantage point isn’t it.
I guess you could aim for a direct repeat of Japan, but do you see Trump having the stomach to send in hundreds of thousands of troops to occupy Iran? Even more unbelievable, could you imagine him appointing someone competent and capable of rebuilding national infrastructure and remodeling the political system? He is already saying he doesn't care if the replacement regime is democratic or not.
Far more likely he'd send in a Kushner or Trump to manage the place like a Roman province - all about self-enrichment.
Iran’s ancient history, the Persian Empire, by the command of Darius & Xerses marched on Europe and were only just stopped by the Greeks. The Iranians set themselves apart from other Middle Eastern nations and in a superior sense, and within that tribal diversity, ethnicity not too dissimilar to Iraq but underneath it all the Iranians are as proud and strong as any nation concerning its sovereignty. The answer should have course lie with the people but at present, as evidenced by the brutality in suppressing the demonstrations, the people have no ability to come forth effectively while the IRG control the streets. My view that a profound change or dismantling of the IRG is the only way Iran can find another way forward.
ps. THe NZH today’s has a column courtesy NY Times Neil MacFarquar describing the heritage, position and power of the IRG. It concludes the IRG will never surrender.
HeavyG...you said...
"USA and Israel can always bomb the people."
Oh yes... let's try murdering another few hundred thousand people, because bombing civilians has always worked so wonderfully well in the past.
Tell me, are you a Fox News/MIC fan, and a disciple of Hegseth and Lindsey Graham, two of the most bloodthirsty psychopathic neocons ever to walk the planet?
This is THE most disgraceful comment I have read on this site for quite some time.
You are, in effect, advocating widespread mass murder and war crimes, whilst hiding behind a nom de plume.
Pull your head in Colin. I didn't say I supported carpet bombing or nuking Iranian civilians. I just pointed out that if/when US and Israel run out of strategic targets the civilian populace is still an option. Israel has already shown in Gaza that bombing civilians is no issue for it. USA has facilitated bombing of civilians in Gaza and now appears to have been up to a bit of it itself based on evidence of the girls school that was bombed in Tehran.
You can ignore reality all you like and believe that Israel and the USA will never cross such a line (despite having crossed it thousands of times already) but spare me your faux outrage.
I attend protests for the Palestinian people every weekend. Have you ever been to one?
For the truly bloodthirsty MIC cheerleader neocon element who frequent this site, I would strongly suggest that you listen to Ray McGovern's take on the misinformation the West is spoonfed regarding Iran by the MSM. For those who are not familiar with his background, McGovern is a seasoned former CIA Intel Analyst.
"(The murder of more than 170 school girls) happened before the Iranian's even knew they were being attacked, for god's sake. And so to the notion (spread by Trump and Hegseth) that the Iranians did this to themselves, you have a temporal impossibility.
It happened immediately in the first wave. It happened at about 8:30 local time in the morning, if memory serves, and the Supreme Leader was killed at precisely the same time.
It is well recognised now that this was done by American fire, not Israeli. There has been no acknowledgement of that, except what you just saw - what you just played, and there has been no photos, and no press coverage because it is all being kept under the surface.
Now, given the impossibility of the explanation from Trump, and remember, he was interupted by Hegseth, (we are still investigating), nobody is going to be able to prove it was done by the Iranians, I mean, why would they do that?"
Good work Colin.
I presume you also agree what Israel did and continues to do in Gaza is a genocide as has been concluded by the International Association of Genocide Scholars?
(see https://www.bbc.com/news/articles/cde3eyzdr63o)
FG. Although I'd challenge your WW2 Japan/Iran comparison, you did prompt a recall of one of history's most notable understatements; emperor Hirohito's announcement to the people as Japan lay blockaded and its cities utterly devastated from conventional and nuclear bombing - 'the war situation has developed not necessarily to Japans advantage'.
It's a good quote. It's also interesting that because of the archaic formal language that the Emperor spoke most regular Japanese didn't understand what he was saying.
rolande - personal anecdote, I was in Japan not so long ago and on a tour the guide observed the tension between Japanese and Korean people that surfaces there from time to time. I very carefully and politely enquired if that was not entirely surprising given the 20th century history between the two nations. Not a wise idea, cold shoulder thereafter !
Is anyone feeling a touch of Déjà vu with last years economy? Green shoots, feels like things are improving over summer, then the Orange man puts us into a winter of discontent.
This time will the RBNZ be too late to react again? Or should they do a 0.5% OCR cut now instead of waiting for GDP stats towards the end of this year? Should they care about GDP at all?
According to half of our commentariat we should hike now because oild price increases are about to rip through our economy so it's best to front foot that and destroy growth now.
There are reasons to hike, there are reasons to cut. Last year they did nothing and then cut when it was too late, that seems like the worst option.
They seem to be more concerned with the economy than inflation. Which is sensible to me as our inflation is still pretty low, but it’s not really what they should be concentrating on. Who knows what they’ll do, hold and hope for the best is probably most likely, the safe option but it won’t fix either inflation or economy.
Inflation is acting as a contractionary force on our economy at the moment because only those with pricing power can raise prices. Therefore to hike into this would just exacerbate the problem. I think the RBNZ seem cognisant of this hopefully we see nothing this year
Ultimately Trump is trying to contain China , we are just casualties of a globalised economy dependant on oil
will be interesting as it runs out PDK
RBNZ mandate is to control inflation, not GDP (which may be a leading indicator however the RBNZ tend to drive by the rear view mirror)
I am aware of that - yet they cut last year with inflation well above 2% and rising. If they were really only concerned with inflation I can’t see why they would have cut at all last year.
Merkel's Captains Call.
"had Germany not decommissioned nuclear power after the Fukushima accident, it
would have needed 50% less electricity generation from fossil fuels, 84% less generation from imported natural
gas, 27% less fossil fuel capacity and 42% less natural gas capacity58. Another road less traveled: Germany’s
electricity prices in 2024 were almost 25% higher than they would have been had the country kept its nuclear
power online59. And as shown below, Germany might not have experienced such a sharp increase in its
electricity imports which are 2x higher than a decade ago as a share of consumption.
More nuclear shutdown repercussions: Germany’s industrial power prices were 3x higher than the US and China in 2024, and part of the reason why Germany has been experiencing the deindustrialization shown on the right."
https://cdn.jpmorganfunds.com/content/dam/jpm-am-aem/global/en/insights…
Entirely foreseeable, and if memories served was discussed here. Knee jerk reaction to emotive hysteria. But modern nuke designs offer a solution, albeit an expensive one.
Consider the resources being wasted and destroyed (its not as if we have a surfeit)....war, what is it good for?
LmbF. It's an offensive hideous waste, a moral outrage against humanity and the planet. Each large US carrier costs US$6.5m per day in base operational costs.
It's a great distraction when you're increasingly unpopular domestically and are heavily implicated in multiple ongoing scandals. Also great for washed up TV hosts who want to cosplay as crusaders.
Here's a core part of the problem, from ABC news;
"US commanders allegedly told them that "President Trump has been anointed by Jesus to light the signal fire in Iran to cause Armageddon and mark his return to Earth.""
He's going to walk on water soon!
Isreal must laughing at how easily they've been able to push around Trump and his band of fruit loops at the Whitehouse. We all know who's behind the bombardment of Iran and Lebanon.
They've milked Trump's presidency for all it's worth. Productivity is at an all time high in the world of Zionism.
Yup, Operation Epstein Fury is turning into a right quagmire.
Giggity, giggity.
INTEREST TEAM
be good to see a good analysis of the potential private credit meltdown.... eventually this is going to impact ma and pa's kiwisaver
Private credit crisis: Five questions about the future of the asset class
3) If it’s bad in private credit, how bad is it elsewhere? For all the fear and loathing over private credit, we often forget that loans rank highest in the capital structure. For every private credit loan, there’s a borrower, typically a private equity sponsor, and if the market thinks these loans might be fully repaid, it implies a bunch of zero returning assets for private equity. If private credit goes boom, the real pain will be held further down the capital structure.
As the panic buying ramps up at the country's petrol stations how is our 21 days of fuel security being impacted?
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