Shutterstock Track 1219389

Monetization ID TFGEPGEI0LHEIJAI

Kia ora.

Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the international edition from interest.co.nz.

Today we lead with news renewed Hormuz attacks are raising oil prices and interest rates today, not helped by a pullback in tech stocks.

But first today, there was another dairy auction overnight, a full one with new season volumes returning. But this one came in sharply lower, down -4.9% on USD terms although only a -2.5% retreat in NZD terms. Among the results, there was a notable -4.4% fall for WMP, a -7.0% fall for SMP, a -5% fall for butter and a large -12.3% fall for cheddar cheese. A few of the minor categories gained. But these falls were larger than the futures market was pricing in, so you have to say they are 'larger than expected'. While the new lower levels aren't that special in a longer perspective, the speed of the falls is concerning and analysts will be re-assessing their payout forecasts.

In the US, the RealClearMarkets/TIPP Economic Optimism Index rose in July to a better than expected level but it is still well below the average over the past year and below its long term norm.

Meanwhile, American consumer inflation expectations rose when a small dip was anticipated. It is now at 3.7%, its highest since September 2023 and is rising even though expectations for lower petrol prices are included in these results.

The weekly private jobs growth monitoring by ADP shows a smaller rise ;last week than they have recorded in the past 15 week, since mid-March in fact. And the trend has been down for seven straight weeks. This is consistent with the easing that the official non-farm payrolls report showed for June.

The US Logistics Managers Index rose again in June and to its highest since March 2022, driven by three factors; anticipation of more tariff action from Trump, stockpiling to get ahead of inflation, and an expectation that the end of year retail season will be 'normal'.

US exports weakened in May and imports rose in the same time in the broader trade result that includes both goods and services, delivering a sharp rise in their deficit and their highest in over a year. This result matched the recent report of merchandise trade but brings their services trade into the picture.

Meanwhile Canada reported rising exports and stable imports to give them a larger trade surplus in May.

China said its foreign exchange reserves dipped slightly in June from their unusually high May levels. Part of this was due to the retreat in the gold price. But their central bank continued its gold-buying streak for a 20th month, with reserves reaching 75.44 million troy ounces by June’s end, up from 74.96 million in May.

China’s excavator sales are rebounding, up by more than a third in June from a year ago, driven by major projects.

New data out yesterday paints a much improved picture for Japanese household spending in May as households started to get their mojo back. And don't overlook that this was in the middle of the Trump Gulf War uncertainties.

The UST 10yr yield is now just on 4.54%, up +6 bps from this time yesterday.

The price of gold has slipped to US$4146/oz, down -US$13/oz from yesterday. Silver is now under US$61/oz, down -US$1.50 from yesterday.

Oil prices are up +US$2 from yesterday at just under US$70.50/bbl in the US, while the international Brent price is now just on US$74/bbl. Hormuz transits have picked up sharply despite renewed uncertainties with 27 crude or product tankers exiting over the past 24 hours (4 dark with transponders off) but only 18 entering for new loads (4 dark). Interestingly. All this comes as attacks on ships in transit become daily events, so the rise in oil prices isn't surprising. Red Sea activity near Yemen has fallen again to even lower levels on added risks there too.

The Kiwi dollar is down -10 bps from this time yesterday at just on 56.9 USc. Against the Aussie we are little-changed at 82 AUc. Against the euro we are also little-changed at just on 49.8 euro cents. That all means our TWI-5 starts today at just on 60.7 which is down -10 bps from this time yesterday.

The bitcoin price starts today at US$64,063 and up +0.8% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.3%.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.

Audio soundtrack opening is licensed from Shutterstock, Track 1219389 Monetization ID TFGEPGEI0LHEIJAI