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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 China's clear need for less oil has pushed its price sharply lower even as both the Gulf of Hormuz and the Red Sea remain effectively shut. As other sources raise their output, global demand is being undermined, essentially by this Chinese transition.

But first up today, we should note the overnight dairy Pulse auction. Prices achieved were a bit more than -1% lower than the prior week's full auction in USD, but a bit less than that in NZD.

In the US, the ADP weekly private payrolls monitoring recorded another easing, only +15,000 and extending the easing trend that has been in place since early May.

The US merchandise trade deficit came in more than -US$100 bln in June, a second straight month of an unusually high negative level. Year-on-year, exports were up, but imports rose faster.

Meanwhile both their retail (+3.1%) and wholesale inventories (+4.1%) rose in June, reflecting the stockpiling trend that has been in place for a while now.

The expected improvement in the Richmond Fed factory survey didn't eventuate in July from June, but it remains modestly positive. New order flows edged lower while price and cost levels remained elevated.

But there was a solid improvement in the Dallas Fed services sector recorded in their July survey.

Nationally, the Conference Board's consumer sentiment survey in the US took a step lower in July. This extends its falling trajectory that started in early 2025.

The auction for the US Treasury 7yr Note was well supported earlier today but again, investors are getting higher yields for the elevated risk they perceive. This latest one delivered a median yield of 4.41% (high of 4.47%) compared to 4.20% at the prior equivalent event a month ago.

In Japan, a major 7.1 earthquake in the south has caused widespread damage and deaths. And Japan's parliament has approved a plan to create a "second capital" capable of keeping the country running if disaster strikes Tokyo. It is likely to be in Osaka.

Malaysia said producer prices there were +9.2% higher in June than a year ago. This was an unexpected jump from the anticipated +7.7% which was similar to the May rise.

Staying in the region, Singapore reported its birth rate for 2025 and for the first time since its independence, it has fallen below +30,000 in a year. It, like many places, is on a steep trajectory of lower fertility.

Industrial production in India rose +7.3% in June from a year ago, more than expected and the sharpest pace of expansion in nearly two years. It seems to be bouncing back from the initial shocks from the Middle East conflict.

Later today, we will be getting the June CPI result from Australia and a no-change 4.0% rate is anticipated. But yesterday Governor Michelle Bullock was out speaking and affirming that they are worried that these high levels are embedding, so their 1-3% target range is not likely in the medium term. Some are wondering if this was a signal that an unexpected hike is about to be delivered next week.

The UST 10yr yield is now just on 4.60%, down -5 bps from this time yesterday.

The price of gold has fallen to US$4030/oz, down -US$48 from yesterday. Silver is now just over US$57/oz, down -US$1.50 from yesterday.

Oil prices have fallen another -US$3.50 from yesterday at now just over US$79/bbl in the US, while the international Brent price is now just over US$84.50/bbl and down -US$5. Hormuz transits are still basically halted. There have been no crude tankers and only 3 cargo ship exiting over the past 24 hours (1 dark with transponders off) and three entering for new loads (1 dark). The Red Sea is even less active than the prior day.

The Kiwi dollar is up +20 bps from yesterday at just under 57.9 USc. Against the Aussie we are up +40 bps at 83 AUc. Against the euro we are holding at just on 50.8 euro cents. That all means our TWI-5 starts today at 61.8 which is up +20 bps from this time yesterday.

The bitcoin price starts today at US$63,568 and down -2.1% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/-1.7%.

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.

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