Episode Details

Kia ora.

Welcome to Thursday’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 intensified clashes in the Persian Gulf has oil prices rising, little transit activity in the Strait of Hormuz, and significant disconnect from Trump's claim that both sides are still negotiating. Clearly they aren't,

In the world economy, and first in the US, mortgage applications fell again last week, a third consecutive weekly easing mostly driven by lower refinance activity. Mortgage interest rates eased back however even if they remain at close to one year highs.

Ahead of this weekend's US non-farm payrolls report (expect +85,000), private businesses added +122,000 jobs in May according to the ADP survey, a new high since January 2025, compared to a downwardly revised +105,000 in April and above forecasts of +117,000. Hiring was broad-based they report and say it augers well going into the summer hiring season.

But this isn't backed up by the US services PMIs for the US.

The May ISM services PMI reported a good expansion, about the average it has been in 2026 and slightly higher than expected. Good new order flows are behind the result. But the same firms reported contracting staffing levels and faster input cost pressures. The parallel S&P Global services PMI was less upbeat, noting a muted increase in business activity, optimism faltering and employment falling solidly. Overall, it is a jobless expansion, these PMIs both say.

US factory orders are reflecting some of the stockpiling effects we have noted earlier. In April these orders rose +13.0% in nominal dollar terms above year-ago levels. But without aircraft and defense orders, they were up +5.8% - still a good result but mostly accounted for by inflation. And remember PPI rose +6.0% in the same twelve month period.

American crude oil stocks fell again, for the sixth consecutive week and the largest fall in this period. Over the past year, it has fallen more only in three specific weeks but each of those were not in a continuing series. Their strategic oil stocks are now at their lowest in 22 years.

The US Fed's Beige Book surveys for May reported most of the 12 Federal Reserve Districts had slight-to-modest increases in growth, though a handful experienced flat or slightly declining activity. Labour markets remained tight but were cooling. Business respondents said rising input costs for nonlabour inputs wer