Episode Details

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 markets are betting that the next rate move by the US Fed will be a hike. And that has juiced up the USD today.

But first, the overnight dairy Pulse auction brought sharply lower prices for the three lines offered. AMF took a -7.5% tumble from last week's full auction event. They didn't release the butter price this time. SMP fell -4.5% from last week and WMP fell -1.9%. But given the retreat of the NZD at the same time (-2.8%) the impact in local currency will be much less.

In the US, there was another good weekly jobs indicator from ADP for private payrolls, rising about what was expected.

And the flash US factory PMI for June shows solid growth, in fact its best in 4 years, but it also signals lower employment and elevated price inflation, so a mixed bag. The fall in factory jobs was the fastest since the pandemic. New order growth was good but the hikes in input prices are still next-level. Their service sector rose too but much more modestly and new order growth was tame,

But none of this showed up in the Richmond Fed's factory survey. While it did expand it was very modest and well below its May level and what was expected. They had the same lack-luster result in their service sector.

There was a well-supported US Treasury 2 year bond auction overnight, delivering a median yield of 4.14% (high 4.19%) which was well above the 4.02% median at the same event a month ago.

The Chicago Fed boss said yesterday the US inflation is too high and "going the wrong way". (He is presently an alternate FOMC member, but he will be a full member in 2027.)

Across the Pacific, Japan's factories are expanding solidly and faster. They recorded a stronger rise in business activity in June, but rate of cost inflation has hit a four-year high. New orders rose their fastest since 2022.

Singapore is managing to navigate the current global inflation pressures well. They recorded an inflation rate that held steady at 1.8% in May, unchanged for a third consecutive month