Episode Details

Kia ora.

Welcome to Monday’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 clashes in the Strait of Hormuz are unstitching the uneasy ceasefire and giving credence to sceptics who saw the 'truce deal' between the US and Iran as superficial and flawed. The US believes its own propaganda, thinking it is negotiating from strength, but no-one else does, least of all Iran. US allies in the region are starting to realise the US will throw them under the bus for its own ends.

Tankers (6), bulk cargo vessels (6) and other ships (4) are exiting the region, but most tankers are are heading to China, or in the Russian shadow fleet. Those who need insurance are holding back.

But first, this week will feature the usual monthly real estate update releases later in the week, including for building consents. Plus the big end-of-month data dump from the RBNZ.

In Australia, the focus will be similar where we will be looking for early signs of housing market reactions from their new Budget settings.

Elsewhere there will be important PMI updates from everywhere to give us indicators. In the US, their July 4 public holiday will happen on July 3 this year, so it will be a compressed week of labour market data there culminating in an early release of their June non-farm payrolls report when a +114,000 change is expected.

In China, they say artificial intelligence is reshaping the global labour market not by triggering mass layoffs of existing workers but by causing employers to pull back on hirings for new, entry-level positions.

China also reported industrial profits are recovering, up +21% in May from a year ago to ¥3.1 tln, and faster than the +18.8% rise for the first five months. The latest result reflects the ongoing AI investment boom and continued policy support for advanced industries despite lingering weakness in parts of the property-related sector.

In the EU, an ECB survey revealed that median year-ahead inflation expectations eased to 3.5% in May, the lowest level in three months, down from 4.0% in each of the previous two months which were the highest readings since 2023. Longer-term inflation expectations were steady, at 2.9% for three years ahead. Consumers also expect house prices to rise by 3.6% over the next year, slightly below 3.7% in April. Expectations for mortgage interest rates were unchanged at 4.9%.

According to the World Meteorological Organization they are saying the severe heat dome over Europe is expected to continue affecting much of Western, Central, and Southern Europe over the next two weeks. There are likely to be economic impacts soon, and as the summer progresses these impacts may well affect economic activity in a material way.

And the Bank of International Settlements said over the weekend global pressures from rising public debt to financial fragilities, and questions about the sustainability of the AI boom, are increasing systemic financial risks which they suspect could end in a bust. They warned of a complex mix