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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