Episode Details

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Kia ora.

Welcome to Tuesday’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 Iran has decided to shift its policy from defensive to "fully offensive" due to the deadlock in efforts to agree a permanent end to its war with the United States, a senior Iranian official told Reuters overnight. Meanwhile, Trump has threatened to bomb Oman, a Gulf emirate and until recently an ally.

All this is unnerving bond markets with the yield on the US Treasury 30 year bond now at a 22 year high. And they aren't the only long bond yields to rise. Its a trend of higher money costs that is probably only getting started.

However domestically in the US, there have been two third-tier data items out today, and both somewhat positive. The NAHB home builder sentiment survey increased very slightly in August from its unusual July low. But it still remains lower than foir most of 2026 as the core affordability pressures haven't really gone away.

Meanwhile, the NY Fed's regional Empire factory survey was more positive in its August report with reporting strong current activity and new order flows stayed positive. Employment hardly changed however, and input cost increases rose fast again even if prices received eased.

Meanwhile, Canadian inflation was reported back at 3.0% for July, a bit higher than the 2.9% expected and possibly bringing a rate hike there back into play. Rising fuel prices are a key driver here.

Across the Pacific in Singapore, they reported very strong July export growth, up +24% from a year ago to a new all-time monthly July record of S$76 bln but not quite eclipsing their June levels. This is all based on the export of electronic equipment. Their big export destinations are the US, South Korea, Thailand, Taiwan and India. This exporting strength enabled them to post a very large trade surplus in July. (Imports from China were up, but nowhere near enough to account for the export gains overall. So this isn't a re-export story of the paranoid type.)

Japan reported a softer economic activity expansion in Q2-2026 than expected. Analysts had expected their GDP to grow by +2% and up from +1.9% in Q1. But the data released today only shows a +1.1% expansion. But today's data is preliminary and may well be revised higher.

Japanese industrial production rose +1.9% in June from May and exceeding the earli