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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 we head into the final week of the northern holiday season with financial markets reacting to tough news on multiple fronts.

US missteps are catching up with them and that is driving higher interest rates and a lower USD, both a which involve an economic squeeze. Then there is the collapse the US-Canada trade relations which has pushed Canada to matching the new US tariffs. This will hurt both countries, Canada as expected, but the US more than they realise. Carney has brought back the Trudeau response, and this time Canadians have rallied around that reaction. Some significant parts of the US are going to get much higher prices. And as Canada supplies the most of its imported oil and gas, if Canada adds tariffs there, the impact on the US will be magnified.

All this will be grist for the Jackson Hole symposium which will be on from Friday to Sunday (NZT). There will be some worried central bankers showing up, and that probably includes Kevin Warsh, likely feeling undermined by Scott Bessent.

The outlook on global interest rates and long-term sovereign yields will again be a key focus this week as investors grapple with rising energy prices, increasing deficit spending, and soaring corporate debt. In the US it will be about personal income and spending, PCE inflation, and durable goods data for July, in addition to the key annual revision to nonfarm payrolls.

Japan will release consumer confidence survey results and its jobless rate, while rate decisions are due in Korea and Thailand which are widely expected to keep their policy rates unchanged at 1% and 2.75%, respectively, while the Philippine central bank could deliver a +25 bps rate hike to 5% as the country continues to face elevated energy and food prices alongside recent wage increases.

Locally it will be about Q2-2026 retail trade outcomes and current employment indicators, some mortgage and KiwiSaver data, and the week will end with the June update to the RBNZ's Dashboard.

And in Australia, investors will watch July inflation data where an easing from 3.8% to 3.2% is expected. And Q2 capital expenditure and household spending figures will also drop this week

In China, investors will focus on the National People's Congress Standing Committee meeting in Beijing from August 25-28, where authorities could signal additional policy support following a string of weak economic data. They will also release July industrial profit results.

Over the weekend, China reported US$11.1 bln in foreign direct investment in July, which was half the US$22.8 bln in July 2025. Year to date, their foreign direct investment is running -8.8% lower than in the same period a year ago.

And also over the weekend China

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