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Kia ora.

Welcome to Friday’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 financial markets are awaiting a Kevin Warsh speech at the Jackson Hole symposium, specifically about how he sees the Fed's role when the US Treasury seems to be undermining it. What he says about the fight against inflation, if anything, will be revealing. This has markets hesitating today in anticipation. Although, equity markets are bullish off the strong Nvidia results.

US initial jobless claims fell marginally last week, and by marginally more than seasonal factors would have anticipated. There are now 1.78 mln people on these benefits, little different to a week ago but -7.5% less than a year ago.

The US merchandise trade deficit has come in at -US$119 bln in July, up US$17.4 bln from unusually high -US$101 bln in June and the -US$101 bln in the same month in 2025. Apart from the rush to beat upcoming tariffs just after Trump took office in early 2025, this latest result is a record high. Americans seem happy to pay these tariffs to get the products they need. Exports fell from June while imports rose on the same basis.

At the same time, the stockpiling trend seems to be gathering pace. US retail inventories rose in July as did wholesale inventories and both at an unexpectedly faster pace. Both are now at record high levels. Retail inventories are +3.9% higher than year ago levels now, with wholesale inventories up +5.6% on that basis. There could be an unwelcome reckoning if firms come to decide they are over-stocked. History shows their boardrooms are usually unhappy with excessive stocks.

Meanwhile the Kansas City Fed factory survey shows this with a little-changed report that is holding its expansion. New order levels are similar to last month but are falling for export orders. Input costs are rising faster than selling prices.

There was a US Treasury 7 year bond auction earlier today where the median yield came in at 4.46% (4.51% high). That is more costly that the prior equivalent event a month ago.

In Canada, they reported a surprise current account surplus of +C$8.8 bln in Q2-2026 from a deficit of -C$8.3 bln in the prior quarter and an expected -C$2 bln deficit. It is their first quarterly surplus since the 2022 and the largest since 2005.

Across the Pacific, China said it’s industrial profits rose more than +11% in July from the same month a year earlier. As good as that is, it was the softest pace this year.

The Bank of Korea has

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