Episode Details

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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 bond prices and equity prices are falling as oil prices have jumped, and markets now see a much larger chance the US Fed will have to raise rates when it meets on Thursday next week (NZT). Bond yields have jumped today in an outsized shift. Inflation risks are mounting everywhere now.

Copper, silver and gold prices are sliding today.

Adding to anxiety, Iran-backed Houthis have seized another Red Sea port is a defeat for Saudi Arabia, putting more pressure on the Red Sea shipping lanes.

And in the US, at a sparsely attended 'convention', Trump has added to his cash promises to American voters if they keep a Republican Congress after the November elections that now exceed US$1 tln.

In the US, producer prices rose in August more than expected and more than in July. They were up +5.4% from a year ago, faster than the July +4.8% rise. Clearly inflation is embedding in the US economy and is likely to spill out to consumer prices very soon - though the risks of that for their service economy seem much less.

US fuel prices have risen sharply too with diesel now almost averaging US$6/bal, petrol up at US$4.27/gal. These are both quite big rises just from yesterday.

US initial jobless claims rose last week to 176,500, about what seasonal factors would have indicated. There are now 1.675 mln people on these benefits, much lower than last week as qualification standards bite very much harder now.

US crude oil stocks fell again last week but by less than expected and by less than the prior week.

US existing home sales fell -2% in August to under a 4 mln annual rate. Unsold inventories rose. These dynamics are unlikely to get better because benchmark mortgage rates are about to jump.

After declining for all of 2026, the US inventory-to-sales ratio jumped unexpectedly in July with wholesale inventories up +1.3% from June to be +5.7% higher than year-ago levels.

So it will be no surprise to know that the median yield for today's US 30yr bond auction rose to 5.25% (hi 5.31%), from 5.15% at the prior equivalent event a month ago.

As expected, the European Central Bank raised its policy rate by +25 bps to 2.65% saying that they expect inflation to be elevated and this required pushback.

Australian inflation expectations have remained unchanged at 4.9% in September as they were in August. Tha