Episode Details

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Kia ora.

Welcome to Thursday’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 the bond market warnings don't seem to be being taken seriously by policy makers. They are ignoring them at their peril.

US mortgage applications fell sharply again last week as their benchmark 30 year home loan rate rose to 7.30% and a three year high.

However, after three months of slowdown, the precursor ADP employment report showed a +90,000 gain for private sector jobs. In a longer perspective this level is modest, but it is much better than recent outcomes. Saturday's non-farm payrolls are now expected to deliver a similar gain but that will be sharply less than the August one (one you may recall that was received with deep scepticism).

The third and final estimate of Q2-2026 US GDP growth came in at a +2.2% rate, down from the +2.5% rate in Q1-2025. But it was an upward revision from their second Q2-2026 estimate so it has had a positive impact on market views. Higher consumer spending, and more from the data center buildout activity were the main reasons for the upgrade.

Meanwhile, the August PCE inflation metric came in at 3.4% which was little-changed from July and lower than expected. Personal disposable incomes rose +4.8% in August from a year ago while personal consumption expenditures rose +6.1%. The bond market seems sceptical of this data as the softer-than-expected inflation number had no effect stopping the US Treasury yields rising.

The Chicago PMI bounced back in September after the August disappointment, back to levels it has had for most of 2026.

US crude oil stocks rose modestly last week when a small fall was anticipated. (There is no update on their Strategic Reserve holdings.)

The US booked a very elevated merchandise trade deficit in August of -US$132.6 bln and far above the high -$115 bln expected. Clearly the Trump tariff strategies are failing to restrain trade. Exports were up almost +14% (mostly aircraft) but imports surged +28% from the same month in 2025 (mostly data center goods). 

China said both its official facto