Episode Details

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Kia ora.

Welcome to Wednesday’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 that although the Strait of Hormuz is essentially shut again, alternate flows of crude oil are starting to ramp up. And benchmark bond yields have eased back today.

But first, the overnight dairy auction was a full one and prices rose +1.2% in USD terms, up +3.6% in NZD terms from the prior full event three weeks ago. SMP starred again, up +4.3% while WMP was up +1.2%. But the milk fats were all lower with butter dipping slightly, butter down -1.1%, cheddar down +3.9% and mozzarella down -3.9%. However the overall result is likely enough to confirm Fonterra's recent raising of its payout forecasts.

In the US, the weekly ADP Employment pulse report recorded a 23,750 rise, continuing a trend that started in mid-August.

Meanwhile the US logistics industry has issues. Their LMI rose in September to its second-highest reading in four years, behind only June’s level. It is being driven by high and rising inventory levels and inventory costs. Transport costs are surging. Supply chain pressure is not easing.

We have reported US merchandise trade data for August before, but the same data is now out including services, and that has a similar negative result - a monster US$105.6 bln monthly deficit, worse than in any pandemic month, and only exceeded by the pre-tariff rush in 2025. So after the new tariff levels were introduced - the situation is worse.

However, the optimism survey by RCM/TIPP is marginally better in October than for September. But it remains well below 2025 levels, and those themselves were lower than pre-pandemic levels. Investors are much more optimistic now than non-investors.

Canada is reporting a wider trade surplus in August, in fact its best result since 2022. Interestingly, its surplus with the US is particularly strong.

In Asia, the World Bank has updated its growth forecasts, noting that many countries in the region are getting a very sharp boost from the AI adoption investment. China seems to be excluded from that growth pulse although the eased the rate of growth decline in this latest assessment for China, seeing a +4.3% expansion in 2027, +4.2% in 2028. Indonesia, Vietnam, Malaysia and the Philippines will all do better than China, they say. And of course the World Bank ignores Taiwan at China's insistence and they will do better as well. (Not doing well are the Pacific Islands, unfortunately, lumbered with high fuel costs and without the electronics industry.)

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