Here's our summary of key economic events over the weekend that affect New Zealand, with news we are facing a new burst in inflation as commodity prices rise, oil and gold both are rising, and benchmark interest rates are stuck high waiting to see where these tea leaves settle.
Locally this week we will get June migration data, and inflation expectation updates. There also will be the July PMI update and probably the July REINZ results as well.
In Australia, look out for their NAB business sentiment update, but the key event will be the RBA's rate review on Tuesday even if no-change is expected or priced in. That is despite their CPI at 3.8% and running way above their target range of 2% to 3%, and showing little sign it will get back within range any time soon.
In the US, they will release their July CPI data too (expect 3.4%), their PPI (expect 5.5%) and another consumer sentiment update.
In China, we are awaiting their new yuan debt data which should come late this week and be another quite weak result (expect just +¥45 bln).
Over the weekend China released their CPI inflation data, revealing an annual inflation rate of just 0.5% in July, down from 1.0% in the previous month. Analysts had expected an 0.8% rate in July so this was their lowest level since January. Food prices dropped 1.5% year-on-year, following a 1.6% decline in the previous month and marking the fourth straight month it fell. But beef prices rose +4.5% and lamb prices by +6.2% in July from a year ago. Dairy product prices were -1.5% lower however.
Meanwhile, China’s producer prices rose +3.5% in July from a year ago, slowing from a 4.1% rise in June, and that is their steepest rise in nearly four years. The retreating pace is due to weaker commodity prices, softer domestic demand, and continued pressure from overcapacity. There is also intense price competition in some industries.
China’s exports surged almost +24% to US$398 bln in July in a better than expected result. The gains were driven by strong demand for AI-related technology products and a rush by manufacturers to ship goods to the US ahead of potential new tariffs. Outbound shipments to the US rose +17%, the EU by +16%, and to ASEAN nations by +38%.
And while China reported relatively stable foreign exchange reserves as at the end of July, they also reported that their official gold holdings rose +640,000 oz, almost +20 tonnes in one month. That is the most in a 21 month streak of gold buying.
Meanwhile Typhoon Dolphin is heading for the China coast after clipping Okinawa, due to strike south of Shanghai. It is a Cat 3 storm and over 1 mln people have been evacuated to safer ground.
Taiwanese exports stayed very high at US$75.3 bln, just off record levels, but as time rolls on with these high or record high levels, the year-on-year gains are fading. Still, they managed to report a +33% rise from a year ago, an unusually strong gain. And their trade surplus remained unusually large at +US$17.2 bln, up from +US$14.3 bln in July 2025.
Across the Pacific in the US economy, and even with Trump loyalists controlling the data agency, US non-farm payrolls were reported contracting in July, down -23,000 at the headline level when a very modest +80,000 was expected. That is their worst July result in at least a decade. And it get much worse if you look at actual data because payrolls shrank almost -1.1 mln in July from June before seasonal adjustment. This is the real number of people who lost employment in the month.
Their participation rate inched down while their jobless rate was little-changed at 4.1%.
US inflation expectations for one year ahead edged down to 3.6% in July from 3.7% in June which was the highest since September 2023. The July level is the new baseline since the US attacked Iran. Prior to that, this survey recorded about 3% for the prior two years. Earnings in the same survey are seen to rise +2.8%, so that continues to record an underwater expectation for household finances.
US consumer debt levels rose +3.3% in June with revolving credit rising +6.0% on the same basis as both credit card debt and car loans rising sharply. Student loans recorded an unusual fall.
A weakening labour market and both stubbornly high inflation and inflation expectations will complicate the discussions in Warsh's Fed meetings. Do they cut, hold or raise. There are probably votes for all three options. Markets currently price in half a chance of a +25 bps hike in September. And Trump is back trying to screw the scrum.
There was quite the contrast in Canada with them reporting their employment rose +75,100 in July from June. It will have been a very long time since they had a gain that exceeded their southern neighbour. Their jobless rate fell to 6.4% and a two year low while their participation rate inched up.
Bird flu is spreading in Australia, even if the number of reported cases is still quite minor. There is no way to properly track it, and by the time reports are received, infection is well established.
The UST 10yr yield is now just on 4.66%, up +2 bps from this time Saturday but down -8 bps for the week. The 30 year yield is at 5.21% and unchanged from Saturday. The key 2-10 yield curve is now at +45 bps (unchanged). Their 1-5 curve is now at +36 bps (+1 bp) and the 3 mth-10yr curve is at +96 bps (unchanged). The China 10 year bond rate is little-changed at 1.70%. The Japanese 10 year bond yield is now at 2.80%, up +1 bp, little-changed for the week. The Australian 10 year bond yield starts today at 4.99%, up +2 bps from Saturday and for the week. The NZ Government 10 year bond rate is at 4.74%, unchanged from Saturday, up +4 bps for the week.
The price of gold has risen to US$4343/oz, up +US$6 from Saturday, up +US$293 or +7% from a week ago. Silver has held little-changed at just over US$63.50/oz. That is up +US$5.50/oz for the week or a +9.5% gain.
Oil prices are unchanged from yesterday and still just over US$78/bbl in the US, while the international Brent price is still just on US$83.50/bbl, A week ago these prices were US$84.50 and US$88/bbl respectively. Hormuz transits are still very constrained. There have been only three crude tanker and 6 cargo ship exiting over the past 24 hours (3 dark with transponders off) and eight entering for new loads (3 dark), again all Iran-linked. The Red Sea activity is still low with just 20 either way at the Yemen chokepoint.
The Kiwi dollar is unchanged from Saturday at just over 58.9 USc, making it unchanged for the week. Against the Aussie we are little-changed at 83.4 AUc. Against the euro we have held at 51 euro cents. That all means our TWI-5 starts today at 62.6 which is up a bit less than +10 bps from this time Saturday essentially unchanged for the week.
The bitcoin price starts today at US$65,151 and up +0.6% from this time Saturday, up +3.3% from last week. Volatility over the past 24 hours has been very low however at just on +/-0.3%.
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34 Comments
Six paragraphs dedicated to China all of which despite two major conflicts entangling two other major world powers, Trump tariffs and turbulence, and typhoon season , it is largely business as usual then isn’t it. Along the lines of Napoleon then - no need to interfere when the others are doing all the damage unto themselves.
Nixon should have listened to Napoleon: 'China is a sleeping giant; let her sleep.'
But Growth...
"CHINA REVEALS WEAKNESSES BUILDING"
Does this headline fit the reality? - Or is this simply Western financial media framing devoid of context?
Isn't it curious that when Western nations experience low inflation, it is often celebrated as "cooling" or "stabilising" - yet when China experiences it, headlines frequently frame it as an impending systemic crisis or "weakness."
Shouldn't low, or even negative inflation data, be viewed as a success in its context within a market economy where the banking sector is run as a credit-based public utility, and in a heavily dominant savings-oriented culture where high societal saving rates are an integral component of this economic ecosystem?
In a unique macroeconomic model where banking operates as a credit-based public utility, consumer culture prioritises saving, and state-backed investments drive growth, low inflation can indeed be viewed as a structural success rather than a failure.
In this model, inflation directly prevents cost-of-living crises, aligning with state goals of shared prosperity and social cohesion.
As an economic ecosystem viewed in its proper context, low inflation can deliver several major advantages:
(i) To reserve the Purchasing Power of Savers: In a heavily savings-oriented culture, inflation is a hidden tax that erodes wealth. Keeping inflation near 0% ensures that citizens' hard-earned bank deposits maintain their real value over decades.
(ii) Public Utilities Do Not Need "Profit-Driven" Inflation: In Western economies, central banks target 2% inflation to force consumers to spend and corporations to chase yield. When the banking sector is run as a public utility to fund national infrastructure and strategic industries, it does not rely on consumer price inflation to generate commercial banking profits.
(iii) Low Cost of Production: Low consumer price index (CPI) and stable producer prices (PPI) mean the cost of input materials, energy, and labor remains highly competitive. This allows the country to remain a dominant global manufacturing powerhouse.
(iv) Social Stability: For a large population, affordable food, housing, and basic goods are paramount. Low inflation directly prevents cost-of-living crises, aligning with state goals of shared prosperity and social cohesion.
CUTTING TO THE CHASE
This headline, IMO, highlights a major blind spot in Western economic commentary.
In an ecosystem structured around state-directed credit, high domestic savings, and production rather than debt-fueled consumption, low inflation is a feature, not a bug.
It protects the population's wealth and lowers industrial costs.
Great question.
The answer? It is attempting to fit reality to falsehood; an ever-widening gap.
Western 'economics' avoided the realities - that we plunder others, repress others - including all future others. Most economic commentators are subserviently needing of the system's continuance - hence DC's headline.
In actual fact, China has the ability to make stuff. Increasingly, the West doesn't. The fact that 'economic' measurement criteria don't capture that difference - and GDP most certainly doesn't - we will carry that blindness. With consequences, most arriving in blindside fashion.
Every now and then PDK, I daydream about where humanity could be today if only the ~$40 trillion that the US squandered on prosecuting wars (and that figure doesn't even include the trillions that the rest of the Western World blows), instead was allocated to global societal betterment, rather than to devising ever more resourceful ways of killing one another - such a thoroughly novel idea.
This sort of coin could completely transform human society and potentially solve systemic clean energy deficits, eliminate extreme poverty, and regenerate damaged ecosystems on a planetary scale.
Improving the Human Condition Global Healthcare: Funding universal health infrastructure, eradicating preventable diseases, and expanding advanced biomedical research.
Education and Equity: Upgrading worldwide digital learning networks, eliminating student debt, and building high-tech schools in underserved regions.
Poverty Alleviation: Implementing long-term economic safety nets and scalable housing programs to lift billions out of destitution.
Environmental Restoration Clean Energy Transition: Building next-generation solar, wind, advanced geothermal, and fusion energy grids to replace much of the oil industry.
Ecosystem Recovery: Reforestation (of the right kind), ocean cleanup initiatives, and active restoration of collapsed biodiversity zones.
Resource Conservation and Efficiency Water Security: Expanding energy-efficient desalination plants, advanced wastewater recycling.
Automating zero-waste recycling infrastructure and material science innovations to eliminate single-use plastics and rare-earth mineral dependencies.
Plus, plus, plus... lots of other things that I have missed.
"societal betterment, rather than to devising ever more resourceful ways of killing one another"
Yeah, but that requires universal cooperation. History is replete with empire builders theiving the resources of their neighbours. It's always been a successful strategy. It's human nature both at community and international level, and you're not going to change that with wishful thinking.
Plus which, poverty isn't lack of access to money.
It's a lack of access to real stuff - resources and energy.
Which is why we fight.
So 'allocating money' isn't the answer. You are well on the way, but you need to read up on the Limits to Growth.
“I know not with what weapons WW3 will be fought, But WW4 will be fought with sticks and stones.” A. Einstein
"You can take the man out of the cave, but you can't take the cave out of the man" P. 08 AFAIK? :-)
This whole neoliberal globalisation thing at it's core has been an experiment in tempering basic human aggression instincts. Controlled greed. Ironic it should ultimately be the accelerant for unleashing the final global resource grab.
But Colin, if Friedman didn’t pronounce it, it must be the wrong economic system. If you were to compare the quality of life in say Shanghai or New York, the transport, the public health, housing, the vibrancy of the city, education systems, surely you wouldn’t choose Shanghai? Jokes aside, the USA is still after 100+ years seen as a place where hard work can get you riches, while there is the “lie flat “ theme in China that I don’t see in the US. I am not sure that I would want to be young and poor in either country if I could choose to live in this part of the world. But that country is probably Aus now. Sad.
Great post Colin
The problem being you (we) have multiple currencies needing to interact through necessity of system predominantly directed by the whim of one dominant....changing the dominant dosnt solve the problem, when as PDK notes , the system itself is unsustainable.
"changing the dominant doesnt solve the problem,"
Are you are still completely determined to miss the entire point of multipolarity, Frank?
When the fiat experiment implodes, along with the final rendition of a hugely dominant reserve currency - one that doubles as the overwhelming reserve/default currency, it will no longer be a question of "dominant" financial hegemony, and/or might is right..
Globally, sovereign reserve portfolios will diversify into the hard-backed currencies of their trading partners, multiple durable commodities, and PMs.
I am determined to observe that the human world has never been the utopia you believe thwarted ...as Palmtree notes above, it requires universal cooperation and we know that is fleeting even when circumstances demand it.
A beginning absolutely does not "require universal cooperation", Frank.
That is precisely the default cop-out attitude that helps sustain the disastrous status quo for-ever-war model, and why humanity is still obsessed with spending $ trillions killing one another in reckless abandon.
All this really requires is for a few governments to engage half a brain between them, and then invoke/demonstrate the model.
There are already a few doing this - I'm hoping its very catchy.
It dosnt require universal cooperation if you are willing to remove yourself from the global trading system....you may be willing, but what of everyone else?
"Frank, you’re missing the shift that is already happening right under our noses.
This isn't about isolated, autarkic states cutting themselves off from global trade; it’s about the massive growth of bilateral trade in local currencies.
Look at the expanding BRICS bloc. When major economic powerhouses choose to settle accounts in yuan, rupees, or rubles, they aren't 'removing themselves' from the global system - they are rewriting the plumbing.
They still trade globally, but they no longer rely exclusively on the Western financial casino architecture that is already crumbling.
The rest of the world won't need to be dragged into it by 'universal cooperation'; they will willingly follow the path of least resistance when they see it offers cheaper transaction costs and immunity from unilateral sanctions.
It's not isolation - it's diversification."
And i say it is (may be, if it occurs) simply a transition from one hegemon to another....the hopes are always to the fore when seeking to encourage adoption....as said, 'fleeting'
I repeat...
"Are you are still completely determined to miss the entire point of multipolarity, Frank?"
In fact it appears that you don't understand the meaning of the term.
Multipolarity under a expanded BRICS framework is the polar opposite of Western hegemony, because it replaces a centralised, rule-making hierarchy with a decentralised, rule-negotiating network.
Hegemony: Concentrates global financial, military, and political decision-making within a single dominant superpower or tightly aligned bloc (the G7)
Multipolarity: Distributes global authority among several regional powers, ensuring no single nation dictates global terms.
Hegemony: Relies on a 'rules-based international order' (sic), where rules are authored by Western institutions like the IMF, World Bank, and G7 to suit their own foreverwar agenda.
Multipolarity: Advocates for strict adherence to international law via the United Nations (which needs to be reinvented anyway), where diverse civilizations negotiate rules collectively.
Hegemony: Weaponizes the US dollar and Western financial plumbing (like SWIFT) to enforce compliance via economic sanctions.
Multipolarity: Builds parallel financial infrastructure, drives de-dollarization, and promotes local currencies through institutions like the New Development Bank.
Hegemony: Conditions economic aid and political alliances on internal governance structures, promoting Western-style liberal democracy.
Multipolarity: Champions "civilizational diversity," meaning nations respect each other's internal political systems without interference or moral conditioning.
I'm done trying to spell these obvious distinctions out for you, Frank.
The floor is your's - you can have the last word.
Your trust in a label is ...something.
The BRICs reserve currency is weighted , the access is governed, the adoption to date a hedge, but largely unused, there is dispute even at this early stage as to its goals/memebership....and it has yet to be tested which is when national (or personal) interests determine actions....I will observe that the stated goals and mechanism of previous systems always read well also. Multipolar?...in name certainly.
Go figure
Great post.
And then you have us, and MSM headlines like this..."You have decent equity in your house. Here's what you could do with that paper wealth".
It's no wonder we are in as much financial, social and economic trouble as we are.
Better they put the likes of: If you have firewood aplenty, and you needn't be cold this winter. At least it would relate more to something tangible and real for people to engage with.
Election issues: tax. Why is it that “no new taxes “ still has any credibility in our country, which is plainly failing? Failing…our kids are leaving and so are their parents, the queue for a public CT scan in Auckland is over a year, power price rises 177%, causing the closure of high power use businesses such as the timber processing in Northland, infrastructure cost blowouts and delays, Dunedin Hospital, policies that have directly lead to poor productivity, are you still with me? More of the same failed policies will probably kill the patient! Why are we enabling the politicians to chant this rubbish?
" Why are we enabling the politicians to chant this rubbish?"
Because the capacity to chant rubbish is a KPI for political success
Slowlearner, you said... "More of the same failed policies will probably kill the patient! Why are we enabling the politicians to chant this rubbish?
100% - as an economy we are so eyebrows deep into the status quo debt-doom-loop, that it is beyond tax policy reform to turn this train around, although a very moderate FTT tax would help to remove some of the burden from the real economy.
Our situation won't be saved short of complete reform in the way we create money. As long a we continue to embrace the fiat-casino-Ponzi model, and commercial banks have this 97% monopoly on debt-based money creation, allowing them to make-off with hundreds of billions of dollars of unearned economic rent, nothing of consequence will change.
Notice that only ~2 months out from the election, and not a single political party regards this issue as even a blip on the radar. This attitude will only change when the entire Western fiat debacle goes tits up.... which, BTW, is a mathematical certainty.
Bottom line is they don't have to tax to spend. The Government can fully fund the Health system if they want to. But I also wonder if part of the problem lies in the Ministry and not the funding model.
In part they're still dancing around with old paradigms calling the tune. Having said that the debate is important. At least it was cross party.
Agreed. Few realise that Julie Anne Genter is of the past.
And she's a mile ahead of that Leggett fellow - I presume this is the transport hustler and water-leaker of old?
I never really get what people mean when they say this.
The health system requires the expenditure of resources. Those resources have to be collected from the populace. In tax revenue, rents, devaluing their money.... whatever else. There's no "one weird trick", it's just a different method of achieving the same thing. Transfers.
No, you just changed the accounting in mid-post.
Resources ARE NOT MONEY.
so forward budgeting in $$$ becomes non-underwritten at some point due to depletion.
That is where we are, now.
I should have made it clearer, the resources need to be collected from the population. In hours of labour, energy, goats, chickens, magic beans, or their as is the case now, an abstraction of that in the form of money.
Sure. But we have this paralysis of thought, no new / more taxes. Why do politicians talk about magic beans, and why do we allow them to mislead. As you say, it is the resources, hospital appointments, road repairs, whatever…what they are not saying is “to pay down the debt, which I as your PM say is the key goal of my administration, I will make the hospital wait times longer and the pot holes deeper “
Bottom line is they don't have to tax to spend. The Government can fully fund the Health system if they want to.
That's an oxymoron there Murray, but as we know, tax is simply deleting new money, so the solution isn't having generation after generation having less and less tax or the system implodes via increasing deficit spending and interest on said debt. The more people understand this across NZ, and accept that those born after WWII lived a lifetime that will not be repeated again, the sooner we will come to practical solutions that will benefit the majority. Increased taxation will be needed by necessity, as we cannot export enough to outweigh the needs of infrastructure, healthcare, pension spend etc.
The other thing needing addressing is skills in NZ. So many have left and still more going, while we, like the UK rely on immigration to plug gaps which only helps us in the short term, and leaves us worse off longer term if we do not invest in the skills necessary to function as a society down the long term.
Int, you've taken a step too far. I didn't just say "they don't have to tax", there's a bit added to that, that you've chosen to ignore; "to spend". They do need to tax, and the reason is essentially what you laid out; they need to manage the total amount of money in the economy. The purpose of taxation changes and therefore how it is applied. Taxing the low and middle income people I would suggest actually harms the economy, not supports it.
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