Breakfast briefing: American SMEs hit hard

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.

And today we lead with news financial markets are absorbing some conflicting American data, and moving sideways today, with the USD easing.

There were two services PMIs for the giant US economy out today. The ISM version edged up slightly for November, notable because it was expected to edge down. And the result is the best in nine months for this metric. The continued expansion in both business activity and new orders drove this outcome. Similarly, the S&P Global version for the US service sector reported an expansion although less than in October. Both surveys noted high embedded inflation however.

US industrial production rose +0.1% in September from August, following a downwardly revised -0.3% drop in August. This means from a year ago, American industrial production is up +1.6%. Better than a decline but nothing like how the tariff-effects were sold. This activity was far better in the Obama years.

But the ADP private sector payrolls report for November brought tough news. Businesses cut -32,000 jobs in November, following an upwardly revised +47,000 gain in October. Analysts were expecting this report to show a +10,000 rise based on ADP's weekly reporting. It is the biggest decline in payrolls since March 2023, led by a -120,000 drop at small businesses. We won't get the official non-farm payrolls report for November until December 17 (NZT), in its delayed restart.

And the volume of mortgage applications in the US fell by -1.4% from the previous week in the last week of November to the lowest level in nearly three months. And that happened even though the key mortgage rates fell to a four week low.

US vehicle sales were modest in November. They rose from October to 15.6 mln units but that is a long way down from the 16.7 mln in November 2024.

Across the Pacific in China, their services sector continues to expand, driven by a sustained increase in new business, though the expansion slowed since October.

China's local government debt continues to balloon as the lingering real estate slump has led to decreased income from property sales, pushing local government bond issuance for the year to a record high. The total owed by local governments and the local government financing vehicles that fund their projects now sits at a remarkable ¥134 tln (NZ$33 tln).

In the EU, producer prices were little changed in October from September, but from a year ago they have dipped -0.2%. So no inflation pressures from this direction.

In Australia, their economy grew less than expected in Q3-2025. Economic activity expanded +0.4% from the June quarter. Markets had expected a +0.7% expansion as it had in Q2-2025. Still, it was the 16th straight quarter of expansion. On a yearly basis, their GDP rose +2.1%, less than forecasts of +2.2% and after a +2.0% growth in Q2.

The UST 10yr yield is now at 4.07%, down -3 bps from this time yesterday.

The price of gold will start today at US$4218/oz, and up +US$32 from yesterday.

American oil prices are +50 USc firmer at just over US$59/bbl, while the international Brent price is now at just under US$663/bbl.

The Kiwi dollar is up +40 bps from yesterday, still at ju