More tariff own-goals signaled

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.

And today we lead with news US tariff threats are shifting from being aimed at trading 'partners' to a focus on commodities, today especially copper. Protection of favoured US business interests is the goal, cloaked in the labels of 'national security'.

But first up today, the overnight dairy Pulse auction delivered less change than expected, essentially holding on to the SMP and WMP prices at the prior week's full auction. But in the meantime the NZD has retreated so both delivered good gains in NZD, up +1.1% for SMP and up +3.1% for WMP.

The US retail impulse as measured by the Redbook survey delivered a very good +5.9% gain over the same week a year ago, but it should be noted that earlier base week was an unusual down one.

And the New York Fed's national survey of consumer inflation expectations returned to a 'normal' 3% in June, and a five month low. But some components remain a worry. Those surveyed thing food prices will rise 5.5%, rents will rise +9.1% and medical care by +9.3%

Meanwhile the NFIB Small Business Optimism Index for June was little changed at it long run level

The popular US Treasury three year bond auction delivered unchanged demand and little-change on the median yields achieved. Today that came in at 3.84%, whereas the equivalent event a month ago was at 3.92%.

US consumer debt grew a very modest +US$5 bln in May, half the expansion in April and well below the average for the past year. The slowdown was very acute for revolving debt, like credit cards.

In Canada, the widely-watched local PMI turned positive in June following two toughish months.

In Germany, both exports and imports were expected to decline in May from April, and they did, but by slightly more than was expected. But both remain higher than year ago levels.

In Australia, the widely watched NAB business sentiment survey picked up and that was a much better outcome than the contraction expected. In fact this June result for business conditions broke the mould of the long-running decline that started in June 2022.

That survey didn't point to anything special in terms of cost pressures. But those cost pressures clearly worried the RBA when it surprised financial markets with its no-change decision yesterday. The widely-expected rate cut didn't happen and so household budgets will have to wait for more relief. The RBA did pick up the resilience in t