ofInterestNZ

'Strategy' beating 'firepower'

Shutterstock Track 1219389 Monetization ID TFGEPGEI0LHEIJAI Kia ora. Welcome to Monday’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 the Hormuz Strait is effectively shut again with Iran's 'strategy' winning against the US 'firepower'. It is hard to think of any other politician trashing their advantage perceptions so completely. There will be long historical echoes from all this ineffective breast-beating. But elsewhere and locally, this week will bring updates to our migration and travel data, indicators of June retail activity, and early signals of June inflation. We will also get an look at business sentiment, and likely get the June REINZ update. In Australia, they will chime in with their June labour market updates, after updates for consumer and business sentiment. In the US, apart from Trump's wars, investors will turn their attention to the Q2 earnings season, and a steady stream on important economic data that includes their CPI, retail sales and consumer sentiment updates. Fed boss Warsh will be briefing Congress and that will be interesting too, especially about his views on 'reform'. Canada will be reviewing their central bank's policy rate this week, although no change from the 2.25% is anticipated In Japan, it will be about machinery orders and industrial production with eyes also firmly focused on their currency - which will also impact their fast-rising interest rates. In China, it will be a busy week of June economic data releases including for trade, and debt, and highlighted by their Q2-2026 GDP growth rate. Over the weekend, in the fiercely competitive Chinese car market, they reported (http://www.caam.org.cn/) 2.8 mln vehicle sales in June which was somewhat unexpected because a dip from May was anticipated. But it is a -3% dip from year-ago June sales levels. That pushes their twelve month sales to 33.8 mln units, up from 33.0 mln in the prior equivalent year. Car exports rose above 1 mln units in June, the first time that level has been achieved as it floods global markets. It is storm season in China again, and severe flooding has hit a number of regions, enough to concentrate minds in Beijing. Elsewhere, China has banned the export of helium. Actually, the re-export of helium because it gets most of it from Russia. The Middle East conflict has restricted supply from there, and tech users in Europe and Asia are now in a tough spot, as are medical users everywhere. China is conserving its Russian imports for its own tech industry Japan is reporting (https://www.boj.or.jp/statistics/pi/cgpi_release/cgpi2606.pdf) that their producer prices rose +7.1% in June from a year ago, accelerating from an upwardly revised +6.6% increase in May and above market expectations of a +6.8% gain. It is the fastest annual increase since March 2023. Higher energy prices following supply chain disruptions linked to the war in Iran are driving this, of course. And Japan’s finance minister said (https://www.youtube.com/watch?v=HsKygo9sX6Q) they want to steer their state pension funds to "substantially" increase investments in domestic assets. This brought a sharp immediate reaction in both their currency and bond markets, due to the expected size of the shift. The yen gained, or at least it halted its fall, and their bond yields fell sharply (see below). Elsewhere, in the US initial jobless claims rose (https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20261188.pdf) by +224,500 and about what seasonal factors can account for. There are now 1.767 mln people on these benefits, less than year-ago levels. After the good May rebound, existing home sales (https://www.nar.realtor/newsroom/nar-existing-home-sales-report-shows-2-4-decrease-in-june) in the US fell back to average levels, and to levels lower than a year ago. The median price is up only +1.8% from a year ago. That modest rise is less than income growth, so overall affordability is getting a chance to recover there. On Wall Street, South Korean computer chip maker SK Hynix has raised US$26.5 bln in its New York IPO, the largest ever listing by a foreign firm in the US. SK Hynix is a key supplier to AI chip giant Nvidia. In Canada, their payrolls rose a minor +18,200 in June, slightly better than the expected +10,000, and holding on to the +88,000 gain in May. The June gain was all about a strong rise in the private sector (+32,000) which consolidated the good May private sector rise (+56,000). But most of the net June gain was from part-time employment. These positive shifts in June may have something to do with hiring for the football World Cup events. Global container freight rates (https://www.drewry.co.uk/supply-chain-advisors/supply-chain-expertise/world-container-index-assessed-by-drewry) rose another +2% last w...