Searching for an off-ramp

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 the Americans are talking up apparent signals from Tehran that will allow them to declare victory and go home. Markets are taking all this at face-value. But first today, there was a dairy Pulse auction (https://www.globaldairytrade.info/en/gdt-pulse-results/) overnight where prices dipped from the prior week with WMP down -1.5%, SMP down -1.9%, and butter down -6.8%. Results in NZD limited these USD drops. In the US, the Conference Board's survey of consumer sentiment (https://www.conference-board.org/topics/consumer-confidence/) rose marginally in March from its recent lows. That was despite surging inflation expectations, now well over 5%, and a continuing decline in consumers' future expectations. Meanwhile, US job openings (https://www.bls.gov/news.release/jolts.nr0.htm) in February retreated and by a bit more than expected. Quits fell too as job security fears rose. Hiring decreased. The Chicago Business Barometer (https://www.mnimarkets.com/articles/chicago-business-barometertm-tempered-to-528-in-march-1774964700749) fell in March but from a near four-year high in February but the dip wasn't anticipated. Still, it is the third consecutive month of growth in Chicago's economic activity, rare since 2022, though the pace of expansion slowed significantly. New orders and output continued to grow, but at a slower pace, while jobs decreased. However the Dallas Fed services PMI (https://www.dallasfed.org/research/surveys/tssos/2026/2603#tab-results) took quite a tumble to its steepest contraction in almost a year, and a big retreat from February for both their activity and outlook measures. Costs there are rising much faster than prices. The US is getting no relief from petrol and diesel prices (https://gasprices.aaa.com/) , as they hit another high milestone. The gap between WTI and Brent is unusually narrow at present. In Canada, and perhaps unexpectedly. they reported (https://www150.statcan.gc.ca/n1/daily-quotidien/260331/dq260331a-eng.htm) a small expansion in economic activity in January from December (+0.1%) and a slightly faster expansion in February from January (-0.2%). In the face of the threats and bullying from their obnoxious southern neighbour, this is resilience that few expected. In China, major property developer Vanke posted (https://www1.hkexnews.hk/listedco/listconews/sehk/2026/0331/2026033104113.pdf) an enormous loss for 2025, and said it is facing a wall of funding maturities. Vanke has survived because of Shenzhen government ownership support, although that is being dialled back too. Meanwhile, China reported better than expected industrial expansions, in their case for their official March factory PMI (https://www.stats.gov.cn/sj/zxfbhjd/202603/t20260331_1962889.html) . And their services PMI (https://www.stats.gov.cn/sj/zxfbhjd/202603/t20260331_1962889.html) also recorded improvement into expansion, again unexpected. Typically these official surveys have been more pessimistic than the unofficial ones from S&P Global, which won't be released for March until later today. They too are expected to record expansion. Japanese data for industrial production (https://www.meti.go.jp/statistics/tyo/iip/result-1.html) and retail sales (https://www.meti.go.jp/statistics/tyo/syoudou/result/sokuho_1.html) , both for February, sagged and by a bit morte than anticipated. In Korea, they reported industrial production (https://mods.go.kr/board.es?mid=a10301010000&bid=216&list_no=444295&act=view&mainXml=Y) data that was surprisingly weak in February. Global air passenger travel rose (https://www.iata.org/en/iata-repository/publications/economic-reports/air-passenger-market-analysis-february-2026/) a strong +6.1% in February from the same month in 2025, bolstered by the timing of Chinese New Year. In fact, domestic travel within China in February was up +12.5%. Overall international passenger travel was up +5.9% with the Asia/Pacific region rising +8.6%. Likely much of this expansion will be upended now with the March disruptions and sentiment retreats. The UST 10yr yield is now just on 4.31%, down -3 bps from yesterday. The price of gold (http://www.interest.co.nz/charts/commodities/precious-metals) will start today up +US$94 from yesterday, now at US$4641/oz. Silver is up +US$4 to US$74.50/oz. American oil prices are down -US$1 at just on US$101.50/bbl, while the international Brent price is down -US$7.50 at just on US$104.50/bbl. Ship transit traffic (https://www.marinetraffic.com/en/ais/home/centerx:57.8/centery:25.7/zoom:7) in the Strait of Hormuz seem to be slowly returning, but on Iran's terms. The Kiwi dollar is +30 bps firmer against the USD from yesterday, now at 57.4 USc. Against the Aussie we a...