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Press Release – Kiwi EconomicsWere looking forward to June quarter labour market data out this Wednesday. We expect the unemployment rate to remain unchanged, at 5. 3%. Thats slightly below the RBNZs forecast. . . .
Press Release – Kiwi EconomicsWere looking forward to June quarter labour market data out this Wednesday. We expect the unemployment rate to remain unchanged, at 5. 3%. Thats slightly below the RBNZs forecast. But we are not out of the woods yet. Labour market data is out this week. We expect it to track sideways, with the unemployment rate at 5. 3%. The softness in the labour market will continue to hold back wage growth, without a wage-price spiral. With input costs going up, Kiwi businesses are struggling to operate on thin margins. Kiwi households are also operating on thin margins. Both are sensitive to prices going up any further. The hostilities in the Middle East eased over the weekend (but we said that last week too). The US stock market has been sensitive to Fed decisions, and tech sector earnings. On balance, sector earnings have put more wind in their sails than the Fed has taken out. Here’s our take on current eventsWe’re looking forward to June quarter labour market data out this Wednesday. We expect the unemployment rate to remain unchanged, at 5. 3%. That’s slightly below the RBNZ’s forecast. But we are not out of the woods yet. The labour market is slow to respond to hard times. The first things Kiwi business owners cut are investment and hiring intentions, maybe hours. But not jobs. Most business owners will hold on to their staff for as long as possible. Three months of elevated costs from fuel are wearable. Therefore, we are not expecting a spike in unemployment in the June quarter. Not yet. As Kiwi businesses face higher costs, the risk is that their margins will be eroded to the point of failure. Some are skating on thin ice. Many businesses are trying to pass on costs, with great resistance from customers. That leaves shrinking margins and the need to cut costs (elsewhere). The debate is hot on whether they will be successful. We are on the demand destruction side of the argument. Kiwi households have been wearing costs of their own, and won’t react well to prices going up. Households have very little (if anything) left over to spend at the end of each week. This makes them more sensitive to changes in prices, especially for non-essentials. We expect inflation will have peaked in the June quarter, and that the softness in both demand and the labour market will keep a lid on wage growth. No wage growth means no wage-price-spiral, which means no need to panic about inflation getting out of hand. Chart of the Week: American demand for meat beefing up NZ exportsNew Zealand has had a good run of luck with its beef exports. Strong US demand for meat picked up the slack left by a sharp decline in beef exports to China. The fall in beef exports to China was partly due to lower demand from Chinese consumers, and partly because China started importing a lot more of its beef from South America. America’s appetite for beef cannot be satisfied with domestic production alone. A historically low supply of American cattle means that imported beef is needed to fill the gap. The falling number of cows in the US is driven by rising farm costs, environmental conditions, consolidation in the industry and international competition. A screwworm parasite in Mexico led the US to suspend imports of live cattle from Mexico in May 2025. Mexican cattle accounted for over half of US cattle imports between 2020 and 2024. With Mexican cattle temporarily removed from the US supply chain, it had a negative impact on the US cattle herd size. Photo/Supplied. Content Sourced fromscoop. co. nzOriginal url