After 43 long days, the US Government shutdown finally came to an end last week. President Trump signed off on a temporary funding bill, securing funding up until the end of January. There’s risk of another shutdown early next year, but we’ll cross that bridge when we get there. For now, US Government workers returned to work on Friday, and back payments of the month’s missed wages commenced over the weekend. But despite the resumption of government operations, damage has been done. And a full return to normal is expected to take days, even weeks in some areas. Just a few weeks ago, the Congressional Budget Office had estimated that a six-week government closure would reduce US real GDP by 1.5%pts for the December quarter. A rebound in activity is expected to recoup most of these losses into next year. But the matter of economic data lost to the void remains.

Six weeks delayed, the US Bureau of Labor Statistics is set to release September’s missed payrolls report later this week. However, the release of October data will be a little more complicated given the absence of data collection over the month. We’ll likely get payrolls but because the household survey wasn’t run, we won’t get the unemployment rate for October. We also won’t get October CPI inflation. Two-thirds of prices in the CPI are collected by in-person visits, which clearly did not take place with the govt shut down over the month. Statisticians will likely resort to imputation methods to fill the blanks. But such estimates may still lack reliability. And overall has added some extra fog for the Fed as they approach their final meeting of the year in which markets continue to pare back on expectations of a further cut.

On a more positive note, President Trump signed an order to remove reciprocal tariffs on a number of agricultural imports. The move comes in response to growing US consumer concerns around rising food costs. And there’s a big win in it for us with beef products among the list of newly exempt imports. What can we say, Americans just love their burgers. And we love tariff-free meat. Meat is our largest export to the U.S. It’s another positive with fewer negatives leading to a more optimistic outlook into 2026.

Okay, enough about America…

At home, alongside the release of the RBNZ’s Survey of Inflation Expectations (see our COTW for more), a number of high frequency data points painted a mixed picture of how the economy is tracking. Short term visitor arrival numbers for September have recovered almost 90% of pre-covid peak levels. So hopefully it’s signalling towards another strong summer of tourism activity as it was last year. Though at the same time, we’re still seeing persistently weak levels of net migration and a large number of Kiwi departures – taking away from the economy’s demand pool and no doubt keeping the housing market subdued.

Another green shoot was seen with the Manufacturing PMI recording its fourth consecutive month at expansionary levels. Though at 51.4, where 50 marks the threshold between expansion and contraction, activity remains relatively subdued. Nevertheless, the sign of stabilisation in manufacturing is encouraging. The services sector still has a while to go yet. The PSI lifted to 48.7 from 48.3. So, largely a stabilisation at weak levels is the theme. Meanwhile consumer spending continues to disappoint. Retail spend was up just 0.2% in September. And most of that gain came just from elevated supermarket spending. Discretionary spend instead remains weak with spend on durables, apparel and hospitality all recording declines over the month. Households are being forced to prioritise costlier essentials over discretionary goods, and it shows. Looming job insecurity and the absence of a wealth effect certainly isn’t helping either.

Financial Markets

The comments below were provided by Kiwibank traders. Trader comments may not reflect the view of the research team.

In rates, uncertainty grows on and offshore

“Kiwi rates edged higher over the week, largely driven by Fed commentary signalling uncertainty around the future path of interest rates. Market pricing reflects this, with only -10bp of cuts priced for the 12 December FED meeting. Across the Tasman, Australian employment data injected volatility once again, this month’s sharp jobs rebound sending yields higher dragging Kiwi rates with them.

NZ data continues to show signs of stabilization rather than a strong upswing. Inflation expectations, card spending, and PMI readings last week have stopped falling but are not rapidly accelerating either. Meanwhile, the TWI remains about 3% below the RBNZ’s August forecast which could become problematic. For now, NZ rates markets seem content to ignore the repricing of the RBA and Fed curves. The uncertainty evident in market commentary with one offshore calling for a -50bp cut in November and another on hold.

For the RBNZ, the November-to-February window will be critical as the October -50bp cut (and any assumed November cut) filters through the economy. So far, the impact appears slow and gradual. Kiwi rates remain caught between subdued domestic indicators and more upbeat offshore central bank signals. This dynamic suggests short-term steepening in the curve, aided this week by paying from the expected NZGB36 syndication this week. That’s until any signs of a domestic upswing or mortgage fixing emerge, which would likely trigger flattening.

We remain in an unusual holding pattern: domestic data has found a bottom but is not yet turning higher, while global rate-cut expectations are being repriced rapidly. Volatility is likely this week as US data releases hit the wires. Markets are clearly positioned for stronger prints, though recent high-frequency data hints at a pullback—possibly linked to the recent government shutdown.” Ross Weston, Head of Balance Sheet Management– Treasury.

In currencies, the Kiwi treads water

“Despite managing to push a little higher last week, it seems that the Kiwi dollar is still treading water as we wait to hear from the RBNZ next week. The US Dollar was slightly lower last week, which helped the Kiwi slowly claw back some of the ground lost the week prior. The US Dollar index (DXY) opened the week at 99.70 and dropped to a low of 99.00, before ending the at 99.27 at the New York close. Despite the news that the US Government shutdown has been resolved for now, the official data that has been withheld (or not collected in its entirety) due to the shutdown, will be slowly released, which is creating jitters for market participants, and whether or not this will provide the Fed with enough information to confidently cut rates in December. The week ended in a risk off mood. The softer US Dollar saw the Kiwi slowly make its way from 0.5630 to a high of 0.5689 at the end of the week. But at the end of the day (week) still treading water below 0.5700. The NZDAUD cross was more interesting, opening the week at 0.8635 after a pummelling the week prior. It slipped to a low of 0.8609 on Thursday, and what looks like a false low of 0.8594. Some better NZ data on Friday pushed the cross back up to 0.8720 and we closed the week at 0.8690. At this juncture we think any meaningful short term trend picking for the Kiwi will be after the RBNZ have their final call for the year on the OCR next week. The high frequency data is pointing to green shoots, but we’re not out of the woods yet.” Mieneke Perniskie– Senior Dealer, Financial Markets.

Weekly Calendar

• With the US government reopening, there's a big backlog of economic data to flow through. In the coming days and weeks, the delayed US data releases will trickle through. September payrolls is due out on Thursday - six weeks later than the original release date. The market expects a 50k increase in jobs over the month, and the unemployment rate steady at 4.3%.
• Across the pond, UK CPI likely decelerated in October. Headline inflation is expected to drop to 3.6%yoy from 3.8%yoy, as household energy bills cool. Inflation in the UK has likely peaked, which should provide the Bank of England with confidence to continue loosening policy settings - potentially another rate cut this year.
• Here at home, October Selected Price Indexes are due out this week. Food prices likely weakened over the month, as is typical this time of the year. Price movement in fuel, airfares and household utilities will also be key to watch, as the recent fall in food prices have been offset by increases across these categories.

See our 'Weekly Calendar' for more.