Here's our summary of key economic events overnight that affect New Zealand, with news hard data on the coming economic retreat is only marginally easier to find. Equities and commodities are up today.
But US jobless claims rose by +249,000 last week, about the expected seasonal rise. There are now 1.65 mln people on these benefits, the first actual rise since the end of February.
Meanwhile, retail sales unexpectedly rose +0.3% in May from April, following a +0.4% increase in April, and beating forecasts of a -0.1% slip. But these sales are only +2.8% higher than year-ago levels and far less than can be accounted for by inflation.
US industrial production however fell -0.2% in May from April when a small +0.1% rise was expected. This is a volume-based measure and year-on-year it is an insignificant +0.2% higher.
There are a wide variety of experiences at the regional level. The Philly Fed factory survey of that industrial heartland reported a small decline even if some sub indicators turned up. New orders weren't one of them. However the large New York state factory survey was more positive, and they did reveal a good rise in new orders.
China released a set of May economic activity data and it was relatively weak for them. Even the retail sales gain of +12.7% from year ago levels needs to be seen in context of the very low year-ago base. Real estate investment fell -7.2% year-on-year. But electricity production rose +5.6%. While their jobless rate remained unchanged at 5.2%, their troubling youth jobless rate worsened, hitting 20.8% at the end of May, up from 20.4% in April. The weak data triggered another unexpected cut to a key interest rate tied to their property development sector. The People's Bank of China announced it is trimming the rate on ¥237 bln (NZ$53 bln) worth of one-year, medium-term lending facility loans to banks by -10 basis points to 2.65%.
Against this dour data and somewhat unexpectedly, Japanese exports edged higher in May. That may be because Japanese machinery orders rose in April, according to data released yesterday.
In Europe, the ECB raised interest rates by another +25 bps at its overnight meeting. That takes its key policy rate to 4%, the highest level since the 2008 GFC. It was the eighth consecutive rate hike, even though the region entered recession at the beginning of 2023. Both the headline and core inflation rates remain significantly above the ECB's target of 2%. They also revised their inflation forecasts higher and lowered their growth projections. They signaled they would likely raise rates again in July.
In Australia, there was an unexpectedly large surge in employment in May, with more than +76,000 new jobs added. Analysts had expected a gain of only +15,000. Their jobless rate dipped to 3.6% (from 3.7%). +62,000 of those new jobs were full time, +14,000 were part-time. Analysts now think the RBA will raise rates again to rein in the expansion.
Meanwhile, migrants are pouring into Australia. Their 2022 population topped 26.2 mln, up a fast +½ mln in the year, or +1.9%. That's their fastest growth since 2008. +387,000 of them were migrants. (In New Zealand, +24,200 migrants arrived here in the same year. We got our surge at the start of 2023. Our population was 5.15 mln at the end of 2022.)
Globally, container shipping freight rates fell a rather sharp -5% last week, continuing their long retreat and now at a faster pace. However, they are still +20% higher than pre-pandemic levels which themselves were unusually low. Bulk cargo rates are holding their recent minor recovery however.
The UST 10yr yield will start today at 3.73% and down -8 bps. Bond markets don't seem to be buying yesterday's Fed projections. Their key 2-10 yield curve is less inverted at -91 bps. Their 1-5 curve is little-changed at -131 bps. But their 3 mth-10yr curve is much more inverted at -139 bps. The Australian 10 year bond yield is now at 3.99% and unchanged. The China 10 year bond rate has risen +3 bps to 2.69%. But the NZ Government 10 year bond rate is down -2 bps at 4.58%.
Wall Street is up more than +1.4% on the S&P500 in Thursday trade. Overnight European markets were mixed with London up +0.3% and Paris down -0.5%. Yesterday Tokyo closed unchanged. But Hong Kong rose a strong +2.2% and Shanghai was up +0.7% all on Beijing stimulus talk. The ASX200 ended its Thursday session up +0.2% and the NZX50 was up +0.1%.
The price of gold will start today much recovered, up +US$16 at US$1960/oz.
Oil prices are up +US$2 today to now be just under US$71/bbl in the US. The international Brent price is now up at just under US$75.50/bbl.
The Kiwi dollar starts today up at 62.3 USc and back to a three week high. Against the Aussie we are -¾c lower at 90.6 AUc. Against the euro we are lower as well at 56.9 euro cents and almost a -½c retreat. That means the TWI-5 is now down -20 bps to 69.8.
The bitcoin price is lower since this time yesterday at US$25,043 and down -3.3% from yesterday at this time. Volatility over the past 24 hours has been moderate at just on +/- 2.6%. Overnight, two small South Korean crypto platforms halted withdrawals in quick succession, another reminder of the outsized risks even small knocks can give to this wild-west sector.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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89 Comments
Good news today for Auckland though, determined 5th best city in the world for work/life balance
https://www.visualcapitalist.com/cities-with-the-best-work-life-balance/
Nah, heaps of professional service people only work part-time. In my office it's something like 80% of the workforce is part-time. We've worked out that productivity improves with more focussed/flexible work for employees.
Before Covid there was a lot more presenteeism as a general rule. Older managers still confuse presenteeism with productivity.
Franks not surprised. Our productivity is woeful. Walk around any coffee shop on a weekday morning and it’s full of “workers” not working. With wfh and flexi working nobody knows where anybody is or whose doing their hours.
The 1514 crew notice as well all roadworks have 1 guy working and 6-7 sitting around smoking, drinking coffee or playing on their phones
Did you ever spend a winter there? When the sun rises barely above the horizon at 10am and sets at 3pm? And the temperatures are well below 0 degrees? I grew upon in Switzerland, a fairly cold country in winter, but I couldn't live in a Scandinavian country, it's just too depressing in winter.
PS, I have visited Stockholm last year in summer, it's lovely city.
Both the headline and core inflation rates remain significantly above the ECB's target....They also revised their inflation forecasts higher and lowered their growth projections.
Of course, this can't happen today in Europe, with all the financial safeguards now in place (sarc/off), but it's worth recalling:
A loaf of bread in Berlin that cost around 160 Marks at the end of 1922 cost 200,000,000,000 Marks by late 1923
China needs grain to feed the animals.
It has enough land to feed all the humans.
But producing grain for humans comes at an opportunity cost re production of other products. This is currently a controversial issue in China, but the debate is cautious given that President Xi has previously stated his position.
KeithW
Keith,
What are your thoughts on the possibility of a global shift away from meat and dairy consumption due to environmental concerns?
Do you know if anyone in NZ is looking at the implications for NZ of meat and dairy consumption becoming stigmatised for moral reasons (e.g. like whale meat)?
Two completely different phenomena, and this is why it's important to look at more than just the price of things when talking about inflation. You need to look at why prices are rising in order to gain any predictive or explainatory insight.
The ECB is seeing the price of bread rise because bread is costing more to produce. Their money has the same value, but the bread is more expensive. Weimar Germany saw the price of bread rise because they were printing money, which reduces the value of each unit of currency. In this case, the bread cost the same, but each Mark became worth less (eventually less than the paper it was printed on).
This, by the way, is what happens when governments try to print their way out of debt. Anyone suggesting this might be an option needs to think very hard about the potential consequences of it.
I can’t see any way out.
A competent government would have seen this coming and had some big infrastructure and housing projects ready to roll out.
A big immigration intake isn’t an option when the economy is tanking and demand for labour is shrinking.
We just have to take our medicine.
Brace…
Most of those ‘projects’ have been ultra expensive fantasies, like light rail and the major Unitec redevelopment. Both were supposed to be underway several years ago.
People point to all the public housing getting built, but in terms of net dwellings (new dwellings minus those demolished) it’s actually fairly underwhelming.
Some were fantasies
- tunneled light rail when surface does the job just as well for a fraction of the cost
- 3rd Auckland Harbour road crossing - when all we need is a public transport and walking cycling bridge
The rest of them were old paradigm projects like massive roads that are better not built than built.
The criticism of Labour for not building enough houses is partially justified but in terms of timing it would have been the worst time to build, the industry was going gangbangers on private builds and sucking up resource and inflating land and construction prices. The time to build is coming now, when house and land prices are crashing and we about to have spare labour capacity (and lower prices)
The sad thing is that people are criticising Labour for not delivering but National and Act are committed to not even trying to build based on their ideological principles.
CRL is heavy rail and not light rail. Its designed to link the southern and western lines through a loop that will double the capacity of the network. The light rail to the airport is the fantasy project that coincidently travels through solid red electorates.
50 million for only the design stage of the walking/cycling bridge does not a business case make!
- Flood country with more immigration
- Unleash a torrent of Chippy-buck free money (subject to the plebs putting a tick in the right box come October, maybe a little taster beforehand to remind us who's boss)
- Get the propagandists over at Radio NZ to simply tell us "there's no recession here folks"
- Go Weekend At Bernies with Adrian Orr and cut interest rates
Plenty to be done, in all.
I don't see how any of those stimuli do not prove counterproductive, further pushing up the already hot non-tradable CPI (food, fuel, utilities, shelter, childcare - you name it).
On the tradables side, we have probably maxed out our consumer credit limit (current account) and further increases in demand for imports will get us whacked by rating agencies.
Simple.
The RBNZ does the following:
1. Admits the OCR is crap tool. (And that Brash wasn't a great economist.)
2. Seriously restricts the amount of money banks can lend for buying houses & land for houses
3. Seriously increases the amount of money banks can lend for productive endeavors (i.e. activities that actually create something)
4. Once 2 and 3 are in place - should take about 2 weeks - drops the OCR back to 3.5% before eventually doing away with it.
The Government does the following:
1. Admits the NZ tax system is crap.
2. Introduces a comprehensive Capital Gains Tax based on realisation of gains
3. Introduces a Land Tax - ala TOP - but at a lower rate
4. Drops income tax rates on the first two bands (paid for by CGT & LT)
5. Reduces GST on essential foods to 5% (paid for by CGT & LT)
6. Introduces inheritance tax bands on 10m+, 25m+,50m+ and 100m+ (Because the key kid doesn't serve squat.)
"It's really not that hard", ChrisOfNoFame 2023
I really don't know why we are importing people still at a record rate when the job market is in dire straits. Recent migrants now reporting they have cut hours or are being let go despite having job offers of high hours before they got here.
Unemployment is really going to start surging, plus wage rates will be under pressure to drop as the labour market becomes a lot more competitive.
Meanwhile the banks are enjoying a 3%+ margin on their floating rates and government competition watchdogs are all but absent across the entire economy.
Totally agree. Middle management seems to attract the incompetent/stupid, which gives the smart people under them pause to wonder if they really want to move into management. I have only come across about 3 middle managers in my life that are good at what they do, having worked under dozens.
Yup, the system is designed to increase competition for limited consumer resources for the benefit of landlords and market duopolies, rather than expanding productive capacity of our economy.
Can't afford to drop the ball in such a manner in our trade-dependent high-cost economy where every low-wage worker brought in adds increasingly more to aggregate demand than supply.
I'm with Blobbles on this. If you've got a grasp on the big picture, I suggest you'd pretty much have come to a similar conclusion. As to recruiting, are those immigrants coming to a job or hoping to pick one up when they get here? Surely employers can recruit internationally if the need is there?
Heard it on the news past couple of days:
https://www.rnz.co.nz/news/business/491996/migrant-workers-in-queenstow…
https://www.rnz.co.nz/news/national/491946/migrant-workers-pay-thousand…
"I think in some ways there's definitely some exploitation of the migrants going on, in other cases it's maybe they just cannot simply afford it."
You shouldn't go to Queenie to work as a cleaner if you can't afford it. Why would anyone want to work in the service industry there?
Schools are depopulating in central Auckland. Lots esp in the wealthier areas taking out of zone or open roll.
traditionally immigrants are younger and working age than the general population too and pay in for more than they take out. So far less strain on hospitals and health system as your domestic non-tax paying boomer seeing docs each week for their various ailments.
Yesterday a person was interviewed on RNZ re people in Queenstown not getting enough working hours to live. Immigrants on working visa\s promised 35 hours a week but only getting 10-20 per week and thus cannot afford to live in QTown even cheaply... The people feel trapped as they are on visa\s enabled by their accredited employers who issue said visa.... I am sure as ski season ramps up it may correct a bit, but this situation does not paint a picture of boom times.
I don't have anything insightful to add, other than I really don't like Queenstown much. I enjoy the natural scenery, but every time I'm forced to go as part of some stag's weekend, or for work, or as part of some wife-organised trip I leave feeling there is something "off" about the place. Can't put my finger on it.
Trying to build a micro city around a small bay would do it. I love Queenstown, but only when I’m out in the hills on the trails in the cold. A lot of people I know (a lot of millennials) go to Queenstown to stay in a hotel and look out the window. Each to their own I guess.
If you watch the average TikTok or Instagram influencer 'vlogging' their trip to Queenstown you'd be forgiven for thinking its the Southern Hemisphere's answer to Las Vegas - a man-made oasis in the middle of nowhere, where the only attractions are those that feature concrete in one way or another.
- Stay in fancy-but-derivative-looking-and-feeling hotel (that most people couldn't afford, but you're getting it comped because you're an influencer after all)
- Get a giant diabetes shake from the Cookie Time shop
- Go shopping, because you can't do that anywhere else
- Go to the Onsen hot pools and get that same photo everyone else has, only add more filters so you look better
- Eat your comped dinner at one of the flash restaurants and spend more time photographing the food than enjoying it
- Avoid anything that might get your Annie Bing sweatshirt, white Superga shoes or rental Toyota Highlander dirty.
Rinse and repeat.
Influencer culture is a curse upon the world in many respects.
Hey now, I've been to Onsen after a long "run" over Brow and Coronet and it was lovely! The icy shotover below probably would have been better for the calves though.
This is "tourism" that we need to ramp up - by national tourism, we really mean Queenstown let's be honest. What's a shame is that it feels sold out, the people who provide services in the centre can't afford to live anywhere even remotely close. Even Kingston has shot up in price and there's not a lot there plus you have to deal with the devils staircase in winter... no thanks. A tourism centre we support by hiring slightly longer term tourists who live in their cars.
As soon as you step off the concrete, it's a wonderland though, that's how it became popular.
I agree. I used to live near Queenstown and would often drive in to pick-up friends at the airport. Even with groceries being sold at Frankton now, there is a premium to pay when living there. Don't get me started on fuel and a cup of coffee. The tourists are milked at every opportunity and I can't understand why locals live there unless they are in the tourist industry.
Yesterday a person was interviewed on RNZ re people in Queenstown not getting enough working hours to live. Immigrants on working visa\s promised 35 hours a week but only getting 10-20 per week and thus cannot afford to live in QTown even cheaply...
Place is a disaster zone and represents much about what is wrong with NZ.
A mate manages a hotel in QT. He said it's been a struggle for the owners trying to turn a buck despite high occupancy rates. The travel industry went through major corporate consolidations during Covid. Bigger meaner booking agencies now call the shots and claim even bigger margins than previously on travel bookings.
Hotel owners are sucking it up in the short run but would rather lobby for cheaper workers than take a hit on margins, which is major disaster in the making for our tourism sector already reeling with low productivity and the broader NZ economy.
The world thinks Auckland is a great city to live in, the Interest commenters… well, they don't like anything or find anything good.
Revel in having a miserable weekend folks, and don't forget to focus on everything you don't like, it will help to confirm your negative outlook!
Now we have a recession confirmed every economist here seems confident that interest rate increases are definitely at an end. Yet the EU is in a recession too and they've just raised and plan to raise again. Inflation hasn't magically stopped just because we're in a technical recession....will be interesting to see where it goes from here.
The EU - especially Germanic, Gaulish and British countries - behaves very differently to NZ & AU when interest rates increase.
One factor is that many more people are long term renters and/or leasees with significant blockers to the owners raising rents. Another factor is regulations around foods and food supplies. Another factor is banking & lending regulations.
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