Here's our summary of key economic events overnight that affect New Zealand, with news there is little evidence the global economy is on the rise. Bond markets don't think so.
But first, last week there was a rare rise in American mortgage applications, now off a lower base however, but also helped by sharply lower mortgage interest rates. Their benchmark 30 year fixed rate fell to 7.61% plus points, a retreat from 7.86% and the largest fall since July 2022. Of course, they are following the US Treasury rates lower.
American consumer credit levels rose in September from August, but really only back to where they were in July. But they are up +9.0% in a year.
American beef prices are rising, and sharply, as drought threatens cattle herds. Although this is not strictly 'news' - the trend has been around for a year - the drought slaughter in the southwest is ending and the overall US herd is much smaller now. Imports will be benefiting significantly now.
Canadian building consents recorded a very sharp -6.5% fall in September, much more than expected. Much of that was a base effect of unusually large non-residential projects being approved a year ago. But the value of residential consents rose +4.3% from August and were +2.3% higher than a year ago. The residential consent levels are especially strong in Vancouver.
In China, concern about the country’s lackluster economy and troubled property market has led to rising discontent among citizens, a new study shows.
And Beijing is about to make a classic mistake in its efforts to stave off a Country Garden bankruptcy. The giant real estate developer has avoided a complete collapse but is on its last legs. In desperation, Beijing as now ordered insurer Pin Ang to "invest" to save it. One huge zombie could now well infect a healthy company. This is an example of Xi's acolytes being very light on basic economic or business experience. The consequences could be wide, especially if Country Garden does linger on and avoid its 'creative destruction' - which will invite a repeat of the technique.
Meanwhile, their central bank said it will provide emergency liquidity to regions with heavy debt as necessary to help local governments resolve debt risks. Again, more debt to resolve unsustainable debt issues.
In the EU, retail sales volumes slipped again in September to be -2.7% lower in a year. Euro area levels were weaker than the overall EU levels.
In Australia, they had their driest October since 2002 due to El Nino. Rainfall was -65% below the 1961–1990 average.
And staying in Australia, the mammoth Optus outage, one made worse because networks there don't 'share' when they have major issues like this, is being forensically examined for the cause. It is likely they accidentally misconfigured its own BGP routers; whether someone else did it accidentally, or whether someone else did it deliberately, remains to be seen. It’s also not yet clear whether Optus’ BGP issues are the cause of its outage, or a symptom of some other problem.
Globally, September air cargo traffic was up +1.6% from the same month ago, and the fastest growing region was the Asia/Pacific region (+4.2). But the overall levels arte still -1.8% lower than in September 2019, and -3.2% lower in the Asia/Pacific.
The UST 10yr yield is down from yesterday as bond prices rise again, now at 4.53% and a drop of another -4 bps. And their key 2-10 yield curve is more inverted, now by -38 bps. Their 1-5 curve is now inverted by -82 bps and that is a little more. Their 3 mth-10yr curve inversion is now -85 bps and also more than yesterday. The Australian 10 year bond yield is now at 4.52% and down another sharp -10 bps from yesterday. The China 10 year bond rate is unchanged at 2.68%. The NZ Government 10 year bond rate is much lower at 5.21%, down -11 bps.
Wall Street has opened modestly lower with the S&P500 down -0.2% in its Wednesday trade. Overnight European markets closed +0.6% higher, except London which was down -0.1%. Yesterday Tokyo ended its Wednesday session down -0.3%. Hong Kong ended down -0.6%, and Shanghai was down -0.2. The ASX200 ended its Wednesday session up +0.3%, while the NZX50 fell -0.7%.
The price of gold will start today at US$1954/oz and down another -US$10/oz from this time yesterday.
Oil prices have fallen again overnight, down another -US$2.50 to be just over US$75.50/bbl in the US. The international Brent price is down more, now just under US$78/bbl. These are three and a half month lows.
The Kiwi dollar starts today at 59.3 USc and unchanged from this time yesterday. Against the Aussie we are also unchanged at 92.3 AUc. Against the euro we are a little lower at 55.3 euro cents. That all means our TWI-5 starts today at just on at 69, and also little-changed.
The bitcoin price starts today at US$35,427 and up +2.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.9%.
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51 Comments
Cattle stock reduction in USA provides opportunity for NZ beef exports. Manufacturing, grinding CFHs etc for burger trade. That trade in an ironic sense, could now be considered realistically, as a byproduct of NZ’s dairy industry. The old long gone stalwarts, Hellaby, Weddell and more, would be mortified at the fact.
If you consider the number of freezing works that used to exist by the 70/80s you would have to acknowledge that they were servicing the meat industry full stop. Especially the North Island , AFFCO, Hellaby, Borthwicks, Weddell/Fletchers were very large operators, beef producers in their own right. Knighthoods were accorded. In those days the meat industry in totality was near to if not a larger export earner than dairy. The irony therefore is the suggestion that now the product is there for the purpose of dairying, not meat.
We are entering a period of rebuilding resilience/capacitance. That has to be at the expense of short-term profit - which suggests that the path we were on since '84, was temporary.
'This is an example of Xi's acolytes being very light on basic economic or business experience.' No David - it's an example of economics being very light on basic ecological/physical facts. Xi inherited a growth-requiring system, growing within definable limits; he can't solve that, in that he cannot keep it going. But he's out on his ear if growth ceases - as are western elected governments.
Ahhh PDK, bless you thinking there would be any expense to short term profit! No these costs will passed directly through as price increases (inflation don't you know) and profit will be maintained. There might be some softly spoken apologies to no one in particular down the road but these oligopolies operate a cartel and so profits are not at risk.
I think Xi's acolytes are simply big fans of breathing, I too hold a passion for that so they have my sympathies.
Because the Oz telcos have long resisted being required to support domestic roaming - "general network quality and resilience are competitive differentiators"
https://www.abc.net.au/news/2023-11-08/optus-outage-roaming-customers-s…
FEDERAL RESERVE THREATENS TO SUE BITCOIN MAGAZINE
The U.S. Federal Reserve is threatening to sue Bitcoin Magazine, alleging apparel that parodies its FedNow system is not protected speech, but copyright infringement.
Someone sounds worried?
Found this, this morning from Newshub:
"Restaurants across the country are barely scraping by and their savings are gone after the COVID-19 pandemic and cost of living crisis decimated the industry.
The hospitality industry is in chaos with many restaurant owners reporting a huge drop in the number of people dining out and it's seriously eating into profits, forcing some to close their doors."
Meanwhile ANZ are forecasting more interest rate hikes?
Get with the programme ANZ.
It is like someone flipped a switch about 3 months ago and we went from excessive demand to low demand. Hence why I think inflation is already beaten and the RBNZ should be thinking about reducing the OCR before they do too much damage.
I imagine Bellamys is still pumping so the RBNZ have not noticed empty restaurants, they need to wait for stats.nz to tell them 3 months too late.
There is a feedback loop too - eating out is too expensive so people stop eating out, then restaurants have to raise prices due to decreased revenue. The only fix is that enough restaurants close down so that the others become busy. Or the economy heats up again, which will probably require an OCR decrease, I think we will see that middle of next year.
Yes I'm picking the same. I think we're going to see the fundamentals decline rapidly from the new year onwards. The tourist season and continued net migration will help, but it's the average mums and dads that are struggling, and they're the economic bread and butter.
Has anyone found that in an effort to maintain profit margin some restaurant are keeping their prices affordable and instead cutting the quality of the meals. The last couple of meals out I’ve had have tasted like a frozen meal pulled out the back of my grandmas freezer.
Interesting. I see plenty of custom in food places in central Auckland, and we eat in there at least once a week. But that said, we very rarely go to expensive restaurants - the cheap Asian food places are too good to bother with expensive places that disappoint with shrinkflation.
Not sure that China have a debt problem, I know that they have a lot of waste in their investments from that debt but at least ~50% as put into rail and roading will be providing benefit. We should have such problems...
If they bring down their currency, import some inflation and improve their export performance so much the better.
Need to buy something? Let's see where did I put that 3 Trillion USD I had lying around...
"It wasn’t until the mid-90s that a series of reforms allowed urban residents to own and sell real estate. People were then given the option to purchase their previously government-owned homes at extremely favorable rates, and most of them made the transition to being property owners. Now with a population provisioned with houses that they could sell at their discretion and the ability to buy homes of their choice, China’s real estate market was set to boom.
In fact, 90% of families in the country own their home, giving China one of the highest home ownership rates in the world. What’s more is that 80% of these homes are owned outright, without mortgages or any other leans. On top of this, north of 20% of urban households own more than one home, according to Nomura . "
https://www.forbes.com/sites/wadeshepard/2016/03/30/how-people-in-china…
In 2021, the last full year for which Beijing’s National Bureau of Statistics offers data, the average Chinese worker earned 105,000 yuan a year, the equivalent of $16,153.
https://www.forbes.com/sites/miltonezrati/2023/01/30/the-east-west-wage…
So I think the exposure to real estate in the population is not that extensive, these companies can be folded if Xi chooses to. The collapse in house prices over there, needed as much if not more than here, could be managed by these numbers. Think they should crash the ponzi and use the 3T to mop up with investment in their tech sector.
Unemployment of youth is a problem, but so is Taiwan...
It is a big problem because just like NZ Chinese have invested in real estate. So many properties are sitting empty and with no possibility of being tenanted - estimates back in 2020 were that this was north of 50 million apartments. Ghost cities with investors retirement funds gone
on top of which people have paid to buy apartments that havent been and wont be built - so savings gone compounding the at least 1 trillion $ of developers bad debts - which is on top of the even bigger local body bad debts
President Xi has his work cut out solving this crisis and especially when the advice being received is to take the worst option first and kick the can
Still in an autocratic state the Mao option is available - sell goods to Russia and starve the population into submission
I wouldnt be investing in dairy farming in NZ right now
Threatening “Consequences” - by Chris Trotter (substack.com)
"Nice little country you have here, it'd be a shame if anything happened to it"
I would be surprise if this was not the case. Don't think the Maori elite are the mafia of this country? Try getting a resource consent for constructing anything in this country. "Cultural Impact Assessments" are the term for the pay-offs, look at any infrastructure project in this country and you will find the graft. Corruption or pay-off depends on your side of the fence.
re ... "And Beijing is about to make a classic mistake in its efforts to stave off a Country Garden bankruptcy."
Disagree.
While they've done it a different way to how 'Merica would have - 'Merica would have "saved" CG too. Using the massively strong balance sheet of a predominantly life insurance company (that has significant in-house competency in valuing and buying investments) isn't much different to appointing a major investment bank as a statutory manager.
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