Welcome to summer (?!) Here's our summary of key economic events overnight that affect New Zealand, with news global inflation is coming down as energy cost pressures recede. And so far it hasn't been at the expense of global economic expansion.
But first today, US headline jobless claims rose but the increase was minor and less than expected. On an actual basis the fall was rather sharp but recall last week was a retail holiday week. There are now just 1.56 mln people on these benefits, almost the lowest in a year. So still no sign of rising labour market stress in this data. A week from tomorrow their November non-farm payrolls report is released and markets currently expect an expansion of +175,000 - modest but still expanding.
October pending home sale levels gave up more ground in the continuing trend. Pending home sales is a forward-looking indicator of home sales based on contract signings and the -1.5% drop in October is the lowest number since this index was originated in 2001. The prospect of low demand because buyers are put off by high mortgage rates is holding back sellers from listing into a falling market.
October income and spending data growth was modest, each rising just +0.2% from September. That is the lowest for both in seven months of much better gains. Perhaps of more interest was that PCE inflation eased again, now down to +3.0% (3.5% on a core basis) and closer to the US Fed's 2% target range. But even if it is moving in the right direct, there is still some way to go yet.
The slowing the Fed wants, to quash inflation, is well underway according to the November Beige Book surveys. Economic activity slowed since the previous report, with four Districts reporting modest growth, two indicating conditions were flat to slightly down, and six noting slight declines in activity. They are managing to slow things without falling into recession. It's actually an impressive performance.
It is tougher in Canada however. They reported a Q3 GDP decline of -1.1% from a year ago, a sharpish shift from the +1.4% expansion in Q2. Analysts expected a small +0.2% expansion in Q3, so this is a big miss.
India also released Q3 GDP results overnight and these came in better than expected. The Indian economy expanded +7.6% year-on-year in the period, following a strong +7.8% growth in the previous period and beating forecasts of a +6.8% rise. The reading is also higher than the Reserve Bank of India projection of +6.5%.
In Japan, the steam seems to have gone out of their rising retail trade. It fell in October from September by -1.6% to be +4.2% higher than a year ago. Meanwhile, Japanese industrial production has turned up in October, its biggest monthly rise in almost a year.
China's official November PMIs brought some more minor slippage and at a faster pace. The factory sectors contracted slightly faster (although it is still minor); it was expected to contract less. And their services sector's expansion, already minor, eased toward a steady state. It is hard to see how Beijing will be happy about these trends. Their top-level charm offensive of recent weeks isn't working yet in terms of getting business people to change their actions and reactions.
In Europe declining energy costs are still helping cool inflation there. The inflation rate in the Euro Area declined to 2.4% year-on-year in November 2023, reaching its lowest level since July 2021 and falling more that the market consensus of 2.7%. Meanwhile, the core rate, excluding food and energy, also cooled to 3.6%, marking its lowest point since April 2022 and coming in below forecasts of 3.9%.
In Australia there is some substantial positive action in residential building consents. They rose an impressive +7.5% in October from September to be -6.1% lower than a year ago. That is a huge improvement from the year-on-year fall of over -20% in September. It is a sharp shift up that wasn't anticipated by analysts. Still, despite the rise the overall levels remain low.
Container freight rates were unchanged last week. Bulk cargo rates leapt however in a surge we haven't seen since 2022 and to its highest level since May 2022.
The UST 10yr yield has risen +6 bps from yesterday, now just under 4.34%. The key 2-10 yield curve is essentially unchanged at -38 bps. Their 1-5 curve is a little less inverted at -86 bps. Their 3 mth-10yr curve inversion is now -106 bps and also marginally less inverted. The Australian 10 year bond yield is now at 4.49% and up +13 bps from yesterday. The China 10 year bond rate is little-changed at 2.70%. And the NZ Government 10 year bond rate is down -2 bps at 4.99%.
Wall Street has opened its Thursday session with the S&P500 down a minor -0.2%. Overnight, European markets were all up about +0.4%. Yesterday, Tokyo ended its Thursday session up +0.5%. Hong Kong ended up +0.3% as did Shanghai. The ASX200 ended its Thursday session up +0.7% while the NZX50 was up +0.8%.
The price of gold will start today just on US$2040/oz and down -US$2/oz from this time yesterday.
Oil prices have fallen -US$1.50 since yesterday at just under US$76/bbl in the US. The international Brent price is now just under US$81/bbl. Markets were unimpressed by the latest OPEC non-decisions.
The Kiwi dollar starts today at 61.7 USc and unchanged from yesterday. Against the Aussie we are marginally firmer at 93.2 AUc. Against the euro we are back up +20 bps at 56.5 euro cents. That all means our TWI-5 starts today just under 70.5 and up +10 bps from this time yesterday.
The bitcoin price starts today at US$37,795 and almost unchanged (-0.1%) from this time yesterday, and extending its meandering. Volatility over the past 24 hours has remained modest at just on +/- 1.1%.
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36 Comments
The UST 10yr yield has risen +6 bps from yesterday, now just under 4.34%. The key 2-10 yield curve is essentially unchanged at -38 bps.
Alf gave a very interesting take on future inflation recently.
https://themacrocompass.substack.com/p/inflation-what-next
Audaxes...thks for sharing.
So...Yield inversion historically is an indication to looming recessions..
AND... Maybe Running relatively large 6% of GDP deficits during good times , might forestall a recession, somewhat ...??
The Covid response..... is still kinda working its way thru..?? ( Govts still in spending mode...and lots of debt still fixed at low rates..etc )
https://fred.stlouisfed.org/graph/?g=1bYkY
How much money do you have in Crypto ? I would love to know, I'm picking the average is very low after you take out the top handful of holders. If you only have a few thousand it really doesn't make much difference even if it doubles does it ? There is no way I would put my life savings into it.
How much money do you have in Crypto ? I would love to know, I'm picking the average is very low after you take out the top handful of holders. If you only have a few thousand it really doesn't make much difference even if it doubles does it ? There is no way I would put my life savings into it.
Considering 1000 BTC would cost approx USD37 million, few people are capable of owning a few thousand. Most people don't really have the financial means to allocate to 0.1BTC (approx 50% of h'holds are living paycheck to paycheck).
People should allocate nothing to BTC if they have no reason to do so. However, 1% of one's net worth is a good starting point for normies dipping their toes for the first time.
In the case of MicroStrategy, they have made a calculated decision that it's better to hold BTC on their balance sheet than cash. I heard Saylor talk about it's giving his shareholders a reason to own a piece of the business in a world where ownership of tech commerce is concentrated in a few companies. IMO, it appears to have been an inspired move.
https://twitter.com/FullTimeBitcoin/status/1730233541739335925?t=7hIrxo…
Prior to this buy $MSTR held 158,400 #bitcoin and had 14,221,000 shares outstanding. Giving each share equivalent ownership of ~.01113 BTC.
Now there are 15,410,588 shares outstanding with each having the equivalent ownership of ~.01132 BTC.
Few!
New Zealand is now considered the most expensive country in the world to build infrastructure.
Is anyone surprised though? We have been sweating our existing public assets with our risk-averse approach to new investments, high population growth and lack of skill focus on migration.
Take public healthcare for example, the only major new / rebuilt hospital that has been announced in NZ in the last 5 years is in Dunedin and it won't be finished until 2028. We are on-track to adding 750k to our population in that timespan and the average Kiwi will have grown older requiring more health services by then - ~19% of our total population will be over 65 by then, compared to just under 15% in 2018.
But as Auckland grows, don't you think it needs to shift away from roads to public transport?
Kianga Ora is building 20,000 new homes in Mt Roskill and Mangere, plus there is a lot of public building going on in the central isthmus that isn't near a train station. Can all of those people cram into already congested roads?
"Kianga Ora is building 20,000 new homes in Mt Roskill and Mangere,"
An unsure where you get that figure from, but appears to grossly overstate the situation....more like 3.000 in Auckland over the next couple of years.
The next couple of years is meaningless, it takes a long time to build big transport projects.
"We're building 11,000 new quality homes in the greater Roskill area over the next 15+ years"
"The Mangere Development is aiming to deliver approximately. 5000 new warm dry state homes, 2500 Affordable and 2500 Market homes"
I don't know why light rail is woke! That seems to be some weird NZ thing.
The right deliberately use the word tram to conjure up images of a tiny old train competing with cars that has a man ringing a bell on the front of it. The proposed light rail was a decent sized train on a dedicated corridor, well suited to our population and budget. Labour then went and turned it into an underground metro, we don't need that and can't afford that.
That's because they hired like an extra 2000 people and consultants to talk about building a hospital, then had another 300 meetings (I mean Hua) with each person needing to learn a Karakia, followed by another 100 meetings to consult on the 8 species of snails and 4 species of moths to relocat, followed by some more consultation with the local iwi and then we bring in the council. 5 years later and probably a good 50-70 million down the track they still have'nt decided if its the right size, colour, location or name. And that's the issue. Post WW2, they would of just got on and done it.
National campaigned on completing the hospital, and committed to reversing the cut-backs made by Labour.
Just hand-waving when it comes to how to finance it though.
https://www.rnz.co.nz/news/national/493366/national-pledges-to-put-an-e…
Interesting stat. Where did you get it from? Not doubting you. But it fits with the quality and calibre of our governments over that last 50 or so years. It will be interesting to see where Luxon takes us. While he talks a good talk, it is very easy to be cynical. But if business is to truly be successful in NZ, the basic environment has to be there. That includes infrastructure, but people also having money to spend, which means the low wage attitude has to be dumped. I have suggested in the past our tax structure has to change too.
'But if business is to truly be successful in NZ, the basic environment has to be there.'
You hit the nail on the head, but perhaps unwittingly?
Society - as we have constructed it - cannot afford itself; entropy is overtaking our ability to maintain. Put your way: The environment is no longer there. The folk who wanted a 'new' hospital in Dunedin (the last one was built in my living memory) have no idea that this will be the last such. Ever. Knocking on from that, they have no idea whether it will be useful, or usable.
This Government will look no more than 3 years ahead, and will try to re-establish the past. They won't be able to.
And tax is merely a re-distribution of capped energy/resource supplies; bootstrap problems apply.
Not unwittingly PDK. Our politicians are too focused on the short term, the sugar hits if you will. A few days ago Piggy Muldoon's 'Think Big' projects came up again in discussion, and they are a case in point. I have always believed that he was going in the right direction, but his expectation for a return on the $ invested was too short. And the politicians since just didn't get it. Glenbrook is now owned by a Aussie group and the synthetic fuel plant is gone (or close to it) and I think Motonui is still producing Urea but for how long.
The idiot attitude towards near term goals is a failure in communication by every government, and very costly to the environment in every way, plus extremely expensive for the country. If we had top quality roads and highways, and rail network to make transport efficient, climate goals would be a lot easier to achieve in those areas.
Not only is Dunedin Hospital the "only major new / rebuilt hospital that has been announced in NZ in the last 5 years", it's the second time it has been announced in the previous decade. Now National can have another go at it after failing last time in they were in Government.
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