Here's our summary of key economic events overnight that affect New Zealand, with news analysts and economists that predicted a 2023 recession or one in 2024 have gone very quiet, not reminding anyone of their error.
American inflation seems to be cooling, and in a way that the US Fed will like. While overall PCE inflation was unchanged at 2.6%, their core PCE rate came in lower than expected at 2.9%, down from 3.2% in November. Remember this was running at almost 5% a year ago.
And all this happened while personal spending rose in the December quarter, and by more than anticipated. Higher activity and lower inflation is a goldilocks outcome. 'Real' personal consumption is +3.2% higher than a year ago - that's after inflation!
And to add to the vibe, personal income has come in +4.2% higher that year-ago levels on the same 'real' basis, showing households are more than keeping up with inflation.
December American pending home sales also rose rather strongly in December, up +8.3% from November to finally to year ago levels by +1.3%. They haven't had a gain like this outside the pandemic period since early 2017. A surge in California helped although most regions showed gains. And recall, we noted yesterday a similar strong rise in new home sales nationwide.
This past week China rolled out some very large and unexpected stimulus, much of it targeted. Their central bank now seems to have an outsized role in these efforts and the signals are more is to come, with the central bank providing cheap funds via its "Pledged Supplemental Lending" programs.
But investors from well-known global institutions and local icon firms who gathered in Hong Kong this week cast doubts on how effective the policies would be. So far, key concerns such as China's property crisis and low confidence appear unaddressed.
Meanwhile, the Chinese New Year travel rush, known as "春运 or Chunyun," has now started, but the government is projecting a -14% decrease from last year in the number of people using public transportation for returning home or going on trips. In 2024 Chinese travellers are notable by their absence from international destinations. Now local tourism is proving patchy as demand peters out. Chinese New Year formally begins on Saturday, February 10 and continues for 15 days, with the Lantern Festival marking the end of the celebrations from Thursday, February 22 to Sunday, February 25.
Singapore was expecting to report a bounce-back in industrial production in December after the November fall. But it didn't happen. They reported another, albeit smaller, retreat. Analysts there aren't anticipating any significant improvement in the first half of 2024.
We should note that food prices generally are retreating world wide. This is especially true of soybeans. But we should keep an eye on the rice price; it is one that isn't retreating. (Cocoa isn't either and is now at an all-time high.) On the minerals front, coal prices remain very weak. And you wouldn't want to be a nickel producer.
It is not really 'news' but locally we should keep an eye on the cost of insurance. Rises here are going to test many households, remembering you need house insurance to keep a mortgage. We may see many more uninsured cars on our roads. And people may choose insurance based on price and take severe risks on coverage. It is going to be tough.
Remember, it will be Auckland Anniversary Day on Monday. While some of our staff will be on holiday, we will have a full day of news. And there are some interesting data scheduled to be released on Monday. And don't forget, this year Waitangi Day is on Tuesday week, February 6. That probably means Monday, February 5 will be a day of light economic news with many taking the day off.
The UST 10yr yield starts today at 4.16% and up +2 bps from this time yesterday. A week ago it was 4.16% so little-change since. The key 2-10 yield curve is back at -20 bps. Their 1-5 curve inversion has stayed less inverted, now by -74 bps. And their 3 mth-10yr curve inversion is unchanged at -123 bps. The Australian 10 year bond yield is now at 4.24% and unchanged from yesterday. The China 10 year bond rate is little-changed at 2.51%. The NZ Government 10 year bond rate is down -4 bps at 4.75%. It was at 4.82% a week ago so a -7 bops fall since then.
Wall Street has opened its Friday session with the S&P500 down a minor -0.1% but is up +0.7% for the week to a record high weekly close. Overnight European markets were mostly up strongly featuring Paris' rise of +2.3%. However Frankfurt only rose +0.3%. Yesterday Tokyo ended down -1.3% for a -1.5% weekly fall and off its recent highs. Hong Kong fell -1.6% yesterday but still managed a +3.9% weekly rise, And Shanghai gained a minor +0.1% yesterday to finish their week up +3.0%. Singapore rose +0.4% yesterday to finish its week unchanged. The ASX200 ended its shorter week on Thursday +1.9% higher than a week ago. The NZX50 was down a minor -0.1% yesterday to close out the week up +1.8%.
The Fear & Greed index has pushed over to the "extreme greed" range which is also where it was a month ago.
The price of gold will start today up another +US$2/oz from yesterday at just on US$2016/oz. A week ago it was at US$2025/oz so a -US$9 fall from then.
Oil prices are up another +50 USc at just over US$77/bbl in the US while the international Brent price is now just over US$82/bbl. A week ago these prices were US$73.50 and US$78.50 respectively so we are now +5% high from seven days ago.
The Kiwi dollar starts today at 61 USc and marginally lower from this time yesterday. And that is virtually unchanged in a week too. Against the Aussie we are a little softer at 92.7 AUc. Against the euro we are -¼c lower at 56.1 euro cents. That all means our TWI-5 starts today at 69.9 and -20 bps lower in a day but little-changed in a week.
The bitcoin price starts today firmer. It is now at US$41,930 which is up a strong +5.6% from this time yesterday. And it is up +3.4% from this time last week. Volatility over the past 24 hours has been high at just on +/- 3.0%.
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44 Comments
"It is not really 'news' but locally we should keep an eye on the cost of insurance. Rises here are going to test many households, remembering you need house insurance to keep a mortgage. We may see many more uninsured cars on our roads. And people may choose insurance based on price and take severe risks on coverage. It is going to be tough."
It is also worth noting that as insurance becomes less affordable it drives a self reinforcing negative loop....until it is no longer a viable sector.
So you've managed to predict or dodge whatever bullets have been fired at you? I'll grab a pen, you let me know tonight's lotto numbers.
Taking bets to mitigate whatever tragedy is going to bash you around or wipe you out is folly. You can improve odds via insurance, but ultimately the universe is stacked against you.
Remember when our largest South Island city had a massive, mostly unpredicted earthquake? The insurers never modelled for it, many were uninsured, underinsured, and some are still battling over claims over a decade later.
It's also common practice now for health, income and life insurers to medical test you, in order to determine what's most likely to afflict you, so they can either charge you accordingly, or offer you coverage only for what you're likely not to get affected by.
I recently received a vehicle insurance annual premium with a 50% increase despite no claims or crimes. I adjusted a couple of things & reduced the agreed value by $10k to get to a net 20% increase.
I tried a couple of other insurers quotes, these were approx double my current provider.
The last 6 to 12 months.
California homeowners are increasingly running out of options to insure their homes with a private company, as yet another insurer announces its decision to stop offering new policies to residents.
The Hartford Financial Services Group Inc.—better known as The Hartford—announced on Wednesday that it will no longer offer new personal property insurance coverage to homeowners in the Golden State starting in February. Homeowners with existing policies will continue to be renewed, the company told the San Francisco Chronicle.
Don't take my word for it, just research "California insurance crisis".
"We've got you covered" and "giving you peace of mind" only applies if they can make a buck out of your fear.
Didn't bother googling.
Wildfires have always been a problem. For years!
And many places out in the bush and forests have been extremely expensive to insure without a serious investment in in fire mitigation systems. And with no fire protection systems you'd get no cover. Nothing new there. Australia likewise has been developing techniques to deal with fires.
The State of California places consideration regulations on many areas of business and many high volume insurers that do minimal risk assessment are leaving. This also has been going on for years.
The last couple of years have seen bad wildfires and the lower quality insurers are leaving - mainly because re-insurers (who insure the retail insurers) won't support their business models due to minimal risk assessment they do. Nothing new or surprising there.
Your use of the 'crisis' is laughable. Sensationalist nonsense.
Maybe then instead of knee jerk denial then, could be useful to take a pause and see if there's some element of truth to my claims. Helps in having some element of reasoned discussion.
And "crisis" wasn't my word, it's the medias, mentioned by me to aid your research, and the most common descriptor used in contemporary times when promoting whatever problem is being conveyed.
And it's not just the wildfires behind it, it's the exponential and consistent increase in replacement costs from damage. Influenced by Californian construction and legislative costs.
They definitely won't be the last place this is going to happen.
In the last 2 years, my rental property has had a 2 percent increase in rent total.
Meanwhile my insurance has gone up 90%. I have never made a claim.
This year I'm going to have to pass some of this to my tenants.
This is before I get to rates, repair costs and of course tax
One of the problems with targeting premiums at those at more risk is they drop out at higher premiums leaving those at low risk to shoulder the burden for something they start to perceive as not needed. As noted in another comment its a very physiological game, NZ has had widespread coverage compared to other countries so the ins cos have been winning big.
It would be interesting to know, fly on the wall way, how they perceive their monopoly position and how far they think they can push.
Not being an expert or anything but I would suggest, given the recent past events (earthquakes, storms, floods), that NZ as a whole is probably being re rated as higher risk.
So the re insurance market is is increasing the risk premium....so the consumer feels it at the end of the day.
Somebody else might have insights into this.
You may have that backwards...insurance relies on the spreading of risk so the larger the pool of insured the better...when those pools become smaller then the premiums become higher not lower...to the point that the market is not large enough to cover the costs of the model.
Yeah let's take a media event driven market reaction and take it as an over-arching theme.
Remember when people said the same thing about energy costs when Russia got sanctioned over Ukraine and oil eventually dropped $30.
Black swan cygnets can be mistaken for any Anatidae offspring to the uninitiated.
Ukraine is taking Russian oil off the market. Be interesting to see how oil markets cope with millions of barrels off the market? Heard a rumour the the US warned Ukraine not to target Russian oil facilities, but it seems the US needs a bit of a shove, to refocus on reality?
Agree. It was one tanker and bound for Singapore, not NZ. We’ve had at least three loads of Jet Fuel delivered to Marsden Pt in last 12 months that had to be returned due to poor quality. Restrictions put in place etc. No big knee jerk price increases etc. My point is, many things affect fuel deliveries every day, cause you saw this on the news, does it actually make a diff?
The GDP Number Was Great... There Is Just One Huge Problem
The result, for better or worse, speak for themselves: while Q4 GDP rose by $329 billion to $27.939 trillion, a respectable if made up number, what is much more disturbing is that over the same time period, the US budget deficit rose by more than 50%, or $510 billion. And the cherry on top: the increase in public US debt in the same three month period was a stunning $834 billion, or 154% more than the increase in GDP. In other words, it now takes $1.55 in budget deficit to generate $1 of growth... and it takes over $2.50 in new debt to generate $1 of GDP growth!
Luxys coalition working hard to sell off as much NZ assets as possible..(and keep promises to big business funding fat controllers)
Govt to free up foreign investment in ‘sensitive’ NZ land and assets
Act says the changes will encourage investment in New Zealand, but opponents warn of a threat to sovereignty. Ministerial scrutiny of whether overseas investments are in New Zealand’s national interest is to be significantly reduced in a move critics say risks eroding sovereignty but supporters believe will enrich New Zealand (well 1% of NZ and O/Seas owners)
You're onto it Audaxes. The debt keeps piling up, & is essentially underwritten by the American taxpayer in the form of their govt. Balance sheets keep getting heavier & heavier as inflation eats everyone's lunch in one form or another. Not too many winners here unless you're at the top of the food chain, which funnily enough, is mostly populated by... Americans. Wow. How about that?
Meantime, down under on the farm, we have a few subscribers to the above lifestyle but again, the gap between the 1.0% & the rest is getting bigger. Okay, sure, there's another 30% doing very well thank you, but the ones under that are getting noisier by the day.
The big question is, however, is that one of the foundation fundamentals of the past 75 years wealth [for most people] has been home ownership. It's not a given, looking at tomorrow, with the demographics collapsing in some high profile places already, that homes will continue to underwrite tomorrows wealth. Land, perhaps. But homes in tall buildings with 500 others... mmmm maybe not.
We got a wee glimpse of Claus's tomorrow with covid & as some of you already know, he's busily talking up another book in that series with his X virus!!!!! The elites are so up themselves it's sickening.
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