Here's our summary of key economic events overnight that affect New Zealand, with news progress toward lower inflation is underway but the road is bumpy.
First up today we should note that American mortgage application levels decreased again last week. Their mortgage rates moved lower last week, but that did little to ignite overall mortgage application activity which is now -13% lower than the weak year-ago levels. Their overall economy may be in a broad-based and resilient expansion but this does not include their housing market.
American employments levels are rising. Private businesses in the US hired an extra +184,000 workers in March following an upwardly revised +155,000 in February, and beating forecasts of +148,000. This is the biggest increase in hiring in eight months, with employment especially strong in services. In this ADP survey, pay was up +5.1%. The US non-farm payrolls are out on Saturday NZ time for March and they are expected to show a +200,000 increase.
So it might have been a surprise to see that the ISM services PMI for March ease off a little (even if new order levels expanded strongly). Then again, that was not reflected in the S&P Global (ex-Markit) US services PMI which noted further rises in output and new orders, but rates of growth did ease. They found the pace of job creation moderated and selling price inflation rose to an eight-month high. Nothing here signals imminent recession, but clearly inflation is not beaten.
Fed boss Powell spoke earlier today, but kept to his recent script saying a rate cut may come later this year, but they are watching the recent firmer inflation data even if they expect it will ease back soon. A colleague suggested the first cut there won't come until Q4.
American vehicle sales were expected to rise in March but they disappointed, coming in at an annualised pace of 15.5 mln. Still, this is about the same pace we have seen since April 2023 so it is holding its rise from the depressed period two years earlier than that.
In China, new order levels boosted its Caixin services PMI in March. The expansion isn't swift but it is better than a contraction. It was the 15th straight month of growth in services activity, with new business rising to the fastest pace in the year so far.
The Qingming Festival 3 day holiday in China will mean data releases there will be light until next week. Equity markets will be closed. They may be glad of the break; a survey of local economists cast growing doubt that the "about 5%" growth target will be reached this year, and it will be progressively harder in years to come.
In Europe, inflation levels fell more than expected, getting closer to the ECB target. It declined to 2.4% in March, matching November's 28-month low and that was lower than market expectations of 2.6%.
The UST 10yr yield is now at 4.36% and unchanged from this time yesterday. The key 2-10 yield curve inversion is less at -32 bps. And their 1-5 curve inversion is also less at -70 bps. Their 3 mth-10yr curve inversion is now at -101 bps and a bit less as well. The Australian 10 year bond yield is now at 4.16% and up +4 bps. The China 10 year bond rate is down -1 bp to just under 2.30%. The NZ Government 10 year bond rate is now at 4.70% and down -1 bp.
Wall Street has opened its Wednesday session up +0.4%. European markets were generally in positive territory with Frankfurt up +0.5%, Paris up +0.3%, but London was unchanged. Tokyo ended its Wednesday session down a full -1.0%. Hong Kong dropped +1.2%, but Shanghai ended down only -0.2%. The ASX200 fell -1.3% and the NZX50 ended -0.5% lower yesterday.
The price of gold will start today firmer by +US$34 from yesterday at US$2293/oz, and a new all-time high.
Oil prices have risen +US$1 to just under US$85.50/bbl in the US while the international Brent price is now up at just under US$89.50/bbl. These are new five month highs.
The Kiwi dollar starts today at just on 60.1 USc and +½c firmer than this time yesterday. Against the Aussie we are little-changed at 91.5 AUc. Against the euro we are holding at 55.4 euro cents. That all means our TWI-5 starts today just on 69.2 and up +20 bps from this time yesterday.
The bitcoin price starts today firmer at US$66,285 and up +1.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.
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67 Comments
Hard-hitting bureaucracy-over-common-sense action going on in the consent process - water tanks are deemed very unlikely to burst into flames.
Even for government, and let's agree the bar for government performance is set to the lowest setting of complete non-accountability or measurable benefit, this is a record setter.
Very special; if only we could make real change, trimming the sails is a bit pointless, this bureaucracy needs an intervention.
If employment is fuelling inflation then the public service here is contributing mightily given the extraordinary burst of hirings post election. Signals a likely high level hard core embedded in a psyche and culture - we run the country, don’t you know and you don’t tell us what to do, we tell you. The defences have been set, ramparts manned, for sure.
Absolutely, and having been on the inside for one of these "cost cutting" exercises, it will simply mean deferring spend until Labour get back in. There will be no cultural or meaningful change that's for sure.
Still, it's something, I mean at least NACT are trying.
Agreed, this is common behaviour, but they have tried to shut that gate this time, with a mandate to also stop hiring consultants - let's see how that goes. My experience is they simply put off doing things until the floodgates open again.
Performance theatre just about sums all non-front-line and admin support work the government "does".
".....Usually the firing or freezing of staff numbers under National just results in more contractors and consultants being used at a higher price....."
Yes indeed. And that is a management and culture problem that needs to be crushed. It's not an excuse for inaction.
The Auditor General’s report in Dec 2023 detailing wilful, uncontrolled and unaccountable spending by the sixth Labour government was damning. Minister Roberson fittingly accepted responsibility and apologised. However given the period involved some of that carry on must have included Minister Jones’s coveted PGF? If so this new government might need to have more than a close eye on such similar proceedings.
JP Morgan Asset Management has sold a a Chicago apartment complex at a massive $80 million loss. The 19-story, 198-unit apartment building sold for 43% less than the property's previous sale that JPM paid in 2016. JPM paid an all-time high in terms of per unit price.
https://therealdeal.com/chicago/2024/04/02/crescent-heights-pays-80m-fo…
Yep, even the head Spruikster of Onewoof the Comb......is turned full property bearish.
Just Higher Forever.......until depression comes.
It must be so dire and really, really bad, if the positive Cheery PickerInChief: T.A, cannot find any positive morsel to sell to his Plebs on the Onewoof.
You know how bad things must be that The Comb has to use quotes like The Rhino is Staggering..... there are going to be a lot of unfinished sites around.... those old enough will remember how long the old BNZ building stood rusting in the late 80s.
I am still predicting a 10% fall in average prices by Xmas 2024, and very likely the same next year
I am still predicting a 10% fall in average prices by Xmas 2024, and very likely the same next year
Percentages may vary a bit, but agreed, I think this is a fair take on the expected trend.
The only thing I can foresee changing this is a new round of QE, but given how far down the road this can has been kicked by previous rounds and the lack of any real correction as happened elsewhere it would have to be pretty big. Big enough that justification will be hard to come up with. Can't see it on the horizon just yet (modest rate cuts, yes) so I think two years of further declines is a safe guess.
"So rates are going to be JH after all.. talks of massive rates cuts is slowly disappearing."
USA is not NZ.
Is the USA in a Recession? Nope.
Is NZ? Yes - and it's been a long one!
RBNZ doing what silly central bankers do ... Holding high for too long ... Taking NZ Inc backwards and making everybody poorer.
And how silly is our RB?
Exhibit 1: Threw out prudential controls and juiced the economy (big time!) throughout and after covid.
Exhibit 2: NZ has basically been in a Recession for over a year and continues to contract!
Many of us that want to invest in NZ Inc. have been waiting for the RBNZ to start lowering. Life is short and the RBNZ is wasting many years of growth, to say nothing of the years of Kiwi's lives.
Worst RBNZ ever? Probably ...
It seems like we are getting to the point where the NZ economy is heading towards the drain (rather rapidly), but the US one is holding up surprisingly well. It will be interesting to see how long we hold our OCR high to match the Fed. Do we drop the OCR and watch the NZD fall? Or hold it high and watch the economy tank further? Wicked problems...
Fair point. Although a weak NZD will further stoke inflation and dampen household consumption. We're running a massive trade/current account deficit in this country, which technically means there will be way more losers (importers/consumers) than winners (exporters) in our economy from our weakening FX situation.
This is your weekly reminder that oil supply/demand numbers are just as accurate as the jobs and CPI numbers are. They are political announcements, not market data. https://zerohedge.com/energy/wti-dip Link
NZ economy is absolutely tanking and the pace is accelerating. Jobs cuts in Public & private sectors. Families with kids paying hundreds per week in extra mortgage interest payments. Rent and mortgage payments are sucking out a large portion of weekly income. People leaving in droves to Oz.
As long as basic living standards are better in comparison to poorer countries, migrants will be keen to move to countries such as NZ and Canada.
I'd say we still offer decent living (public healthcare and education) to the unskilled and semi-skilled prospects but are clearly falling behind on being able to attract and retain from the skilled and high-skilled talent pool (who obviously don't rank public services alone as a priority when migrating).
Expensive housing, rising crime in major urban areas, mediocre pay and career prospects, and lack of modern conveniences are major turnoffs for global talent from coming here. Plus, no government has policies in mind that will achieve anything other than aggravating those issues.
The exchange also entails exporting skilled workers and importing unskilled.
The trend of high NZ citizens emigrating has now been running persistently high for 2 years. I am sure this trend is strongly correlated to our declining economic output, particularly on a per-capita basis. Replacing locally trained Kiwis with low-skilled migrants is undoubtedly a productivity killer.
Families with kids also doing it tough as NACT raise their kids bus fares to help fund tax cuts for landlords. Property speculator entitlement mentality cutting society deep - but the PM and MPs have portfolios to think of.
And we'll keep overtaxing the productive enterprising Kiwis to give a free ride to lazy land speculation...not going to help the economy at all.
Here is a virtual tissue Rick. Those families have had no material changes to their circumstances since NACT came in.
As I have said before, those productive enterprising Kiwis you are so proud of are the only ones that can afford to invest in housing. Therefore they will be the Property speculators you hate so much. Your cognitive dissonance is high.
There seem to be a great many property investors and speculators who are too scared to even buy shares - how are they productive? There will of course also be plenty with multiple strings to their bows - business experience, productive investments, and a few rental properties. They may have been adaptable enough to have dodged the harsh property environment of the last few years, or diversified enough not to care about minor issues like losing interest deductibility.
Pretending kids bus fares aren't going up doesn't make any sense, JAO, and it undermines your whole post. Bit of disconnect from reality there.
Moreover, the rest of us are quite aware that it is quite possible to incentivise and reward those who build productive export businesses, thus raising New Zealand's productivity and - ultimately - living standards. Preferable to incentivise such folk instead of having the taxpayer subsidising and incentivising speculation on and from existing housing, which adds no value to New Zealand.
Their overall economy may be in a broad-based and resilient expansion but this does not include their housing market.
Nothing to see here: Intel said its manufacturing unit had incurred $7bn operating losses for 2023 versus operating losses of $5.2bn the year before. They also reported $18.9bn revenue for 2023, down 31% yoy. Link
First Columbia Nuclear Missile Sub At Risk of 1-Year Delay Due to Supplier Problems
This was a very interesting and eye opening podcast about the current situation in China
https://www.theinvestorspodcast.com/episodes/the-bear-case-for-china-w-…
This will be fixed through central control would be my bet. Nationalisation of all these companies and the wiping of this debt. This is simply the Chinese continuing to follow the West's playbook.
In regards to Taiwan I think he will choose (or have to choose) the above social reformation over starting a losing war.
If I had money in China I would get it out.
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